Genuine Parts Company Reports Results For The Fourth Quarter And Full Year 2019

ATLANTA, Feb. 19, 2020 /PRNewswire/ -- Genuine Parts Company GPC announced today financial results for the fourth quarter and twelve months ended December 31, 2019.

GPC Logo. (PRNewsFoto/Genuine Parts Company)

Sales for the fourth quarter were $4.7 billion, a 2.2% increase compared to $4.6 billion for the same period in 2018.  Total sales included 0.5% comparable growth and approximately 6.7% from acquisitions, offset by a 4.2% decline due to the sale of EIS, Inc (EIS) and Grupo Auto Todo and a 0.8% negative impact from foreign currency. Net income was $8.9 million and diluted earnings per share was $0.06. Excluding the impact of restructuring and special termination costs, goodwill impairment and certain transaction costs, adjusted net income was $196.7 million, or $1.35 per diluted share. In addition, net income and adjusted net income for the fourth quarter of 2019 excludes any profit contribution from EIS. Refer to the reconciliation of GAAP net income to adjusted net income for more information.

Fourth quarter sales for the Automotive Group were up 8.7%, including an approximate 2.9% comparable sales increase, a 7.2% net benefit from acquisitions, divestitures and other adjustments and unfavorable foreign currency of 1.4%. Sales for the Industrial Group were down 5.9%, including a 1.2% comparable sales decrease and a 12.3% decrease due to the sale of EIS, partially offset by a 7.6% increase from acquisitions. Sales for the Business Products Group were down 6.3%.

Paul Donahue, Chairman and Chief Executive Officer, commented, ''Our fourth quarter results were driven by total sales growth of approximately 7% excluding the impact of EIS, which we sold on September 30th.  The quarter was highlighted by the continued improvement in gross margin, solid sales and operating results in our U.S. and Australasian automotive businesses and continued operating margin expansion in Industrial.''

Mr. Donahue added, "We also closed on the Todd automotive and Fluid Power House industrial acquisitions in the fourth quarter and, effective January 1, 2020, sold our Canadian business products operations to further strengthen our portfolio.  Our team was busy executing on our growth strategy while also focused on the cost savings initiatives announced last quarter.  We are in the midst of streamlining functional areas across the organization, reducing the total number of distribution facilities and implementing greater use of automation within our facilities and back-office functions.  We remain confident in our ability to achieve our targeted $100 million cost savings run-rate by the end of 2020."

Full Year 2019 Results

Sales for the twelve months ended December 31, 2019 were $19.4 billion, a 3.5% increase compared to $18.7 billion for the same period in 2018.  Net income for the twelve months was $621.1 million and diluted earnings per share was $4.24.  Excluding items which impact comparability with prior periods, as noted above, adjusted net income was $833.2 million, or $5.69 per share, for the twelve months ended December 31, 2019. Refer to the reconciliation of GAAP net income to adjusted net income for more information.

Mr. Donahue concluded, "2019 represents the third consecutive year of record sales for Genuine Parts Company, with positive comparable sales and the benefit of several key acquisitions.  We also streamlined our operations with the sale of various non-core businesses.  Combined, these efforts served to further optimize our portfolio, and we expect to continue our strategic transformation in 2020.  We enter the new year with plans and initiatives to drive sales and profitability, working capital improvement and significant value for all our stakeholders."

2020 Outlook

The Company is establishing its full year 2020 sales guidance at Flat to up 1.0%, or up an adjusted 3.0% to 4.0% excluding the impact of the EIS and SPR Canada divestitures.  The Company's guidance for diluted earnings per share is $5.80 to $5.90, an increase of 2% to 4%, or an adjusted 5% to 7% excluding the divestitures noted above.  Further details regarding the Company's full-year 2020 guidance is outlined below:





Year Ended 12/31/2020

Total sales growth (1)



3% to 4%

Automotive sales growth



4% to 5%

Industrial sales growth (1)



2% to 3%

Business Products sales growth (1)



