Genuine Parts Company Reports Sales And Earnings For The Second Quarter Ended June 30, 2019

- Record Sales of $4.9 billion, Up 2.3% -

- Diluted EPS $1.53 and Adjusted EPS $1.57 Excluding Transaction and Other Costs -

- Updates 2019 Revenue and Earnings Outlook -

Jul 18, 2019

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.

GPC Logo. (PRNewsFoto/Genuine Parts Company)

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


 

 

SOURCE Genuine Parts Company

For further information: Carol B. Yancey, Executive Vice President and CFO - (678) 934-5044; Sidney G. Jones, Senior Vice President - Investor Relations - (678) 934-5628


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