ATLANTA, July 18, 2019 /PRNewswire/ -- Genuine Parts
Company (NYSE: GPC) announced today sales and earnings for the
second quarter and six months ended June 30, 2019.
Sales for the second quarter ended June 30, 2019 were a
record $4.9 billion, a 2.3% increase
compared to $4.8 billion for the same
period in 2018. Total sales for the second quarter included
the contribution of 1.6% comparable growth and 2.7% from
acquisitions, offset by the negative impact of 1.5% from foreign
currency translation along with 0.5% due to the sale of Grupo Auto
Todo in the first quarter of 2019. Net income for the second
quarter was $224.4 million and
earnings per share on a diluted basis were $1.53. Before the impact of certain
transaction and other costs primarily related to the acquisition of
PartsPoint Group (PartsPoint), adjusted net income was $230.3 million, or $1.57 per diluted share.
Second quarter sales for the Automotive Parts Group were up
1.4%, including a 1.3% comparable sales increase, a 3.5% benefit
from acquisitions and an unfavorable foreign currency translation
of 2.5%. In addition, automotive sales were impacted by 0.9% due to
the sale of Grupo Auto Todo. Sales for the Industrial Parts
Group were up 4.9%, including a 3.1% comparable sales increase,
2.1% from acquisitions and a slightly unfavorable foreign currency
translation of 0.3%. Sales for the Business Products Group were
down 1.1%, consisting primarily of the change in comparable sales
growth.
Paul Donahue, Chairman and Chief
Executive Officer, commented, "Our second quarter results were
highlighted by positive total sales growth across each of our
automotive businesses and in our industrial segment. In
addition, we were pleased to generate significant improvement in
our gross margin. In the automotive segment, our U.S.,
Australasian and Canadian operations delivered another quarter of
positive sales comps and steady growth, while our business in
Europe remained challenged by
transitory factors such as the mild winter weather and a softening
economic environment. Our industrial business continues to
perform well in North America, and
we are excited to move forward with the additional growth
opportunities presented by Inenco, our new industrial business in
Australasia. Finally, the business products segment operated
well to maintain their net margin, despite the slight decline in
revenues."
Sales for the six months ended June 30,
2019 were $9.7 billion, a 2.8%
increase compared to $9.4 billion for
the same period in 2018. Net income for the six months was
$384.7 million and earnings per share
on a diluted basis were $2.62. Before
the transaction and other costs discussed above, adjusted net
income was $417.5 million, or
$2.85 per diluted share, for the six
months.
Mr. Donahue concluded, "While not satisfied with our results in
the quarter, we remain confident in our overall strategy and the
additional growth opportunities we continue to pursue across our
global platform. Our immediate focus is on the execution of
our initiatives to control costs and improve our
profitability. This is essential in our quest to deliver
improved results and create additional shareholder value as we move
forward."
2019 Outlook
In consideration of our results thus far in 2019, the continued
softness we expect in Europe for
the balance of the year, as well as the impact of the PartsPoint
and Inenco acquisitions, the Company is updating its full year 2019
sales and earnings guidance. The Company expects sales to
increase 4.5% to 5.5%, inclusive of an approximate 2% sales
contribution from the PartsPoint and Inenco acquisitions.
This updated sales outlook represents a change from the Company's
previous guidance for a 3% to 4% sales increase.
The Company expects diluted earnings per share to range from
$5.42 to $5.52 and is updating its outlook for adjusted
diluted earnings per share, which excludes any first half and
future transaction and other costs, to $5.65 to $5.75. This is a change from the Company's
prior guidance of $5.75 to
$5.90. This updated earnings
outlook accounts for an approximate $0.05 contribution from PartsPoint and the
additional 65% investment in Inenco. Additionally, the
Company continues to expect a tax rate of approximately 25% in
2019.
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. Eastern time 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 13691973. A replay will also be available on the
Company's website or at 844-512-2921, conference ID 13691973, two
hours after the completion of the call until 12:00 a.m. Eastern time on August 1, 2019.
