ATLANTA, July 19, 2018 /PRNewswire/ -- Genuine Parts
Company (NYSE: GPC) announced today sales and earnings for the
second quarter and six months ended June 30,
2018.
Sales for the second quarter ended June
30, 2018 were a record $4.8
billion, a 17.6% increase compared to $4.1 billion for the same period in 2017.
Net income for the second quarter was $227.0
million and earnings per share on a diluted basis were
$1.54, also a new record.
Before the impact of certain transaction and other costs incurred
related to the Company's fourth quarter 2017 acquisition of
Alliance Automotive Group (AAG) in Europe and the pending transaction to spin-off
the Company's Business Products Group, S.P. Richards, adjusted net
income was $233.6 million, or
$1.59 per diluted share. Total
sales for the second quarter included 3% comparable growth, 14%
from acquisitions, including AAG, and a 0.5% benefit from foreign
currency translation.
Second quarter sales for the Automotive Group were up 27.7%,
including a 2.1% comparable sales increase as well as the benefit
of acquisitions and a slightly favorable foreign currency
translation. Sales for the Industrial Group were up 8.7%,
including a 6.5% comparable sales increase, and sales for the
Business Products Group were flat with the prior year quarter in
both total and comparable sales.
Paul Donahue, President and Chief
Executive Officer, commented, "We are pleased to report another
quarter of record sales, driven by the favorable impact of
strategic acquisitions and improved organic sales trends across our
business segments. The positive shift in the underlying sales
environment in the automotive business is especially encouraging
and, combined with the execution of our plans to drive operating
improvement, including plans to address our automotive margin, we
are optimistic for improved margin trends as we move ahead."
Sales for the six months ended June 30,
2018 were $9.4 billion, a
17.5% increase compared to $8.0
billion for the same period in 2017. Net income for
the six months was $403.5 million and
earnings per share on a diluted basis were $2.74. Before the transaction and other
costs discussed above, adjusted net income was $420.0 million, or $2.85 per diluted share, for the six months.
Mr. Donahue concluded, "We enter the second half of 2018 excited
for the opportunities ahead at GPC. As we move forward with
the planned spin-off of our Business Products Group, we remain
committed to our core growth and higher-margin global automotive
and industrial businesses. To this end, we are focused on the
further strengthening of our core sales growth, maximizing the
benefits of our acquisitions and effectively reducing our cost
structure to improve our operating results and enhance our
long-term sales and profit outlook."
2018 Outlook
The Company is raising its sales guidance to be up 13% to 14%,
an increase from the prior guidance of up 12% to 13%. The
Company expects diluted earnings per share to range from
$5.49 to $5.64 and is reiterating its earnings guidance
for adjusted diluted earnings per share, which excludes any
transaction-related costs, of $5.60
to $5.75. The Company currently
expects a tax rate of approximately 25.0%, which is down
slightly from the prior guidance of approximately 26.0% for
2018.
Non-GAAP Information
This release contains certain financial information not derived
in accordance with United States
generally accepted accounting principles ("GAAP"). These items
include adjusted net income and adjusted diluted earnings per
share. The Company does not, nor does it suggest investors should,
consider such non-GAAP financial measures in isolation from, or as
a substitute for, GAAP financial information. The Company believes
that the presentation of adjusted net income and adjusted diluted
earnings per share provides meaningful supplemental information to
both management and investors that is indicative of the Company's
core operations. The Company has included a reconciliation of this
additional information to the most comparable GAAP measure
following the financial statements below.
Conference Call
Genuine Parts Company will hold a conference call today at
11:00 a.m. EDT to discuss the results
of the quarter and the future outlook. Interested parties may
listen to the call on the Company's website, www.genpt.com, by
clicking "Investors", or by dialing 877-407-0789, conference ID
13681125. A replay will also be available on the Company's
website or at 844-512-2921, conference ID 13681125, two hours after
the completion of the call until 12:00 a.m.
EDT on August 3, 2018.
