GPC - Earnings call transcript Q3 2019

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Operator

Greetings, and welcome to the Genuine Parts Company Third Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Sid Jones, Senior Vice President, Investor Relations for Genuine Parts Company. Thank you.

begin. may You

Sid Jones

here thank Executive Genuine and to joining today Officer. and XXXX. us our and our Good Executive President Chief Company you and third the Officer; I'm for outlook Parts results Yancey, call Paul quarter for Donahue, earnings Chairman our morning, Carol and for with Vice XXXX discuss Financial conference Chief

Investors to may during please A of include website. this is discussion accepted we morning, be may which press advised section earnings be this generally which begin issued in provided results referred non-GAAP certain our reconciliation our is this call today's financial of the measures under as morning, measures, Before posted that also the release of reported these principles. accounting in

also important regarding any made the materially described differ obligation and Today's the during results company's assumes forward-looking company several forward-looking from company's this to The press SEC call including statements update no to statements company factors actual any due may this businesses. its morning's filings, release. could The latest call. in forward-looking statements involve

I the will to over for remarks. Now call his Paul turn

Paul Donahue

to Yancey businesses. make to year. and open remarks cover provide your Thank call few be overall morning. We me our let Sid. my our third full for highlights Carol update will a we outlook released time we add today, call. After the our on on performance, XXXX Earlier questions. you, will then financial current XXXX and I'll an the across that, quarter our with quarter conference results the appreciate welcome results. the And taking this you our to us third our

our third recap, to quarter our So global across platform. performance

QX a set X.X% comp with sales were time a a our in from X.X% the achieving divestment to by a from These quarterly translation X.X% pleased X.X% driven XXXX strategic first from the related sales last history. sales sales quarterly and Todo $X the decline and quarter Auto headwind currency and benefit mark increase are the improvement sales year. by X.X% items company's earlier This increase in total for in acquisitions. foreign of a follows offset the to increase record represents partially billion sales We a the

Net of was and were share. $XXX quarter other in excluding income the was This divestments, last and related year. million the and $XXX $X.XX per third in $X.XX income or to and of million impact quarter per reported net earnings compares third acquisitions income transaction cost adjusted share the $X.XX, to

active and areas, strategy actions our were the and opportunities teams business. this in our Sparesbox Inenco quarter Our growth executing to we Australasia, and industrial the several progress significant this made We included complete in online and ahead. EIS are acquisition quarter the accessories investment of optimize the portfolio. Australia's we leading sale for further see automotive to This excited

each these segments. cover business as our review we will We areas of

the another QX from X.X% by of foreign Mexico. and a translation unfavorable and This growth up were in X.X%, Our improved XX% year the total last global were comparable automotive from added sale approximately X% an acquisitions was up and X% X.X% partially the offset revenues currency X.X% QX, which of our X.X% which sales, of represented in improved sales total in sales. from was impact business from Auto

into year balance North of on Canadian basis over of We the our XXXX. and positive remain American were well and up X.X% and Automotive operations, sales aftermarket markets comp strength automotive automotive North the a business ongoing expect momentum confident gain comps. posted X.X% our these American U.S. in In sales the the to

our DIFM segment DIY quarter, our sales. and sales and outpacing commercial both positive retail to with very the customers we with had For growth the consecutive well second sales performing

repair customer Among sales represents our the growth. Canada. Center XX,XXX to segments, customer X,XXX This overall independent in and our to in group NAPA approximately commercial our sales continue DIFM shops customers outperform U.S. AutoCare another

We to sales with increases growth customers, and accounts account with to national stronger also a pleased were of fleet obviously dealers. our categories major us. key see So tire OE government centers, in very our our segment customers each and including regional

Now segment segment, a quarter, increase have our of team few this turning our retail revenue to our in business. generated headwinds the we while positive a experienced in

comps related strong rollout events. timing our We believe of XXXX, this industry in promotional store continued and across count, of a the impact transaction combination which slowing to reflects a associated have major our seen finally, lapping with we

of team financial a more both Carol details that to the launched and Canadian delivered adding worth later, businesses quarters and quarter. U.S. the in trend this Our our improve while profitability strong series will it's improved provide expect has margins initiatives, we which in ahead,

for to Europe, we are North quarter this to environment solid American automotive expect momentum. positive sales to relative In our the an our challenging a operate to sales although improvement second a quarter. continue we core So in build on report to operations we performance pleased and continue in

comps effect while region feel improvement with events the Overall, one-time the down posted decline improvement in QX. as single-digit our of quarter. France, along market, a slightly a by our UK comps our in challenged slight Germany the down our largest were it most continues Across sales series geographical was a in fueled regions, tough in saw which significant Brexit of mid-single from digits, an we to high XXXX. increase the was

the labor UK encouraging the rather on revenue overall and out both we cost Union are reach side of the remain European we on and can the the agreement executing news plans progress their sales week cost to AAG strong we UK UK, and this see domestic made of said, our in coming is and team The in sentiment is or and somewhat sooner the an remains while savings a hopeful That than on showing lumping. QX believe beginning of later. and impact has signs business, past despite market is ledger. business The employment decline in slowing growth

QX Specifically across a incremental to further key will provide believe offering private of related the for NAPA our competition one several quality label of be rollout We the QX, European product would us. introduction the distinguish opportunities growth categories. the business and to brand sales initiative from highlight