Forward Looking Statements
Some statements in this press release, 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 anticipated strategic benefits,
synergies and other attributes resulting from acquisitions, 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 acquired companies into
the Company, including the challenges associated with the
integration of processes to ensure the adequacy of our internal
controls in regard to the Alliance Automotive Group business, and
to realize the anticipated synergies and benefits; changes in the
European aftermarket; 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 new import tariffs and the unpredictability of
additional tariffs and data security policies and requirements;
changes in general economic conditions, including unemployment,
inflation (including the impact of potential tariffs) or deflation
and the United Kingdom's
referendum to exit from the European Union, commonly known as
Brexit; changes in tax policies; volatile exchange rates;
volatility in oil prices; 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 tariffs and trade
considerations on their operations and output, as required to meet
product demand; failure or weakness in our disclosure controls and
procedures and internal controls over financial reporting; 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 2018 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, Poland, the Netherlands and
Belgium. The Company also distributes industrial replacement
parts and electrical specialty materials in the U.S., Canada and Mexico through its Industrial Products
Group. S.P. Richards Company, the Business Products Group,
distributes a variety of business products in the U.S.
and Canada. Further information is available at
www.genpt.com.
GENUINE PARTS COMPANY
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
(UNAUDITED)
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended June
30,
|
(in thousands, except per share data)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net sales
|
|
$
|
4,934,260
|
|
|
$
|
4,822,065
|
|
|
$
|
9,671,093
|
|
|
$
|
9,408,359
|
|
Cost of goods
sold
|
|
3,335,679
|
|
|
3,300,479
|
|
|
6,564,344
|
|
|
6,450,966
|
|
Gross
profit
|
|
1,598,581
|
|
|
1,521,586
|
|
|
3,106,749
|
|
|
2,957,393
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling,
administrative and other expenses
|
|
1,216,913
|
|
|
1,148,217
|
|
|
2,414,133
|
|
|
2,281,988
|
|
Depreciation and
amortization
|
|
66,154
|
|
|
58,451
|
|
|
128,131
|
|
|
116,814
|
|
Provision for
doubtful accounts
|
|
5,962
|
|
|
3,666
|
|
|
9,931
|
|
|
6,367
|
|
Total operating
expenses
|
|
1,289,029
|
|
|
1,210,334
|
|
|
2,552,195
|
|
|
2,405,169
|
|
Non-operating
expenses (income):
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
23,296
|
|
|
26,476
|
|
|
47,179
|
|
|
50,585
|
|
Other
|
|
(15,873)
|
|
|
(15,495)
|
|
|
(6,266)
|
|
|
(27,951)
|
|
Total non-operating
expenses (income)
|
|
7,423
|
|
|
10,981
|
|
|
40,913
|
|
|
22,634
|
|
Income before income
taxes
|
|
302,129
|
|
|
300,271
|
|
|
513,641
|
|
|
529,590
|
|
Income
taxes
|
|
77,699
|
|
