Genuine Parts Company announced its results for the first quarter ended March 31, 2022, with a quarterly sales record, margin expansion, and earning growth topping the highlight list.
“We are pleased with the continued strength in our results to start the year, and we could not be prouder of the hard work by all our 52,000 teammates,” said Paul Donahue, Chairman and Chief Executive Officer. “The first quarter was highlighted by new sales records for GPC and our Automotive and Industrial segments, margin expansion and our seventh consecutive quarter of double-digit earnings growth. The GPC team successfully navigated through ongoing supply chain challenges and inflationary pressures at levels we haven’t seen in 40 years.”
First Quarter 2022 Results
Sales were $5.3 billion, an 18.6% increase compared to $4.5 billion in the same period of the prior year. The sales growth is attributable to a 12.3% increase in comparable sales and an 8.1% benefit from acquisitions, partially offset by a 1.8% net unfavorable impact of foreign currency and other. All figures in USD.
Net income was $245.8 million, or a diluted earnings per share of $1.72. This compares to net income of $217.7 million, or $1.50 per diluted share, in the prior year period.
Adjusted net income was $265.7 million, an increase of 22.0% compared to adjusted net income of $217.7 million for the same three-month period of the prior year. On a per share diluted basis, adjusted net income was $1.86, an increase of 24.0% compared to $1.50 per diluted share last year.
First Quarter 2022 Segment Highlights
Automotive Parts Group
Automotive sales were $3.3 billion, up 10.9% from the first quarter of 2021, and representing 62% of total Company revenues. T
he improvement consisted of a 10.3% global increase in comparable sales and a 3.1% contribution from acquisitions, net of a 2.5% unfavorable impact of foreign currency and other. Segment profit of $264.6 million increased 12.3%, with a segment profit margin of 8.1%, up 10 basis points from 2021.
Industrial Parts Group
Industrial sales were $2.0 billion, up 33.6% from the first quarter of 2021, and representing 38% of total Company revenues. The sales increase reflects a 17.9% contribution from the acquisition of Kaman Distribution Group (KDG) and a 16.1% increase in comparable sales, slightly offset by a 0.4% unfavorable impact of foreign currency. Segment profit of $188.4 million increased 50.3%, with profit margin of 9.3%, up 100 basis points from 2021.
Mr. Donahue added, “The continued strength in Automotive reflects solid growth across our operations, with 12% and 13% comparable sales increases in the U.S. and Canada, respectively, and high-single digit comps in Europe and Australasia. Additionally, Industrial posted its fourth consecutive quarter of double-digit sales comps, driven by strengthening sales trends throughout the quarter.”
“Our focus on key strategic priorities helped to deliver profitable sales growth, expand margins and generate strong cash flow in the quarter,” said Will Stengel, President. “We are also pleased with the progress to integrate Kaman Distribution Group which is trending ahead of plan.”
Balance Sheet, Cash Flow and Capital Allocation
The Company generated operating cash flow from operations of $398.8 million during the first three months of 2022, an increase from $300.9 million in the same period last year. The increase was driven primarily by higher net income and the effective management of our working capital, including a $200 million benefit related to our A/R Sales Agreement during the quarter. We used $1.4 billion in cash for investing activities, primarily in connection with the acquisition of KDG, in addition to $78 million for capital expenditures. We also had $914.0 million in cash provided by financing activities, which includes $1.1 billion of net proceeds from debt, primarily related to the KDG acquisition. This was partially offset by quarterly dividends of $115.9 million paid to shareholders and $72.9 million of stock repurchases. Free cash flow was $320.8 million for the first three months of 2022.
The Company ended the quarter with $2.0 billion in total liquidity, consisting of $1.4 billion availability on the revolving credit facility and $0.6 billion in cash and cash equivalents.
2022 Outlook
In consideration of several factors, the Company is updating full-year 2022 guidance previously provided in its earnings release on February 17, 2022.