As it on periods reductions relates to the expect cost savings, positive European expense and profits impact thus our we additional our efforts are in a ahead. having operating to generate far

European In made during our M&A quarter. the progress addition, we strategy also with

which with France This on our across strategic closed the acquisition we segment heavy-duty Xst. to to acquisition Xst We PartsPoint the this plan. performed the leader Todd us continue October positions the in market group French Likewise, market. on integrate according closed acquisition, and European business as June the overall in on

are Todd $XXX in revenues. add $XX As expected a to annual million reminder million and and PartsPoint

despite and European segment market conditions, this we integration and see So many current of committed Automotive important things business, to growth our plans we in our good shape remain our taking for operations.

with Sparesbox full our also the region. our conditions full sales investment which July Zealand, to challenging our in for with closed of our pleased complete quarter. turning the our to were sales quarter Australia economic growth market on X. continues team comp solid to more across X.X% growth in strongest -- XX% Now first New represents outperform core XXXX and We the This despite

understanding As business grow this results, accessories in to the our material a and our partnership all of while automotive financial to not global reminder potentially digital digital our Australasia, sales Sparesbox is and enhance marketplace Australia's serves capabilities and our leading of parts online operations. and across

to our will turn a global business and automotive review industrial of our we now that's So business.

closing Our Global continues push Group our on the the with X September acquisition sale Industrial the of XX. with further optimization Parts July of initiatives to EIS and on Inenco portfolio

improve this will but an We billion, increase quarter approximately up of and benefit X.X%, exclude points comp from transaction XX and a for acquisitions. second XX a group address basis sales $X.X solid points This had operating consecutive basis if EIS. their with both by X% the overall margin quarter X% we sales shortly, group also including

continued unexpected in overall our have given are we growth the business. our in we we the in line The slowdown progress economy. the is pleased So top not have industrial softness seen with seen Industrial

This seven product eight our and third has positive the in across mixed of industry sector translated and industries XX product XX results our to categories of quarter. sales with

U.S. October X effective Motion tuck-in team strategic the as for to strategy headquartered With power the growth trends acquisitions the look fluid and continues overall acquired house manufacturing part Canada. slowing of Ontario, its in

service FPA fluid sales full distributor which projected is a of and locations million. four $XX annual power with

better at high their a Our Canada or we pace and XX the single-digit to has bolster are Industrial consecutive segment. for Fluid Power excited position quarters been in business growing in

and close We well they on our in have running. footprint Australia, industrial We into region leading pleased on profitability. July distributor hit accretive the Australasia further Indonesia, X acquisition with this in industrial ground performed diversified were sales this the operations New and Inenco and and the to Zealand Australasia. the Inenco have also very quarter, in and providing a is entry with business

Motion We growth. continue and presents industrial fit North that with was for in excellent an opportunities strategic believe global America to tremendous Inenco

a to XXXX. ultimately and September Group third this Industries of closed the during Finally, transaction Motion on the definitive quarter, we XX, agreement announced sell Specialties Electrical

another sale very interest complete relative We As in forward step industrial background, business optimize and in we our of its GPC to to sustainable this determined and of core lower position that company our the were growth. for the and best profile our take lower long-term had was this best to margin given growth strategy the operations. portfolio pleased

S.P. So our Group. now let's discuss Business Products Richards,

reflects and In in sales delivered and in as sales down this of another as third this contrast, quarters the for approximately quarter, business with our business well ahead. we For comp slower the primarily National from office slower quarter supplies sales and expect Group. category facilities were continued our the solid X%. our safety technology results Accounts growth This categories core decreased sales supplies

year-over-year the top impressive our and has a with mid-July. improved the DC Despite significant devastating XX profitability improvement stabilized progress This BPG at softness operations the office a and head point fire team operating its quarter. is line, in at for basis especially margin that given Atlanta the in in occurred

how want during was are unfortunate pleased this we report one we then to event. injured to First, say no

to with plan in operational of enabling Second, get matter our back a team effective up and was business days. well prepared an them continuity

very difficult our under to We are their circumstances. and of proud team servicing our attention for customers safety

a that's segment recap of our and XXXX. business So in the third results consolidated quarter of

We you I on deliver plans structure, savings These aggressive address meaningful Carol progress drive savings and before expense to are incremental for update and it turning and ongoing cost our accelerating designed to initiatives. cost plans over in our action efforts her to But reduction remarks. our wanted more effectively developing value.

Carol will generate we pleased to expansion that plans help come. million XXXX. place today, in reductions drive $XXX years later announce of the have margin as are discuss So by of are to end operating will we savings to that these And the cost meaningful annualized in

to excited team Our is together this to and to committed savings. achieve these mission work

over with that, Carol. I'll it So to hand

Carol Yancey

Thank you, Paul.