Forward Looking Statements
Some statements in this report, as well as in other materials we
file with the Securities and Exchange Commission (SEC) or otherwise
release to the public and in materials that we make available on
our website, constitute forward-looking statements that are subject
to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Senior officers may also make verbal statements
to analysts, investors, the media and others that are
forward-looking. Forward-looking statements may relate, for
example, to the proposed business combination transaction between
the Company and Essendant, Inc. ("Essendant") in which the Company
will spin-off its Business Products Group and combine this business
with Essendant or the acquisition of Alliance Automotive Group
(AAG) and the anticipated strategic benefits, synergies and other
attributes of these transactions, as well as future operations,
prospects, strategies, financial condition, economic performance
(including growth and earnings), industry conditions and demand for
our products and services. The Company cautions that its
forward-looking statements involve risks and uncertainties, and
while we believe that our expectations for the future are
reasonable in view of currently available information, you are
cautioned not to place undue reliance on our forward-looking
statements. Actual results or events may differ materially from
those indicated as a result of various important factors. Such
factors may include, among other things, the Company's ability to
successfully integrate AAG into the Company and to realize the
anticipated synergies and benefits; changes in the European
aftermarket; the Company's ability to complete the
transaction to spin-off its Business Products Group and combine it
with Essendant, particularly in light of Staples, Inc.'s announced
offer to acquire Essendant; the Company's ability to successfully
implement its business initiatives in each of its three business
segments; slowing demand for the Company's products; changes in
national and international legislation or government regulations or
policies, including potential import tariffs and data security
policies and requirements; changes in general economic conditions,
including unemployment, inflation (including the impact of
potential tariffs) or deflation; changes in tax policies; volatile
exchange rates; significant cost increases, such as rising fuel and
freight expenses; labor shortages; uncertain credit markets and
other macroeconomic conditions; competitive product, service and
pricing pressures; the ability to maintain favorable vendor
arrangements and relationships; disruptions in our vendors'
operations, including the impact of potential tariffs and trade
considerations on their operations and output, as required to meet
product demand; the Company's ability to successfully integrate its
other acquired businesses; the uncertainties and costs of
litigation; disruptions caused by a failure or breach of the
Company's information systems, as well as other risks and
uncertainties discussed in the Company's Annual Report on Form 10-K
for 2017 and from time to time in the Company's subsequent filings
with the SEC.
Forward-looking statements are only as of the date they are
made, and the Company undertakes no duty to update its
forward-looking statements except as required by law. You are
advised, however, to review any further disclosures we make on
related subjects in our subsequent Forms 10-K, 10-Q, 8-K and other
reports to the SEC.
About Genuine Parts Company
Genuine Parts Company is a distributor of automotive replacement
parts in the U.S., Canada,
Mexico, Australasia, France, the U.K., Germany and Poland. The Company also
distributes industrial replacement parts and electrical and
electronic materials in the U.S., Canada and Mexico through its Industrial Products Group,
comprised of Motion Industries and EIS, Inc. S.P. Richards
Company, the Business Products Group, distributes a variety of
business products in the U.S. and Canada.
GENUINE PARTS COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended June
30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Unaudited)
|
|
(in thousands, except
per share data)
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
