Document and Entity Information
Document and Entity Information | 3 Months Ended |
Mar. 31, 2017shares | |
Document And Entity Information [Abstract] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Mar. 31, 2017 |
Document Fiscal Year Focus | 2,017 |
Document Fiscal Period Focus | Q1 |
Trading Symbol | GPC |
Entity Registrant Name | GENUINE PARTS CO |
Entity Central Index Key | 40,987 |
Current Fiscal Year End Date | --12-31 |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 147,394,019 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 177,917 | $ 242,879 |
Trade accounts receivable, less allowance for doubtful accounts (2017 – $17,023; 2016 – $15,557) | 2,084,871 | 1,938,562 |
Merchandise inventories, net | 3,287,042 | 3,210,320 |
Prepaid expenses and other current assets | 644,232 | 556,670 |
TOTAL CURRENT ASSETS | 6,194,062 | 5,948,431 |
Goodwill | 985,355 | 956,153 |
Other intangible assets, less accumulated amortization | 623,111 | 618,510 |
Deferred tax assets | 129,539 | 132,652 |
Other assets | 497,553 | 475,530 |
Property, plant and equipment, less accumulated depreciation (2017 – $981,901; 2016 – $960,999) | 737,206 | 728,124 |
TOTAL ASSETS | 9,166,826 | 8,859,400 |
CURRENT LIABILITIES: | ||
Trade accounts payable | 3,230,985 | 3,081,111 |
Current portion of debt | 475,000 | 325,000 |
Dividends payable | 99,824 | 97,584 |
Income taxes payable | 65,270 | 6,354 |
Other current liabilities | 708,754 | 734,101 |
TOTAL CURRENT LIABILITIES | 4,579,833 | 4,244,150 |
Long-term debt | 550,000 | 550,000 |
Pension and other post–retirement benefit liabilities | 287,589 | 341,510 |
Deferred tax liabilities | 49,328 | 48,326 |
Other long-term liabilities | 467,732 | 468,058 |
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 - 2017 - 147,394,019 shares; 2016 - 148,410,422 shares | 147,394 | 148,410 |
Additional paid-in capital | 57,664 | 56,605 |
Retained earnings | 3,964,184 | 4,001,734 |
Accumulated other comprehensive loss | (950,269) | (1,013,021) |
TOTAL PARENT EQUITY | 3,218,973 | 3,193,728 |
Noncontrolling interests in subsidiaries | 13,371 | 13,628 |
TOTAL EQUITY | 3,232,344 | 3,207,356 |
TOTAL LIABILITIES AND EQUITY | $ 9,166,826 | $ 8,859,400 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 17,023 | $ 15,557 |
Property, plant and equipment, less allowance for depreciation | $ 981,901 | $ 960,999 |
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) | 147,394,019 | 148,410,422 |
Common stock, shares outstanding (in shares) | 147,394,019 | 148,410,422 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||
Net sales | $ 3,905,641 | $ 3,718,267 |
Cost of goods sold | 2,749,920 | 2,613,796 |
Gross profit | 1,155,721 | 1,104,471 |
Operating expenses: | ||
Selling, administrative and other expenses | 873,814 | 823,172 |
Depreciation and amortization | 38,132 | 34,654 |
Total operating expenses | 911,946 | 857,826 |
Income before income taxes | 243,775 | 246,645 |
Income taxes | 83,615 | 88,620 |
Net income | $ 160,160 | $ 158,025 |
Basic net income per common share (usd per share) | $ 1.08 | $ 1.06 |
Diluted net income per common share (usd per share) | 1.08 | 1.05 |
Dividends declared per common share (usd per share) | $ 0.675 | $ 0.658 |
Weighted average common shares outstanding (in shares) | 148,154 | 149,593 |
Dilutive effect of stock options and non-vested restricted stock awards (in shares) | 634 | 749 |
Weighted average common shares outstanding - assuming dilution (in shares) | 148,788 | 150,342 |
Comprehensive income | $ 222,912 | $ 226,124 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
OPERATING ACTIVITIES: | ||
Net income | $ 160,160 | $ 158,025 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 38,132 | 34,654 |
Share-based compensation | 2,717 | 4,249 |
Excess tax benefits from share-based compensation | (1,546) | (5,144) |
Changes in operating assets and liabilities | (97,643) | (56,739) |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 101,820 | 135,045 |
INVESTING ACTIVITIES: | ||
Purchases of property, plant and equipment | (24,806) | (11,670) |
Acquisitions and other investing activities | (106,236) | (73,625) |
NET CASH USED IN INVESTING ACTIVITIES | (131,042) | (85,295) |
FINANCING ACTIVITIES: | ||
Proceeds from debt | 1,005,000 | 975,000 |
Payments on debt | (855,000) | (900,000) |
Share-based awards exercised, net of taxes paid | (1,624) | (5,586) |
Excess tax benefits from share-based compensation | 0 | 5,144 |
Dividends paid | (97,584) | (92,596) |
Purchases of stock | (91,984) | (46,431) |
NET CASH USED IN FINANCING ACTIVITIES | (41,192) | (64,469) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH | 5,452 | 8,223 |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (64,962) | (6,496) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 242,879 | 211,631 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 177,917 | $ 205,135 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2017 | |
