GENUINE PARTS COMPANY REPORTS SALES AND EARNINGS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2017
- Company Reports Sales of $4.1 Billion, Up 4% - - Diluted Earnings Per Share of $1.08 and Adjusted Earnings Per Share of $1.16 - - Updates 2017 Outlook -
Atlanta, Georgia, October 19, 2017 — Genuine Parts Company (NYSE: GPC) announced today sales and earnings for the third quarter and nine months ended September 30, 2017.
Sales for the third quarter ended September 30, 2017 were $4.1 billion, a 4% increase compared to $3.9 billion for the same period in 2016. Net income for the third quarter was $158.4 million compared to $185.3 million recorded for the same period in the previous year. Earnings per share on a diluted basis were $1.08 compared to $1.24 in the third quarter last year. Before the impact of certain transaction costs primarily related to the Company’s pending $2.0 billion European acquisition recorded in the third quarter of 2017, adjusted net income was $170 million, or $1.16 per diluted share.
Third quarter sales for the Automotive Group were up 3.6% including an approximate 1% comparable sales increase. Sales at Motion Industries, the Industrial Group, were up 7.1%, including a 4% comparable sales increase, and sales at EIS, the Electrical/Electronic Group, grew 11.6%, with comparable sales down 1%. Sales for S.P. Richards, the Office Products Group, were down 4.7% for the quarter in both total and comparable sales.
Paul Donahue, President and Chief Executive Officer, commented, “The third quarter presented us with both opportunities and challenges. We were excited to announce our entry into Europe with the pending acquisition of one of the leading automotive distributors in that region, Alliance Automotive Group, which we expect to close in November. While, domestically, we continued to operate in a challenging sales environment across three of the key industries we serve, U.S. Automotive, Office and Electrical, our Industrial and international Automotive businesses produced stronger year over year growth. In total, we generated a 4% total sales increase, despite one less billing day in the quarter and the disruption from unprecedented natural disasters, including hurricanes and earthquakes. This was achieved via organic growth of 1%, 2% from acquisitions and a 1% foreign exchange benefit.”
Mr. Donahue added, “Our third quarter profitability was impacted by lower gross margin and higher operating expenses, as our initiatives to drive margin expansion did not meet our expectations. To that point, our plans and initiatives are underway to expedite corrective action.”
Sales for the nine months ended September 30, 2017 were $12.1 billion, a 4.7% increase compared to $11.6 billion for the same period in 2016. Net income for the nine months was $509 million compared to $535 million in 2016, and earnings per share on a diluted basis were $3.44 compared to $3.56 in 2016. Before the transaction costs recorded in the third quarter of 2017 noted above, adjusted net income was $520 million and adjusted earnings per diluted share were $3.52.
Mr. Donahue concluded, “We enter the fourth quarter focused on generating stronger organic sales growth as well as maximizing the benefits of our acquisitions. We are also intensely focused on the plans and initiatives underway to cut costs and improve our profitability. While we are disappointed with this quarter’s results, we are excited about the opportunities ahead and we move forward with a deep sense of urgency as we focus on maximizing shareholder value and positioning the Company for long-term success.”
2017 Outlook
For the full year 2017, the Company is increasing its sales guidance from up 3% to 4% to up 4% to 4.5%. The Company is also updating diluted earnings per share to range from $4.47 to $4.52 and adjusted diluted earnings per share to range from $4.55 to $4.60. This compares to the prior outlook of $4.70 to $4.75. Adjusted diluted earnings per share excludes any fourth quarter 2017 revenue, earnings or expenses, including transaction costs, associated with the pending acquisition of Alliance Automotive Group, as well as the transaction costs recorded in the third quarter of 2017 noted above.
Conference Call
Genuine Parts Company will hold a conference call today at 11:00 a.m. EDT to discuss the results of the quarter and the future outlook. Interested parties may listen to the call on the Company’s website, www.genpt.com, by clicking “Investors”, or by dialing 877-857-6161, conference ID 8518758. A replay will also be available on the Company’s website or at 844-512-2921, conference ID 8518758, two hours after the completion of the call until 12:00 a.m. Eastern time on November 2, 2017.
