Genuine Parts (GPC) 10-Q 5 Nov 09 2009 Q3 Quarterly report Financial data

Document and Company Informatio

Document and Company Information (USD $)
	9 Months Ended Sep. 30, 2009	Jun. 30, 2008
Document And Company Information [Abstract]
Entity Registrant Name	GENUINE PARTS CO
Entity Central Index Key	0000040987
Document Type	10-Q
Document Period End Date	2009-09-30
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float		$6,228,135,000
Entity Common Stock, Shares Outstanding	159,552,155

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (USD $)
In Thousands	Sep. 30, 2009	Dec. 31, 2008
CURRENT ASSETS
Cash and cash equivalents	$363,133	$67,777
Trade accounts receivable, less allowance for doubtful accounts (2009 - 36,438;2008 - $18,588)	1,250,575	1,224,525
Merchandise inventories, net - at lower of cost or market	2,188,133	2,316,880
Prepaid expenses and other current assets	232,450	262,238
TOTAL CURRENT ASSETS	4,034,291	3,871,420
Goodwill and intangible assets, less accumulated amortization	171,573	158,825
Deferred tax assets	152,787	218,503
Other assets	132,943	114,337
Property, plant and equipment, less allowance for depreciation (2009 - $676,451; 2008 - $628,532)	485,647	423,265
TOTAL ASSETS	4,977,241	4,786,350
CURRENT LIABILITIES
Trade accounts payable	1,124,276	1,009,423
Income taxes payable	56,997	24,685
Dividends payable	63,819	62,148
Other current liabilities	199,419	190,847
TOTAL CURRENT LIABILITIES	1,444,511	1,287,103
Long-term debt	500,000	500,000
Other long-term liabilities	128,729	103,264
Retirement and other post-retirement benefit liabilities	289,659	502,605
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 - 2009 - 159,552,155; 2008 - 159,442,508	159,552	159,443
Retained earnings	2,752,450	2,643,451
Additional paid-in capital	8,681	0
Accumulated other comprehensive loss	(313,788)	(478,562)
TOTAL PARENT EQUITY	2,606,895	2,324,332
Noncontrolling interests in subsidiaries	7,447	69,046
TOTAL EQUITY	2,614,342	2,393,378
TOTAL LIABILITIES AND EQUITY	$4,977,241	$4,786,350

1_Condensed Consolidated Balanc

Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data	Sep. 30, 2009	Dec. 31, 2008
CURRENT ASSETS
Allowance for doubtful accounts	$36,438	$18,588
Allowance for depreciation	$676,451	$628,532
EQUITY:
Preferred stock, par value	1	1
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Common stock, par value	1	1
Common stock, shares authorized	450,000,000	450,000,000
Common stock, shares issued	159,552,155	159,442,508

Condensed Consolidated Statemen

Condensed Consolidated Statements of Income (Unaudited) (USD $)
In Thousands, except Per Share data	3 Months Ended Sep. 30, 2009	3 Months Ended Sep. 30, 2008	9 Months Ended Sep. 30, 2009	9 Months Ended Sep. 30, 2008
Net sales	$2,606,757	$2,882,115	$7,586,298	$8,495,073
Cost of goods sold	1,841,511	2,033,110	5,343,996	5,974,372
Gross profit	765,246	849,005	2,242,302	2,520,701
Operating expenses:
Selling, administrative & other expenses	571,978	616,395	1,693,384	1,835,998
Depreciation and amortization	22,562	21,768	67,494	66,469
Total operating expenses	594,540	638,163	1,760,878	1,902,467
Income before income taxes	170,706	210,842	481,424	618,234
Income taxes	63,067	79,825	181,016	230,601
Net income	$107,639	$131,017	$300,408	$387,633
Basic net income per common share	0.67	0.81	1.88	2.37
Diluted net income per common share	0.67	0.81	1.88	2.36
Dividends declared per common share	0.4	0.39	1.2	1.17
Weighted average common shares outstanding	159,541	161,603	159,500	163,324
Dilutive effect of stock options and non- vested restricted stock awards	335	673	268	689
Weighted average common shares outstanding - assuming dilution	159,876	162,276	159,768	164,013

