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Genuine Parts Company Reports Sales and Earnings for the Third Quarter Ended September 30, 2018

- Sales of $4.7 Billion, Up 15% -

- Diluted EPS $1.49, Up 38% -

- Adjusted EPS Excluding Net Transaction-Related Costs and Fees $1.48, Up 29% -

- Updates Full-Year Guidance -

ATLANTA, Oct. 18, 2018 /PRNewswire/ -- Genuine Parts Company (GPC) announced today sales and earnings for the third quarter and nine months ended September 30, 2018.

GPC Logo. (PRNewsFoto/Genuine Parts Company)

Sales for the third quarter ended September 30, 2018 were $4.7 billion, a 15.3% increase compared to $4.1 billion for the same period in 2017.  Net income for the third quarter was $220.2 million and earnings per share on a diluted basis were $1.49.  Before the net 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 attempted transaction to spin-off the Company's Business Products Group, S.P. Richards, and the favorable impact of a $12 million termination fee, adjusted net income was $217.6 million, or $1.48 per diluted share.  Total sales for the third quarter included 4.3% comparable growth, approximately 12% from acquisitions, including AAG, and an approximate 1% negative impact from foreign currency translation.

Third quarter sales for the Automotive Group were up 23.3%, including an approximate 3% comparable sales increase and the benefit of acquisitions, partially offset by unfavorable foreign currency translation of approximately 2%.  Sales for the Industrial Group were up 8.3%, including an approximate 7% comparable sales increase, and sales for the Business Products Group were up 1.3% consisting primarily of comparable sales growth.

Paul Donahue, President and Chief Executive Officer, commented, "We are pleased to report the further strengthening of our sales, driven by positive sales comps across all our business segments and the favorable impact of strategic acquisitions.  In addition, our teams made progress in driving operating improvement, resulting in an improved operating margin for the automotive and industrial segments and the Company overall.  We also did an excellent job of managing our working capital, which contributed to the strong cash flows for the quarter."

Sales for the nine months ended September 30, 2018 were $14.1 billion, a 16.8% increase compared to $12.1 billion for the same period in 2017.  Net income for the nine months was $623.8 million and earnings per share on a diluted basis were $4.23.  Before the transaction and other costs discussed above, adjusted net income was $637.6 million, or $4.33 per diluted share, for the nine months.

Mr. Donahue concluded, "We enter the fourth quarter of 2018 with positive momentum and plans for continued sales and earnings growth.  We remain focused on the further strengthening of our core sales growth, maximizing the benefits of our acquisitions and improving our operating results to further enhance our long-term sales and profit outlook.  As always, we will support these initiatives with a strong balance sheet and continued strong cash flows."

2018 Outlook

The Company is raising its sales guidance to be up 14% to 15%, an increase from the prior guidance of up 13% to 14%. The Company expects diluted earnings per share to range from $5.50 to $5.60 and is updating its guidance for adjusted diluted earnings per share, which excludes any transaction-related costs, to $5.60 to $5.70 from $5.60 to $5.75. The Company continues to expect a full-year tax rate of approximately 25.0%.

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 13683506. A replay will also be available on the Company's website or at 844-512-2921, conference ID 13683506, two hours after the completion of the call until 12:00 a.m. EDT on November 2, 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 impact of Essendant Inc.'s ("Essendant") election to terminate the proposed business combination transaction between the Company and Essendant in which the Company would have spun off its Business Products Group and combined it with Essendant or the acquisition of AAG and the anticipated strategic benefits, synergies and other attributes resulting from this and other 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 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 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 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 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

(UNAUDITED)





Three Months Ended

 September 30,


Nine Months Ended

September 30,

(in thousands, except share and per share data)


2018


2017


2018


2017

Net sales


$

4,722,922



$

4,095,906



$

14,131,281



$

12,101,725


Cost of goods sold


3,238,687



2,869,016



9,689,653



8,479,402


Gross profit


1,484,235



1,226,890



4,441,628



3,622,323


Operating expenses:









Selling, administrative and other expenses


1,119,266



931,500



3,401,254



2,715,799


Depreciation and amortization


61,082



40,276



177,896



117,640


Provision for doubtful accounts


4,939



3,508



11,306



9,182


Total operating expenses


1,185,287



975,284



3,590,456



2,842,621


Non-operating expenses (income):









Interest expense


25,084



9,038



75,669



23,263


Other


(17,871)



(3,787)



(45,822)



(30,828)


Total non-operating expenses (income)


7,213



5,251



29,847



(7,565)


Income before income taxes


291,735



246,355



821,325



787,267


Income taxes


71,508



87,913



197,550



278,693


Net income


$

220,227



$

158,442



$

623,775



$

508,574


Basic net income per common share


$

1.50



$

1.08



$

4.25



$

3.45


Diluted net income per common share


$

1.49



$

1.08



$

4.23



$

3.44


Dividends declared per common share


$

.7200



$

.6750



$

2.160



$

2.025


Weighted average common shares outstanding


146,763



146,720



146,746



147,312


Dilutive effect of stock options and non-vested 
     restricted stock awards


690



502



574



561


Weighted average common shares outstanding – 
     assuming dilution


147,453



147,222



147,320



147,873


 

GENUINE PARTS COMPANY AND SUBSIDIARIES

SEGMENT INFORMATION

(UNAUDITED)





Three Months Ended
September 30,


Nine Months Ended
September 30,

(in thousands)


2018


2017


2018


2017

Net sales: (1)









Automotive


$

2,649,716



$

2,149,865



$

7,950,176



$

6,271,233


Industrial (2)