-1% to -2%

Diluted earnings per share



$5.80 to $5.90

Effective tax rate



24.0% to 26.0%

Net cash provided by operating activities



$1.0 billion to $1.1 billion

Capital expenditures



$275 million to $325 million



(1) Sales growth excludes the 2019 sales for EIS and SPR Canada

Non-GAAP Information

This release contains certain financial information not derived in accordance with United States generally accepted accounting principles (GAAP). These items include adjusted net income and adjusted diluted earnings per share. The Company believes that the presentation of adjusted net income and adjusted net income per common share, which are not calculated in accordance with GAAP, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provide meaningful supplemental information to both management and investors that is indicative of the Company's core operations. The Company considers these metrics useful to investors because they provide greater transparency into management's view and assessment of the Company's ongoing operating performance by removing items management believes are not representative of our continuing operations and may distort our longer-term operating trends. We believe these measures to be useful to enhance the comparability of our results from period to period and with our competitors, as well as to show ongoing results from operations distinct from items that are infrequent or not associated with the Company's core operations. The Company does not, nor does it suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information. The Company has included a reconciliation of this additional information to the most comparable GAAP measure following the financial statements below.

Conference Call

Genuine Parts Company will hold a conference call today at 11:00 a.m. Eastern time 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 877-407-0789, conference ID 13698286. A replay will also be available on the Company's website or at 844-512-2921, conference ID 13698286, two hours after the completion of the call until 12:00 a.m. EDT on March 4, 2020.

Forward Looking Statements

Some statements in this press release, 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 anticipated strategic benefits, synergies and other attributes resulting from acquisitions or divesitures, as well as future operations, prospects, strategies, including the 2019 Cost Savings Plan, 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 Company's ability to successfully integrate acquired businesses into the Company and to realize the anticipated synergies and benefits; the Company's ability to successfully divest businesses;  the Company's ability to successfully implement its business initiatives in each of its three business segments; slowing demand for the Company's products; changes in national and international legislation or government regulations or policies, including changes to import tariffs and the unpredictability of such changes, data security policies and requirements as well as privacy legislation; changes in general economic conditions, including unemployment, inflation (including the impact of tariffs) or deflation and the United Kingdom's exit from the European Union, commonly known as Brexit and the unpredictability of the impact following such exit from the European Union; changes in tax policies; volatile exchange rates; volatility in oil prices; significant cost increases, such as rising fuel and freight expenses; labor shortages and the Company's ability to successfully attract and retain employees in the current labor market; uncertain credit markets and other macroeconomic conditions; competitive product, service and pricing pressures; the ability to maintain favorable supplier arrangements and relationships; disruptions in our suppliers' operations, including the impact of the corona virus on our suppliers as well as our supply chain, including potential problems with inventory availability and the potential result of higher cost of product and international freight due to the high demand of products and low supply for an unpredictable period of time; failure or weakness in our disclosure controls and procedures and internal controls over financial reporting; 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 2018 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 filed with the SEC.

About Genuine Parts Company

Genuine Parts Company is a distributor of automotive replacement parts in the U.S., Canada, Mexico, Australasia, France, the U.K., Germany, Poland, the Netherlands and Belgium.  The Company also distributes industrial replacement parts in the U.S., Canada, Mexico and Australasia through its Industrial Parts Group.  S.P. Richards Company, the Business Products Group, distributes a variety of business products in the U.S. Further information is available at www.genpt.com.

 

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)









Three Months Ended

December 31,



Twelve Months Ended

December 31,

(in thousands, except per share data)



2019



2018



2019



2018

Net sales



$

4,706,189





$

4,603,792





$

19,392,305





$

18,735,073



Cost of goods sold



3,121,095





3,061,633





13,076,036





12,751,286



Gross margin



1,585,094





1,542,159





6,316,269





5,983,787



Operating expenses:

