|
73,299
|
|
|
128,961
|
|
|
126,042
|
|
Net income
|
|
$
|
224,430
|
|
|
$
|
226,972
|
|
|
$
|
384,680
|
|
|
$
|
403,548
|
|
Basic net income per
common share
|
|
$
|
1.54
|
|
|
$
|
1.55
|
|
|
$
|
2.63
|
|
|
$
|
2.75
|
|
Diluted net income
per common share
|
|
$
|
1.53
|
|
|
$
|
1.54
|
|
|
$
|
2.62
|
|
|
$
|
2.74
|
|
Dividends declared
per common share
|
|
$
|
.7625
|
|
|
$
|
.7200
|
|
|
$
|
1.5250
|
|
|
$
|
1.4400
|
|
Weighted average
common shares outstanding
|
|
146,075
|
|
|
146,748
|
|
|
146,029
|
|
|
146,738
|
|
Dilutive effect of
stock options and non-vested
restricted stock awards
|
|
661
|
|
|
512
|
|
|
684
|
|
|
548
|
|
Weighted average
common shares outstanding –
assuming dilution
|
|
146,736
|
|
|
147,260
|
|
|
146,713
|
|
|
147,286
|
|
GENUINE PARTS COMPANY
AND SUBSIDIARIES
|
SEGMENT
INFORMATION
|
(UNAUDITED)
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended June
30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net sales:
|
|
|
|
|
|
|
|
|
Automotive
|
|
$
|
2,774,808
|
|
|
$
|
2,736,201
|
|
|
$
|
5,397,153
|
|
|
$
|
5,300,460
|
|
Industrial
|
|
1,681,721
|
|
|
1,602,665
|
|
|
3,317,144
|
|
|
3,150,609
|
|
Business
products
|
|
477,731
|
|
|
483,199
|
|
|
956,796
|
|
|
957,290
|
|
Total net
sales
|
|
$
|
4,934,260
|
|
|
$
|
4,822,065
|
|
|
$
|
9,671,093
|
|
|
$
|
9,408,359
|
|
Operating
profit:
|
|
|
|
|
|
|
|
|
Automotive
|
|
$
|
228,385
|
|
|
$
|
243,611
|
|
|
$
|
407,613
|
|
|
$
|
428,317
|
|
Industrial
|
|
136,334
|
|
|
125,191
|
|
|
257,362
|
|
|
237,382
|
|
Business
products
|
|
20,896
|
|
|
21,422
|
|
|
42,116
|
|
|
43,023
|
|
Total operating
profit
|
|
385,615
|
|
|
390,224
|
|
|
707,091
|
|
|
708,722
|
|
Interest expense,
net
|
|
(22,514)
|
|
|
(25,525)
|
|
|
(45,543)
|
|
|
(48,832)
|
|
Intangible asset
amortization
|
|
(23,917)
|
|
|
(21,806)
|
|
|
(46,501)
|
|
|
(43,209)
|
|
Corporate expense
(1)
|
|
(37,055)
|
|
|
(42,622)
|
|
|
(101,406)
|
|
|
(87,091)
|
|
Income before income
taxes
|
|
$
|
302,129
|
|
|
$
|
300,271
|
|
|
$
|
513,641
|
|
|
$
|
529,590
|
|
(1)
|
Includes $4,108 and
$38,222 of expenses for the three and six months ended
June 30, 2019, respectively, from realized currency losses and
transaction and other costs. The realized currency losses of
$27,037 for the six months ended June 30, 2019 resulted from
the March 7, 2019 sale of Grupo Auto Todo.
|
|
|
|
Includes $9,105 and
$22,114 for the three and six months ended June 30, 2018,
respectively, in certain transaction and other costs related to the
acquisition of Alliance Automotive Group ("AAG") and the attempted
Business Products Group spin-off.
|
GENUINE PARTS COMPANY
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(UNAUDITED)
|
|
(in thousands,
except share and per share data)
|
|
June 30,
2019
|
|
June 30,
2018
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
562,551
|
|
|
$
|
355,141
|
|
Trade accounts
receivable, less allowance for doubtful accounts (2019 –
$31,280; 2018 – $25,329)
|
|
2,836,875
|
|
|
2,669,649
|
|
Merchandise
inventories, net
|
|
3,750,778
|
|
|
3,484,949
|
|
Prepaid expenses and
other current assets
|
|
1,034,466