The Company considered its recent business trends and financial results, current growth plans, strategic initiatives, global economic outlook, geopolitical conflicts and the potential impact on results in establishing its updated guidance, which is outlined in the table below. Consistent with the previous outlook, the Company has also accounted for an approximate 2% headwind from foreign currency translation. The Company will continue to update full-year guidance during 2022, as appropriate.
| For the Year Ending December 31, 2022 | ||
| Previous Outlook | Updated Outlook | |
| Total sales growth | 9% to 11% | 10% to 12% |
| Automotive sales growth | 4% to 6% | 5% to 7% |
| Industrial sales growth | 20% to 22% | 21% to 23% |
| Diluted earnings per share | $7.45 to $7.60 | $7.56 to $7.71 |
| Adjusted diluted earnings per share | $7.45 to $7.60 | $7.70 to $7.85 |
| Effective tax rate | Approximately 25% | Approximately 25% |
| Net cash provided by operating activities | $1.5 billion to $1.7 billion | $1.5 billion to $1.7 billion |
| Free cash flow | $1.2 billion to $1.4 billion | $1.2 billion to $1.4 billion |
“The increase in our sales and earnings outlook reflects the confidence in our plans for accelerated growth and profitability as we build on the positive momentum in our Automotive and Industrial businesses. While cognizant of the many uncertainties in the global economy, we believe GPC is well-positioned with the financial strength and flexibility to support our growth plans and provide for disciplined, value-creating capital allocation while enhancing shareholder value,” Mr. Donahue concluded.
Conference Call
A conference call was at 11:00 a.m. Eastern time to discuss the results of the quarter. A supplemental earnings deck will also be available for reference. Interested parties may listen to the call and view the supplemental earnings deck on our website at http://genuineparts.investorroom.com. The call is also available by dialing 888-317-6003, conference ID 2523809. A replay will also be available on our website or at 877-344-7529, conference ID 2602302, two hours after the completion of the call.
About Genuine Parts Company
Founded in 1928, we are a global service organization engaged in the distribution of automotive and industrial replacement parts. Our Automotive Parts Group distributes automotive replacement parts in the U.S., Canada, Mexico, Australasia, France, the United Kingdom, Ireland, Germany, Poland, the Netherlands, Belgium, Spain, and Portugal. Our Industrial Parts Group distributes industrial replacement parts in the U.S., Canada, Mexico and Australasia. In total, we serve our global customers from an extensive network of more than 10,000 locations in 17 countries and has approximately 52,000 employees.
Further information is available at www.genpt.com.
| GENUINE PARTS COMPANY AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||
| (UNAUDITED) | ||
| Three Months Ended March 31, | ||
| (in thousands, except per share data) | 2022 | 2021 |
| Net sales | $ 5,294,635 | $ 4,464,714 |
| Cost of goods sold | 3,468,688 | 2,923,899 |
| Gross profit | 1,825,947 | 1,540,815 |
| Operating expenses: | ||
| Selling, administrative and other expenses | 1,403,979 | 1,195,164 |
| Depreciation and amortization | 87,369 | 72,296 |
| Provision for doubtful accounts | 4,494 | 4,909 |
| Total operating expenses | 1,495,842 | 1,272,369 |
| Non-operating expense (income): | ||
| Interest expense, net | 19,850 | 18,324 |
| Other | (15,461) | (35,737) |
| Total non-operating expense (income) | 4,389 | (17,413) |
| Income before income taxes | 325,716 | 285,859 |
| Income taxes | 79,878 | 68,149 |
| Net income | $ 245,838 | $ 217,710 |
| Dividends declared per common share | $ 0.8950 | $ 0.8150 |
| Basic earnings per share | $ 1.73 | $ 1.51 |
| Diluted earnings per share | $ 1.72 | $ 1.50 |
| Weighted average common shares outstanding | 141,916 | 144,413 |
| Dilutive effect of stock options and non-vested restricted stock awards | 926 | 887 |
| Weighted average common shares outstanding – assuming dilution | 142,842 | 145,300 |