We will sales total outlook of review billion our begin a margin was more financial our gross With the include These increase, provide for with margin and sophisticated incentives. the improvement XX.X% information favorable in you factors. quarter then X.X% for strategies, quarter with with our relating a XX.X% supplier XXXX. XXXX mix benefit our in third of pricing to flexible and updated $X representing key the higher and compared product to of several

raw continue our and business addition, rate in rate. line gross our remain have businesses These PartsPoint commodities automotive, improved primarily been expect scenario higher the relatively across in segments has segments three general place impact in XXXX. factors and freight. The Business gross Products associated margins of environment all gross supplier has with the we drove In increases price margin while profiles. inflation pricing, all in pricing is of our such related relatively with areas as In far XXXX tariffs, run thus and current increase margin and of our to the seen to in three Industrial to Inenco material

in to to been our our passing price have gross the increases margins. customers far protect Thus successful on we

impact sales also XX% September for positive this products. reflects tariff this for mind, business immaterial was inflation through of primarily have expect of margins. tariff tariffs to the to effective we gross to we in a List their and the was in the impact QX XXXX. Specific X% and was We on have to X, continue which List net U.S. items would tariffs no quarter X balance the believe products continue XA our by on X. our although impact X% items, been of industrial had With on on for approximately that that add tariffs automotive levels the our XX% business approximately the So the X, impacted the results current third

in quarter, expenses up $X.X year SG&A. XX.X% our last and XX.X% the billion These from to were Turning sales. of third

be by this improve in to higher The and and Inenco increase. our IT, continue expenses factor freight investments to effect have the and SG&A profile, was impacted and delivery, in as as such businesses security, Our cyber also efficiencies ongoing a SG&A the PartsPoint costs of payroll productivity. and rising well a areas as

addition, seeing In expenses due in sales we of are deleveraging certain comparable to the operations. slower growth

Paul mentioned been costs our our and intensifying leverage As effectively expenses. initiatives enhancing our earlier, our to we've and more reduce efforts

million expect and as years $XXX made cost generate are opportunities for While implementation. we in we of these generate forward. continue end the XXXX, evaluate savings still the we significant annualized expect We've progress move the and of By beyond. to efforts stages savings meaningful in additional will reduction early to we to of

of drive cost operations part redundant intend reorganize costs, to commitment numerous focused back our and including responsibilities. areas variety and eliminate to initiatives. office functional saving a efficiencies on We As across our streamline we're several of

ultimately utilized and to consolidate the functions. facilities and and distribution our back number distribution enhance and office addition, expect total reduce we In automation to of

maintaining and more These look executed they actions we're a details successfully launched coming while to drive and initiatives quarters. working plans the process, finalized organizational workforce changes excellent on initiatives forward will and as require also are number providing of in We to this service. and these customer on currently

by segment. results let's discuss the now So

third profit in quarter for Automotive operating XXXX. margin $X.X operating of the X% quarter down margin X.X% Our year billion, compared with the from prior and of the $XXX was up million our was to third X% of X.X% revenue an

as the well quarter, of Europe. This plans XX see as facing basis saving implementing And relates expect to we that improvement mentioned, will operations we Europe are point as the next in XX the through we decline directly challenges the our margin Automotive in to be through all months. in

increase Our the XXXX. XX% from QX billion in industrial were sales $X.X strong a of quarter,

margin of solid Our operating XX results. to margin year profit business X.X% X.X% XX.X% point The to operating last and due operate well from XX industrial of gross quarters and expansion increase sales with basis $XXX million continues to was operating and with leveraging up expenses. their of a a improved consecutive the

of prior revenues Our operating X% X.X% business their $XXX Their improved up $XX.X X%, down year. year. is were million products to margin and million, from the from last operating profit X.X%

continued to for nice it's results So steady see the margin expansion and this business.

the the the up third X.X% company up was compared from margin in and quarter expense sales total in quarter, a last million, year. operating year. profit net third our on last million third Our We the X.X% $XX is million profit had and in quarter up slightly was X% interest operating of second which X% quarter $XXX from the to increase $XX

$XX estimate full lower This year, million to million the rates levels is debt $XX our from be to previous million down Looking of net to the for million. $XX the $XX balance range our which ahead, interest year. improvement interest we reflects currently expecting are and in projected of for the

total amortization $XX third we expect full-year Our $XXX the be to for was continue approximately quarter million expense and amortization million. to

million to million narrowing depreciation we full-year million basis our for and million $XX amortization million third million and to benefit information range expense segment depreciation was release, income with to $XXX expense other the sale be approximate represents year. the associated the corporate other to and quarter the our $XX including combined the acquisition for was in $XXX in third and an transaction our are the a Inenco in primarily press we range depreciation $XXX of to $XX $XXX quarter On related costs the EIS. the expense primarily for XXXX. with presented in which Our Continuing the expect million of line the

the $X $XX investments $XX professional gain million Cyber the relates in our the of transaction by of Digital and security, acquisition was initiatives. pressures items, or resulted offset sale was last revaluation the in to Inenco original and payroll corporate EIS, loss costs, expense in legal net increase partially omnichannel IT, increased excluding related our overall from primarily million final million these a XX% $X of investment. on and and The XX% This to year ongoing a million fees, interest

XXXX, For to our are $XXX expense $XXX million. narrowing we expected for range million corporate to

Our in transaction due other rate tax from year, prior primarily rate quarter to third increase XX.X% for was the XX.X%, and costs. associated an the the

For the tax be XX%. continue to full year, our to XXXX approximately we rate expect

of X% an and currency to impact condition. total compares our excluding remains receivable represents This $X.X sales turn prior to of let's increase balance excellent X.X% the sheet, year. up which billion acquisitions, and X% and strong a the Accounts EIS. foreign is our from Now increase

a So pleased our receivables. of account job remain this of good managing quality we did and we with the