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 United States 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, 2016 . Accordingly, the unaudited interim condensed consolidated financial statements and related disclosures herein should be read in conjunction with the Company’s 2016 Annual Report on Form 10-K. The preparation of interim financial statements requires management to make estimates and assumptions for 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 is 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 three month period ended March 31, 2017 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
Segment Information | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information Three Months Ended March 31, 2017 2016 (in thousands) Net sales: Automotive $ 1,998,383 $ 1,932,178 Industrial 1,232,082 1,152,627 Office products 519,005 476,654 Electrical/electronic materials 184,417 175,847 Other (28,246 ) (19,039 ) Total net sales $ 3,905,641 $ 3,718,267 Operating profit: Automotive $ 151,757 $ 153,710 Industrial 90,374 81,833 Office products 31,119 34,204 Electrical/electronic materials 13,635 14,841 Total operating profit 286,885 284,588 Interest expense, net (6,174 ) (4,822 ) Other intangible assets amortization (10,806 ) (8,760 ) Other, net (26,130 ) (24,361 ) Income before income taxes $ 243,775 $ 246,645 Net sales by segment exclude the effect of certain discounts, incentives and freight billed to customers. The line item “Other” represents the net effect of the discounts, incentives and freight billed to customers, which is reported as a component of net sales in the Company’s condensed consolidated statements of income and comprehensive income. |
Other Comprehensive Income (Los
Other Comprehensive Income (Loss) | 3 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) The difference between comprehensive income and net income was due to foreign currency translation adjustments and pension and other post-retirement benefit adjustments, as summarized below. Three Months Ended March 31, 2017 2016 (in thousands) Net income $ 160,160 $ 158,025 Other comprehensive income (loss): Foreign currency translation 57,020 63,366 Pension and other post-retirement benefit adjustments: Recognition of prior service credit, net of tax (212 ) (222 ) Recognition of actuarial loss, net of tax 5,944 4,955 Total other comprehensive income (loss) 62,752 68,099 Comprehensive income $ 222,912 $ 226,124 The following tables present the changes in accumulated other comprehensive loss by component for the three months ended March 31 : 2017 Changes in Accumulated Other Pension and Foreign Total (in thousands) Beginning balance, January 1 $ (609,080 ) $ (403,941 ) $ (1,013,021 ) Other comprehensive income before reclassifications, net of tax — 57,020 57,020 Amounts reclassified from accumulated other comprehensive loss, net of tax 5,732 — 5,732 Net current period other comprehensive income 5,732 57,020 62,752 Ending balance, March 31 $ (603,348 ) $ (346,921 ) $ (950,269 ) 2016 Changes in Accumulated Other Pension and Foreign Total (in thousands) Beginning balance, January 1 $ (535,634 ) $ (394,984 ) $ (930,618 ) Other comprehensive income before reclassifications, net of tax — 63,366 63,366 Amounts reclassified from accumulated other comprehensive loss, net of tax 4,733 — 4,733 Net current period other comprehensive income 4,733 63,366 68,099 Ending balance, March 31 $ (530,901 ) $ (331,618 ) $ (862,519 ) 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. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers ( Topic 606 ), which will create a single, comprehensive revenue recognition model for recognizing revenue from contracts with customers. The standard is effective for interim and annual reporting periods beginning after December 15, 2017 and may be adopted either retrospectively or on a modified retrospective basis. 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 are required under 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. The Company has established a cross-functional implementation team to evaluate and implement the new standard update related to the recognition of revenue from contracts with customers. The Company primarily sells goods and recognizes revenue at point of sale or delivery and this will not change under the new standard. We are completing an analysis of revenue streams at each of the business units and are evaluating the impact the new standard may have on revenue recognition. In addition, the Company is evaluating recently issued guidance on practical expedients as part of the transition decision. The Company plans to use the modified retrospective adoption method and does not believe there will be a material impact to the Company’s consolidated revenues upon adoption. The Company will continue to evaluate the impacts of the pending adoption of ASU 2014-09 and the preliminary assessments are subject to change. