FORM 10-Q |
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
GEORGIA | 58-0254510 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
2999 WILDWOOD PARKWAY, ATLANTA, GA | 30339 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ý | Accelerated filer | ¨ | |||
Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | ¨ | |||
Emerging growth company | o |
Class | Outstanding at June 30, 2018 | |
Common Stock, $1.00 par value per share | 146,752,732 |
June 30, 2018 | December 31, 2017 | ||||||
(unaudited) | |||||||
(in thousands, except share and per share data) | |||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | 355,141 | $ | 314,899 | |||
Trade accounts receivable, less allowance for doubtful accounts (2018 – $25,329; 2017 – $17,612) | 2,669,649 | 2,421,563 | |||||
Merchandise inventories, net | 3,484,949 | 3,771,089 | |||||
Prepaid expenses and other current assets | 1,013,630 | 805,342 | |||||
TOTAL CURRENT ASSETS | 7,523,369 | 7,312,893 | |||||
Goodwill | 2,142,822 | 2,153,988 | |||||
Other intangible assets, less accumulated amortization | 1,356,149 | 1,400,392 | |||||
Deferred tax assets | 25,480 | 40,158 | |||||
Other assets | 600,124 | 568,248 | |||||
Property, plant and equipment, less accumulated depreciation (2018 – $1,117,925; 2017 – $1,044,353) | 918,578 | 936,702 | |||||
TOTAL ASSETS | $ | 12,566,522 | $ | 12,412,381 | |||
LIABILITIES AND EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Trade accounts payable | $ | 3,831,274 | $ | 3,634,859 | |||
Current portion of debt | 686,415 | 694,989 | |||||
Dividends payable | 105,661 | 99,000 | |||||
Income taxes payable | 17,782 | 10,736 | |||||
Other current liabilities | 1,015,762 | 1,034,441 | |||||
TOTAL CURRENT LIABILITIES | 5,656,894 | 5,474,025 | |||||
Long-term debt | 2,490,552 | 2,550,020 | |||||
Pension and other post–retirement benefit liabilities | 200,137 | 229,868 | |||||
Deferred tax liabilities | 174,564 | 193,308 | |||||
Other long-term liabilities | 482,048 | 501,004 | |||||
EQUITY: | |||||||
Preferred stock, par value – $1 per share | |||||||
Authorized – 10,000,000 shares; none issued | -0- | -0- | |||||
Common stock, par value – $1 per share | |||||||
Authorized – 450,000,000 shares; issued and outstanding – 2018 – 146,752,732 shares; 2017 – 146,652,615 shares | 146,753 | 146,653 | |||||
Additional paid-in capital | 72,211 | 68,126 | |||||
Retained earnings | 4,236,359 | 4,049,965 | |||||
Accumulated other comprehensive loss | (943,351 | ) | (852,592 | ) | |||
TOTAL PARENT EQUITY | 3,511,972 | 3,412,152 | |||||
Noncontrolling interests in subsidiaries | 50,355 | 52,004 | |||||
TOTAL EQUITY | 3,562,327 | 3,464,156 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 12,566,522 | $ | 12,412,381 |
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 expenses: | |||||||||||||||
Selling, administrative and other expenses | 1,148,217 | 906,943 | 2,281,988 | 1,784,299 | |||||||||||
Depreciation and amortization | 58,451 | 39,232 | 116,814 | 77,364 | |||||||||||
Provision for doubtful accounts | 3,666 | 2,546 | 6,367 | 5,674 | |||||||||||
Total operating expenses | 1,210,334 | 948,721 | 2,405,169 | 1,867,337 | |||||||||||
Non-operating expenses (income): | |||||||||||||||
Interest expense | 26,476 | 7,446 | 50,585 | 14,225 | |||||||||||
Other | (15,495 | ) | (13,592 | ) | (27,951 | ) | (27,041 | ) | |||||||
Total non-operating expenses (income) | 10,981 | (6,146 | ) | 22,634 | (12,816 | ) | |||||||||
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 | |||||||
Dividends declared per common share | $ | .7200 | $ | .6750 | $ | 1.440 | $ | 1.350 | |||||||
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 | |||||||||||
Net income | $ | 226,972 | $ | 189,972 | $ | 403,548 | $ | 350,132 | |||||||
Other comprehensive income (loss), net of income taxes: | |||||||||||||||
Foreign currency translation adjustment | (163,993 | ) | 23,157 | (121,113 | ) | 80,177 | |||||||||
Net investment hedge, net of income taxes in 2018 — ($5,935) | 32,755 | — | 16,045 | — | |||||||||||
Pension and postretirement benefit adjustments, net of income taxes in 2018 — $2,642 and $5,290; 2017 — $3,568 and $7,139 respectively | 7,145 | 5,723 | 14,309 | 11,455 | |||||||||||
Other comprehensive (loss) income, net of income taxes | (124,093 | ) | 28,880 | (90,759 | ) | 91,632 | |||||||||
Comprehensive income | $ | 102,879 | $ | 218,852 | $ | 312,789 | $ | 441,764 |
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 | ) | |||
Purchases 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 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
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 asset amortization | (21,806 | ) | (11,434 | ) | (43,209 | ) | (22,240 | ) | |||||||
Corporate expense (3) | (42,622 | ) | (33,807 | ) | (87,091 | ) | (59,937 | ) | |||||||
Income before income taxes | $ | 300,271 | $ | 297,137 | $ | 529,590 | $ | 540,912 |
Primary Geographical Markets: | |||||||||||||||||||||||||||||||
Three Months Ended June 30 | |||||||||||||||||||||||||||||||
North America | Australasia | Europe | Total | ||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Reportable Segments: | |||||||||||||||||||||||||||||||
Automotive | $ | 1,944,980 | $ | 1,859,478 | $ | 302,799 | $ | 283,444 | $ | 488,422 | $ | — | $ | 2,736,201 | $ | 2,142,922 | |||||||||||||||
Industrial | 1,602,665 | 1,474,209 | — | — | — | — | 1,602,665 | 1,474,209 | |||||||||||||||||||||||
Business products | 483,199 | 483,047 | — | — | — | — | 483,199 | 483,047 | |||||||||||||||||||||||
Total net sales from contracts with customers | $ | 4,030,844 | $ | 3,816,734 | $ | 302,799 | $ | 283,444 | $ | 488,422 | $ | — | $ | 4,822,065 | $ | 4,100,178 |
Primary Geographical Markets: | |||||||||||||||||||||||||||||||
Six Months Ended June 30 | |||||||||||||||||||||||||||||||
North America | Australasia | Europe | Total | ||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Reportable Segments: | |||||||||||||||||||||||||||||||
Automotive | $ | 3,727,294 | $ | 3,563,029 | $ | 604,803 | $ | 558,339 | $ | 968,363 | $ | — | $ | 5,300,460 | $ | 4,121,368 | |||||||||||||||
Industrial | 3,150,609 | 2,903,168 | — | — | — | — | 3,150,609 | 2,903,168 | |||||||||||||||||||||||
Business products | 957,290 | 981,283 | — | — | — | — | 957,290 | 981,283 | |||||||||||||||||||||||
Total net sales from contracts with customers | $ | 7,835,193 | $ | 7,447,480 | $ | 604,803 | $ | 558,339 | $ | 968,363 | $ | — | $ | 9,408,359 | $ | 8,005,819 |
2018 | |||||||||||||||
Changes in Accumulated Other Comprehensive Loss by Component | |||||||||||||||
Pension and Other Post- Retirement Benefits | Net Investment Hedge | Foreign Currency Translation | Total | ||||||||||||
Beginning balance, January 1 | $ | (568,957 | ) | $ | (17,388 | ) | $ | (266,247 | ) | $ | (852,592 | ) | |||
Other comprehensive income (loss) before reclassifications, net of tax | — | 16,045 | (121,113 | ) | (105,068 | ) | |||||||||
Amounts reclassified from accumulated other comprehensive loss, net of tax | 14,309 | — | — | 14,309 | |||||||||||