2_Condensed Consolidated Statem

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Thousands	9 Months Ended Sep. 30, 2009	9 Months Ended Sep. 30, 2008
OPERATING ACTIVITIES:
Net income	$300,408	$387,633
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	67,494	66,469
Share-based compensation	6,709	10,018
Excess tax benefits from share-based compensation	(63)	(313)
Other	1,917	3,362
Changes in operating assets and liabilities	390,038	1,836
NET CASH PROVIDED BY OPERATING ACTIVITIES	766,503	469,005
INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(49,360)	(60,091)
Acquisitions and other	(123,047)	(98,735)
Purchase of properties under construction and lease agreement	(72,811)	0
NET CASH USED IN INVESTING ACTIVITIES	(245,218)	(158,826)
FINANCING ACTIVITIES:
Stock options exercised	2,178	1,364
Excess tax benefits from share-based compensation	63	313
Dividends paid	(189,739)	(188,805)
Changes in cash overdraft position	(52,000)	0
Purchase of stock	(159)	(228,863)
NET CASH USED IN FINANCING ACTIVITIES	(239,657)	(415,991)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	13,728	(1,597)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	295,356	(107,409)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	67,777	231,837
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$363,133	$124,428

Basis of Presentation

Basis of Presentation
	9 Months Ended Sep. 30, 2009 USD / shares
Basis of Presentation [Abstract]
Basis of Presentation	Note A 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 December31, 2008. Accordingly, the condensed consolidated financial statements and related disclosures herein should be read in conjunction with the 2008 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 in its interim consolidated financial statements for the accrual of bad debts, inventory adjustments, discounts and volume incentives earned, among others. Bad debts are accrued based on a percentage of sales and volume incentives are estimated based upon cumulative and projected purchasing levels. 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 can only be performed at year-end. The estimates 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 Companys financial results for the interim periods have been made. These adjustments are of a normal recurring nature. The results of operations for the three and nine month periods ended September 30, 2009 are not necessarily indicative of results for the entire year.

Segment Information

Segment Information
	9 Months Ended Sep. 30, 2009 USD / shares
Segment Information [Abstract]
Segment Information	Note B Segment Information Three Months Ended Sept. 30, Nine months Ended Sept. 30, 2009 2008 2009 2008 (in thousands) (in thousands) Net sales: Automotive $ 1,381,578 $ 1,393,118 $ 3,960,743 $ 4,127,518 Industrial 711,471 907,015 2,149,200 2,686,297 Office products 436,287 458,968 1,255,169 1,332,167 Electrical/electronic materials 89,364 126,827 256,106 363,712 Other (11,943 ) (3,813 ) (34,920 ) (14,621 ) Total net sales $ 2,606,757 $ 2,882,115 $ 7,586,298 $ 8,495,073 Operating profit: Automotive $ 107,735 $ 111,730 $ 312,919 $ 317,888 Industrial 36,495 77,220 102,113 222,781 Office products 26,692 33,426 99,081 114,721 Electrical/electronic materials 6,802 10,272 17,560 29,175 Total operating profit 177,724 232,648 531,673 684,565 Interest expense, net (6,662 ) (7,391 ) (20,510 ) (21,877 ) Other, net (356 ) (14,415 ) (29,739 ) (44,454 ) Income before income taxes $ 170,706 $ 210,842 $ 481,424 $ 618,234 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 Companys condensed consolidated statements of income.

Comprehensive Income

Comprehensive Income
	9 Months Ended Sep. 30, 2009 USD / shares
Comprehensive Income [Abstract]
Comprehensive Income	Note C Comprehensive Income Comprehensive income was $465.2million and $360.6million for the nine months ended September30, 2009 and 2008, respectively. The difference between comprehensive income and net income was due to foreign currency translation adjustments and retirement and other post-retirement benefit adjustments as summarized below: Nine months Ended Sept. 30, 2009 2008 (in thousands) Net income $ 300,408 $ 387,633 Other comprehensive income (loss): Foreign currency translation 65,756 (36,594 ) Retirement and other post-retirement benefit adjustments: Recognition of prior service (credit)cost, net of tax (6,350 ) 293 Recognition of actuarial loss, net of tax 11,826 9,243 Net actuarial gain, net of tax 93,542 Total other comprehensive income (loss) 164,774 (27,058 ) Comprehensive income $ 465,182 $ 360,575 Comprehensive income for the three months ended September30, 2009 and 2008 totaled $160.8million and $109.1million, respectively.

