Genuine Parts Company Reports Results For The Fourth Quarter And Full Year 2020

Fourth Quarter 2020 Highlights

– Sales of $4.3 billion, Down 0.7%

– Diluted EPS from Continuing Operations $1.18, Up 119%

– Adjusted Diluted EPS from Continuing Operations $1.52, Up 19.7%

Full Year 2020 Highlights

– Sales $16.5 billion, Down 5.6%; Excluding Divestitures, Down 2.3%

– Diluted EPS from Continuing Operations $1.13, Down 74%

– Adjusted Diluted EPS from Continuing Operations $5.27, Down 0.8%

– Cash Flow from Operations of $2.0 billion

– Returned $549 million to Shareholders via Cash Dividends and Share Repurchases

– Introduces 2021 Outlook for Revenue Growth of 4% to 6% and Diluted EPS of $5.55 to $5.75

ATLANTA, Feb. 17, 2021 /PRNewswire/ — Genuine Parts Company (NYSE: GPC) announced today its results for the fourth quarter and twelve months ended December 31, 2020.

“Our fourth quarter results reflect the benefit of our ongoing strategic actions, despite the continued challenges of COVID-19. The GPC team was agile in adapting to dynamic conditions and executed on our initiatives to deliver customer value, operational efficiencies and strong financial results. We are grateful to our 50,000 associates for their unwavering commitment to excellence while responding to unprecedented business and economic conditions,” said Paul Donahue, Chairman and Chief Executive Officer of Genuine Parts Company.

Fourth Quarter 2020 Results

Sales from continuing operations were $4.3 billion, a 0.7% decrease from the same period in 2019. The decrease in sales was primarily attributable to a 2.8% decline in comparable sales, partially offset by a 0.8% benefit from acquisitions and a 1.3% net benefit of foreign currency and other.

Net income from continuing operations was $171.6 million, or a diluted earnings per share of $1.18. This compares to net income from continuing operations of $79.0 million, or $0.54 per diluted share in the prior year period. Excluding the impact of restructuring, an inventory adjustment, and transaction and other costs, adjusted net income from continuing operations was $221.0 million compared to $185.7 million a year ago. Adjusted net income per diluted share from continuing operations was $1.52, a 19.7% increase compared to $1.27 per diluted share last year¹.

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Mr. Donahue continued, “Automotive sales were led by strong growth in Australasia, while the pace of recovery slowed in Europe and North America relative to the previous quarter. In response, our team was focused on our strategic priorities to strengthen our supply chain, improve our inventory availability and enable our sales team to build positive sales momentum. Industrial sales were much improved from the prior quarter and grew progressively stronger through the last three months of the year. These top line results, combined with further gross margin improvement and lower operating expenses, drove expanded operating margins in both our automotive and industrial businesses and strong earnings growth. We also finished the year with a strong balance sheet, ample liquidity and robust cash flow.”

Fourth Quarter 2020 Segment Results

Automotive Parts Group

Automotive sales were $2.8 billion in the fourth quarter, up 0.7% from 2019 and representing 66% of total Company revenues. The increase consisted of a 0.9% contribution from acquisitions and a 1.8% net benefit of foreign currency, offset by a 2.0% decrease in comparable sales. Segment profit of $240.1 million increased 19.4%, with profit margin of 8.5%, up 130 basis points from 2019.

Industrial Parts Group

Industrial sales were $1.4 billion in the fourth quarter, down 3.3% from 2019 and representing 34% of total Company revenues. The decrease in sales was comprised of a 4.4% decrease in comparable sales, partially offset by a 0.6% contribution from acquisitions and a 0.5% net benefit of foreign currency. Segment profit of $133.4 million increased 5.1%, with profit margin of 9.3%, up 70 basis points from 2019.

Full Year 2020 Results

Sales from continuing operations for the twelve months ended December 31, 2020 were $16.5 billion, a 5.6% decrease compared to $17.5 billion in 2019. Excluding divestitures, net sales from continuing operations were down 2.3% for the twelve months. Net income from continuing operations was $163.4 million and diluted earnings per share were $1.13 for the twelve months, compared to $646.5 million, or $4.42 per share in 2019. Excluding items which impact comparability with prior periods, the Company’s adjusted net income from continuing operations was $765.0 million, or $5.27 per share, compared to $776.8 million, or $5.31 per share in 2019.

Balance Sheet, Cash Flow and Capital Allocation

The Company generated operating cash flow from continuing operations of $2.0 billion in 2020, an increase from $833 million in 2019, driven primarily by working capital initiatives, including the sale of accounts receivable that increased operating cash flows by $800 million. Free cash flow was $1.9 billion, an increase from $555 million in 2019. The Company also generated $183 million in cash flow from investing activities and used $1.5 billion of cash flow in financing activities.