Net current period other comprehensive income (loss) | 14,309 | 16,045 | (121,113 | ) | (90,759 | ) | |||||||||
Ending balance, June 30 | $ | (554,648 | ) | $ | (1,343 | ) | $ | (387,360 | ) | $ | (943,351 | ) |
2017 | |||||||||||||||
Changes in Accumulated Other Comprehensive Loss by Component | |||||||||||||||
Pension and Other Post- Retirement Benefits | Net Investment Hedge | Foreign Currency Translation | Total | ||||||||||||
Beginning balance, January 1 | $ | (609,080 | ) | $ | — | $ | (403,941 | ) | $ | (1,013,021 | ) | ||||
Other comprehensive income before reclassifications, net of tax | — | — | 80,177 | 80,177 | |||||||||||
Amounts reclassified from accumulated other comprehensive loss, net of tax | 11,455 | — | — | 11,455 | |||||||||||
Net current period other comprehensive income | 11,455 | — | 80,177 | 91,632 | |||||||||||
Ending balance, June 30 | $ | (597,625 | ) | $ | — | $ | (323,764 | ) | $ | (921,389 | ) |
Pension Benefits | |||||||
2018 | 2017 | ||||||
Service cost | $ | 2,612 | $ | 2,133 | |||
Interest cost | 22,071 | 24,099 | |||||
Expected return on plan assets | (38,516 | ) | (39,681 | ) | |||
Amortization of prior service credit | (37 | ) | (87 | ) | |||
Amortization of actuarial loss | 9,935 | 9,466 | |||||
Net periodic benefit income | $ | (3,935 | ) | $ | (4,070 | ) |
Pension Benefits | |||||||
2018 | 2017 | ||||||
Service cost | $ | 5,266 | $ | 4,290 | |||
Interest cost | 44,184 | 48,231 | |||||
Expected return on plan assets | (77,104 | ) | (79,414 | ) | |||
Amortization of prior service credit | (74 | ) | (175 | ) | |||
Amortization of actuarial loss | 19,894 | 18,951 | |||||
Net periodic benefit income | $ | (7,834 | ) | $ | (8,117 | ) |
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 |
Period | Total Number of Shares Purchased (1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs | |||
April 1, 2018 through April 30, 2018 | 3,843 | $90.21 | — | 17,371,203 | |||
May 1, 2018 through May 31, 2018 | 7,917 | $91.10 | — | 17,371,203 | |||
June 1, 2018 through June 30, 2018 | 21,748 | $94.62 | — | 17,371,203 | |||
Totals | 33,508 | $93.28 | — | 17,371,203 |
(1) | Includes shares surrendered by employees to the Company to satisfy tax withholding obligations in connection with the vesting of shares of restricted stock, the exercise of stock options and/or tax withholding obligations. |
(2) | On November 17, 2008, and August 21, 2017, the Board of Directors announced that it had authorized the repurchase of 15 million shares and 15 million shares, respectively. The authorization for these repurchase plans continues until all such shares have been repurchased or the repurchase plan is terminated by action of the Board of Directors. Approximately 2.4 million shares authorized in the 2008 plan and 15.0 million shares authorized in 2017 remain available to be repurchased by the Company. There were no other plans announced as of June 30, 2018. |
Exhibit 3.1 | ||
Exhibit 3.2 | ||
Exhibit 31.1 | ||
Exhibit 31.2 | ||
Exhibit 32.1 | ||
Exhibit 32.2 | ||
Exhibit 101 | Interactive data files pursuant to Rule 405 of Regulation S-T: | |
(i) the Condensed Consolidated Balance Sheets at June 30, 2018 and December 31, 2017; (ii) the Condensed Consolidated Statements of Income and Comprehensive Income for the three and six month periods ended June 30, 2018 and 2017; (iii) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017; and (iv) the Notes to the Condensed Consolidated Financial Statements |
Genuine Parts Company (Registrant) | ||
Date: July 25, 2018 | /s/ Carol B. Yancey | |
Carol B. Yancey | ||
Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Genuine Parts Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Paul D. Donahue |
Paul D. Donahue President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Genuine Parts Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Carol B. Yancey |
Carol B. Yancey Executive Vice President and Chief Financial Officer |
1 | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2 | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Paul D. Donahue |
Paul D. Donahue President and Chief Executive Officer |
July 25, 2018 |
1 | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2 | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Carol B. Yancey |
Carol B. Yancey Executive Vice President and Chief Financial Officer |
July 25, 2018 |
Document and Entity Information |
6 Months Ended |
---|---|
Jun. 30, 2018
shares
| |
Document And Entity Information [Abstract] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Jun. 30, 2018 |
Document Fiscal Year Focus | 2018 |
Document Fiscal Period Focus | Q2 |
Trading Symbol | GPC |
Entity Registrant Name | GENUINE PARTS CO |
Entity Central Index Key | 0000040987 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 146,752,732 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 25,329 | $ 17,612 |
Accumulated depreciation | $ 1,117,925 | $ 1,044,353 |
Preferred stock, par value (usd per share) | $ 1 | $ 1 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Common stock, par value (usd per share) | $ 1 | $ 1 |
Common stock, shares authorized (in shares) | 450,000,000 | 450,000,000 |
Common stock, shares issued (in shares) | 146,752,732 | 146,652,615 |
Common stock, shares outstanding (in shares) | 146,752,732 | 146,652,615 |
Condensed Consolidated Statements of Income and Comprehensive Income (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Income Statement [Abstract] | ||||
Net investment hedge, tax | $ (5,935) | $ (5,935) | ||
Pension and postretirement benefit adjustments, tax | $ 2,642 | $ 3,568 | $ 5,290 | $ 7,139 |
Basis of Presentation |
6 Months Ended |
---|---|
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the Annual Report on Form 10-K of Genuine Parts Company (the “Company”) for the year ended December 31, 2017. Accordingly, the unaudited interim condensed consolidated financial statements and related disclosures herein should be read in conjunction with the Company’s 2017 Annual Report on Form 10-K. The preparation of interim financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements. Specifically, the Company makes estimates and assumptions in its interim condensed consolidated financial statements for inventory adjustments, the accrual of bad debts, customer sales returns, and volume incentives earned, among others. Inventory adjustments (including adjustments for a majority of inventories that are valued under the last-in, first-out (“LIFO”) method) are accrued on an interim basis and adjusted in the fourth quarter based on the annual book to physical inventory adjustment and LIFO valuation, which are performed each year-end. Reserves for bad debts and customer sales returns are estimated and accrued on an interim basis based upon historical experience. Volume incentives are estimated based upon cumulative and projected purchasing levels. The estimates and assumptions for interim reporting may change upon final determination at year-end, and such changes may be significant. In the opinion of management, all adjustments necessary for a fair presentation of the Company’s financial results for the interim periods have been made. These adjustments are of a normal recurring nature. The results of operations for the six months ended June 30, 2018 are not necessarily indicative of results for the entire year. The Company has evaluated subsequent events through the date the financial statements covered by this quarterly report were issued. |
Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information
(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) 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 pending transaction to spin-off the Company's Business Products Group, S.P. Richards, and combine it with Essendant, Inc. ("Essendant"). See the acquisitions and divestitures footnote for additional information. Net sales is disaggregated by geographical region for each of the Company’s segments, as the Company deems this presentation best depicts how the nature, amount, timing and uncertainty of net sales and cash flows are affected by economic factors. Disaggregated geographical net sales by reportable segment are summarized as follows:
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Revenue Recognition |
6 Months Ended |
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Jun. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | Revenue Recognition The Company applied Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), using the modified retrospective method effective January 1, 2018. The cumulative effect of initially applying ASU 2014-09 and its amendments resulted in a reduction to the opening retained earnings balance of $8,000, prior to the tax adjustment, at January 1, 2018 and a related adjustment to other current liabilities as of that date. Revenue for periods prior to January 1, 2018 have not been adjusted and continue to be reported under Revenue Recognition (Topic 605). Upon adoption of ASU 2014-09, the Company also began classifying its estimate of merchandise returns expected in the next twelve months, which was $222,697 as of June 30, 2018, in prepaid expenses and other current assets. This estimate was historically classified in merchandise inventories, net and the amount was $203,589 as of December 31, 2017. The Company primarily recognizes revenue at the point in time that transfer of control of products or services to customers occurs and at an amount that reflects the consideration expected to be received for those products or services. Contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price and recognizes revenue upon delivery or as services are rendered. Revenue is recognized net of allowances for returns, variable consideration, and any taxes collected from customers that will be remitted to governmental authorities. Revenue recognized over time is not significant. Payment terms with customers vary by the type and location of the customer and the products or services offered. The Company does not adjust the promised amount of consideration for the effects of significant financing components based on the expectation that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Arrangements with customers that include payment terms extending beyond one year are not significant. Liabilities for customer incentives, discounts, or rebates are included in other current liabilities in the accompanying balance sheets. Product Distribution Revenues The Company generates revenue primarily by distributing products through wholesale and retail channels. For wholesale customers, revenue is recognized when the goods are transferred to customers, title has passed and control of the goods has passed to the customer. Retail revenue is recognized at the point of sale when the goods are transferred to customers and consideration is received. Shipping and handling activities are performed prior to the customer obtaining control of the products. Costs associated with shipping and handling are considered costs to fulfill a contract and are included in selling, administrative and other expenses in the period they are incurred. Other Revenues The Company offers software support, product cataloguing, marketing, training and other membership program and support services to certain customers. This revenue is recognized as services are provided. Revenue from these services is recognized over a short duration and the impact is not significant. Variable Consideration The Company’s products are generally sold with a right of return and may include variable consideration in the form of incentives, discounts, credits or rebates. The Company estimates variable consideration based on historical experience to determine the expected amount to which the Company will be entitled in exchange for transferring the promised goods or services to a customer. The Company recognizes estimated variable consideration as an adjustment to the transaction price when control of the related product is transferred. The realization of variable consideration occurs within a short period of time from product delivery; therefore, the time value of money effect is not significant. |
Accumulated Other Comprehensive Loss |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The following tables present the changes in accumulated other comprehensive loss by component for the six months ended June 30:
The accumulated other comprehensive loss components related to the pension benefits are included in the computation of net periodic benefit income in the employee benefit plans footnote. The nature of the net investment hedge is discussed in the non-derivative financial instrument footnote. |
Recent Accounting Pronouncements |
6 Months Ended |
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Jun. 30, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Revenue from Contracts with Customers (Topic 606) In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, which creates a single, comprehensive revenue recognition model for recognizing revenue from contracts with customers. The Company adopted ASU 2014-09 and its amendments on January 1, 2018. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than were required under previously existing guidance, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. ASU 2014-09 did not result in a significant change in the judgment or timing associated with the recognition of revenue from the sale of the Company’s products or services. See the revenue recognition footnote for additional information. Leases (Topic 842) In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"), which, among other things, requires an entity to recognize a right-of-use asset and a lease liability on the balance sheet for all leases, including operating leases, with a term greater than twelve months. Expanded disclosures with additional qualitative and quantitative information will also be required. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018 and early adoption is permitted. The new standard must be adopted using a modified retrospective transition. The Company has established a cross-functional team to evaluate and implement the new standard. As disclosed in the leased properties footnote in the 2017 Annual Report on Form 10-K, the future minimum payments under noncancelable operating leases are approximately $1,140,000 as of December 31, 2017. The Company believes the adoption of this standard will have a significant impact on the consolidated balance sheets. Income Tax Reform As more fully discussed in Note 7 of the Company’s notes to the consolidated financial statements in its 2017 Annual Report on Form 10-K, the Tax Cuts and Jobs Act (the Act) was enacted December 22, 2017. As of June 30, 2018, the Company has not completed the accounting for the tax effects of the enactment of the Act due to its complexities and limited guidance available; however, the Company has made a reasonable estimate of the effect of the Act on the existing deferred tax balances and of the one-time transition tax. There was no impact on the tax rate as a result of a change in estimate for the six months ended June 30, 2018. In all cases, the Company continues to refine the calculations as additional analysis and modeling are completed. Further, the Company's estimates may also be affected as regulations and additional guidance become available. In addition, the Act subjects a U.S. shareholder to tax on Global Intangible Low-Taxed Income (GILTI) earned by certain foreign subsidiaries. Given the complexity of the GILTI provisions, the Company is still evaluating its effects and has not yet made an accounting policy election. The provision is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures. Compensation-Retirement Benefits (Topic 715) In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715) ("ASU 2017-07"), which requires an entity to report the service cost component of net periodic benefit cost in the same line item as other compensation costs (selling, administrative and other expenses) and the remaining components in non-operating expense in the consolidated statement of income and comprehensive income. The Company adopted ASU 2017-07 retrospectively on January 1, 2018 and it did not have a material impact on the Company's condensed consolidated financial statements or related disclosures. See the employee benefit plans footnote for additional information. The Company elected to use the amounts disclosed in the employee benefit plans note for the prior comparative period as the basis for applying the retrospective presentation. |
Share-Based Compensation |
6 Months Ended |
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Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | Share-Based Compensation As more fully discussed in Note 6 of the Company’s notes to the consolidated financial statements in its 2017 Annual Report on Form 10-K, the Company maintains various long-term incentive plans, which provide for the granting of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance awards, dividend equivalents and other share-based awards. SARs represent a right to receive upon exercise an amount, payable in shares of common stock, equal to the excess, if any, of the fair market value of the Company’s common stock on the date of exercise over the base value of the grant. The terms of such SARs require net settlement in shares of common stock and do not provide for cash settlement. An RSU represents a contingent right to receive one share of the Company’s common stock at a future date. The majority of awards previously granted vest on a pro-rata basis for periods ranging from one to five years and are expensed accordingly on a straight-line basis. The Company issues new shares upon exercise or conversion of awards under these plans. Most awards may be exercised or converted to shares not earlier than twelve months nor later than ten years from the date of grant. At June 30, 2018, total compensation cost related to nonvested awards not yet recognized was approximately $48,924, as compared to $32,812 at December 31, 2017. The weighted-average period over which this compensation cost is expected to be recognized is approximately two years. The aggregate intrinsic value for SARs and RSUs outstanding at June 30, 2018 was approximately $99,878. At June 30, 2018, the aggregate intrinsic value for SARs and RSUs vested totaled approximately $35,996, and the weighted-average contractual lives for outstanding and exercisable SARs and RSUs were approximately five years. For the six months ended June 30, 2018, $9,035 of share-based compensation cost was recorded, as compared to $8,086 for the same six month period in the prior year. Options to purchase approximately 2,098,000 and 1,445,000 shares of common stock were outstanding but excluded from the computation of diluted earnings per share for the three and six month periods ended June 30, 2018, as compared to approximately 1,968,000 and 1,697,000 shares for the three and six month periods ended June 30, 2017. These options were excluded from the computation of diluted net income per common share because the options’ exercise prices were greater than the average market price of the common stock. During the six months ended June 30, 2018, the Company granted approximately 360,000 RSUs. |
Employee Benefit Plans |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefit Plans | Employee Benefit Plans Net periodic benefit income for the Company's pension plans included the following components for the three months ended June 30:
Net periodic benefit income for the Company's pension plans included the following components for the six months ended June 30:
Service cost is recorded in selling, administrative and other expenses in the condensed consolidated statements of income and comprehensive income while all other components are recorded within other non-operating expenses (income). Pension benefits also include amounts related to a supplemental retirement plan. During the six months ended June 30, 2018, the Company made a $38,700 contribution to the pension plan. |
Guarantees |
6 Months Ended |
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Jun. 30, 2018 | |
Guarantees [Abstract] | |