Our up less inventory inventory our making in investment this currency at and was excluding XX X% key EIS X% September from levels. with and September of up pleased year, foreign the are than acquisitions, very we're was the maintaining billion, at teams our progress last appropriate $X.X

a ratio purchasing of the accounts benefit our X% up Our At global of due was September billion partners. to payable payment is key terms and XXX%. improved increase degree AP $X.X with in lesser volume to the inventory to XX, mainly

as cash structure the down Our June total average to repayment debt interest At from remain and our a our outstanding We the of at of comfortable to strong growth XX, on strong rate result XX at at priorities stands total we and with improved our third ongoing September capacity primarily is our $X.X billion from $X.X from year. for debt operations future in allocations. the which the our financial at effective initiatives XXth due X.XX% debt our sheet capital a billion support debt September XX current have quarter. is X.XX% of and the September balance last

had in in cash $XXX million the in flows cash operations from quarter we mentioned, strong third XXXX. far As thus we've generated and

operations free the $XXX to we million approximately full cash capital the billion the range. from $X and For to to million $XXX which in expect year, and in cash be dividend continue flow, excludes expenditures

our to continue of the serves believe our to value. to support expect priorities we use So for cash cash we which shareholder ongoing maximize flows

acquisitions, strategic repurchases. Our our key share the dividend priorities remain cash for businesses, and in reinvestment the

We have capital planned growing reflects XXXX and in thus in technology million our far up This invested from our $XX a platform and in $XXX XXXX. million in such productivity in global investments expenditures as our increase the areas facilities.

For the million. $XXX year, updating range we're $XXX to the of to capital our million expenditures

Regarding XXrd of to represents dividend consecutive the dividends year shareholders. paid XXXX our increased our

dividend X% which adjusted increase is XX% XXXX XXXX of approximately of with our Our in it's represents $X.XX line targeted a and XXXX payout earnings, our annual ratio. from

shares XXX,XXX share we our to repurchase. far common stock and approximately shares have Turning have $XX.X we today repurchase our thus of program million in purchased for XXXX authorized

We long the provides is and combined active expect with term and the to our return dividend believe to over stock our continue best in the attractive investment an shareholders. program that be the to

current So now discuss let's our for XXXX. outlook

of current a impact XX across through of the sale strong for all our plans and earnings sales XXXX our see our operations, the We These year of initiatives, growth our EIS include months we year, the results and the of future consideration dollar. factors. in of conditions ongoing are U.S. the several foreseeable factors market and updating the September nine full guidance

represents accounts the to these plus foreign increase impact for of guidance to as plus sales year EIS outlook the it X.X%. translation to in relative This change updated previous of a X.X% With X.X% sale currency from for previous well sales incremental as approximately we expect our items mind, our guidance. our and full sales a increase

guidance As to plus from impact currency X.X% in X% we are from we customary, segment, X% for the guidance of the changed the of previously products and and plus to segment. foreign plus to up acquisitions, continue guiding segment, and any has plus this for to challenging X% plus X% of benefit sales sale which future which of environment, EIS, the be to X% plus is our for this X% sales the X% excludes the is related due by business industrial to to previous X.X% primarily business primarily down to down a the Europe, which approximately Automotive face

share diluted share the $X.XX $X.XX, of in the $X.XX, the our earnings XXXX. and accounts On be are for for change earnings to income updating which primarily incurred to the sale $X.XX a range $X.XX represents earnings to in to other transaction per to the per earnings outlook costs $X.XX this through due expect side, we to we the and months previous from And $X.XX $X.XX adjusted of EIS. in nine to

reminder, over our Paul. transaction now As any other and earnings excludes I XXXX diluted for turn financial completes that a future costs, month to and adjusted and it update our share outlook per nine back will and

Paul Donahue

achieved We Industrial sales We with U.S., point several automotive growth you, with year-over-year billion We positive quarter, of first quarter a our further well gain. gross had as basis improved highlight business. Thank Carol. our in would history. time sales were XXX and company's our our margin as line comp Canadian in businesses pleased quarterly Australasian and another third to in the our sales, $X the surpassing for record in accomplishments. expectations for perform We

Our global margin posting October X, both and diversified further basis the XX fluid a Products improved and The point basis our margin several Industrial business and Sparesbox X. capital improvement. continue generated and cash and a a strong to via improvement. perform footprint Inenco Todd Business Group XX expanded point on flows working our finally, well, segment geography, We position stabilized and we July by including acquisitions, powerhouse on generating

made we strong accomplishments, ongoing progress these business on to our In transformation. addition have

optimize EIS XX. on take of portfolio the as of We to to businesses by steps September demonstrated our continue sale

actions enduring strengthened our the initiatives cost to sustainable, focused today. discuss value-creating meaningful including reduction we Finally, drive on efficiency we

through growing initiatives securing to executing digital new and our this We We will acquisitions. strategic strategy improve also aggressive top incrementally our achieve revenue finally bolt-on continue business performance. on by plan execute to to generation, line

for shareholders We creating significant progress objective. on the make value long-term update investment focused we we will continue to as important this are and community our towards

listening, that, thank will and it and and Carol your we'll to with the take you for turn back operator We I questions.