| GENUINE PARTS COMPANY AND SUBSIDIARIES | ||
| SEGMENT INFORMATION | ||
| (UNAUDITED) | ||
| Three Months Ended March 31, | ||
| (in thousands) | 2022 | 2021 |
| Net sales: | ||
| Automotive | $ 3,275,621 | $ 2,953,165 |
| Industrial | 2,019,014 | 1,511,549 |
| Total net sales | $ 5,294,635 | $ 4,464,714 |
| Segment profit: | ||
| Automotive | $ 264,573 | $ 235,678 |
| Industrial | 188,353 | 125,292 |
| Total segment profit | 452,926 | 360,970 |
| Interest expense, net | (19,850) | (18,324) |
| Intangible asset amortization | (39,694) | (25,544) |
| Corporate expense | (41,751) | (31,243) |
| Other unallocated costs (1) | (25,915) | — |
| Income before income taxes | $ 325,716 | $ 285,859 |
| (1) | The following table presents a summary of the other unallocated costs: |
| Three Months Ended March 31, | ||
| (in thousands) | 2022 | 2021 |
| Other unallocated costs: | ||
| Gain on insurance proceeds (2) | $ 634 | $ — |
| Transaction and other costs (3) | (26,549) | — |
| Total other unallocated costs | $ (25,915) | $ — |
| (2) | Adjustment reflects insurance recoveries in excess of losses incurred on inventory, property, plant and equipment and other fire-related costs. |
| (3) | Adjustment primarily reflects costs associated with the January 3, 2022 acquisition of Kaman Distribution Group. |
| GENUINE PARTS COMPANY AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (UNAUDITED) | ||
| (in thousands, except share and per share data) | March 31, 2022 | March 31, 2021 |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 610,776 | $ 1,117,988 |
| Trade accounts receivable, less allowance for doubtful accounts (2022 – $49,644; 2021 – $39,800) | 2,137,806 | 1,809,637 |
| Merchandise inventories, net | 4,211,496 | 3,600,658 |
| Prepaid expenses and other current assets | 1,467,356 | 1,149,877 |
| Total current assets | 8,427,434 | 7,678,160 |
| Goodwill | 2,534,521 | 1,885,447 |
| Other intangible assets, less accumulated amortization | 1,935,153 | 1,455,333 |
| Property, plant and equipment, less accumulated depreciation (2022 – $1,386,714; 2021 – $1,296,920) | 1,239,046 | 1,165,236 |
| Operating lease assets | 1,125,803 | 1,044,127 |
| Other assets | 1,011,354 | 715,240 |
| Total assets | $ 16,273,311 | $ 13,943,543 |
| Liabilities and equity | ||
| Current liabilities: | ||
| Trade accounts payable | $ 5,214,540 | $ 4,479,398 |
| Current portion of debt | 120,000 | 160,373 |
| Dividends payable | 126,891 | 117,714 |
| Other current liabilities | 1,788,101 | 1,578,866 |
| Total current liabilities | 7,249,532 | 6,336,351 |
| Long-term debt | 3,387,851 | 2,458,020 |
| Operating lease liabilities | 847,342 | 788,907 |
| Pension and other post–retirement benefit liabilities | 263,257 | 254,558 |
| Deferred tax liabilities | 400,980 | 206,630 |
| Other long-term liabilities | 516,473 | 562,968 |
| 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 – 2022 – 141,627,749 shares; 2021 – 144,458,057 shares | 141,628 | 144,458 |
| Additional paid-in capital | 126,064 | 117,867 |
| Accumulated other comprehensive loss | (804,877) | (1,023,760) |
| Retained earnings | 4,132,925 | 4,085,998 |
| Total parent equity | 3,595,740 | 3,324,563 |
| Noncontrolling interests in subsidiaries | 12,136 | 11,546 |
| Total equity | 3,607,876 | 3,336,109 |
| Total liabilities and equity | $ 16,273,311 | $ 13,943,543 |
| GENUINE PARTS COMPANY AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (UNAUDITED) | ||
| Three Months Ended March 31, | ||
| (in thousands) | 2022 | 2021 |
| Operating activities: | ||
| Net income | $ 245,838 | $ 217,710 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and amortization | 87,369 | 72,296 |
| Share-based compensation | 7,171 | 6,235 |
| Excess tax benefits from share-based compensation | (714) | (1,764) |
| Changes in operating assets and liabilities | 59,144 | 6,465 |
| Net cash provided by operating activities | 398,808 | 300,942 |
| Investing activities: | ||
| Purchases of property, plant and equipment | (78,045) | (48,391) |