Guarantees | Guarantees The Company guarantees the borrowings of certain independently controlled automotive parts stores (“independents”) and certain other affiliates in which the Company has a noncontrolling equity ownership interest (“affiliates”). Presently, the independents are generally consolidated by unaffiliated enterprises that have controlling financial interests through ownership of a majority voting interest in the independents. The Company has no voting interest or equity conversion rights in any of the independents. The Company does not control the independents or the affiliates, but receives a fee for the guarantees. The Company has concluded that the independents are variable interest entities, but that the Company is not the primary beneficiary. Specifically, the equity holders of the independents have the power to direct the activities that most significantly impact the entities’ economic performance including, but not limited to, decisions about hiring and terminating personnel, local marketing and promotional initiatives, pricing and selling activities, credit decisions, monitoring and maintaining appropriate inventories, and store hours. Separately, the Company concluded the affiliates are not variable interest entities. The Company’s maximum exposure to loss as a result of its involvement with these independents and affiliates is generally equal to the total borrowings subject to the Company’s guarantees. While such borrowings of the independents and affiliates are outstanding, the Company is required to maintain compliance with certain covenants, including a maximum debt to capitalization ratio and certain limitations on additional borrowings. At June 30, 2018, the Company was in compliance with all such covenants. At June 30, 2018, the total borrowings of the independents and affiliates subject to guarantee by the Company were approximately $685,141. These loans generally mature over periods from one to six years. In the event that the Company is required to make payments in connection with guaranteed obligations of the independents or the affiliates, the Company would obtain and liquidate certain collateral (e.g., accounts receivable and inventory) to recover all or a portion of the amounts paid under the guarantees. When it is deemed probable that the Company will incur a loss in connection with a guarantee, a liability is recorded equal to this estimated loss. To date, the Company has had no significant losses in connection with guarantees of independents’ and affiliates’ borrowings. As of June 30, 2018, the Company has recognized certain assets and liabilities amounting to $70,000 each for the guarantees related to the independents’ and affiliates’ borrowings. These assets and liabilities are included in other assets and other long-term liabilities in the condensed consolidated balance sheets. |
Fair Value of Financial Instruments |
6 Months Ended |
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Jun. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash equivalents, trade accounts receivable, trade accounts payable, and borrowings under the line of credit and term loan approximate their respective fair values based on the short-term nature of these instruments. As of June 30, 2018, the carrying amount, net of debt issuance costs, and the fair value of fixed rate debt were approximately $1,483,356 and $1,433,875, respectively. The fair value of fixed rate debt is designated as Level 2 in the fair value hierarchy (i.e., significant observable inputs) and is based primarily on the discounted value of future cash flows using current market interest rates offered for debt of similar credit risk and maturity. The carrying amount, net of debt issuance costs, of fixed rate debt of $1,483,356 is included in long-term debt in the accompanying condensed consolidated balance sheet. |
Non-Derivative Financial Instrument |
6 Months Ended |
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Jun. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Non-Derivative Financial Instrument | Non-Derivative Financial Instrument As of June 30, 2018, the Company had designated €700,000 of the face value of Euro-denominated debt, a non-derivative financial instrument, as a hedge of the foreign currency exchange rate exposure of an equal amount to the Company's euro-denominated net investment in a European subsidiary. As of June 30, 2018, the euro-denominated debt has a total carrying amount of $817,880, which is included in long-term debt in the Company’s condensed consolidated balance sheet. For the three and six months ended June 30, 2018, the Company recorded a gain, net of tax, of approximately $32,755 and $16,045 respectively, in the net investment hedge section of the accumulated other comprehensive loss in the Company’s condensed consolidated balance sheet and statement of income and comprehensive income. No hedge ineffectiveness was recognized in income. |
Legal Matters |
6 Months Ended |
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Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Legal Matters | Legal Matters As more fully discussed in Note 10 of the Company's notes to the consolidated financial statements in its 2017 Annual Report on Form 10-K, a jury awarded damages against the Company in a litigated automotive product liability dispute. At the time of the filing of these financial statements, based upon the Company’s legal defenses, insurance coverage, and reserves, the Company does not believe this matter will have a material impact to the condensed consolidated financial statements. |
Acquisitions and Divestitures |
6 Months Ended |
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Jun. 30, 2018 | |
Business Combinations [Abstract] | |
Acquisitions and Divestitures | Acquisitions and Divestitures Acquisitions As more fully discussed in Note 11 of the Company's notes to the consolidated financial statements in its 2017 Annual Report on Form 10-K, the estimated fair values of the assets acquired and liabilities assumed as part of the AAG acquisition in November 2017 are preliminary and subject to revision, pending completion of the final valuations for these assets. Among other things, the Company is finalizing its review of valuation reports of certain tangible and intangible assets, as well as completing its review of certain related tax accounts. For the six months ended June 30, 2018, no significant changes were made to the provisional amounts disclosed for the year ended December 31, 2017. Divestitures On April 12, 2018, the Company entered into a definitive agreement with Essendant to combine with the Company's Business Products Group in a business combination transaction. The transaction is structured as a Reverse Morris Trust, in which the Company will separate the Business Products Group into a standalone company and spin off that standalone company to the Company's shareholders, immediately followed by the merger of a subsidiary of Essendant and the spun-off company. Subsequently, Essendant received letters from Staples, Inc. ("Staples") expressing its interest in the purchase of 100% of Essendant's equity for $11.50 per share in cash. Additionally, the Federal Trade Commission has issued second requests in connection with filings under the Hart-Scott-Rodino Antitrust Improvement Act for both the Company's definitive agreement with Essendant and the Staples proposal to acquire Essendant. The proceeds of the transaction will take the form of Essendant shares to be issued at closing to the Company's shareholders plus one-time cash payments to the Company of approximately $347,000, subject to adjustments at closing. Upon closing, the Company's shareholders will own approximately 51% and Essendant shareholders will own approximately 49% of the combined company on a diluted basis, with approximately 80,000,000 