Operator

conducting with Please we'll session. this Horvers Our with At of question. Morgan. Christopher time, you. line Instructions] J.P. question-and-answer Thank a proceed question from be first your comes [Operator the

Christopher Horvers

Thanks, good morning everybody.

first, did comp NAPA the a one So cleanup to question, both have in and quarter was Sunday approximate less and what the benefit Motion that?

Carol Yancey

Yes.

really, extra did we So and in the segment. the third QX, day we the geography in arguably and day have quarter an business it while we on were the of sort depending in varies

would of more So minimal was a we say it impact.

Christopher Horvers

Minimal.

And guess something than -- so less points that. historically I maybe XX basis said or

Carol Yancey

less correct. than that. Something That's

Christopher Horvers

less? In one Motion, did have

Carol Yancey

yes. did, They

Christopher Horvers

fact back-to-back Okay, could turn Motion thinking core got extra first that I quarters those the the how that the can negative PMI coming maybe negative September. in the has about are it. comps And given you over And noise. outlook day ex talk months. Motion in side, on the it then Did been you about you think

Paul Donahue

Yes.

So of And XX. Chris, The the go XX and further question. months two six been a in PMI. declined the out has decline thanks for for despite back consecutive months Motion business, if PMI you in Chris, row look our

So any not by stretch. phenomenon a new

the September strongest we're Our both were They than overall pleased in clearly like way we're have the the margin the Much in with in and But delivered, a and with to July had out in guys and the this is again, fortunately the their August. slowing deliver -- terms environment, Motion things very business quarter of business slightly done we're seen quarter. what we a was business the operating good we're the take way August. but month in right weaker cost of able the our they've nice pleased industrial team improvement deliver quarter. Chris August. past, month cyclical as delivered in

Christopher Horvers

think be just implied run comp I quarter. the you but to what's for fourth then of sort through numbers, the And about Motion having it. Got to the guess able

Carol Yancey

QX, geography X% item a in we're as And to industrial in be to of comp. not it the beyond note in in so would expansion a Inenco one and They're into that going was just we're some the Australasia. around have things quite what with other that similar our really and America. seeing QX business North Chris, to susceptible different to pleased

we but look a still for comp strong total as So similar QX. ahead, reported sales,

Christopher Horvers

Got -- how How you see similar that fourth it. -- quarter? the the discussion NAPA for around did And noise? here trends the -- then extra then NAPA implied U.S. day ex the the just U.S. what comp lastly monthly And the business. in

Paul Donahue

So described in August, question, part similar September in team for I'll not very surprise. take quarter I Industrial. good what the of the a the Chris the the of U.S. very again, to Good cadence August first the here

I'll of commented of we saw guidance I it I that might in cadence similar as very I'd a of July, that that We as And got let the slow the all-in-all, second far And we July. the one. have the and on are call, even outlined September. for up last what But industrial. the tackle in think against forward Carol half during month to our then looking July, say strongest comp July, a about we year in off to better start

Carol Yancey

sure, Yes, Chris.

we X%, As around we nine comp. X% just expect look would ended similar as U.S. automotive the we coming around with in to months X.X% QX be was to

Christopher Horvers

Perfect, of thanks Best luck. so much.

Paul Donahue

Thanks, Chris.

Operator

you. Thank

proceed next Please line RBC the of with Capital Scot Markets. Ciccarelli your question Our question. from with comes

Gustavo Gonzalez

good morning. Gustavo Scot Hi, today. you questions. Thank taking actually for This for on our Gonzalez is

environment touch a even prior of it there, multiples sort the of and ago and years and maybe and acknowledging, sort of say, set and automotive market puts on now or right seeing like or Can looks you're opportunity out years? are M&A in of three what strategic versus lot on of there market-by-market. versus, on particular sort of today takes how kind the two sort directionally in Just the of M&A sort you industrial update us

Paul Donahue

geographies. touch an bolt-on that, different on for classic A from France, point, M&A GPC strategy the to for lookout the footprint on and us from acquisitions house Todd strategic for that business number heavy plastic the across Sure, one business and will bolsters our acquisition in are the be our power vantage in at in quarter we I'll fluid -- which duty segments always standpoint market, upon at strengthens coupled past acquisition our us positions business, were power our motion our this which Canada. embark fluid

are to is look to bolt-on bolt-on M&A year per our and that for at will classic certainly in to X% approach acquisitions continue acquisitions. look strategy those X% to we our So generally

not acquisitions and bolt-on be XXXX more like changed getting our has a those it's of at acquisitions us, acquisitions the in that more terms terms a focused In strategic valuations beyond. AAG the bidding that going would. sane to previous years players, we're those in into on look know if acquisitions, And we very valuations not then most more environment, in of we're the those type we strategic in larger, more, of and you know they -- really integrating

Gustavo Gonzalez

it, Got thank you.

