EX-99.1 2 gpc-earn3q18.htm EXHIBIT 99.1 Exhibit

gpcearn3q17image10.jpg
GENUINE PARTS COMPANY
 
NEWS RELEASE
 
 

FOR IMMEDIATE RELEASE



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, Georgia, October 18, 2018 -- Genuine Parts Company (NYSE: GPC) announced today sales and earnings for the third quarter and nine months ended September 30, 2018.

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."


(Cont.)


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 d

(Cont.)


iffer 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.

Contacts

Carol B. Yancey, Executive Vice President and CFO – (678) 934-5044
Sidney G. Jones, Senior Vice President - Investor Relations – (678) 934-5628

(Cont.)



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


(Cont.)



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.


(Cont.)



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


(Cont.)


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



(Cont.)


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