diluted shares expected to be outstanding. The spinoff will have no effect on the number of the Company's common shares owned by the Company's shareholders or the number of shares of the Company's common stock outstanding. The transaction is intended to be tax-free to the Company's shareholders for U.S. federal income tax purposes. Subject to regulatory and Essendant shareholder approvals and other customary closing conditions, the Company continues to expect to close on the proposed transaction with Essendant before the end of 2018. The assets and liabilities of the Business Products Group will continue to be presented as "held and used" on the Company's condensed consolidated balance sheet until the closing of the transaction. The spinoff announcement was evaluated and determined not to be an event or a change in circumstance that required a recoverability test or a goodwill impairment assessment. However, an impairment loss could be recognized by the Company at the spinoff date if the aggregate carrying amount of the Business Products Group's assets and liabilities exceeds its aggregate fair value at that date. The Company cannot currently predict whether an impairment loss will be recorded at the spinoff date. |
Reclassifications |
6 Months Ended |
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Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Reclassifications | Reclassifications Certain prior period amounts have been reclassified to conform to the current year presentations. Within the condensed consolidated statements of income and comprehensive income, the Company adopted ASU 2017-07 and adjusted the prior period to include the components of net periodic benefit income other than the service cost component within other non-operating expenses (income). See the employee benefit plans footnote for additional information. As more fully discussed in the segment information footnote, the Company adjusted prior period net sales to allocate discounts, incentives, and freight billed to customers to their respective segments and also combined the industrial and electrical/electronic materials segments. Refer to the revenue recognition footnote for more information about the Company's change in classification for its estimate of certain merchandise returns in connection with adopting ASU 2014-09. |
Basis of Presentation (Policies) |
6 Months Ended |
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Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Accounting | The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the Annual Report on Form 10-K of Genuine Parts Company (the “Company”) for the year ended December 31, 2017. Accordingly, the unaudited interim condensed consolidated financial statements and related disclosures herein should be read in conjunction with the Company’s 2017 Annual Report on Form 10-K. |
Use of Estimates | The preparation of interim financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements. Specifically, the Company makes estimates and assumptions in its interim condensed consolidated financial statements for inventory adjustments, the accrual of bad debts, customer sales returns, and volume incentives earned, among others. Inventory adjustments (including adjustments for a majority of inventories that are valued under the last-in, first-out (“LIFO”) method) are accrued on an interim basis and adjusted in the fourth quarter based on the annual book to physical inventory adjustment and LIFO valuation, which are performed each year-end. Reserves for bad debts and customer sales returns are estimated and accrued on an interim basis based upon historical experience. Volume incentives are estimated based upon cumulative and projected purchasing levels. The estimates and assumptions for interim reporting may change upon final determination at year-end, and such changes may be significant. |
Revenue Recognition | The Company applied Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), using the modified retrospective method effective January 1, 2018. The cumulative effect of initially applying ASU 2014-09 and its amendments resulted in a reduction to the opening retained earnings balance of $8,000, prior to the tax adjustment, at January 1, 2018 and a related adjustment to other current liabilities as of that date. Revenue for periods prior to January 1, 2018 have not been adjusted and continue to be reported under Revenue Recognition (Topic 605). Upon adoption of ASU 2014-09, the Company also began classifying its estimate of merchandise returns expected in the next twelve months, which was $222,697 as of June 30, 2018, in prepaid expenses and other current assets. This estimate was historically classified in merchandise inventories, net and the amount was $203,589 as of December 31, 2017. The Company primarily recognizes revenue at the point in time that transfer of control of products or services to customers occurs and at an amount that reflects the consideration expected to be received for those products or services. Contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price and recognizes revenue upon delivery or as services are rendered. Revenue is recognized net of allowances for returns, variable consideration, and any taxes collected from customers that will be remitted to governmental authorities. Revenue recognized over time is not significant. Payment terms with customers vary by the type and location of the customer and the products or services offered. The Company does not adjust the promised amount of consideration for the effects of significant financing components based on the expectation that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Arrangements with customers that include payment terms extending beyond one year are not significant. Liabilities for customer incentives, discounts, or rebates are included in other current liabilities in the accompanying balance sheets. Product Distribution Revenues The Company generates revenue primarily by distributing products through wholesale and retail channels. For wholesale customers, revenue is recognized when the goods are transferred to customers, title has passed and control of the goods has passed to the customer. Retail revenue is recognized at the point of sale when the goods are transferred to customers and consideration is received. Shipping and handling activities are performed prior to the customer obtaining control of the products. Costs associated with shipping and handling are considered costs to fulfill a contract and are included in selling, administrative and other expenses in the period they are incurred. Other Revenues The Company offers software support, product cataloguing, marketing, training and other membership program and support services to certain customers. This revenue is recognized as services are provided. Revenue from these services is recognized over a short duration and the impact is not significant. Variable Consideration The Company’s products are generally sold with a right of return and may include variable consideration in the form of incentives, discounts, credits or rebates. The Company estimates variable consideration based on historical experience to determine the expected amount to which the Company will be entitled in exchange for transferring the promised goods or services to a customer. The Company recognizes estimated variable consideration as an adjustment to the transaction price when control of the related product is transferred. The realization of variable consideration occurs within a short period of time from product delivery; therefore, the time value of money effect is not significant. |