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory , which modifies existing requirements regarding measuring first-in, first-out and average cost inventory at the lower of cost or market. Under existing standards, the market amount requires consideration of replacement cost, net realizable value (“NRV”), and NRV less an approximately normal profit margin. ASU 2015-11 replaces market with NRV, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This eliminates the need to determine and consider replacement cost or NRV less an approximately normal profit margin when measuring inventory. The Company adopted ASU 2015-11 on January 1, 2017 and it did not have a material impact to the Company's condensed consolidated financial statements for the three months ended March 31, 2017 and it will not have a material impact on the annual consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases ( Topic 842 ) ("ASU 2016-02"), which 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 is currently evaluating the impact of ASU 2016-02 on its condensed consolidated financial statements and related disclosures. As disclosed in the leased properties footnote in the 2016 Annual Report on Form 10-K, the future minimum payments under noncancelable operating leases are approximately $865.0 million and the Company does believe the adoption of this standard will have a significant impact on the consolidated balance sheets. In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation ( Topic 718 ): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09") that changes the accounting for certain aspects of share-based compensation to employees including forfeitures, employer tax withholding, and the financial statement presentation of excess tax benefits or expense. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based compensation, which prospectively reclassifies cash flows from excess tax benefits of share-based compensation currently disclosed in financing activities to operating activities in the period of adoption. The guidance will increase income tax expense volatility, as well as the Company's cash flows from operations. In addition, the Company did not elect to change shares withheld for employment income tax purposes, or the current methodology of estimating forfeitures upon adoption. The Company adopted ASU 2016-09 on January 1, 2017 on a prospective basis. The adoption of ASU 2016-09 did not have a material impact to the Company's condensed consolidated financial statements for the three months ended March 31, 2017 and it is not expected to have a material impact on the annual consolidated financial statements or related disclosures. In Marc h 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715) , 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. This standard is effective for interim and annual reporting periods beginning after December 15, 2017 and early adoption is permitted. The Company will adopt ASU 2017-07 on January 1, 2018 and it is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures. |
Share-Based Compensation
Share-Based Compensation | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | Share-Based Compensation As more fully discussed in Note 5 of the Company’s notes to the consolidated financial statements in its 2016 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. RSUs represent 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 March 31, 2017 , total compensation cost related to nonvested awards not yet recognized was approximately $24.3 million , as compared to $34.6 million at December 31, 2016 . 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 March 31, 2017 was approximately $82.5 million . At March 31, 2017 , the aggregate intrinsic value for SARs and RSUs vested totaled approximately $50.9 million , and the weighted-average contractual lives for outstanding and exercisable SARs and RSUs were approximately six and five years , respectively. For the three months ended March 31, 2017 , $2.7 million of share-based compensation cost was recorded, as compared to $4.2 million for the same period in the prior year. Options to purchase approximately 1.3 million shares of common stock were outstanding but excluded from the computation of diluted earnings per share for the three month period ended March 31, 2017 , unchanged from the same period of the prior year. 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. On April 3, 2017, the Company granted approximately 742,000 SARs and 166,000 RSUs. |
Employee Benefit Plans
Employee Benefit Plans | 3 Months Ended |
Mar. 31, 2017 | |
Compensation and Retirement Disclosure [Abstract] | |
Employee Benefit Plans | Employee Benefit Plans Net periodic benefit income for the pension plans included the following components for the three months ended March 31 : Pension Benefits 2017 2016 (in thousands) Service cost $ 2,157 $ 2,027 Interest cost 24,132 26,091 Expected return on plan assets (39,733 ) (39,138 ) Amortization of prior service credit (88 ) (108 ) Amortization of actuarial loss 9,485 7,795 Net periodic benefit income $ (4,047 ) $ (3,333 ) Pension benefits also include amounts related to a supplemental retirement plan. During the three months ended March 31, 2017 , the Company made a $38.7 million contribution to the pension plan. |
