The document summarizes key points from an O'Reilly Auto Parts investor presentation. It notes that the aging vehicle population is supporting ongoing strong fundamentals in the auto aftermarket industry. It also discusses O'Reilly's business model, including their mix of DIY and professional customers, focus on productivity and customer service, and opportunities to improve performance at acquired CSK stores. Additionally, it covers how favorable economic conditions are helping O'Reilly improve margins through lower rents and wages while reducing inventory.

1. Investors Mosaic Fundamental Analysis
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2. Auto Aftermarket Fundamentals Remain Strong Due
to Increasing of Age of Vehicle Population
Source: O’Reilly Auto Parts Investor Day Presentation
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3. There is Room for the Industry Leaders to Continue
Taking Market Share from “Mom & Pops”
Source: O’Reilly Auto Parts Investor Day Presentation
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4. The Industry is Large, But Growth is Only Moderate at
1.0% - 2.0% a Year.
Source: O’Reilly Auto Parts Investor Day Presentation
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5. O’Reilly’s Sales Performance Remains Rock Solid Due
to Favorable Macro Backdrop
• The company benefits from a relatively even
split of DIY and DIFM business.
• The DIFM market is growing faster as fewer
people have desire to work on their own cars.
• But DIY is doing fine as the soft economy forces
people to hold onto their vehicles longer and do
more work themselves to save money.
• Management is laser-like focused on enhancing
productivity & providing superior customer
service
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6. The Business Model is Scaling Beautifully With Room
for Improvement as CSK Stores Mature
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7. Soft Real Estate Market and Labor Market is Enabling
Lower Store Rents and Keeping a Lid on Wages
• The soft economy has helped O’Reilly improve
their margin structure dramatically over the past
few quarters. These tailwinds should persist for
several more quarters.
• Furthermore, O’Reilly has plenty of room to
improve the performance of the CSK stores they
purchased 3 years ago as they instill the O’Reilly
culture.
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8. Favorable Balance Sheet Changes Accelerating Free
Cash Flow and Improving Return on Capital
• O’Reilly is taking a page from AutoZone’s
playbook and focusing on squeezing cash out of
the supplier base by leveraging their own strong
credit profile.
• Furthermore, management is very focused on
removing excess inventory from the CSK stores.
This has improved Inventory turns.
• Overall, these changes generate cash and
improve ROIC, both of which are very favorable
for equity valuation.
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9. The Company is Starting to Generate Gobs of Free
Cash Flow Which Will Go Towards Big Stock Buyback
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10. Financial Summary
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11. Our Valuation Analysis Suggests Fair Value is $94
Based on 2012 EPS.
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