The Company improved its debt position in the fourth quarter by issuing $500 million in public debt and refinancing its revolving credit facility. The Company ended the year with $2.9 billion in total liquidity, consisting of $1.9 billion in unused credit capacity and $1.0 billion in cash and cash equivalents. For the year, the Company reduced debt by $749 million, or 22%, and is in compliance with all its debt covenants.

“While we chose to prudently conserve cash and carefully monitor our capital deployment through much of 2020 due to COVID-19, we reinvested in our businesses via essential capital expenditures and a few bolt-on acquisitions. The Company also returned $549 million to shareholders, including $453 million in dividends and $96 million in share repurchases,” said Carol Yancey, Executive Vice President and Chief Financial Officer. “We enter 2021 with an excellent balance sheet, including a strong cash position and ample liquidity, to support our growth plans and provide for disciplined, value creating capital allocation. As we gain greater visibility into the macro environment, we expect to resume more normal levels of capital allocation, including the reinvestment in our business.”

“The year 2020 was extraordinary in every respect,” Mr. Donahue concluded. “The COVID-19 pandemic has been incredibly challenging, but the global GPC team proved resilient and up to the challenge. Despite economic and market uncertainties, we remained focused on our strategic growth initiatives and cost actions. Notably, we further streamlined our operations with the divestiture of our Business Products segment, which helped optimize our portfolio and strengthened our focus on the global automotive and industrial businesses. We are extremely proud of our team for their many accomplishments in a difficult year and excited to move forward into 2021 as a stronger, more agile Company well-positioned to drive strong sales growth, earnings and cash flow.”

2021 Outlook

The Company is reinstating its practice of providing full-year guidance. The Company considered its current growth plans, strategic initiatives, recent business trends, global economic outlook and the continued uncertainty of COVID-19 and its potential impact on our results, in establishing its full-year 2021 guidance as outlined in the table below. The Company will update full-year guidance during 2021, as appropriate.

Certain Non-GAAP Information

This release contains certain financial information not derived in accordance with the United States (“U.S.”) generally accepted accounting principles (“GAAP”). These items include changes in sales excluding divestitures, adjusted net (loss) income from continuing operations, adjusted diluted net (loss) income from continuing operations per common share and free cash flow. The Company believes that the presentation of changes in sales excluding divestitures, adjusted net (loss) income from continuing operations, adjusted diluted net (loss) income from continuing operations per common share and free cash flow, 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 that may distort our longer-term operating trends. We believe these measures are useful and enhance the comparability of our results from period to period and with our competitors, as well as 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 as superior to, 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.

Comparable Sales

Comparable sales is a key metric that refers to period-over-period comparisons of our sales excluding the impact of acquisitions, divestitures and foreign currency. The Company considers this metric useful to investors because it provides greater transparency into management’s view and assessment of the Company’s core ongoing operations. This metric is widely used by analysts, investors and competitors in our industry, although our calculation of the metric may not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate this metric in the same manner.

Daily Sales

Daily sales is a key metric that represents the amounts invoiced to the Company’s customers each day. Daily sales do not represent GAAP-based sales because, among other things, invoices are not always generated at the same time goods and services are delivered to customers and the amounts do not include adjustments for estimates of returns, rebates or other forms of variable consideration. Management uses this metric to monitor demand trends at each of its subsidiaries throughout each month for the purposes of monitoring performance against forecasts and to make operational decisions. The Company considers this metric useful to investors because it provides greater transparency into management’s view and assessment of the Company’s ongoing operations. The calculation of this metric may not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate this metric in the same manner.

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 future outlook. A supplemental earnings deck will also be available for reference. Interested parties may listen to the call and view the supplemental earnings deck on the Company’s website at http://genuineparts.investorroom.com. The call is also available by dialing 877-407-0789, conference ID 13715052. A replay will also be available on the Company’s website or at 844-512-2921, conference ID 13715052, two hours after the completion of the call until 12:00 a.m. Eastern time on March 3, 2021.

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. All statements in the future tense and all statements accompanied by words such as “expect,” “likely,” “outlook,” “forecast,” “preliminary,” “would,” “could,” “should,” “position,” “will,” “project,” “intend,” “plan,” “on track,” “anticipate,” “to come,” “may,” “possible,” “assume,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Senior officers may also make verbal statements to analysts, investors, the media and others that are forward-looking. These forward-looking statements include, without limitation, statements regarding our growth plans, capital allocations and reinvestment in our business during the coming year, as well as statements under the heading “2021 Outlook” above.