4,822,065
|
|
$
|
4,100,178
|
|
$
|
9,408,359
|
|
$
|
8,005,819
|
Cost of goods
sold
|
3,300,479
|
|
2,860,466
|
|
6,450,966
|
|
5,610,386
|
Gross
profit
|
1,521,586
|
|
1,239,712
|
|
2,957,393
|
|
2,395,433
|
|
|
|
|
|
|
|
|
Operating and
non-operating expenses:
|
|
|
|
|
|
|
|
Selling,
administrative & other expenses
|
1,162,864
|
|
903,343
|
|
2,310,989
|
|
1,777,157
|
Depreciation and
amortization
|
58,451
|
|
39,232
|
|
116,814
|
|
77,364
|
|
1,221,315
|
|
942,575
|
|
2,427,803
|
|
1,854,521
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
300,271
|
|
297,137
|
|
529,590
|
|
540,912
|
Income
taxes
|
73,299
|
|
107,165
|
|
126,042
|
|
190,780
|
|
|
|
|
|
|
|
|
Net income
|
$
|
226,972
|
|
$
|
189,972
|
|
$
|
403,548
|
|
$
|
350,132
|
|
|
|
|
|
|
|
|
Basic net income per
common share
|
$
|
1.55
|
|
$
|
1.29
|
|
$
|
2.75
|
|
$
|
2.37
|
|
|
|
|
|
|
|
|
Diluted net income
per common share
|
$
|
1.54
|
|
$
|
1.29
|
|
$
|
2.74
|
|
$
|
2.36
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
|
146,748
|
|
147,079
|
|
146,738
|
|
147,613
|
|
|
|
|
|
|
|
|
Dilutive effect of
stock options and non-vested
restricted stock awards
|
512
|
|
571
|
|
548
|
|
598
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding –
assuming
dilution
|
147,260
|
|
147,650
|
|
147,286
|
|
148,211
|
|
|
|
|
|
|
|
|
GENUINE PARTS COMPANY
AND SUBSIDIARIES
SEGMENT INFORMATION AND FINANCIAL HIGHLIGHTS
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended June
30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Unaudited)
|
|
(in
thousands)
|
|
|
|
|
|
|
Net sales:
(1)
|
|
|
|
|
|
Automotive
|
$
|
2,736,201
|
|
$
|
2,142,922
|
|
$
|
5,300,460
|
|
$
|
4,121,368
|
Industrial
(2)
|
1,602,665
|
|
1,474,209
|
|
3,150,609
|
|
2,903,168
|
Business
products
|
483,199
|
|
483,047
|
|
957,290
|
|
981,283
|
Total net
sales
|
$
|
4,822,065
|
|
$
|
4,100,178
|
|
$
|
9,408,359
|
|
$
|
8,005,819
|
|
|
|
|
|
|
Operating
profit:
|
|
|
|
|
|
Automotive
|
$
|
243,611
|
|
$
|
207,332
|
|
$
|
428,317
|
|
$
|
359,089
|
Industrial
(2)
|
125,191
|
|
111,833
|
|
237,382
|
|
215,842
|
Business
products
|
21,422
|
|
30,091
|
|
43,023
|
|
61,210
|
Total operating
profit
|
390,224
|
|
349,256
|
|
708,722
|
|
636,141
|
Interest expense,
net
|
(25,525)
|
|
(6,878)
|
|
(48,832)
|
|
(13,052)
|
Intangible
amortization
|
(21,806)
|
|
(11,434)
|
|
(43,209)
|
|
(22,240)
|
Other, net
(3)
|
(42,622)
|
|
(33,807)
|
|
(87,091)
|
|
(59,937)
|
Income before income
taxes
|
$
|
300,271
|
|
$
|
297,137
|
|
$
|
529,590
|
|
$
|
540,912
|
|
|
|
|
|
|
Capital
expenditures
|
$
|
33,513
|
|
$
|
29,289
|
|
$
|
65,146
|
|
$
|
54,095
|
|
|
|
|
|
|
Depreciation and
amortization
|
$
|
58,451
|
|
$
|
39,232
|
|
$
|
116,814
|
|
$
|
77,364
|
|
(1) The net effects
of discounts, incentives, freight billed to customers have been
allocated to their respective segments for the current and prior
period. Previously, the net effects of such items were
captured and presented separately in a line item entitled
"Other".
|
|
(2) Effective January
1, 2018, the electrical/electronic materials segment became a
division of the industrial segment. These two reporting segments
became a single reporting segment, the Industrial Parts Group. The
change in segment is presented retrospectively.
|
|
(3) Includes $9.1
million and $22.1 million for the three and six months ended June
30, 2018, respectively, in transaction and other costs related to
Alliance Automotive Group and the pending combination of S.P.
Richards with Essendant.
|
GENUINE PARTS COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
June 30,
|
|
June 30,
|
|
2018
|
|
2017
|
|
(Unaudited)
|
|
(in
thousands)
|
ASSETS
|
|
|
|
CURRENT
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
355,141
|
|
|
$
|
203,145
|
|
Trade accounts
receivable, net
|
2,669,649
|
|
|
2,169,970
|
|
Merchandise
inventories, net
|
3,484,949
|
|
|
3,330,189
|
|
Prepaid expenses and
other current assets
|
1,013,630
|
|
|
598,112
|
|
|
|
|
|
TOTAL CURRENT
ASSETS
|
7,523,369
|
|
|
6,301,416
|
|
|
|
|
|
Goodwill and other
intangible assets, less accumulated amortization
|
3,498,971
|
|
|
1,677,748
|
|
Deferred tax
assets
|
25,480
|
|
|
126,299
|
|
Other
assets
|
600,124
|
|
|
565,905
|
|
Net property, plant
and equipment
|
918,578
|
|
|
740,776
|
|
|
|
|
|
