Genuine Parts (GPC) 10-Q 6 May 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information (USD $)
	3 Months Ended Mar. 31, 2010	Jun. 30, 2009
Document and Entity Information [Abstract]
Entity Registrant Name	GENUINE PARTS CO
Entity Central Index Key	0000040987
Document Type	10-Q
Document Period End Date	2010-03-31
Amendment Flag	false
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
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		$5,174,878,000
Entity Common Stock, Shares Outstanding	158,792,492

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (USD $)
In Thousands	Mar. 31, 2010	Dec. 31, 2009
CURRENT ASSETS
Cash and cash equivalents	$333,537	$336,803
Trade accounts receivable, less allowance for doubtful accounts (2010 - $23,047; 2009 - $16,590)	1,323,980	1,187,075
Merchandise inventories, net - at lower of cost or market	2,211,457	2,214,076
Prepaid expenses and other current assets	277,257	294,874
TOTAL CURRENT ASSETS	4,146,231	4,032,828
Goodwill and intangible assets, less accumulated amortization	204,907	171,532
Deferred tax assets	167,632	167,722
Other assets	172,723	147,583
Property, plant and equipment, less allowance for depreciation (2010 - $705,605; 2009 - $691,175)	477,269	485,024
TOTAL ASSETS	5,168,762	5,004,689
CURRENT LIABILITIES
Trade accounts payable	1,185,177	1,094,347
Income taxes payable	78,609	42,988
Dividends payable	65,083	63,586
Other current liabilities	185,260	207,363
TOTAL CURRENT LIABILITIES	1,514,129	1,408,284
Long-term debt	500,000	500,000
Retirement and other post-retirement benefit liabilities	299,567	300,197
Other long-term liabilities	169,500	166,836
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 - 2010 - 158,792,492; 2009 - 158,917,846	158,792	158,918
Retained earnings	2,802,369	2,772,309
Accumulated other comprehensive loss	(283,579)	(309,897)
TOTAL PARENT EQUITY	2,677,582	2,621,330
Noncontrolling interests in subsidiaries	7,984	8,042
TOTAL EQUITY	2,685,566	2,629,372
TOTAL LIABILITIES AND EQUITY	$5,168,762	$5,004,689

1_Condensed Consolidated Balanc

Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data	Mar. 31, 2010	Dec. 31, 2009
CURRENT ASSETS
Allowance for doubtful accounts	$23,047	$16,590
Allowance for depreciation	$705,605	$691,175
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	158,792,492	158,917,846

Condensed Consolidated Statemen

Condensed Consolidated Statements of Income (Unaudited) (USD $)
In Thousands, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Condensed Consolidated Statements of Income [Abstract]
Net sales	$2,602,115	$2,444,496
Cost of goods sold	1,841,640	1,712,295
Gross profit	760,475	732,201
Operating expenses:
Selling, administrative, and other expenses	576,217	565,012
Depreciation and amortization	22,143	22,521
Total operating expenses	598,360	587,533
Income before income taxes	162,115	144,668
Income taxes	61,506	55,509
Net income	$100,609	$89,159
Basic net income per common share	0.63	0.56
Diluted net income per common share	0.63	0.56
Dividends declared per common share	0.41	0.4
Weighted average common shares outstanding	158,771	159,444
Dilutive effect of stock options and non-vested restricted stock awards	408	219
Weighted average common shares outstanding - assuming dilution	159,179	159,663

2_Condensed Consolidated Statem

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
OPERATING ACTIVITIES:
Net income	$100,609	$89,159
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	22,143	22,521
Share-based compensation	1,091	2,370
Other	19	807
Changes in operating assets and liabilities	15,783	85,565
NET CASH PROVIDED BY OPERATING ACTIVITIES	139,645	200,422
INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(9,850)	(14,097)
Acquisitions and other	(65,772)	(5,779)
NET CASH USED IN INVESTING ACTIVITIES	(75,622)	(19,876)
FINANCING ACTIVITIES:
Stock options exercised	2,581	142
Dividends paid	(63,544)	(62,148)
Changes in cash overdraft position		(52,000)
Purchase of stock	(9,306)	(116)
NET CASH USED IN FINANCING ACTIVITIES	(70,269)	(114,122)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	2,980	(920)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(3,266)	65,504
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	336,803	67,777
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$333,537	$133,281

Basis of Presentation

Basis of Presentation
	3 Months Ended Mar. 31, 2010
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, 2009. Accordingly, the quarterly condensed consolidated financial statements and related disclosures herein should be read in conjunction with the 2009 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 month period ended March31, 2010 are not necessarily indicative of results for the entire year. The Company has evaluated subsequent events through the date the financial statements were issued.