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 extent and duration of the disruption to our business operations caused by the global health crisis associated with the COVID-19 outbreak, including the effects on the financial health of our business partners and customers, on supply chains and our suppliers, on vehicle miles driven as well as other metrics that affect our business, and on access to capital and liquidity provided by the financial and capital markets; the Company’s ability to maintain compliance with its debt covenants; 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 and realize the expected benefits of those divestitures; the Company’s ability to successfully implement its business initiatives in its two business segments; changes in demand for the Company’s products; the ability to maintain favorable supplier arrangements and relationships; disruptions in our suppliers’ operations, including the impact of COVID-19 on our suppliers as well as our supply chain; changes in national and international legislation or government regulations or policies, including changes to import tariffs, short term government subsidies, and the unpredictability of such changes and their impact to the Company and its suppliers and customers, 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 (U.K.) exit from the European Union and the unpredictability of the impact of such exit; changes in tax laws, regulations, treaties and policies, including the interpretation and enforcement of any of the foregoing; volatile exchange rates; volatility in oil prices; significant cost increases, such as rising fuel and freight expenses; 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; failure or weakness in our disclosure controls and procedures and internal controls over financial reporting, including as a result of the work from home environment; the uncertainties and costs of litigation; disruptions caused by a failure or breach of the Company’s information systems; and the other risks and uncertainties discussed in the Company’s Annual Report on Form 10-K for 2020 (all of which risks may be amplified by the COVID-19 outbreak) 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

Founded in 1928, Genuine Parts Company is a global service organization engaged in the distribution of automotive and industrial replacement parts. The Company’s Automotive Parts Group distributes automotive replacement parts in the U.S., Canada, Mexico, Australasia, France, the U.K., Germany, Poland, the Netherlands and Belgium. The Company’s Industrial Parts Group distributes industrial replacement parts in the U.S., Canada, Mexico and Australasia. In total, the Company serves its global customers from an extensive network of more than 10,000 locations in 14 countries. Further information is available at www.genpt.com.

¹Adjusted net income from continuing operations, adjusted diluted net income from continuing operations per common share, sales excluding divestitures and free cash flow referred in this press release are non-GAAP financial measures. Please refer to the supplemental information presented below for reconciliations of the non-GAAP financial measures used in this release to the most comparable GAAP financial measure and related disclosures.

(4,920)

(4,232)

Deferred income taxes

(27,722)

(55,939)

…

1,593

Share-based compensation

22,621

28,703

17,737

Realized currency and other divestiture losses

11,356

34,701

—

Gain on equity investment

—

(38,663)

—

Goodwill impairment charge

506,721

—

—

Other operating activities

12,569

(17,589)

1,648

Changes in operating assets and liabilities:

Trade accounts receivable, net

957,514

(134,163)

(62,103)

Merchandise inventories, net

58,462

(54,765)

(74,148)

Trade accounts payable

89,350

82,739

357,097

Other short-term assets and liabilities

(109,812)

11,740

(100,616)

Other long-term assets and liabilities

57,903

76,937

(57,372)

Net cash provided by operating activities from continuing operations

2,014,522

832,519

1,056,722

Investing activities:

Purchases of property, plant and equipment

(153,502)

(277,873)

(226,506)

Proceeds from sale of property, plant and equipment

18,064

24,387

14,391

Proceeds from divestitures of businesses

387,379

434,609

—

Acquisitions of businesses and other investing activities

(69,173)

(724,718)

(257,823)

Net cash provided by (used in) investing activities from continuing operations

182,768

(543,595)

(469,938)

Financing activities:

Proceeds from debt

2,638,014

5,037,168

5,064,291

Payments on debt

(3,533,017)

(4,897,769)

(5,124,265)

Stock options exercised

(4,120)

(11,413)

(10,227)

Dividends paid

(453,277)

(438,890)

(415,983)

Purchase of stock

(96,215)

(74,187)

(91,983)

Other financing activities

(65,150)

(871)

(30,663)

Net cash used in financing activities from continuing operations

(1,513,765)

(385,962)

(608,830)

Cash flows from discontinued operations:

Net cash flows provided by operating activities from discontinued operations

5,039

59,491

88,442

Net cash used in investing activities from discontinued operations

(11,131)

(19,611)

(26,186)

Net cash provided by financing activities from discontinued operations

—

—

—

Net cash (used in) provided by discontinued operations

(6,092)

39,880

62,256

Effect of exchange rate changes on cash and cash equivalents

35,741

603

(21,562)

Net increase (decrease) in cash and cash equivalents

713,174

(56,555)

18,648

Cash and cash equivalents at beginning of year

276,992

333,547

314,899

Cash and cash equivalents at end of year

$

990,166

$

276,992

$

333,547

Supplemental disclosures of cash flow information

Cash paid during the year for:

Income taxes

$

223,019

$

303,736

$

236,536

Interest

$

91,344

$

95,281

$

102,131

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SOURCE Genuine Parts Company