| Proceeds from sale of property, plant and equipment | 5,895 | 16,863 |
| Proceeds from divestitures of businesses | 25,939 | 10,345 |
| Acquisitions of businesses and other investing activities | (1,374,734) | (19,489) |
| Net cash used in investing activities | (1,420,945) | (40,672) |
| Financing activities: | ||
| Proceeds from debt | 2,890,000 | 31,599 |
| Payments on debt | (1,784,585) | (26,767) |
| Share-based awards exercised | (1,063) | (5,429) |
| Dividends paid | (115,876) | (114,043) |
| Purchases of stock | (72,919) | — |
| Other financing activities | (1,593) | (1,354) |
| Net cash provided by (used in) financing activities | 913,964 | (115,994) |
| Effect of exchange rate changes on cash and cash equivalents | 4,248 | (16,454) |
| Net (decrease) increase in cash and cash equivalents | (103,925) | 127,822 |
| Cash and cash equivalents at beginning of period | 714,701 | 990,166 |
| Cash and cash equivalents at end of period | $ 610,776 | $ 1,117,988 |
| GENUINE PARTS COMPANY AND SUBSIDIARIES | ||
| RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME AND GAAP DILUTED NET INCOME PER COMMON SHARE TO ADJUSTED DILUTED NET INCOME PER COMMON SHARE | ||
| (UNAUDITED) | ||
| Three Months Ended March 31, | ||
| (in thousands) | 2022 | 2021 |
| GAAP net income | $ 245,838 | $ 217,710 |
| Adjustments: | ||
| Gain on insurance proceeds (1) | (634) | — |
| Transaction and other costs (2) | 26,549 | — |
| Total adjustments | 25,915 | — |
| Tax impact of adjustments | (6,103) | — |
| Adjusted net income | $ 265,650 | $ 217,710 |
The table below represent amounts per common share assuming dilution:
| Three Months Ended March 31, | ||
| (in thousands, except per share data) | 2022 | 2021 |
| GAAP net income | $ 1.72 | $ 1.50 |
| Adjustments: | ||
| Gain on insurance proceeds (1) | (0.01) | — |
| Transaction and other costs (2) | 0.19 | — |
| Total adjustments | 0.18 | — |
| Tax impact of adjustments | (0.04) | — |
| Adjusted net income | $ 1.86 | $ 1.50 |
| Weighted average common shares outstanding – assuming dilution | 142,842 | 145,300 |
The table below clarifies where the items that have been adjusted above to improve comparability of the financial information from period to period are presented in the condensed consolidated statements of income.
| Three Months Ended March 31, | ||
| (in thousands) | 2022 | 2021 |
| Line item: | ||
| Cost of goods sold | $ 5,000 | $ — |
| Selling, administrative and other expenses | 21,549 | — |
| Non-operating expense (income): Other | (634) | — |
| Total adjustments | $ 25,915 | $ — |
| (1) | Adjustment reflects insurance recoveries in excess of losses incurred on inventory, property, plant and equipment and other fire-related costs. |
| (2) | Adjustment primarily reflects costs associated with the January 3, 2022 acquisition of Kaman Distribution Group. |
| GENUINE PARTS COMPANY AND SUBSIDIARIES | |||||
| CHANGE IN NET SALES SUMMARY | |||||
| (UNAUDITED) | |||||
| Three Months Ended March 31, 2022 | |||||
| Comparable Sales | Acquisitions | Foreign Currency | Other | GAAP Total Net Sales | |
| Automotive | 10.3 % | 3.1 % | (2.4) % | (0.1) % | 10.9 % |
| Industrial | 16.1 % | 17.9 % | (0.4) % | — % | 33.6 % |
| Total Net Sales | 12.3 % | 8.1 % | (1.7) % | (0.1) % | 18.6 % |
| GENUINE PARTS COMPANY AND SUBSIDIARIES | ||
| RECONCILIATION OF GAAP NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW | ||
| (UNAUDITED) | ||
| Three Months Ended March 31, | ||
| (in thousands) | 2022 | 2021 |
| Net cash provided by operating activities | $ 398,808 | $ 300,942 |
| Purchases of property, plant and equipment | (78,045) | (48,391) |
| Free Cash Flow | $ 320,763 | $ 252,551 |
| For the Year Ending December 31, 2022 | ||
| Previous Outlook | Updated Outlook | |
| Net cash provided by operating activities | $1.5 billion to $1.7 billion | $1.5 billion to $1.7 billion |
| Purchases of property, plant and equipment | $300 million to $350 million | $300 million to $350 million |
| Free Cash Flow | $1.2 billion to $1.4 billion | $1.2 million to $1.4 million |
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