Guarantees
Guarantees | 3 Months Ended |
Mar. 31, 2017 | |
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 March 31, 2017 , the Company was in compliance with all such covenants. At March 31, 2017 , the total borrowings of the independents and affiliates subject to guarantee by the Company were approximately $447.7 million . 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 March 31, 2017 , the Company has recognized certain assets and liabilities amounting to $44.0 million 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 Instrum
Fair Value of Financial Instruments | 3 Months Ended |
Mar. 31, 2017 | |
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 approximate their respective fair values based on the short-term nature of these instruments. At March 31, 2017 , the carrying value and the fair value of fixed rate debt were approximately $550.0 million and $551.7 million , 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 value of fixed rate debt of $550.0 million is included in long-term debt in the accompanying condensed consolidated balance sheets. |
Legal Matters
Legal Matters | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Legal Matters | Legal Matters On April 17, 2017, a jury awarded damages against the Company of $81.5 million in a litigated automotive product liability dispute . The Company believes the verdict is not supported by the facts or the law and is contrary to the Company’s role in the automotive parts industry. The Company intends to challenge the verdict through post-trial motions and, if necessary, on appeal to a higher court. The awarded damages are before offsets from previous settlements and potential bankruptcy trust claims, which are not currently known as a result of the judicial process, but are expected to reduce the initial awarded damages. 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; however, this assessment may change as additional facts are known and the judicial process progresses. |
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 31, 2017 | |
Business Combinations [Abstract] | |
Acquisitions | Acquisitions Effective April 3, 2017, the Company acquired a 35% investment in the Inenco Group for approximately $70 million from Conbear Holdings Pty Limited ("Conbear"). The acquisition was funded with the Company’s cash on hand and the funds were in escrow as of March 31, 2017. The funds are classified as prepaid expenses and other current assets in the condensed consolidated balance sheet and acquisition and other investing activities on the condensed consolidated statement of cash flows. The Inenco Group, which is headquartered in Sydney, Australia, is an industrial distributor of bearings, power transmissions, and seals in Australasia, with annual revenues of approximately $325 million and 161 locations across Australia and New Zealand, as well as an emerging presence in Asia. The Company and Conbear both have an option to acquire or sell, respectively, the remaining 65% of Inenco at a later date contingent upon certain conditions being satisfied. However, there can be no guarantee that such conditions will be met or, if they are met, whether either company would exercise its option. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
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 United States 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, 2016 . Accordingly, the unaudited interim condensed consolidated financial statements and related disclosures herein should be read in conjunction with the Company’s 2016 Annual Report on Form 10-K. |
Use of Estimates | The preparation of interim financial statements requires management to make estimates and assumptions for 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 is 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. |
Segment Reporting | Net sales by segment exclude the effect of certain discounts, incentives and freight billed to customers. The line item “Other” represents the net effect of the discounts, incentives and freight billed to customers, which is reported as a component of net sales in the Company’s condensed consolidated statements of income and comprehensive income. |