Forward Looking Statements
Some statements in this report, as well as in other materials we file with the Securities and Exchange Commission (SEC) or otherwise release to the public and in materials that we make available on our website, constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Senior officers may also make verbal statements to analysts, investors, the media and others that are forward-looking. Forward-looking statements may relate, for example, to the financing, timing and completion of the acquisition of Alliance Automotive Group (AAG) and the anticipated synergies and benefits of the transaction, as well as future operations, prospects, strategies, financial condition, economic performance (including growth and earnings), industry conditions and demand for our products and services. The Company cautions that its forward-looking statements involve risks and uncertainties, and while we believe that our expectations for the future are reasonable in view of currently available information, you are cautioned not to place undue reliance on our forward-looking statements. Actual results or events may differ materially from those indicated as a result of various important factors. Such factors may include, among other things, the inability to complete the acquisition due to failure to satisfy the customary closing conditions and/or the delay of or inability to obtain all regulatory approvals related to the acquisition, the Company’s ability to successfully integrate AAG into the Company and to realize the anticipated synergies and benefits, changes in the European aftermarket, the Company’s ability to successfully implement its business initiatives in each of its four business segments; slowing demand for the Company’s products; changes in legislation or government regulations or policies; changes in general economic conditions, including unemployment, inflation or deflation; changes in tax policies; volatile exchange rates; high energy costs; uncertain credit markets and other macro-economic conditions; competitive product, service and pricing pressures; the ability to maintain favorable vendor arrangements and relationships; disruptions in our vendors’ operations; the Company’s ability to successfully integrate its acquired businesses; the uncertainties and costs of litigation; disruptions caused by a failure or breach of the Company’s information systems, as well as other risks and uncertainties discussed in the Company’s Annual Report on Form 10-K for 2016 and from time to time in the Company’s subsequent filings with the SEC.
Forward-looking statements are only as of the date they are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. You are advised, however, to review any further disclosures we make on related subjects in our subsequent Forms 10-K, 10-Q, 8-K and other reports to the SEC.
About Genuine Parts Company
Genuine Parts Company is a distributor of automotive replacement parts in the U.S., Canada, Mexico and Australasia. The Company also distributes industrial replacement parts in the U.S., Canada and Mexico through its Motion Industries subsidiary. S. P. Richards Company, the Office Products Group, distributes business products in the U.S. and Canada. The Electrical/Electronic Group, EIS, Inc., distributes electrical and electronic components throughout the U.S., Canada and Mexico.
Contacts
Carol B. Yancey, Executive Vice President and CFO – (678) 934-5044 Sidney G. Jones, Senior Vice President — Investor Relations – (678) 934-5628
1
GENUINE PARTS COMPANY and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Sept. 30,
Nine Months Ended Sept. 30,
2017
2016
2017
2016
(Unaudited)
(in thousands, except per share data)
Net sales
$
4,095,906
$
3,941,743
$
12,101,725
$
11,559,648
Cost of goods sold
2,869,016
2,743,142
8,479,402
8,091,124
Gross profit
1,226,890
1,198,601
3,622,323
3,468,524
Operating expenses:
Selling, administrative & other expenses
940,259
869,562
2,717,416
2,522,223
Depreciation and amortization
40,276
37,682
117,640
108,247
980,535
907,244
2,835,056
2,630,470
Income before income taxes
246,355
291,357
787,267
838,054
Income taxes
87,913
106,031
278,693
303,334
Net income
$
158,442
$
185,326
$
508,574
$
534,720
Basic net income per common share
$
1.08
$
1.24
$
3.45
$
3.58
Diluted net income per common share
$
1.08
$
1.24
$
3.44
$
3.56