|
|
|
1,013,630
|
|
Total current
assets
|
|
8,184,670
|
|
|
7,523,369
|
|
Goodwill
|
|
2,329,325
|
|
|
2,142,822
|
|
Other intangible
assets, less accumulated amortization
|
|
1,517,842
|
|
|
1,356,149
|
|
Deferred tax
assets
|
|
27,698
|
|
|
25,480
|
|
Property, plant and
equipment, less accumulated depreciation (2019 –
$1,341,918; 2018 – $1,117,925)
|
|
1,089,763
|
|
|
918,578
|
|
Operating lease
assets
|
|
961,975
|
|
|
—
|
|
Other
assets
|
|
528,199
|
|
|
600,124
|
|
Total
assets
|
|
$
|
14,639,472
|
|
|
$
|
12,566,522
|
|
|
Liabilities and
equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Trade accounts
payable
|
|
$
|
4,064,547
|
|
|
$
|
3,831,274
|
|
Current portion of
debt
|
|
1,011,334
|
|
|
686,415
|
|
Dividends
payable
|
|
111,380
|
|
|
105,661
|
|
Other current
liabilities
|
|
1,310,967
|
|
|
1,033,544
|
|
Total current
liabilities
|
|
6,498,228
|
|
|
5,656,894
|
|
Long-term
debt
|
|
2,871,106
|
|
|
2,490,552
|
|
Operating lease
liabilities
|
|
724,682
|
|
|
—
|
|
Pension and other
post–retirement benefit liabilities
|
|
208,008
|
|
|
200,137
|
|
Deferred tax
liabilities
|
|
212,308
|
|
|
174,564
|
|
Other long-term
liabilities
|
|
437,165
|
|
|
482,048
|
|
Equity:
|
|
|
|
|
Preferred stock, par
value – $1 per share; authorized – 10,000,000 shares;
none
issued
|
|
—
|
|
|
—
|
|
Common stock, par
value – $1 per share; authorized – 450,000,000 shares;
issued and outstanding – 2019 – 146,078,369 shares; 2018 –
146,752,732 shares
|
|
146,078
|
|
|
146,753
|
|
Additional paid-in
capital
|
|
83,949
|
|
|
72,211
|
|
Retained
earnings
|
|
4,630,480
|
|
|
4,236,359
|
|
Accumulated other
comprehensive loss
|
|
(1,195,179)
|
|
|
(943,351)
|
|
Total parent
equity
|
|
3,665,328
|
|
|
3,511,972
|
|
Noncontrolling
interests in subsidiaries
|
|
22,647
|
|
|
50,355
|
|
Total
equity
|
|
3,687,975
|
|
|
3,562,327
|
|
Total liabilities and
equity
|
|
$
|
14,639,472
|
|
|
$
|
12,566,522
|
|
GENUINE PARTS COMPANY
AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(UNAUDITED)
|
|
|
|
Six Months Ended June
30,
|
(in
thousands)
|
|
2019
|
|
2018
|
Operating
activities:
|
|
|
|
|
Net income
|
|
$
|
384,680
|
|
|
$
|
403,548
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
128,131
|
|
|
116,814
|
|
Share-based
compensation
|
|
13,081
|
|
|
9,035
|
|
Excess tax benefits
from share-based compensation
|
|
(3,986)
|
|
|
(2,599)
|
|
Realized currency
losses on divestiture
|
|
27,037
|
|
|
—
|
|
Changes in operating
assets and liabilities
|
|
(247,568)
|
|
|
(71,723)
|
|
Net cash provided by
operating activities
|
|
301,375
|
|
|
455,075
|
|
Investing
activities:
|
|
|
|
|
Purchases of
property, plant and equipment
|
|
(106,712)
|
|
|
(65,146)
|
|
Acquisitions of
businesses and other investing activities
|
|
(357,286)
|
|
|
(82,545)
|
|
Net cash used in
investing activities
|
|
(463,998)
|
|
|
(147,691)
|
|
Financing
activities:
|
|
|
|
|
Proceeds from
debt
|
|
2,973,236
|
|
|
2,320,906
|
|
Payments on
debt
|
|
(2,359,975)
|
|
|
(2,367,284)
|
|
Share-based awards
exercised
|
|
(7,371)
|
|
|
(4,851)
|
|
Dividends
paid
|
|
(216,724)
|
|
|
(204,649)
|
|