Recently Issued Accounting Pronouncements | In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers ( Topic 606 ), which will create a single, comprehensive revenue recognition model for recognizing revenue from contracts with customers. The standard is effective for interim and annual reporting periods beginning after December 15, 2017 and may be adopted either retrospectively or on a modified retrospective basis. 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 are required under 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. The Company has established a cross-functional implementation team to evaluate and implement the new standard update related to the recognition of revenue from contracts with customers. The Company primarily sells goods and recognizes revenue at point of sale or delivery and this will not change under the new standard. We are completing an analysis of revenue streams at each of the business units and are evaluating the impact the new standard may have on revenue recognition. In addition, the Company is evaluating recently issued guidance on practical expedients as part of the transition decision. The Company plans to use the modified retrospective adoption method and does not believe there will be a material impact to the Company’s consolidated revenues upon adoption. The Company will continue to evaluate the impacts of the pending adoption of ASU 2014-09 and the preliminary assessments are subject to change. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory , which modifies existing requirements regarding measuring first-in, first-out and average cost inventory at the lower of cost or market. Under existing standards, the market amount requires consideration of replacement cost, net realizable value (“NRV”), and NRV less an approximately normal profit margin. ASU 2015-11 replaces market with NRV, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This eliminates the need to determine and consider replacement cost or NRV less an approximately normal profit margin when measuring inventory. The Company adopted ASU 2015-11 on January 1, 2017 and it did not have a material impact to the Company's condensed consolidated financial statements for the three months ended March 31, 2017 and it will not have a material impact on the annual consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases ( Topic 842 ) ("ASU 2016-02"), which 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 is currently evaluating the impact of ASU 2016-02 on its condensed consolidated financial statements and related disclosures. As disclosed in the leased properties footnote in the 2016 Annual Report on Form 10-K, the future minimum payments under noncancelable operating leases are approximately $865.0 million and the Company does believe the adoption of this standard will have a significant impact on the consolidated balance sheets. In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation ( Topic 718 ): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09") that changes the accounting for certain aspects of share-based compensation to employees including forfeitures, employer tax withholding, and the financial statement presentation of excess tax benefits or expense. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based compensation, which prospectively reclassifies cash flows from excess tax benefits of share-based compensation currently disclosed in financing activities to operating activities in the period of adoption. The guidance will increase income tax expense volatility, as well as the Company's cash flows from operations. In addition, the Company did not elect to change shares withheld for employment income tax purposes, or the current methodology of estimating forfeitures upon adoption. The Company adopted ASU 2016-09 on January 1, 2017 on a prospective basis. The adoption of ASU 2016-09 did not have a material impact to the Company's condensed consolidated financial statements for the three months ended March 31, 2017 and it is not expected to have a material impact on the annual consolidated financial statements or related disclosures. In Marc h 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715) , 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. This standard is effective for interim and annual reporting periods beginning after December 15, 2017 and early adoption is permitted. The Company will adopt ASU 2017-07 on January 1, 2018 and it is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures. |
Share-based Compensation | As more fully discussed in Note 5 of the Company’s notes to the consolidated financial statements in its 2016 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. RSUs represent 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 March 31, 2017 , 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 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 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 approximate their respective fair values based on the short-term nature of these instruments. |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Summary of Segment Information | Three Months Ended March 31, 2017 2016 (in thousands) Net sales: Automotive $ 1,998,383 $ 1,932,178 Industrial 1,232,082 1,152,627 Office products 519,005 476,654 Electrical/electronic materials 184,417 175,847 Other (28,246 ) (19,039 ) Total net sales $ 3,905,641 $ 3,718,267 Operating profit: Automotive $ 151,757 $ 153,710 Industrial 90,374 81,833 Office products 31,119 34,204 Electrical/electronic materials 13,635 14,841 Total operating profit 286,885 284,588 Interest expense, net (6,174 ) (4,822 ) Other intangible assets amortization (10,806 ) (8,760 ) Other, net (26,130 ) (24,361 ) Income before income taxes $ 243,775 $ 246,645 |