Recent Accounting Pronouncements | Revenue from Contracts with Customers (Topic 606) In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, which creates a single, comprehensive revenue recognition model for recognizing revenue from contracts with customers. The Company adopted ASU 2014-09 and its amendments on January 1, 2018. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than were required under previously existing guidance, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. ASU 2014-09 did not result in a significant change in the judgment or timing associated with the recognition of revenue from the sale of the Company’s products or services. See the revenue recognition footnote for additional information. Leases (Topic 842) In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"), which, among other things, requires an entity to recognize a right-of-use asset and a lease liability on the balance sheet for all leases, including operating leases, with a term greater than twelve months. Expanded disclosures with additional qualitative and quantitative information will also be required. This guidance is effective for interim and annual reporting periods beginning after December 15, 2018 and early adoption is permitted. The new standard must be adopted using a modified retrospective transition. The Company has established a cross-functional team to evaluate and implement the new standard. As disclosed in the leased properties footnote in the 2017 Annual Report on Form 10-K, the future minimum payments under noncancelable operating leases are approximately $1,140,000 as of December 31, 2017. The Company believes the adoption of this standard will have a significant impact on the consolidated balance sheets. Income Tax Reform As more fully discussed in Note 7 of the Company’s notes to the consolidated financial statements in its 2017 Annual Report on Form 10-K, the Tax Cuts and Jobs Act (the Act) was enacted December 22, 2017. As of June 30, 2018, the Company has not completed the accounting for the tax effects of the enactment of the Act due to its complexities and limited guidance available; however, the Company has made a reasonable estimate of the effect of the Act on the existing deferred tax balances and of the one-time transition tax. There was no impact on the tax rate as a result of a change in estimate for the six months ended June 30, 2018. In all cases, the Company continues to refine the calculations as additional analysis and modeling are completed. Further, the Company's estimates may also be affected as regulations and additional guidance become available. In addition, the Act subjects a U.S. shareholder to tax on Global Intangible Low-Taxed Income (GILTI) earned by certain foreign subsidiaries. Given the complexity of the GILTI provisions, the Company is still evaluating its effects and has not yet made an accounting policy election. The provision is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures. Compensation-Retirement Benefits (Topic 715) In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715) ("ASU 2017-07"), which requires an entity to report the service cost component of net periodic benefit cost in the same line item as other compensation costs (selling, administrative and other expenses) and the remaining components in non-operating expense in the consolidated statement of income and comprehensive income. The Company adopted ASU 2017-07 retrospectively on January 1, 2018 and it did not have a material impact on the Company's condensed consolidated financial statements or related disclosures. See the employee benefit plans footnote for additional information. The Company elected to use the amounts disclosed in the employee benefit plans note for the prior comparative period as the basis for applying the retrospective presentation. |
Share-based Compensation | As more fully discussed in Note 6 of the Company’s notes to the consolidated financial statements in its 2017 Annual Report on Form 10-K, the Company maintains various long-term incentive plans, which provide for the granting of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance awards, dividend equivalents and other share-based awards. SARs represent a right to receive upon exercise an amount, payable in shares of common stock, equal to the excess, if any, of the fair market value of the Company’s common stock on the date of exercise over the base value of the grant. The terms of such SARs require net settlement in shares of common stock and do not provide for cash settlement. An RSU represents a contingent right to receive one share of the Company’s common stock at a future date. The majority of awards previously granted vest on a pro-rata basis for periods ranging from one to five years and are expensed accordingly on a straight-line basis. The Company issues new shares upon exercise or conversion of awards under these plans. Most awards may be exercised or converted to shares not earlier than twelve months nor later than ten years from the date of grant. |
Guarantees | The Company guarantees the borrowings of certain independently controlled automotive parts stores (“independents”) and certain other affiliates in which the Company has a noncontrolling equity ownership interest (“affiliates”). Presently, the independents are generally consolidated by unaffiliated enterprises that have controlling financial interests through ownership of a majority voting interest in the independents. The Company has no voting interest or equity conversion rights in any of the independents. The Company does not control the independents or the affiliates, but receives a fee for the guarantees. The Company has concluded that the independents are variable interest entities, but that the Company is not the primary beneficiary. Specifically, the equity holders of the independents have the power to direct the activities that most significantly impact the entities’ economic performance including, but not limited to, decisions about hiring and terminating personnel, local marketing and promotional initiatives, pricing and selling activities, credit decisions, monitoring and maintaining appropriate inventories, and store hours. Separately, the Company concluded the affiliates are not variable interest entities. The Company’s maximum exposure to loss as a result of its involvement with these independents and affiliates is generally equal to the total borrowings subject to the Company’s guarantees. While such borrowings of the independents and affiliates are outstanding, the Company is required to maintain compliance with certain covenants, including a maximum debt to capitalization ratio and certain limitations on additional borrowings. At June 30, 2018, the Company was in compliance with all such covenants. In the event that the Company is required to make payments in connection with guaranteed obligations of the independents or the affiliates, the Company would obtain and liquidate certain collateral (e.g., accounts receivable and inventory) to recover all or a portion of the amounts paid under the guarantees. When it is deemed probable that the Company will incur a loss in connection with a guarantee, a liability is recorded equal to this estimated loss. |