Segment Information

Segment Information
	3 Months Ended Mar. 31, 2010
Segment Information [Abstract]
Segment Information	Note B Segment Information Three Months Ended March 31, 2010 2009 (in thousands) Net sales: Automotive $ 1,290,401 $ 1,219,128 Industrial 803,302 736,501 Office products 410,511 412,748 Electrical/electronic materials 100,298 86,133 Other (2,397 ) (10,014 ) Total net sales $ 2,602,115 $ 2,444,496 Operating profit: Automotive $ 88,905 $ 87,407 Industrial 48,846 34,175 Office products 36,559 38,728 Electrical/electronic materials 6,815 5,668 Total operating profit 181,125 165,978 Interest expense, net (6,733 ) (7,096 ) Other, net (12,277 ) (14,214 ) Income before income taxes $ 162,115 $ 144,668 Net sales by segment exclude the effect of certain discounts, incentives and freight billed to customers. The line item Other, net 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
	3 Months Ended Mar. 31, 2010
Comprehensive Income [Abstract]
Comprehensive Income	Note C Comprehensive Income Comprehensive income was $126.9million and $75.8million for the three months ended March31, 2010 and 2009, 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: Three Months Ended March 31, 2010 2009 (in thousands) Net income $ 100,609 $ 89,159 Other comprehensive income (loss): Foreign currency translation 21,606 (17,781 ) Retirement and other post-retirement benefit adjustments: Recognition of prior service (credit)cost, net of tax (1,251 ) (1,227 ) Recognition of actuarial loss, net of tax 5,963 5,653 Total other comprehensive income (loss) 26,318 (13,355 ) Comprehensive income $ 126,927 $ 75,804

Recently Issued Accounting Pron

Recently Issued Accounting Pronouncements
	3 Months Ended Mar. 31, 2010
Recently Issued Accounting Pronouncements [Abstract]
Recently Issued Accounting Pronouncements	Note D Recently Issued Accounting Pronouncements In June2009, the Financial Accounting Standards Board (FASB) issued new guidance that addresses the elimination of the concept of a qualifying special purpose entity. It also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity. Additionally, the guidance requires an ongoing assessment of whether a company is the primary beneficiary of the entity. The Company adopted the new guidance on January1, 2010 and concluded that certain independently controlled automotive parts stores for which the Company guarantees debt are variable interest entities, however, the Company is not the primary beneficiary. These entities are discussed further in Note G Guarantees.

Share-Based Compensation

Share-Based Compensation
	3 Months Ended Mar. 31, 2010
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 2009 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 March31, 2010, total compensation cost related to nonvested awards not yet recognized was approximately $2.7 million, as compared to $12.1million at March31, 2009. The weighted-average period over which this compensation cost is expected to be recognized is approximately 1.5years. The aggregate intrinsic value for options, SARs and RSUs outstanding at March31, 2010 was approximately $24.8 million. At March31, 2010, the aggregate intrinsic value for options, SARs and RSUs vested totaled approximately $19.0million, and the weighted-average contractual life for outstanding and exercisable options, SARs and RSUs was approximately six years. For the three months ended March 31, 2010, $1.1million of share-based compensation cost was recorded, as compared to $2.4million for the same period in the prior year. The Company had no grant activity for the three months ended March31, 2010; however, on April1, 2010, the Company granted approximately 1,002,000 SARs and 124,000 RSUs.

Employee Benefit Plans

Employee Benefit Plans
	3 Months Ended Mar. 31, 2010
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 March 31: Other Post-retirement Pension Benefits Benefits 2010 2009 2010 2009 (in thousands) Service cost $ 3,771 $ 4,371 $ $ 190 Interest cost 24,315 23,482 156 426 Expected return on plan assets (28,568 ) (27,776 ) Amortization of prior service (credit)cost (899 ) (1,802 ) (265 ) 93 Amortization of actuarial loss 8,571 8,936 448 426 Net periodic benefit cost $ 7,190 $ 7,211 $ 339 $ 1,135 Pension benefits also include amounts related to a supplemental retirement plan. During the three months ended March31, 2010, the Company did not make a contribution to the pension plan.

Guarantees

Guarantees
	3 Months Ended Mar. 31, 2010
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 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 entitys 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 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. 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 March31, 2010, the Company was in compliance with all such covenants. At March31, 2010, the total borrowings of the independents and affiliates subject to guarantee by the Company were approximately $200.2million. 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 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. The Company has accrued for certain guarantees related to the independents and affiliates borrowings as of March31, 2010. 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
	3 Months Ended Mar. 31, 2010
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 March31, 2010, the fair value of fixed rate debt was approximately $533.2million, 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.

Acquisitions

Acquisitions
	3 Months Ended Mar. 31, 2010
Acquisitions [Abstract]
Acquisitions	Note I Acquisitions During the three months ended March31, 2010, the Company acquired two companies in the Industrial and Electrical Groups for approximately $66.0million. 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 $33.0million of goodwill and other intangible assets associated with the acquisitions. The Company is in the process of analyzing the estimated values of assets and liabilities acquired and are obtaining third-party valuations of certain tangible and intangible assets, thus, the allocation of the purchase price is preliminary and subject to revision.