Other Comprehensive Income (L18
Other Comprehensive Income (Loss) (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
Comprehensive Income (Loss) | The difference between comprehensive income and net income was due to foreign currency translation adjustments and pension and other post-retirement benefit adjustments, as summarized below. Three Months Ended March 31, 2017 2016 (in thousands) Net income $ 160,160 $ 158,025 Other comprehensive income (loss): Foreign currency translation 57,020 63,366 Pension and other post-retirement benefit adjustments: Recognition of prior service credit, net of tax (212 ) (222 ) Recognition of actuarial loss, net of tax 5,944 4,955 Total other comprehensive income (loss) 62,752 68,099 Comprehensive income $ 222,912 $ 226,124 |
Changes in Accumulated Other Comprehensive Income (Loss) | The following tables present the changes in accumulated other comprehensive loss by component for the three months ended March 31 : 2017 Changes in Accumulated Other Pension and Foreign Total (in thousands) Beginning balance, January 1 $ (609,080 ) $ (403,941 ) $ (1,013,021 ) Other comprehensive income before reclassifications, net of tax — 57,020 57,020 Amounts reclassified from accumulated other comprehensive loss, net of tax 5,732 — 5,732 Net current period other comprehensive income 5,732 57,020 62,752 Ending balance, March 31 $ (603,348 ) $ (346,921 ) $ (950,269 ) 2016 Changes in Accumulated Other Pension and Foreign Total (in thousands) Beginning balance, January 1 $ (535,634 ) $ (394,984 ) $ (930,618 ) Other comprehensive income before reclassifications, net of tax — 63,366 63,366 Amounts reclassified from accumulated other comprehensive loss, net of tax 4,733 — 4,733 Net current period other comprehensive income 4,733 63,366 68,099 Ending balance, March 31 $ (530,901 ) $ (331,618 ) $ (862,519 ) |
Employee Benefit Plans (Tables)
Employee Benefit Plans (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Compensation and Retirement Disclosure [Abstract] | |
Components of Net Periodic Benefit Income for the Pension Plans | Net periodic benefit income for the pension plans included the following components for the three months ended March 31 : Pension Benefits 2017 2016 (in thousands) Service cost $ 2,157 $ 2,027 Interest cost 24,132 26,091 Expected return on plan assets (39,733 ) (39,138 ) Amortization of prior service credit (88 ) (108 ) Amortization of actuarial loss 9,485 7,795 Net periodic benefit income $ (4,047 ) $ (3,333 ) |
Segment Information (Detail)
Segment Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Segment Reporting Information [Line Items] | ||
Net sales | $ 3,905,641 | $ 3,718,267 |
Income before income taxes | 243,775 | 246,645 |
Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Operating profit | 286,885 | 284,588 |
Operating Segments [Member] | Automotive [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales | 1,998,383 | 1,932,178 |
Operating profit | 151,757 | 153,710 |
Operating Segments [Member] | Industrial [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales | 1,232,082 | 1,152,627 |
Operating profit | 90,374 | 81,833 |
Operating Segments [Member] | Office Products [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales | 519,005 | 476,654 |
Operating profit | 31,119 | 34,204 |
Operating Segments [Member] | Electrical/Electronic Materials [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales | 184,417 | 175,847 |
Operating profit | 13,635 | 14,841 |
Other [Member] | ||
Segment Reporting Information [Line Items] | ||
Net sales | (28,246) | (19,039) |
Interest expense, net | (6,174) | (4,822) |
Other intangible assets amortization | (10,806) | (8,760) |
Other, net | $ (26,130) | $ (24,361) |
Other Comprehensive Income (L21
Other Comprehensive Income (Loss) - Comprehensive Income (Loss) (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Equity [Abstract] | ||
Net income | $ 160,160 | $ 158,025 |
Other comprehensive income (loss): | ||
Foreign currency translation | 57,020 | 63,366 |
Pension and other post-retirement benefit adjustments: | ||
Recognition of prior service credit, net of tax | (212) | (222) |
Recognition of actuarial loss, net of tax | 5,944 | 4,955 |
Total other comprehensive income (loss) | 62,752 | 68,099 |
Comprehensive income | $ 222,912 | $ 226,124 |
Other Comprehensive Income (L22
Other Comprehensive Income (Loss) - Changes in Accumulated Other Comprehensive Income (Loss) by Component (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
AOCI Attributable to Parent [Roll Forward] | ||
Beginning balance, January 1 | $ 3,193,728 | |
Other comprehensive income before reclassifications, net of tax | 57,020 | $ 63,366 |
Amounts reclassified from accumulated other comprehensive loss, net of tax | 5,732 | 4,733 |
Total other comprehensive income (loss) | 62,752 | 68,099 |
Ending balance, March 31 | 3,218,973 | |
Pension and Other Post-Retirement Benefits [Member] | ||