Selling, administrative, and other expenses



1,250,141





1,214,036





4,934,167





4,615,290



Depreciation and amortization



73,235





63,739





270,288





241,635



Provision for doubtful accounts



3,281





5,841





14,905





17,147



Restructuring costs



112,184









112,184







Goodwill impairment charge



81,968









81,968







Total operating expenses



1,520,809





1,283,616





5,413,512





4,874,072



Non-operating expenses (income):

















Interest expense



22,047





26,256





95,711





101,925



Other



(12,645)





(22,000)





(66,011)





(67,822)



Special termination costs



42,757









42,757







Total non-operating expenses (income)



52,159





4,256





72,457





34,103



Income before income taxes



12,126





254,287





830,300





1,075,612



Income taxes



3,208





67,588





209,215





265,138



Net income



8,918





186,699





621,085





810,474



Basic net income per common share



$

0.06





$

1.28





$

4.26





$

5.53



Diluted net income per common share



$

0.06





$

1.27





$

4.24





$

5.50



Weighted average common shares outstanding



145,325





146,392





145,736





146,657



Dilutive effect of stock options and nonvested

restricted stock awards



780





707





681





584



Weighted average common shares outstanding —

assuming dilution



146,105





147,099





146,417





147,241





Notes:





-

Restructuring costs and special termination costs are related to the 2019 Cost Savings Plan announced in the fourth quarter of 2019. The costs are primarily associated with severance and other employee costs, including a voluntary retirement program, and facility and closure costs related to the consolidation of operations.

-

Goodwill impairment charge relates to our Business Products reporting unit. Several factors that developed in the fourth quarter of 2019 at this reporting unit led to this charge, including: (i) greater uncertainty associated with long-term industry trends and the competitive environment and (ii) fourth quarter results, including segment profitability, that were below management expectations due primarily to a reduction in volume with certain national account customers.

 

 

GENUINE PARTS COMPANY AND SUBSIDIARIES

SEGMENT INFORMATION

(UNAUDITED)









Three Months Ended

December 31,



Twelve Months Ended

December 31,

(in thousands)



2019



2018



2019



2018

Net sales:

















Automotive



$

2,799,773





$

2,576,344





$

10,987,533





$

10,526,520



Industrial



1,478,357





1,570,646





6,528,332





6,298,584



Business products



428,059





456,802





1,876,440





1,909,969



Total net sales



$

4,706,189





$

4,603,792





$

19,392,305





$

18,735,073



Segment profit:

















Automotive



$

200,646





$

199,330





$

830,359





$

854,389



Industrial



126,943





130,825





521,830





487,360



Business products



14,001





25,887





77,728





88,756



Total segment profit



$

341,590





$

356,042





$

1,429,917





$

1,430,505



Interest expense, net



$

(21,002)





$

(21,380)





$

(91,315)





$

(92,093)



Corporate expense



$

(36,286)





$

(41,110)





$

(137,592)





$

(137,723)



Intangible asset amortization



$

(24,734)





$

(22,170)





$

(97,459)





$

(88,972)



Other unallocated amounts:

















Restructuring costs



$

(112,184)





$





$

(112,184)





$



Special termination costs



(42,757)









(42,757)







Goodwill impairment charge



(81,968)









(81,968)







Realized currency and other divestiture losses



(6,798)









(41,499)







Termination fee















12,000



Gain on equity investment











38,663







Transaction and other costs



(3,735)





(17,095)





(33,506)





(48,105)



Total other unallocated amounts



$

(247,442)





$

(17,095)





$

(273,251)





$

(36,105)





















Income before income taxes



$

12,126





$

254,287





$

830,300





$

1,075,612



 

 

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)









As of December 31,

(in thousands)



2019



2018

Assets









Current assets:









Cash and cash equivalents



$

276,992





$

333,547



Trade accounts receivable, less allowance for doubtful accounts

(2019 - $37,905; 2018 - $21,888)