Paul Donahue

welcome. You're

Operator

Thank you.

of next McClintock Our with Raymond the comes line proceed question Matt Please your from James. question. with

Matt McClintock

European to I that -- you business Hi. on morning Yes, to said that what that for question. and I returned quarter during positive quarter did or believe see good around could little a first wanted few that focus minutes. you to be brought slightly that, wanted you automotive the French into I in a that that growth know if bit, wanted everyone. business I this actually that to positive the the improvement dig

Paul Donahue

and what question, pleased in I rebound foremost we is our for the would European were business first thanks And to QX. say, Matt. very see Look,

QX was As a you know, challenge.

significant sales our nicely, quarter single market rebounded French the a increase team delivering in and the in which largest a Europe So had is a decline QX. solid positive team, after

issues they that business our a pleased going to was initiatives continue face softness the good may issues Brexit we did drive a here the -- put and see the going the to job, transitory resolution. in largely But help we UK the where into there able we we UK in certainly are reach and that if those where forward. resolution will the French saw will team again, are think place they that I that that perhaps in to quarter be to were believe forward

Matt McClintock

the Is deal that quarters remove does is something would into is a before have is the business? overhang to was removed. overhang period would out Brexit that something of that you an in up immediately And place. reached Thanks. play go would that Or if apparently has actually today my think your that that over follow actually that

Paul Donahue

think specific Yes, the just the has Matt, hard is I quarters, I that's with all question, been aren't a malaise general. in that say, weighed in it on the you good of you and around sure give bit marketplace, business of there folks I uncertainty to could Brexit wish a in but I tell number answer. will past a It's

bounce if QX, So way immediate and of but Matt, it are categories don't product makes an in a its I launched we'll add not. that for in to I NAPA we're going know the and back taking into if bounce expect UK, to our they resolution it we couple forward. be that to aggressive getting also that that do in back, intend QX a reach I We're And or through initiatives introducing whether see accelerate happens brand they sure. resolution. reach there Parliament do would the

reach whether that business. So to not? resolution ready Our they stands or team improve

Matt McClintock

I appreciate the of luck. color. Best

Paul Donahue

You're welcome. you. Thank

Operator

Thank you.

Daniel the Stephens Our Imbro your question proceed from with comes of question. with Inc. line next Please

Daniel Imbro

are North versus saw AutoCare as improves. stack you for we've basis. a there Yes, loyalty driving or automotive you acceleration industry questions. acceleration two-year like growth about the much Can just in good morning weather the thanks nice our What talk your taking just programs, organic and how remodels, think NAPA an that store is seen on America, growth,

Paul Donahue

largest Yes, QX category, our the NAPA we by saw very a our performed quarter. I you is tell QX, in spot is business very our point a well a it was trend it large which in percentage, similar very segment would out about quarter. Daniel. business as as and question, in DIFM in our the NAPA AutoCare what the Thanks would I bright for

better a Our team, do terrific also account a major job, the in NAPA business. and lift our AutoCare team to saw continues we

as soften get is got new So was on we've track business in the in retail saw retail initiatives on QX we it both the the business have did quite into QX, we're in carried some will our that confident QX in side, anniversaried of that We've for but last that few well. driving our retail opportunities back us highlight been QX. team but DIFM we the real years,

Daniel Imbro

how last how mentioned that the us new helpful. rolling maybe, so the players, help to of about think Thanks on And compare product you does responded think a lot, the up and consumer up private you're that's categories in today then I across some far existing then brand? Can is following your has Europe question, the to I NAPA brand you business in how much mean, label. Europe.

Paul Donahue

NAPA will launched an probably a early a it's Daniel was that responded give it the I excited, in major QX, buzz. lot lot Europe, it to Yes, of you They we NAPA brand. how our private at the in a to What on you tell they've bit a team of overall update I market. brand excitement, varies would say the know by about U.K. brands show in

the France private bit in be Netherlands U.K. is Germany to the Germany, with launch but which to be NAPA intent chose very label, France, UK first, the the for private move would why make strongest label mistake brand. and So, a private and the in will we little market our into no more

Daniel Imbro

it, so Got luck. much. thanks of Best

Paul Donahue

You're welcome. Thank you.

Operator

you. Thank

from line question. of Goldman with with comes Sachs. proceed question next Our Please McShane the your Kate

Kate McShane

about just Hi, go good morning. Thanks questions. savings. back for taking ask wanted my to the I and

there impact reinvested identify, changes needs able $XXX to mentioned? much rework the given to then is the you aren't you've be and terms identified, any Just you going timing, of flow how much to million, are to in XXXX, versus of through be how could

Carol Yancey

quarters costs and appreciate about I be of million a would is so $XXX first and have some one-time come look kind we're comment related in could we're your related and as flow the again it still or still areas, facility ahead either the would that as would $XXX those question, at in obviously this stop non-recurring $XXX with working would about annualized Yes, we're head million of initial a that we obviously million have at number look what it's we're then planning million. year. we out have as to and to talking of would XXXX, ahead, doing going we as that number move and annualized for the QX, going by XXXX look initiatives look comes XXXX would type expectation over we're in into the the continuing that at specifically we for of a certainly that with be net opportunities the count QX end by number in, be the things it be but in and looking not just of in several that other end plans could that ahead, we $XXX we but we on the our of And

Kate McShane

was tariffs we the the from you seen Okay, to thank you in what been through you. And just units specifically? tariffs, sales in place. impact Can just third think versus could back then inflation the go automotive and what talk quarter industry if on you've now us the that and have impact from

Carol Yancey

Yes.