TOTAL
ASSETS
|
$
|
12,566,522
|
|
|
$
|
9,412,144
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
Trade accounts
payable
|
$
|
3,831,274
|
|
|
$
|
3,302,969
|
|
Current portion of
debt
|
686,415
|
|
|
580,000
|
|
Dividends
payable
|
105,661
|
|
|
99,109
|
|
Income taxes
payable
|
17,782
|
|
|
28,300
|
|
Other current
liabilities
|
1,015,762
|
|
|
790,789
|
|
|
|
|
|
TOTAL CURRENT
LIABILITIES
|
5,656,894
|
|
|
4,801,167
|
|
|
|
|
|
Long-term
debt
|
2,490,552
|
|
|
550,000
|
|
Pension and other
post-retirement benefit liabilities
|
200,137
|
|
|
272,394
|
|
Deferred tax
liabilities
|
174,564
|
|
|
48,256
|
|
Other long-term
liabilities
|
482,048
|
|
|
438,984
|
|
|
|
|
|
Common
stock
|
146,753
|
|
|
146,831
|
|
Retained
earnings
|
4,308,570
|
|
|
4,062,682
|
|
Accumulated other
comprehensive loss
|
(943,351)
|
|
|
(921,389)
|
|
|
|
|
|
TOTAL PARENT
EQUITY
|
3,511,972
|
|
|
3,288,124
|
|
|
|
|
|
Noncontrolling
interests in subsidiaries
|
$
|
50,355
|
|
|
$
|
13,219
|
|
|
|
|
|
TOTAL
EQUITY
|
3,562,327
|
|
|
3,301,343
|
|
|
|
|
|
TOTAL LIABILITIES AND
EQUITY
|
$
|
12,566,522
|
|
|
$
|
9,412,144
|
|
GENUINE PARTS COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
Six Months Ended June
30,
|
|
2018
|
|
2017
|
|
(Unaudited)
|
|
(in
thousands)
|
|
|
|
|
OPERATING
ACTIVITIES:
|
|
|
|
Net income
|
$
|
403,548
|
|
|
$
|
350,132
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
116,814
|
|
|
77,364
|
|
Share-based
compensation
|
9,035
|
|
|
8,086
|
|
Excess tax benefits
from share-based compensation
|
(2,599)
|
|
|
(2,245)
|
|
Changes in operating
assets and liabilities
|
(71,723)
|
|
|
(88,053)
|
|
NET CASH PROVIDED BY
OPERATING ACTIVITIES
|
455,075
|
|
|
345,284
|
|
|
|
|
|
INVESTING
ACTIVITIES:
|
|
|
|
Purchases of property,
plant and equipment
|
(65,146)
|
|
|
(54,095)
|
|
Acquisitions and other
investing activities
|
(82,545)
|
|
|
(240,216)
|
|
NET CASH USED IN
INVESTING ACTIVITIES
|
(147,691)
|
|
|
(294,311)
|
|
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
Proceeds from
debt
|
2,320,906
|
|
|
2,250,000
|
|
Payments on
debt
|
(2,367,284)
|
|
|
(1,995,000)
|
|
Share-based awards
exercised
|
(4,851)
|
|
|
(3,014)
|
|
Dividends
paid
|
(204,649)
|
|
|
(197,408)
|
|
Purchase of
stock
|
—
|
|
|
(153,508)
|
|
NET CASH USED IN
FINANCING ACTIVITIES
|
(255,878)
|
|
|
(98,930)
|
|
|
|
|
|
EFFECT OF EXCHANGE
RATE CHANGES ON CASH
|
(11,264)
|
|
|
8,223
|
|
|
|
|
|
NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
40,242
|
|
|
(39,734)
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS AT BEGINNING OF PERIOD
|
314,899
|
|
|
242,879
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS AT END OF PERIOD
|
$
|
355,141
|
|
|
$
|
203,145
|
|
GENUINE PARTS COMPANY
AND SUBSIDIARIES
Reconciliation of GAAP Net Income to Adjusted Net Income
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended June
30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(Unaudited)
|
|
(in thousands, except
per share data)
|
|
|
|
|
|
|
|
|
GAAP net
income
|
$
|
226,972
|
|
|
$
|
189,972
|
|
|
$
|
403,548
|
|
|
$
|
350,132
|
|
Diluted net income
per common share
|
$
|
1.54
|
|
|
$
|
1.29
|
|
|
$
|
2.74
|
|
|
$
|
2.36
|
|
|
|
|
|
|
|
|
|
Add after-tax
adjustments:
|
|
|
|
|
|
|
|
Transaction and other
costs
|
6,581
|
|
|
—
|
|
|
16,464
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Adjusted net
income
|
$
|
233,553
|
|
|
$
|
189,972
|
|
|
$
|
420,012
|
|
|
$
|
350,132
|
|
Adjusted diluted net
income per common
share
|
$
|
1.59
|
|
|
$
|
1.29
|
|
|
$
|
2.85
|
|
|
$
|
2.36
|
|
GENUINE PARTS COMPANY
AND SUBSIDIARIES
Reconciliation of 2018 Forecasted GAAP Net Income to Forecasted
Adjusted Net Income
|
|
|
|
Low End
|
|
High End
|
|
|
(Unaudited)
|
|
|
(in thousands, except
per share
data)
|
|
|
|
|
|
Forecasted GAAP net
income
|
|
$
|
808,000
|
|
|
$
|
830,000
|
|
Forecasted diluted
net income per common share
|
|
$
|
5.49
|
|
|
$
|
5.64
|
|
|
|
|
|
|
Add forecasted
after-tax adjustments:
|
|
|
|
|
Forecasted
transaction and other costs
|
|
16,464
|
|
|
16,464
|
|
|
|
|
|
|
Forecasted adjusted
net income
|
|
$
|
824,464
|
|
|
$
|
846,464
|
|
Forecasted adjusted
diluted net income per common share
|
|
$
|
5.60
|
|
|
$
|
5.75
|
|
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SOURCE Genuine Parts Company