2,635,155





2,493,636



Merchandise inventories, net



3,831,183





3,609,389



Prepaid expenses and other current assets



1,195,286





1,139,118



Total current assets



7,938,616





7,575,690



Goodwill



2,293,519





2,128,776



Other intangible assets, net



1,568,926





1,411,642



Deferred tax assets



54,851





29,509



Operating lease assets



1,075,969







Other assets



498,965





510,192



Property, plant and equipment, less accumulated depreciation

(2019 - $1,282,952; 2018 - $1,192,694)



1,214,783





1,027,231



Total assets



$

14,645,629





$

12,683,040













Liabilities and equity









Current liabilities:









Trade accounts payable



$

4,106,163





$

3,995,789



Current portion of debt



624,043





711,147



Other current liabilities



1,553,063





1,088,428



Dividends payable



110,851





105,369



Total current liabilities



6,394,120





5,900,733



Long-term debt



2,802,056





2,432,133



Operating lease liabilities



825,567







Pension and other post-retirement benefit liabilities



249,832





235,228



Deferred tax liabilities



232,902





196,843



Other long-term liabilities



445,652





446,112



Equity:









Preferred stock, par value $1 per share — authorized 10,000,000 shares; none

issued









Common stock, par value $1 per share - authorized 450,000,000 shares; issued

and outstanding - 2019 - 145,378,158 shares and 2018 - 145,936,613 shares



145,378





145,937



Additional paid-in capital



98,777





78,380



Accumulated other comprehensive loss



(1,141,308)





(1,115,078)



Retained earnings



4,571,860





4,341,212



Total parent equity



3,674,707





3,450,451



Noncontrolling interests in subsidiaries



20,793





21,540



Total equity



3,695,500





3,471,991



Total liabilities and equity



$

14,645,629





$

12,683,040





 

 

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)







Year Ended December 31



2019



2018



2017

Operating activities











Net income

$

621,085





$

810,474





$

616,757



Adjustments to reconcile net income to net cash provided by operating

activities:











Depreciation and amortization

270,288





241,635





167,691



Excess tax benefits from share-based compensation

(4,920)





(4,232)





(3,134)



Deferred income taxes

(70,932)





3,891





65,990



Share-based compensation

32,050





20,716





16,892



Realized currency and other divestiture losses

41,499











Gain on equity investment

(38,663)











Goodwill impairment charge

81,968











Other operating activities

(13,801)





1,579





(18,040)



Changes in operating assets and liabilities:











Trade accounts receivable, net

(116,145)





(72,041)





(19,273)



Merchandise inventories, net

(66,202)





(73,173)





(9,923)



Trade accounts payable

70,679





364,639





61,474



Other short-term assets and liabilities

10,212





(97,864)





(1,544)



Other long-term assets and liabilities

74,892





(50,460)





(61,847)



Net cash provided by operating activities

892,010





1,145,164





815,043



Investing activities











Purchases of property, plant and equipment

(297,869)





(232,422)





(156,760)



Proceeds from sale of property, plant and equipment

24,772





14,665





21,275



Proceeds from divestitures of businesses

434,609











Acquisitions of businesses and other investing activities

(724,718)





(278,367)





(1,494,795)



Net cash used in investing activities

(563,206)





(496,124)





(1,630,280)



Financing activities











Proceeds from debt

5,037,168





5,064,291





6,630,294



Payments on debt

(4,897,769)





(5,124,265)





(4,350,222)



Payments on acquired debt of AAG









(833,775)



Stock options exercised

(11,413)





(10,227)





(5,239)



Dividends paid

(438,890)





(415,983)





(395,475)



Purchase of stock

(74,187)





(91,983)





(173,524)



Other financing activities

(871)





(30,663)







Net cash (used in) provided by financing activities

(385,962)





(608,830)





872,059



Effect of exchange rate changes on cash

603





(21,562)





15,198



Net (decrease) increase in cash and cash equivalents

(56,555)





18,648





72,020



Cash and cash equivalents at beginning of year

333,547





314,899





242,879



Cash and cash equivalents at end of year

$

276,992





$

333,547





$

314,899















Supplemental disclosures of cash flow information











Cash paid during the year for:











Income taxes

$

303,736





$

236,536





$

298,827



Interest

$

95,281





$

102,131





$

38,401



 