X, is U.S. first for that It so primarily So talking in up through for three on Automotive similar tariff sales automotive. about as that a about X.X% one the of expect on we, XX% amount again would for the that was went we QX we're half, X% and list our July and we commented was about QX.

automotive. kind basis for have full-year a So X.X% U.S. blended we of

them and they amount about comes around immaterial in of would XX/XX, QX. we in business in, QX could have as have industrial for but the it QX there that really For List similar Xb now for do for and be X% X% business, was also it's a products

takes guess agile all as tremendous leave through being become through no to it the relates gross pass I and those nimble tariffs. margins. much done and moving with, would you to we in again, job And successfully I our have navigating have impact just our more have prices And teams and a seen puts able and on

Kate McShane

you. thank then automotive. on Okay, And question my final

You events Were pushed or into timing events. QX? certain mentioned forward of they brought promotional the promotional were

Paul Donahue

I begin honestly, They fine that going forward, would were just colder those And we hit as we pulled to into business. ask we'd out U.S. forward automotive Kate be QX, we're some Kate, we'll comment balance the we think about roll to you also think and going weather.

our look in and July, DIFM think year-over-year the going which well think plays I which we us I look average So would for jump a is aftermarket, at the QX strength, you we is be thing the the our gas in for miles to very automotive at quarter, continue fundamentals considerably, nice performance absolutely really one age, all solid and overall in aftermarket when when into plays it that health price XXXX. that is saw of driven, the to stress down I

Kate McShane

thank Okay, you.

Paul Donahue

Thank welcome. you. You're

Operator

Thank you.

Melich comes Our next your line Evercore ISI. the question of from with Please question. with Greg proceed

Greg Melich

to Carol be to out highlight us much want little as there. that's the might in your numbers? about on just I how thanks. give of in you related have Or up a bit tariffs occurring tariffs talked Hi, to follow opposed those the the guys inflation. is you inflation some inflation past COGS. inflation and that Could general other

Carol Yancey

tariffs for do the Greg. that, virtually automotive inflation and happy same. we saw U.S. the to Yes, What are

been passing generally like they've on that the is the it to inflation sales the inflation. a X.X% side, had, on or So be through more COGS X% side

freight Our they industrial and probably to you talk is business business and is indirect total inflation a inflation more about that, X% tariff normal for things running them around raw related. there would that's products, for like about level then materials and supplier with running and about X% in for tariffs X% would and

Greg Melich

at the sales the flow and of terms number of is going through. else maybe when to Got forward. just And benefit through pass to look tariffs hit we a is that the that peak watching to timing something that, as quarter Is in you why -- and should Is it ebb when this is through? it. then flow be follow-up there that

Carol Yancey

went again was half tariffs half guess, take half the that but the were we operated year, pass-through more led if a how X% so tariff, we up X% original knew X% through XX% first and we recall, we take we our that but and be about amount would again under, I impact we July second pronounced. to take through of about to XX% didn't and did the didn't full passed that that that's half No, on what full we of about you first the the that pricing tariff XX%

So all along, second around that's was why said X%. first would half we've be half X%

Greg Melich

bigger is think there went And maybe Got but any in may be -- is little is picture you The leaned clearly consumer you that there question. with this having a or was this any the is of evidence DIY deferring a inflation into and softer. do-it-for-me trouble and that, early then Do guys decisions? stronger, it. any there

Paul Donahue

retail because and one bit as contemplated have It's the we softening well we've question, of seen on Greg that front. certainly a a great

it I early -- yet may make very But to we think tell what there. bit be are a will watching it's a very, call closely. you I is

One the key of obviously are we and flowing stores number of the always through closely size. our the monitor tickets basket then stats that average obviously

both and very retail size, quarter. Basket wholesale healthy was this

We're bit we're our you wholesale call. to early think our in it's so closely. But, ticket. But maybe just react marketplace, than I so if more down competitive were that ticket when it yet we'll retail stand make would Our necessary. I and tell a and monitoring monitoring the

Greg Melich

That's Good luck. a lot. super helpful, thanks

Paul Donahue

Thank you, Greg.

Operator

you. Thank

Our next of Seth comes from line your Please with Wedbush Securities. with the Basham proceed question. question

Seth Basham

Thanks a morning. lot, and good

Paul Donahue

Good morning, Seth.

Carol Yancey

Good morning.

Seth Basham

Good you have some to further savings. cost hear for that plans

for SG&A XXXX it would outlook be able appropriate normalized in sales leverage, that the about long-term guidance? be your think think a to line to we those environment assuming with you'll from As savings, drive

Carol Yancey

operating Yes. again, would SG&A margin improvement you point is improvement. would about a in improvement drive growth, -- Look the we as expect operating basis to sales and mentioned normal comparable $XXX drive expect million we XX margin to

Seth Basham

give to you in Great. And as providing Can incentives color the a some of benefit. talked gross sustainability of then, you was little and in about margin what more as those incentives. quarter, segment relates to supplier that bit it types the

Carol Yancey

margin of margin initiatives segments the businesses the product I our margin. had larger that we've just share in The improvement. the gross doing of all gross of gross and three coming what we of initiatives sell our side has significant favorable margin all mix area is to buy so side call, in core all done actually that our so in from and from Yes, pricing, improvement we're is the gross improved

mentioned, what's because -- from we had gross PartsPoint we delivering incentives a had driving of and are and that a do an sell and and automotive really again core carry is good the Inenco buy higher as a inflation. with initiatives little margin just side is products. bit us but and growth, which have better have primarily been this tariff have gross it in we those and doing positive we then We our an supplier margin, side And uplift bit impact PPG, have on office of

Seth Basham

a just you Can color with associated and gross on little provide it. benefit Got margin more SG&A the and the headwind PPG Inenco?