Fair Value of Financial Instruments | The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash equivalents, trade accounts receivable, trade accounts payable, and borrowings under the line of credit and term loan approximate their respective fair values based on the short-term nature of these instruments. The fair value of fixed rate debt is designated as Level 2 in the fair value hierarchy (i.e., significant observable inputs) and is based primarily on the discounted value of future cash flows using current market interest rates offered for debt of similar credit risk and maturity. |
Segment Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Segment Information |
(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) 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 pending transaction to spin-off the Company's Business Products Group, S.P. Richards, and combine it with Essendant, Inc. ("Essendant"). See the acquisitions and divestitures footnote for additional information. |
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Revenue from External Customers by Geographic Areas | Disaggregated geographical net sales by reportable segment are summarized as follows:
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Accumulated Other Comprehensive Loss (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Accumulated Other Comprehensive Loss | The following tables present the changes in accumulated other comprehensive loss by component for the six months ended June 30:
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Employee Benefit Plans (Tables) |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Net Periodic Benefit Income for the Pension Plans | Net periodic benefit income for the Company's pension plans included the following components for the three months ended June 30:
Net periodic benefit income for the Company's pension plans included the following components for the six months ended June 30:
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Revenue Recognition (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Jan. 01, 2018 |
Dec. 31, 2017 |
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Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Retained earnings | $ (4,236,359) | $ (4,049,965) | |
Right to recover product | 222,697 | 203,589 | |
Other current liabilities | $ 1,015,762 | $ 1,034,441 | |
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Accounting Standards Update 2014-09 [Member] | |||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||
Retained earnings | $ 8,000 | ||
Other current liabilities | $ 8,000 |
Recent Accounting Pronouncements (Details) $ in Millions |
Dec. 31, 2017
USD ($)
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Accounting Changes and Error Corrections [Abstract] | |
Future minimum payments due | $ 1,140 |
Employee Benefit Plans - Components of Net Periodic Benefit Income for the Pension Plans (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Retirement Benefits [Abstract] | ||||
Service cost | $ 2,612 | $ 2,133 | $ 5,266 | $ 4,290 |
Interest cost | 22,071 | 24,099 | 44,184 | 48,231 |
Expected return on plan assets | (38,516) | (39,681) | (77,104) | (79,414) |
Amortization of prior service credit | (37) | (87) | (74) | (175) |
Amortization of actuarial loss | 9,935 | 9,466 | 19,894 | 18,951 |
Net periodic benefit income | $ (3,935) | $ (4,070) | $ (7,834) | $ (8,117) |
Employee Benefit Plans - Additional Information (Details) $ in Millions |
6 Months Ended |
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Jun. 30, 2018
USD ($)
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Retirement Benefits [Abstract] | |
Contribution to the pension plan | $ 38.7 |
Guarantees (Details) $ in Thousands |
6 Months Ended |
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Jun. 30, 2018
USD ($)
| |
Guarantor Obligations [Line Items] | |
Total borrowings of the independents and affiliates subject to guarantee | $ 685,141 |
Guarantees related to borrowings, other assets | 70,000 |
Guarantor obligation, current carrying value | $ 70,000 |
Minimum [Member] | |
Guarantor Obligations [Line Items] | |
Guaranteed obligations maturity (in years) | 1 year |
Maximum [Member] | |
Guarantor Obligations [Line Items] | |
Guaranteed obligations maturity (in years) | 6 years |
Fair Value of Financial Instruments (Details) $ in Thousands |
Jun. 30, 2018
USD ($)
|
---|---|
Reported Value Measurement [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value of fixed rate debt | $ 1,483,356 |
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value of fixed rate debt | $ 1,433,875 |
Non-Derivative Financial Instrument (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2018
EUR (€)
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2017
USD ($)
|
|
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||
Net investment hedge, net of tax | $ 32,755 | $ 0 | $ 16,045 | $ 0 | |
Designated as Hedging Instrument [Member] | |||||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | |||||
Notional amount of nonderivative instruments | € | € 700,000,000 | ||||
Unsecured long-term debt, noncurrent | $ 817,880 | $ 817,880 |
Acquisitions and Divestitures (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
5 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Jun. 30, 2018 |
|
Business Products Group [Member] | Scenario, Forecast [Member] | ||
Business Acquisition [Line Items] | ||
Proceeds from divestiture of businesses | $ 347 | |
Company's Shareholders [Member] | Scenario, Forecast [Member] | ||
Business Acquisition [Line Items] | ||
Ownership percentage by parent | 51.00% | |
Essendant Shareholders [Member] | Scenario, Forecast [Member] | ||
Business Acquisition [Line Items] | ||
Ownership percentage by noncontrolling owners | 49.00% | |
Combined Company [Member] | Scenario, Forecast [Member] | ||
Business Acquisition [Line Items] | ||
Shares outstanding of combined company, diluted (in shares) | 80 | |
Essendant [Member] | Staples [Member] | ||
Business Acquisition [Line Items] | ||
Percentage of voting interests | 100.00% | |
Share price (usd per share) | $ 11.50 |
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