AOCI Attributable to Parent [Roll Forward] | ||
Beginning balance, January 1 | (609,080) | (535,634) |
Other comprehensive income before reclassifications, net of tax | 0 | 0 |
Amounts reclassified from accumulated other comprehensive loss, net of tax | 5,732 | 4,733 |
Total other comprehensive income (loss) | 5,732 | 4,733 |
Ending balance, March 31 | (603,348) | (530,901) |
Accumulated Foreign Currency Adjustment Attributable to Parent [Member] | ||
AOCI Attributable to Parent [Roll Forward] | ||
Beginning balance, January 1 | (403,941) | (394,984) |
Other comprehensive income before reclassifications, net of tax | 57,020 | 63,366 |
Amounts reclassified from accumulated other comprehensive loss, net of tax | 0 | 0 |
Total other comprehensive income (loss) | 57,020 | 63,366 |
Ending balance, March 31 | (346,921) | (331,618) |
AOCI Attributable to Parent [Member] | ||
AOCI Attributable to Parent [Roll Forward] | ||
Beginning balance, January 1 | (1,013,021) | (930,618) |
Ending balance, March 31 | $ (950,269) | $ (862,519) |
Recent Accounting Pronounceme23
Recent Accounting Pronouncements (Details) $ in Millions | Dec. 31, 2016USD ($) |
Accounting Changes and Error Corrections [Abstract] | |
Future minimum payments due | $ 865 |
Share-Based Compensation (Detai
Share-Based Compensation (Detail) - USD ($) $ in Millions | Apr. 03, 2017 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of shares received per restricted stock unit (in shares) | 1 | |||
Total compensation cost related to nonvested awards, unrecognized | $ 24.3 | $ 34.6 | ||
Weighted-average period to recognize compensation cost (in years) | 2 years | |||
Aggregate intrinsic value for outstanding SARs and RSUs | $ 82.5 | |||
Aggregate intrinsic value for vested SARs and RSUs | $ 50.9 | |||
Weighted-average remaining contractual life for outstanding SARs and RSUs (in years) | 6 years | |||
Weighted-average remaining contractual life for exercisable SARs and RSUs, (in years) | 5 years | |||
Share-based compensation | $ 2.7 | $ 4.2 | ||
Outstanding options to purchase common shares not included in dilutive shares (in shares) | 1,300,000 | |||
Minimum [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based payment award granted vesting period range (in years) | 1 year | |||
Share-based payment, awards exercise period (in years and months) | 12 months | |||
Maximum [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based payment award granted vesting period range (in years) | 5 years | |||
Share-based payment, awards exercise period (in years and months) | 10 years | |||
Subsequent Event [Member] | Stock Appreciation Rights [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares granted (in shares) | 742,000 | |||
Subsequent Event [Member] | Restricted Stock Units [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares granted (in shares) | 166,000 |
Employee Benefit Plans - Compo
Employee Benefit Plans - Components of Net Periodic Benefit Income for the Pension Plans (Detail) - Pension Benefits [Member] - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost | $ 2,157 | $ 2,027 |
Interest cost | 24,132 | 26,091 |
Expected return on plan assets | (39,733) | (39,138) |
Amortization of prior service credit | (88) | (108) |
Amortization of actuarial loss | 9,485 | 7,795 |
Net periodic benefit income | $ (4,047) | $ (3,333) |
Employee Benefit Plans - Addit
Employee Benefit Plans - Additional Information (Detail) $ in Millions | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Compensation and Retirement Disclosure [Abstract] | |
Contribution to the pension plan | $ 38.7 |
Guarantees (Detail)
Guarantees (Detail) $ in Millions | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Guarantor Obligations [Line Items] | |
Total borrowings of the independents and affiliates subject to guarantee | $ 447.7 |
Guarantees related to borrowings, other assets | 44 |
Guarantor obligations, current carrying value | $ 44 |
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 Instr28
Fair Value of Financial Instruments (Detail) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Carrying value of fixed rate debt | $ 550,000 | $ 550,000 |
Fair Value, Inputs, Level 2 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Carrying value of fixed rate debt | 550,000 | |
Fair value of fixed rate debt | $ 551,700 |
Legal Matters (Detail)
Legal Matters (Detail) $ in Millions | Apr. 17, 2017USD ($) |
Subsequent Event [Member] | |
Loss Contingencies [Line Items] | |
Jury awarded damages | $ 81.5 |
Acquisitions (Details)
Acquisitions (Details) - Subsequent Event [Member] - Inenco Group [Member] $ in Millions | Apr. 03, 2017USD ($)Location |
Business Acquisition [Line Items] | |
Percentage of voting interests acquired | 35.00% |
Payments to acquire business, gross | $ 70 |
Revenue reported by acquired entity for last annual period | $ 325 |
Number of locations of acquired entity | Location | 161 |
Percentage of voting interests with option to be acquired | 65.00% |