Net cash provided by
(used in) financing activities
|
|
389,166
|
|
|
(255,878)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
2,461
|
|
|
(11,264)
|
|
Net increase in cash
and cash equivalents
|
|
229,004
|
|
|
40,242
|
|
Cash and cash
equivalents at beginning of period
|
|
333,547
|
|
|
314,899
|
|
Cash and cash
equivalents at end of period
|
|
$
|
562,551
|
|
|
$
|
355,141
|
|
GENUINE PARTS COMPANY
AND SUBSIDIARIES
|
RECONCILIATION OF
GAAP NET INCOME TO ADJUSTED NET INCOME
|
(UNAUDITED)
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended June
30,
|
(in thousands, except
per share data)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
GAAP net
income
|
|
$
|
224,430
|
|
|
$
|
226,972
|
|
|
$
|
384,680
|
|
|
$
|
403,548
|
|
Diluted net income
per common share
|
|
$
|
1.53
|
|
|
$
|
1.54
|
|
|
$
|
2.62
|
|
|
$
|
2.74
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Realized currency
losses
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27,037
|
|
|
$
|
—
|
|
Transaction and other
costs
|
|
4,108
|
|
|
9,105
|
|
|
11,185
|
|
|
22,114
|
|
Tax impact of
adjustments
|
|
1,727
|
|
|
(2,524)
|
|
|
(5,423)
|
|
|
(5,650)
|
|
Adjusted net
income
|
|
$
|
230,265
|
|
|
$
|
233,553
|
|
|
$
|
417,479
|
|
|
$
|
420,012
|
|
Adjusted diluted net
income per common share
|
|
$
|
1.57
|
|
|
$
|
1.59
|
|
|
$
|
2.85
|
|
|
$
|
2.85
|
|
GENUINE PARTS COMPANY
AND SUBSIDIARIES
|
CHANGE IN NET SALES
SUMMARY
|
(UNAUDITED)
|
|
|
|
Three Months Ended
June 30, 2019
|
|
|
Comparable
Sales
|
|
Acquisitions
|
|
Divestitures
and Other
|
|
Foreign
Currency
|
|
Total Net
Sales
|
Automotive
|
|
1.3
|
%
|
|
3.5
|
%
|
|
(0.9)
|
%
|
|
(2.5)
|
%
|
|
1.4
|
%
|
Industrial
|
|
3.1
|
%
|
|
2.1
|
%
|
|
—
|
%
|
|
(0.3)
|
%
|
|
4.9
|
%
|
Business
Products
|
|
(1.0)
|
%
|
|
—
|
%
|
|
—
|
%
|
|
(0.1)
|
%
|
|
(1.1)
|
%
|
Total Net
Sales
|
|
1.6
|
%
|
|
2.7
|
%
|
|
(0.5)
|
%
|
|
(1.5)
|
%
|
|
2.3
|
%
|
|
|
|
|
|
|
|
|
Six Months Ended June
30, 2019
|
|
|
Comparable
Sales
|
|
Acquisitions
|
|
Divestitures
and Other
|
|
Foreign
Currency
|
|
Total Net
Sales
|
Automotive
|
|
2.2
|
%
|
|
3.2
|
%
|
|
(0.7)
|
%
|
|
(2.9)
|
%
|
|
1.8
|
%
|
Industrial
|
|
3.6
|
%
|
|
2.0
|
%
|
|
—
|
%
|
|
(0.3)
|
%
|
|
5.3
|
%
|
Business
Products
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
(0.1)
|
%
|
|
(0.1)
|
%
|
Total Net
Sales
|
|
2.4
|
%
|
|
2.4
|
%
|
|
(0.3)
|
%
|
|
(1.7)
|
%
|
|
2.8
|
%
|
GENUINE PARTS COMPANY
AND SUBSIDIARIES
|
RECONCILIATION OF
2019 FORECASTED GAAP NET INCOME TO FORECASTED ADJUSTED
NET INCOME
|
(UNAUDITED)
|
|
(in thousands, except
per share data)
|
|
Low End
|
|
High End
|
Forecasted GAAP net
income
|
|
$
|
794,500
|
|
|
$
|
809,000
|
|
Forecasted diluted
net income per common share
|
|
$
|
5.42
|
|
|
$
|
5.52
|
|
|
|
|
|
|
Add forecasted
after-tax adjustments:
|
|
|
|
|
Forecasted transaction
and other costs
|
|
32,799
|
|
|
32,799
|
|
Forecasted adjusted
net income
|
|
$
|
827,299
|
|
|
$
|
841,799
|
|
Forecasted adjusted
diluted net income per common share
|
|
$
|
5.65
|
|
|
$
|
5.75
|
|
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SOURCE Genuine Parts Company