Third Quarter 2017

Genuine Parts Company Reports Sales and Earnings for The Third Quarter Ended September 30, 2017

- Company Reports Sales of $4.1 Billion, Up 4% -

- Diluted Earnings Per Share of $1.08 and Adjusted Earnings Per Share of $1.16 -

- Updates 2017 Outlook -

Oct 19, 2017
8:30am

ATLANTA, Oct. 19, 2017 /PRNewswire/ -- Genuine Parts Company (NYSE: GPC) announced today sales and earnings for the third quarter and nine months ended September 30, 2017.

GPC Logo. (PRNewsFoto/Genuine Parts Company)

Sales for the third quarter ended September 30, 2017 were $4.1 billion, a 4% increase compared to $3.9 billion for the same period in 2016.  Net income for the third quarter was $158.4 million compared to $185.3 million recorded for the same period in the previous year.  Earnings per share on a diluted basis were $1.08 compared to $1.24 in the third quarter last year.  Before the impact of certain transaction costs primarily related to the Company's pending $2.0 billion European acquisition recorded in the third quarter of 2017, adjusted net income was $170 million, or $1.16 per diluted share.

Third quarter sales for the Automotive Group were up 3.6% including an approximate 1% comparable sales increase.  Sales at Motion Industries, the Industrial Group, were up 7.1%, including a 4% comparable sales increase, and sales at EIS, the Electrical/Electronic Group, grew 11.6%, with comparable sales down 1%.  Sales for S.P. Richards, the Office Products Group, were down 4.7% for the quarter in both total and comparable sales.

Paul Donahue, President and Chief Executive Officer, commented, "The third quarter presented us with both opportunities and challenges.  We were excited to announce our entry into Europe with the pending acquisition of one of the leading automotive distributors in that region, Alliance Automotive Group, which we expect to close in November.  While, domestically, we continued to operate in a challenging sales environment across three of the key industries we serve, U.S. Automotive, Office and Electrical, our Industrial and international Automotive businesses produced stronger year over year growth.  In total, we generated a 4% total sales increase, despite one less billing day in the quarter and the disruption from unprecedented natural disasters, including hurricanes and earthquakes.  This was achieved via organic growth of 1%, 2% from acquisitions and a 1% foreign exchange benefit."

Mr. Donahue added, "Our third quarter profitability was impacted by lower gross margin and higher operating expenses, as our initiatives to drive margin expansion did not meet our expectations.  To that point, our plans and initiatives are underway to expedite corrective action."

Sales for the nine months ended September 30, 2017 were $12.1 billion, a 4.7% increase compared to $11.6 billion for the same period in 2016.  Net income for the nine months was $509 million compared to $535 million in 2016, and earnings per share on a diluted basis were $3.44 compared to $3.56 in 2016. Before the transaction costs recorded in the third quarter of 2017 noted above, adjusted net income was $520 million and adjusted earnings per diluted share were $3.52.

Mr. Donahue concluded, "We enter the fourth quarter focused on generating stronger organic sales growth as well as maximizing the benefits of our acquisitions.  We are also intensely focused on the plans and initiatives underway to cut costs and improve our profitability.  While we are disappointed with this quarter's results, we are excited about the opportunities ahead and we move forward with a deep sense of urgency as we focus on maximizing shareholder value and positioning the Company for long-term success."

2017 Outlook

For the full year 2017, the Company is increasing its sales guidance from up 3% to 4% to up 4% to 4.5%.  The Company is also updating diluted earnings per share to range from $4.47 to $4.52 and adjusted diluted earnings per share to range from $4.55 to $4.60.  This compares to the prior outlook of $4.70 to $4.75.  Adjusted diluted earnings per share excludes any fourth quarter 2017 revenue, earnings or expenses, including transaction costs, associated with the pending acquisition of Alliance Automotive Group, as well as the transaction costs recorded in the third quarter of 2017 noted above.

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 877-857-6161, conference ID 8518758.  A replay will also be available on the Company's website or at 844-512-2921, conference ID 8518758, two hours after the completion of the call until 12:00 a.m. Eastern time on November 2, 2017.

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 financing, timing and completion of the acquisition of Alliance Automotive Group (AAG) and the anticipated synergies and benefits of the transaction, 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 inability to complete the acquisition due to failure to satisfy the customary closing conditions and/or the delay of or inability to obtain all regulatory approvals related to the acquisition, 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 successfully implement its business initiatives in each of its four business segments; slowing demand for the Company's products; changes in legislation or government regulations or policies; changes in general economic conditions, including unemployment, inflation or deflation; changes in tax policies; volatile exchange rates; high energy costs; uncertain credit markets and other macro-economic conditions; competitive product, service and pricing pressures; the ability to maintain favorable vendor arrangements and relationships; disruptions in our vendors' operations; the Company's ability to successfully integrate its 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 2016 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 and Australasia.  The Company also distributes industrial replacement parts in the U.S., Canada and Mexico through its Motion Industries subsidiary.  S. P. Richards Company, the Office Products Group, distributes business products in the U.S. and Canada. The Electrical/Electronic Group, EIS, Inc., distributes electrical and electronic components throughout the U.S., Canada and Mexico.