1,577,329



1,456,651



4,727,938



4,359,819


Business products


495,877



489,390



1,453,167



1,470,673


Total net sales


$

4,722,922



$

4,095,906



$

14,131,281



$

12,101,725











Operating profit:









Automotive


$

226,742



$

178,202



$

655,059



$

537,291


Industrial (2)


119,153



108,142



356,535



323,984


Business products


19,846



23,974



62,869



85,184


Total operating profit


365,741



310,318



1,074,463



946,459


Interest expense, net


(21,881)



(8,202)



(70,713)



(21,254)


Intangible amortization


(23,593)



(11,845)



(66,802)



(34,085)


Other, net (3)


(28,532)



(43,916)



(115,623)



(103,853)


Income before income taxes


$

291,735



$

246,355



$

821,325



$

787,267






(1)

The net effect of discounts, incentives, and freight billed to customers has been allocated to their respective segments for the current and
prior periods.  Previously, the net effect 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 reporting is presented retrospectively.



(3)

The three and nine months ended September 30, 2018 include $3.1 million of income and $19.0 million of expenses, respectively, from
transaction and other costs incurred related to the Alliance Automotive Group ("AAG") acquisition and the attempted S.P. Richards spin-off,
net of a $12 million termination fee received in the third quarter.




The three and nine months ended September 30, 2017 include $18.6 million in transaction and other costs primarily related to the AAG
acquisition.

 

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)





September 30,


September 30,

(in thousands)


2018


2017

Assets





Current assets:





Cash and cash equivalents


$

359,105



$

210,082


Trade accounts receivable, net


2,655,888



2,155,948


Merchandise inventories, net


3,536,503



3,354,178


Prepaid expenses and other current assets


998,999



596,400


Total current assets


7,550,495



6,316,608







Goodwill and other intangible assets, less accumulated amortization


3,518,470



1,713,569


Deferred tax assets


22,898



122,797


Net property, plant and equipment


937,740



760,213


Other assets


627,516



581,047


Total assets


$

12,657,119



$

9,494,234



Liabilities and equity





Current liabilities:





Trade accounts payable


$

4,036,006



$

3,275,155


Current portion of debt


450,493



595,000


Dividends payable


105,673



98,959


Income taxes payable


23,964



26,666


Other current liabilities


1,045,053



806,887


Total current liabilities


5,661,189



4,802,667


Long-term debt


2,463,452



550,000


Pension and other post-retirement benefit liabilities


200,558



260,243


Deferred tax liabilities


188,467



50,106


Other long-term liabilities


480,374



441,090


Equity:





Common stock


146,759



146,613


Retained earnings


4,426,572



4,108,556


Accumulated other comprehensive loss


(962,277)



(876,934)


Total parent equity


3,611,054



3,378,235


Noncontrolling interests in subsidiaries


52,025



11,893


Total equity


3,663,079



3,390,128


Total liabilities and equity


$

12,657,119



$

9,494,234


 

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)





Nine Months Ended
September 30,

(in thousands)


2018


2017

Operating activities:





Net income


$

623,775



$

508,574


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





Depreciation and amortization


177,896



117,640


Share-based compensation


15,417



12,912


Excess tax benefits from share-based compensation


(3,079)



(2,504)


Changes in operating assets and liabilities


111,517



(94,265)


Net cash provided by operating activities


925,526



542,357


Investing activities:





Purchases of property, plant and equipment


(91,942)



(97,181)


Acquisitions and other investing activities


(153,988)



(289,353)


Net cash used in investing activities


(245,930)



(386,534)


Financing activities:





Proceeds from debt


3,406,975



3,420,000


Payments on debt


(3,710,934)



(3,150,000)


Share-based awards exercised


(5,860)



(3,289)


Dividends paid


(310,310)



(296,517)


Purchases of stock


(1,918)



(171,884)


Net cash used in financing activities


(622,047)



(201,690)


Effect of exchange rate changes on cash and cash equivalents


(13,343)



13,070


Net increase (decrease) in cash and cash equivalents


44,206



(32,797)


Cash and cash equivalents at beginning of period


314,899



242,879


Cash and cash equivalents at end of period


$

359,105



$

210,082


 

GENUINE PARTS COMPANY AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME

(UNAUDITED)





Three Months Ended

September 30,


Nine Months Ended

September 30,

(in thousands, except per share data)


2018


2017


2018


2017

GAAP net income


$

220,227



$

158,442



$

623,775



$

508,574


Diluted net income per common share


$

1.49



$

1.08



$

4.23



$

3.44











Add after-tax adjustments:









Transaction and other costs


6,453



11,584



22,918



11,585


Termination fee


(9,045)





(9,045)




Adjusted net income


$

217,635



$

170,026



$

637,648



$

520,159


Adjusted diluted net income per common share


$

1.48



$

1.15



$

4.33



$

3.52



 

GENUINE PARTS COMPANY AND SUBSIDIARIES

RECONCILIATION OF 2018 FORECASTED GAAP NET INCOME TO FORECASTED ADJUSTED
NET INCOME

(UNAUDITED)



(in thousands, except per share data)


Low End


High End

Forecasted GAAP net income


$

810,500



$

825,500


Forecasted diluted net income per common share


$

5.50



$

5.60







Add forecasted after-tax adjustments:





Forecasted transaction and other costs, net of termination fee


13,873



13,873


Forecasted adjusted net income


$

824,373



$

839,373


Forecasted adjusted diluted net income per common share


$

5.60



$

5.70


 

Cision

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