Carol Yancey

Yes, happy to.

you XX was XX when related of had, points then and So And business the core that a was was that point margin XXX and to you SG&A for look of acquisitions, if was our so around the it side, costs the new adjustments from look up accounting our we similar third SG&A points. you, on mentioned, basis purchase PPG gross exclude one-time up. take to Inenco. being you would our out two-thirds you Paul about at basis when if as two it's XXX again impact SG&A tell basis We up our the at

these important kind of things side well. business when core operating bit our some look of to margin So, take you again improving should the it's at as a be out and

Seth Basham

very Understood. much. Thank you

Paul Donahue

you, Thank Seth.

Operator

you. Thank

line from Chris comes with question question. next Bottiglieri with of your Research. Wolfe Our Please the proceed

Jacob Moser

for guys, question. for Moser Chris. the Hey Thanks is taking on Jacob actually this

Paul Donahue

Okay.

Jacob Moser

of just wondering cost reductions. of the million I'm $XXX So

had said acquisition. you from million I remaining think synergy the $XX you target the some guys AAG still from

all So $XX that to this incremental million? is

Carol Yancey

and that SG&A. Yes, is it related million all to of to are as which million, the is $XXX margin was it in and track that those global relates on we $XX AAG, gross area procurement,

payroll facility So freight-related. more it and is and

Jacob Moser

this is point? has got of And at $XX Okay, much to how synergies it million quantify through possible that come of you.

Carol Yancey

are the receive we three have said achieve we No, and of would years we that. that by -- end we on to track

in but it's improvement of stuff other coming bulk the look, would all doing. the it's number, I track, -- mean is our that our that on -- we we're we're margin argue So it's gross from

Jacob Moser

Got you you, in said okay. you debt just, paid then And quarter. down the some

three and you you're changed that maybe versus So historically you're out? how leverage about see I think, thinking shaking around you debt-to-EBITDA do times now where have like, X.X

Carol Yancey

Yes.

sale So really what use and our that acquisitions effect capital pay redeployed proceeds the we we take capital from that in quarter. down other we we of in were had improvement that our working the two in our had made to in in had the been some to and nice is working able earlier some the debt. on The quarter EIS improvement of

pleased where the and at more the had of and are. at to debt is QX before a We're end look with bit by now, of where we we're bit end expected up at and it having when is down with was what we come little and right comfortable just it where year. looking at and ticked flexibility opportunities we're it now was a maybe So obviously with comfortable our look where it the is what really the

leverage today still So we right take with again of will and the up opportunity. amount certainly have it for we the we're comfortable

Jacob Moser

questions. Thanks for the taking right, All great.

Paul Donahue

you. Thank

Carol Yancey

you. Thank

Operator

proceed and with Jefferies. Ladies from Bret our morning question line of you. gentlemen, with this Please Thank your final comes the Jordan question.

Bret Jordan

second similar 'XX the is tariffs? as might second -- I first the the we to think if in list negligible inflation those to about forecast half 'XX fair second think half, have Carol, guys. inflation, we on just morning Good lap half it of of the and

Carol Yancey

are second come think in, again reasonable any first makes kind be versus they that mean stay you've half other things half would sense. I would I what -- and laid out but of see inflationary the We think that assuming tariffs where like year-over-year would XXXX. really don't I other

Bret Jordan

there it branded. bigger private pick label that's then do to program. delta private need used more I you price up private margin how against is can to over over mean you you aggressively private on think a And what a the market with label I profile you in the think question margin of guess Okay. there. Europe, label when And about label, sell the to

Paul Donahue

today, U.K., we've priced bit just and Well, in aggressively label a the Bret, initial maybe batteries, launched then suspension what where we've product I the launches mentioning U.K., the as be well would are categories Bret, we've the given core will private in seen a as we having their again they seen, they more private by our and is flight follow start, a some products, it pretty why, big little over you've a you value, there, in closely think got economy to the are of brand. probably know bit challenges, certainly with I that's opportunity NAPA

Bret Jordan

in the performance weakness? or Regional U.S. any cleanup. one then And great. particular Okay, strengths NAPA,

Paul Donahue

Yes. northern QX, tier our to was Very similar which division. Bret

did include all performed for would the some that year a fine. against have QX, U.S., the central Southwest and way part from in saw hurricanes So in We out Group again Mountain bit Where the benefited of which in through, softness in a led bigger west, us the saw may ago sales Northeast which just via Atlantic. the our the bit Midwest a really the of we well, was also think so little comps. QX, we one-time some up coming are Atlantic the we

really much too U.S. part into wouldn't for I that. performed Northern the So of But read really, the well us.

Bret Jordan

Thank Okay, great. you.

Paul Donahue

Brett. you, You're welcome. Thank

Operator

Thank you. final Ladies and the to our turn management for gentlemen, that back floor any I'll concludes session. comments. question-and-answer

Carol Yancey

today call participating year-end forward to We'd reporting our look we like out in our for and to thank numbers. you

support So thank Parts you of Genuine for your Company.

Operator

at Thank time. Thank your you. for lines disconnect your today's this you participation. teleconference, may This concludes you

Genuine Parts (GPC) 17 Oct 192019 Q3 Earnings call transcript