Recently Issued Accounting Pron

Recently Issued Accounting Pronouncements
	9 Months Ended Sep. 30, 2009 USD / shares
Recently Issued Accounting Pronouncements [Abstract]
Recently Issued Accounting Pronouncements	Note D Recently Issued Accounting Pronouncements On September15, 2006, the Financial Accounting Standards Board (FASB) issued new guidance that defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. This guidance does not expand the use of fair value in any new circumstances. The Company adopted the guidance for its financial assets and liabilities as of January1, 2008 and for its non-financial assets and liabilities as of January1, 2009. The adoption did not have a significant impact on the condensed consolidated financial statements. In December2007, the FASB issued new guidance on business combinations, in which an acquiring entity is required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. The guidance also changes the accounting treatment and disclosure for certain specific items in a business combination. The guidance applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December15, 2008. The Company adopted the new guidance on January1, 2009, which did not have a significant impact on the condensed consolidated financial statements. In December2007, the FASB issued guidance that establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This guidance requires that noncontrolling minority interests be reported as equity instead of a liability on the balance sheet. Additionally, it requires disclosure of consolidated net income attributable to the parent and to the noncontrolling interest on the face of the income statement. The guidance is effective for fiscal years beginning on or after December15, 2008. The Company adopted the guidance on January1, 2009 and reclassified approximately $69.0million of noncontrolling minority interest from liabilities to equity on the December31, 2008 condensed consolidated balance sheet. Refer to Note J for a description of the Companys acquisition of a substantial portion of the noncontrolling interest during the nine months ended September30, 2009. The net income attributable to noncontrolling interests is not material to the Companys consolidated net income and is, therefore, included in selling, administrative other expenses on the accompanying condensed consolidated statements of income. In December2008, the FASB provided additional guidance on an employers disclosures about plan assets of a defined benefit pension or other postretirement plan on investment policies and strategies, major categories of plan assets, inputs and valuation techniques used to measure the fair value of plan assets and significant concentrations of risk within plan assets. The new guidance shall be effective for fiscal years ending after December15, 2009, with earlier application permitted. Upon initial application, these provisions are not required for earlier periods

Share Based Compensation

Share Based Compensation
	9 Months Ended Sep. 30, 2009 USD / shares
Share-Based Compensation [Abstract]
Share-Based Compensation	Note E Share-Based Compensation As more fully discussed in Note 5 of the Companys notes to the consolidated financial statements in the 2008 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 Companys 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 Companys 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 September30, 2009, total compensation cost related to nonvested awards not yet recognized was approximately $6.9 million, as compared to $19.6million at December31, 2008. The weighted-average period over which this compensation cost is expected to be recognized is approximately two years. The aggregate intrinsic value for options, SARs and RSUs outstanding at September30, 2009 was approximately $19.7million. At September30, 2009, the aggregate intrinsic value for options, SARs and RSUs vested totaled approximately $11.8million, and the weighted-average contractual life for outstanding and exercisable options, SARs and RSUs was approximately six years. For the nine months ended September30, 2009, $6.7million of share-based compensation cost was recorded, as compared to $10.0million for the same period in the prior year. The Company had no grant activity for the nine months ended September30, 2009.

Employee Benefit Plans

Employee Benefit Plans
	9 Months Ended Sep. 30, 2009 USD / shares
Employee Benefit Plans [Abstract]
Employee Benefit Plans	Note F Employee Benefit Plans Net periodic benefit cost included the following components for the three months ended September30: Other Post-retirement Pension Benefits Benefits 2009 2008 2009 2008 (in thousands) Service cost $ 4,015 $ 13,307 $ 63 $ 220 Interest cost 23,328 22,569 250 404 Expected return on plan assets (28,608 ) (28,675 ) Amortization of prior service (credit)cost (1,731 ) (6 ) (145 ) 93 Amortization of actuarial loss 3,808 4,475 448 404 Net periodic benefit cost $ 812 $ 11,670 $ 616 $ 1,121 Net periodic benefit cost included the following components for the nine months ended September30: Other Post-retirement Pension Benefits Benefits 2009 2008 2009 2008 (in thousands) Service cost $ 12,503 $ 39,996 $ 443 $ 660 Interest cost 70,140 67,838 1,102 1,212 Expected return on plan assets (84,646 ) (86,184 ) Curtailment gain (4,298 ) Amortization of prior service (credit)cost (5,277 ) (13 ) 41 279 Amortization of actuarial loss 18,259 13,485 1,300 1,212 Net periodic benefit cost $ 6,681 $ 35,122 $ 2,886 $ 3,363 Pension benefits also include amounts related to a supplemental retirement plan. During the nine months ended September30, 2009, the Company contributed $52.9million to the pension plan. In the nine months ended September30, 2009, the Company recorded a $4.3million non-cash curtailment adjustment in connection with a reorganization consisting of individually insignificant reductions of expected years of future service of employees covered by the defined benefit pension plan. Curtailment accounting is required if an event eliminates, for a significant number of employees, the accrual of defined benefits for some or all of their future services. In connection with this event, plan assets and liabilities were remeasured for the nine month period ended September30, 2009, resulting in a reduction to retirement and other post-retirement benefit liabilities of $141.7million.