 


 

GENUINE PARTS COMPANY and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME



Three Months Ended Sept. 30,

Nine Months Ended Sept. 30,


2017

2016

2017

2016


(Unaudited)


(in thousands, except per share data)






Net sales

$4,095,906

$3,941,743

$12,101,725

$11,559,648

Cost of goods sold

2,869,016

2,743,142

8,479,402

8,091,124

Gross profit

1,226,890

1,198,601

3,622,323

3,468,524






Operating expenses:





Selling, administrative & other expenses

940,259

869,562

2,717,416

2,522,223

Depreciation and amortization

40,276

37,682

117,640

108,247


980,535

907,244

2,835,056

2,630,470






Income before income taxes

246,355

291,357

787,267

838,054

Income taxes

87,913

106,031

278,693

303,334






Net income

$   158,442

$   185,326

$   508,574

$    534,720






Basic net income per common share

$1.08

$1.24

$3.45

$3.58






Diluted net income per common share

$1.08

$1.24

$3.44

$3.56






Weighted average common shares outstanding

146,720

148,899

147,312

149,243






Dilutive effect of stock options and





   non-vested restricted stock awards

502

828

561

781






Weighted average common shares outstanding –

assuming dilution

147,222

149,727

147,873

150,024






 

GENUINE PARTS COMPANY and SUBSIDIARIES

SEGMENT INFORMATION AND FINANCIAL HIGHLIGHTS



Three Months Ended Sept. 30,

Nine Months Ended Sept. 30,


2017

2016

2017

2016


(Unaudited)


(in thousands)






Net sales:





Automotive

$2,171,008

$2,095,030

$  6,333,495

$  6,115,186

Industrial

1,244,234

1,162,224

3,729,183

3,482,246

Office Products

509,966

535,175

1,533,372

1,493,434

Electrical/Electronic Materials

199,236

178,448

588,281

538,803

Other (1)

(28,538)

(29,134)

(82,606)

(70,021)

Total net sales

$4,095,906

$3,941,743

$12,101,725

$11,559,648






Operating profit:





Automotive

$   178,202

$   197,874

$   537,291

$     555,156

Industrial

94,595

85,608

281,269

255,704

Office Products

23,974

30,257

85,184

97,101

Electrical/Electronic Materials

13,547

14,277

42,715

45,105

Total operating profit

310,318

328,016

946,459

953,066

Interest expense, net

(8,202)

(5,244)

(21,254)

(14,731)

Intangible amortization

(11,845)

(10,339)

(34,085)

(28,324)

Other, net

(43,916)

(21,076)

(103,853)

(71,957)

Income before income taxes

$   246,355

$   291,357

$   787,267

$     838,054






Capital expenditures

$     43,086

$     36,939

$     97,181

$       86,650






Depreciation and amortization

$     40,276

$     37,682

$   117,640

$     108,247






     (1) Represents the net effect of discounts, incentives and freight billed reported as a component of net sales.

 


GENUINE PARTS COMPANY and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



Sept. 30,

Sept. 30,


2017

2016


(Unaudited)


 (in thousands)

ASSETS



CURRENT ASSETS



Cash and cash equivalents

$   210,082

$   225,177

Trade accounts receivable, net

2,155,948

2,032,548

Merchandise inventories, net

3,354,178

3,146,157

Prepaid expenses and other current assets

596,400

504,600




TOTAL CURRENT ASSETS

6,316,608

5,908,482




Goodwill and other intangible assets, less accumulated amortization

1,713,569

 

1,550,435

Deferred tax assets

122,797

109,679

Other assets

581,047

491,925

Net property, plant and equipment

760,213

688,851




TOTAL ASSETS

$9,494,234

$8,749,372


LIABILITIES AND EQUITY



CURRENT LIABILITIES



Trade accounts payable

$3,275,155

$3,099,438

Current portion of debt

595,000

475,000

Income taxes payable

26,666

32,594

Dividends payable

98,959

97,955

Other current liabilities

806,887

696,544




TOTAL CURRENT LIABILITIES

4,802,667

4,401,531







Long-term debt

550,000

300,000

Pension and other post-retirement benefit liabilities

260,243

202,131

Deferred tax liabilities

50,106

51,472

Other long-term liabilities

441,090

458,944




Common stock

146,613

148,737

Retained earnings

4,108,556

4,038,985

Accumulated other comprehensive loss

(876,934)

(865,510)




TOTAL  PARENT EQUITY

3,378,235

3,322,212




Noncontrolling interests in subsidiaries

11,893

13,082




       TOTAL  EQUITY

3,390,128

3,335,294




TOTAL LIABILITIES AND EQUITY

$9,494,234

$8,749,372




 

GENUINE PARTS COMPANY and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



Nine Months Ended Sept. 30,


2017

2016


(Unaudited)


(in thousands)




OPERATING ACTIVITIES:



Net income

$508,574

$534,720

Adjustments to reconcile net income to
 net cash provided by operating activities:



Depreciation and amortization

117,640

108,247

Share-based compensation

12,912

15,362

Excess tax benefits from share-based compensation

(2,504)

(10,475)

Changes in operating assets and liabilities

(94,265)

93,498







NET CASH PROVIDED BY OPERATING ACTIVITIES

542,357

741,352




INVESTING ACTIVITIES:



Purchases of property, plant and equipment

(97,181)

(86,650)

Acquisitions and other investing activities

(289,353)

(365,545)




NET CASH USED IN INVESTING ACTIVITIES

(386,534)

(452,195)




FINANCING ACTIVITIES:



Proceeds from debt

3,420,000

3,020,000

Payments on debt

(3,150,000)

(2,870,000)

Share-based awards exercised, net of taxes paid

(3,289)

(11,942)

Excess tax benefits from share-based compensation

-

10,475

Dividends paid

(296,517)

(288,909)

Purchase of stock

(171,884)

(143,810)




NET CASH USED IN FINANCING ACTIVITIES

(201,690)

(284,186)




EFFECT OF EXCHANGE RATE CHANGES ON CASH

13,070

8,575




NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS

(32,797)

13,546




CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

242,879

211,631




CASH AND CASH EQUIVALENTS AT END OF PERIOD

$210,082

$225,177







 

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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