 

GENUINE PARTS COMPANY AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME

(UNAUDITED)









Three Months Ended

December 31,



Twelve Months Ended

December 31,

(In thousands, except per share data)



2019



2018



2019



2018

GAAP net income



$

8,918





$

186,699





$

621,085





$

810,474



Diluted net income per common share



$

0.06





$

1.27





$

4.24





$

5.50





















Adjustments:

















Restructuring (1)



$

154,941





$





$

154,941





$



Goodwill impairment charge (2)



81,968









81,968







Realized currency and other divestiture losses (3)



6,798









41,499







Termination fee (4)















(12,000)



Gain on equity investment (5)











(38,663)







Transaction and other costs (6)



3,735





17,095





33,506





48,105



Total adjustments



$

247,442





$

17,095





$

273,251





$

36,105



Tax impact of adjustments



(59,705)





(5,360)





(61,155)





(10,497)



Adjusted net income



$

196,655





$

198,434





$

833,181





$

836,082



Adjusted diluted net income per common share



$

1.35





$

1.35





$

5.69





$

5.68







The table below clarifies where the items adjusted above are presented in the consolidated statements of income.









Three Months Ended

December 31,



Twelve Months Ended

December 31,

(in thousands)



2019



2018



2019



2018

Line item:

















Cost of goods sold



$

2,127





$





$

9,608





$

5,779



Selling, administrative and other expenses



1,982





17,095





26,085





30,326



Restructuring costs



112,184









112,184







Goodwill impairment charge



81,968









81,968







Non-operating expenses (income): Special termination costs



42,757









42,757







Non-operating expenses (income): Other



6,424









649







Total adjustments



$

247,442





$

17,095





$

273,251





$

36,105





(1) Adjustment reflects restructuring and special termination costs related to the 2019 Cost Savings Plan announced in the fourth quarter of 2019. The costs are primarily associated with severance and other employee costs, including a voluntary retirement program, and facility and closure costs related to the consolidation of operations.

(2) Adjustment reflects a fourth quarter goodwill impairment charge related to our Business Products reporting unit.

(3) Adjustment reflects realized currency and other divestitures losses primarily related to the sale of EIS and Grupo AutoTodo.

(4)  Adjustment reflects a termination fee received in the third quarter of 2018 related to the attempted Business Products Group spin-off .

(5) Adjustment relates to the gain recognized upon remeasuring the Company's preexisting 35% equity investment to fair value upon acquiring the remaining equity of Inenco on July 1, 2019.

(6) Adjustment reflects transaction and other costs related to acquisitions and divestitures in 2019.

 

 

GENUINE PARTS COMPANY AND SUBSIDIARIES

CHANGE IN NET SALES SUMMARY

(UNAUDITED)









Three Months Ended December 31, 2019





Comparable

Sales



Acquisitions



Divestitures

and Other



Foreign

Currency



Total Net

Sales

Automotive



2.9

%



7.2

%



0.0

%



(1.4)

%



8.7

%

Industrial



(1.2)

%



7.6

%



(12.3)

%



%



(5.9)

%

Business Products



(6.3)

%



%



%



%



(6.3)

%

Total Net Sales



0.5

%



6.7

%



(4.2)

%



(0.8)

%



2.2

%





































































Twelve Months Ended December 31, 2019





Comparable

Sales



Acquisitions



Divestitures

and Other



Foreign

Currency



Total Net

Sales

Automotive



2.3

%



5.0

%



(0.6)

%



(2.3)

%



4.4

%

Industrial



1.7

%



5.2

%



(3.1)

%



(0.2)

%



3.6

%

Business Products



(1.7)

%



%



%



(0.1)

%



(1.8)

%

Total Net Sales



1.7

%



4.6

%



(1.4)

%



(1.4)

%



3.5

%



 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/genuine-parts-company-reports-results-for-the-fourth-quarter-and-full-year-2019-301007511.html

SOURCE Genuine Parts Company

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