Guarantees

Guarantees
	9 Months Ended Sep. 30, 2009 USD / shares
Guarantees [Abstract]
Guarantees	Note G 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 a controlling financial interest through ownership of a majority voting interest in the entity. The Company has no voting interest or other equity conversion rights in any of the independents. The Company does not control the independents or the affiliates, but receives a fee for the guarantee. The Company has concluded that it is not the primary beneficiary with respect to any of the independents and that the affiliates are not variable interest entities. The Companys maximum exposure to loss as a result of its involvement with these independents and affiliates is equal to the total borrowings subject to the Companys guarantee. Certain borrowings of the independents and affiliates contain covenants similar to those included in the $350.0 million unsecured revolving line of credit agreement, as more fully discussed in Note 3 of the Companys notes to the consolidated financial statements in the 2008 Annual Report on Form 10-K. At September30, 2009, the Company was in compliance with all such covenants. At September30, 2009, the total borrowings of the independents and affiliates subject to guarantee by the Company were approximately $199.2million. These loans generally mature over periods from one to ten 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 guarantee. 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. In accordance with FASB requirements and based on available information, the Company has accrued for certain guarantees related to the independents and affiliates borrowings as of September30, 2009. These liabilities are not material to the financial position of the Company and are included in other long-term liabilities in the accompanying condensed consolidated balance sheets.

Fair Value of Financial Instrum

Fair Value of Financial Instruments
	9 Months Ended Sep. 30, 2009 USD / shares
Fair Value of Financial Instruments [Abstract]
Fair Value of Financial Instruments	Note H Fair Value of Financial Instruments The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash equivalents, trade accounts receivable and trade accounts payable approximate their respective fair values based on the short-term nature of these instruments. At September30, 2009, the fair value of fixed rate debt was approximately $533.5million, based primarily on quoted prices for similar instruments. The fair value of fixed rate debt was estimated by calculating the present value of anticipated cash flows. The discount rate used was an estimated borrowing rate for similar debt instruments with like maturities.

Subsequent Events

Subsequent Events
	9 Months Ended Sep. 30, 2009 USD / shares
Subsequent Events [Abstract]
Subsequent Events	Note I Subsequent Events The Company has evaluated subsequent events during the period beginning October1, 2009 through November5, 2009, the date the financial statements were issued. The Company concluded that there were no events or transactions occurring during this period that required recognition or disclosure in the accompanying condensed consolidated financial statements.

Acquisitions

Acquisitions
	9 Months Ended Sep. 30, 2009 USD / shares
Acquisitions [Abstract]
Acquisitions	Note J Acquisitions For the nine months ended September30, 2009, the Company acquired eight companies in the Industrial and Automotive Groups for approximately $60.0million. The Company allocated the purchase price to the assets acquired and the liabilities assumed based on their fair values as of their respective acquisition dates. The results of operations for the acquired companies were included in the Companys condensed consolidated statements of income beginning on their respective acquisition dates. The Company recorded approximately $12.2million of goodwill and other intangible assets associated with the acquisitions. On June1, 2009, the Company acquired the remaining noncontrolling interest in its consolidated subsidiary, Balkamp, Inc., for approximately $63.0million. The acquisition was accounted for as an equity transaction and the associated noncontrolling interest in the subsidiarys equity was eliminated as part of the transaction.

Leased Properties

Leased Properties
	9 Months Ended Sep. 30, 2009 USD / shares
Leased Properties [Abstract]
Leased Properties	Note K Leased Properties On June26, 2009, the $85million construction and lease agreement , as more fully discussed in Note 4 of the Companys notes to the consolidated financial statements in the 2008 Annual Report on Form 10-K, expired. In accordance with the agreement, the Company purchased the properties from the lessor for $72.8million, including closing costs, paid in July2009. The properties have been included in property, plant, and equipment in the accompanying condensed consolidated balance sheet.