Weighted average common shares outstanding
146,720
148,899
147,312
149,243
Dilutive effect of stock options and
non-vested restricted stock awards
502
828
561
781
Weighted average common shares outstanding – assuming dilution
147,222
149,727
147,873
150,024
2
GENUINE PARTS COMPANY and SUBSIDIARIES SEGMENT INFORMATION AND FINANCIAL HIGHLIGHTS
Three Months Ended Sept. 30,
Nine Months Ended Sept. 30,
2017
2016
2017
2016
(Unaudited)
(in thousands)
Net sales:
Automotive
$
2,171,008
$
2,095,030
$
6,333,495
$
6,115,186
Industrial
1,244,234
1,162,224
3,729,183
3,482,246
Office Products
509,966
535,175
1,533,372
1,493,434
Electrical/Electronic Materials
199,236
178,448
588,281
538,803
Other (1)
(28,538
)
(29,134
)
(82,606
)
(70,021
)
Total net sales
$
4,095,906
$
3,941,743
$
12,101,725
$
11,559,648
Operating profit:
Automotive
$
178,202
$
197,874
$
537,291
$
555,156
Industrial
94,595
85,608
281,269
255,704
Office Products
23,974
30,257
85,184
97,101
Electrical/Electronic Materials
13,547
14,277
42,715
45,105
Total operating profit
310,318
328,016
946,459
953,066
Interest expense, net
(8,202
)
(5,244
)
(21,254
)
(14,731
)
Intangible amortization
(11,845
)
(10,339
)
(34,085
)
(28,324
)
Other, net
(43,916
)
(21,076
)
(103,853
)
(71,957
)
Income before income taxes
$
246,355
$
291,357
$
787,267
$
838,054
Capital expenditures
$
43,086
$
36,939
$
97,181
$
86,650
Depreciation and amortization
$
40,276
$
37,682
$
117,640
$
108,247
(1) Represents the net effect of discounts, incentives and freight billed reported as a component of net sales.
3
GENUINE PARTS COMPANY and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
Sept. 30,
Sept. 30,
2017
2016
(Unaudited)
(in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
210,082
$
225,177
Trade accounts receivable, net
2,155,948
2,032,548
Merchandise inventories, net
3,354,178
3,146,157
Prepaid expenses and other current assets
596,400
504,600
TOTAL CURRENT ASSETS
6,316,608
5,908,482
Goodwill and other intangible assets, less accumulated amortization
1,713,569
1,550,435
Deferred tax assets
122,797
109,679
Other assets
581,047
491,925
Net property, plant and equipment
760,213
688,851
TOTAL ASSETS
$
9,494,234
$
8,749,372
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade accounts payable
$
3,275,155
$
3,099,438
Current portion of debt
595,000
475,000
Income taxes payable
26,666
32,594
Dividends payable
98,959
97,955
Other current liabilities
806,887
696,544
TOTAL CURRENT LIABILITIES
4,802,667
4,401,531
Long-term debt
550,000
300,000
Pension and other post-retirement benefit liabilities
260,243
202,131
Deferred tax liabilities
50,106
51,472
Other long-term liabilities
441,090
458,944
Common stock
146,613
148,737
Retained earnings
4,108,556
4,038,985
Accumulated other comprehensive loss
(876,934
)
(865,510
)
TOTAL PARENT EQUITY
3,378,235
3,322,212
Noncontrolling interests in subsidiaries
11,893
13,082
TOTAL EQUITY
3,390,128
3,335,294
TOTAL LIABILITIES AND EQUITY
$
9,494,234
$
8,749,372
4
GENUINE PARTS COMPANY and SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended Sept. 30,
2017
2016
(Unaudited)
(in thousands)
OPERATING ACTIVITIES:
Net income
$
508,574
$
534,720
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
117,640
108,247
Share-based compensation
12,912
15,362
Excess tax benefits from share-based compensation
(2,504
)
(10,475
)
Changes in operating assets and liabilities
(94,265
)
93,498
NET CASH PROVIDED BY OPERATING ACTIVITIES
542,357
741,352
INVESTING ACTIVITIES:
Purchases of property, plant and equipment
(97,181
)
(86,650
)
Acquisitions and other investing activities
(289,353
)
(365,545
)
NET CASH USED IN INVESTING ACTIVITIES
(386,534
)
(452,195
)
FINANCING ACTIVITIES:
Proceeds from debt
3,420,000
3,020,000
Payments on debt
(3,150,000
)
(2,870,000
)
Share-based awards exercised, net of taxes paid
(3,289
)
(11,942
)
Excess tax benefits from share-based compensation
—
10,475
Dividends paid
(296,517
)
(288,909
)
Purchase of stock
(171,884
)
(143,810
)
NET CASH USED IN FINANCING ACTIVITIES
(201,690
)
(284,186
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
13,070
8,575
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(32,797
)
13,546
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
242,879
211,631
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
210,082
$
225,177
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