Genuine Parts Company has announced sales and earnings for the first quarter ended March 31, 2018.
Sales for the first quarter ended March 31, 2018 were a record $4.6 billion, a 17.4% increase compared to $3.9 billion for the same period in 2017. Net income for the first quarter was $176.6 million and earnings per share on a diluted basis were $1.20. Before the impact of certain transaction-related costs incurred for the Company’s fourth quarter 2017 acquisition of Alliance Automotive Group (AAG) in Europe and a recently announced agreement to spin-off the Company’s Business Products Group, S.P. Richards, adjusted net income was $186.5 million, or $1.27 per diluted share. Total sales for the first quarter included 2% organic growth, 14% from acquisitions, including AAG, and a 1% benefit from foreign currency translation.
First quarter sales for the Automotive Group were up 29.6%, including an approximate 1.5% comparable sales increase as well as the benefit of acquisitions and favourable foreign currency translation. Sales for the Industrial Group, which includes both Motion Industries and EIS, were up 8.3%, including a 5% comparable sales increase, and sales for the Business Products Group were down 4.8% for the quarter in both total and comparable sales.
Paul Donahue, President and Chief Executive Officer, commented, “We were pleased to complete the first quarter of 2018 with double-digit total sales growth, driven by increases in our core global automotive and industrial businesses. While our operating margins were challenged, we remain focused on the execution of our plans to drive additional operating improvement and better position the Company for sustained long-term growth and profitability. With our recent announcement to spin-off the Business Products Group, we took an important step that will allow us to commit more resources and increase our focus on our core growth and higher-margin global businesses. This is an exciting time for Genuine Parts, and we look forward to effectively executing on the opportunities ahead.
2018 Outlook
The Company is maintaining its initial sales and earnings guidance and continues to expect sales to be up 12% to 13% and adjusted diluted earnings per share, which excludes any first quarter and future transaction-related costs, to be $5.60 to $5.75. The Company currently expects a tax rate of approximately 26.0%, which is down slightly from the initial guidance of 26.0 to 27.0% in 2018.
| GENUINE PARTS COMPANY and SUBSIDIARIES | |||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||
| Three Months Ended March 31, | |||||||
| 2018 | 2017 | ||||||
| (Unaudited) | |||||||
| (in thousands, except per share data) | |||||||
| Net sales | $ | 4,586,294 | $ | 3,905,641 | |||
| Cost of goods sold | 3,150,487 | 2,749,920 | |||||
| Gross profit | 1,435,807 | 1,155,721 | |||||
| Operating and non-operating expenses: | |||||||
| Selling, administrative & other expenses | 1,148,125 | 873,814 | |||||
| Depreciation and amortization | 58,363 | 38,132 | |||||
| 1,206,488 | 911,946 | ||||||
| Income before income taxes | 229,319 | 243,775 | |||||
| Income taxes | 52,743 | 83,615 | |||||
| Net income | $ | 176,576 | $ | 160,160 | |||
| Basic net income per common share | $ | 1.20 | $ | 1.08 | |||
| Diluted net income per common share | $ | 1.20 | $ | 1.08 | |||
| Weighted average common shares outstanding | 146,727 | 148,154 | |||||
| Dilutive effect of stock options and non-vested restricted stock awards | 595 | 634 | |||||
| Weighted average common shares outstanding – assuming dilution | 147,322 | 148,788 | |||||
| GENUINE PARTS COMPANY and SUBSIDIARIES | |||||||
| SEGMENT INFORMATION AND FINANCIAL HIGHLIGHTS | |||||||
| Three Months Ended March 31, | |||||||
| 2018 | 2017 | ||||||
| (Unaudited) | |||||||
| (in thousands) | |||||||
| Net sales: (1) | |||||||
| Automotive | $ | 2,564,259 | $ | 1,978,446 | |||
| Industrial (2) | 1,547,944 | 1,428,959 | |||||
| Business Products | 474,091 | 498,236 | |||||
| Total net sales | $ | 4,586,294 | $ | 3,905,641 | |||
| Operating profit: | |||||||
| Automotive | $ | 184,706 | $ | 151,757 | |||
| Industrial (2) | 112,191 | 104,009 | |||||
| Business Products | 21,601 | 31,119 | |||||
| Total operating profit | 318,498 | 286,885 | |||||
| Interest expense, net | (23,307) | (6,174) | |||||
| Intangible amortization | (21,403) | (10,806) | |||||
| Other, net (3) | (44,469) | (26,130) | |||||
| Income before income taxes | $ | 229,319 | $ | 243,775 | |||
| Capital expenditures | $ | 31,633 | $ | 24,806 | |||
| Depreciation and amortization | $ | 58,363 | $ | 38,132 | |||
(1) The net effect of discounts, incentives, freight billed to customers has been allocated to their respective segments for the current and prior period. Previously, the net effect of such items were captured and presented separately in a line item entitled “Other”.
(2) Effective January 1, 2018, the Electrical/electronic material segment became a division of the Industrial segment. These two reporting segments became a single reporting segment, the Industrial Parts Group. The change in segment is presented retrospectively.
(3) Includes $13.0 million for the three months ended March 31, 2018, respectively, in transaction-related costs associated with Alliance Automotive Group and the pending combination of S.P. Richards with Essendant.
| GENUINE PARTS COMPANY and SUBSIDIARIES | |||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
| March 31, | March 31, | ||||||
| 2018 | 2017 | ||||||
| (Unaudited) | |||||||
| (in thousands) | |||||||
| ASSETS | |||||||
| CURRENT ASSETS | |||||||
| Cash and cash equivalents | $ | 325,973 | $ | 177,917 | |||
| Trade accounts receivable, net | 2,641,151 | 2,084,871 | |||||
| Merchandise inventories, net | 3,772,919 | 3,287,042 | |||||
| Prepaid expenses and other current assets | 841,569 | 644,232 | |||||
| TOTAL CURRENT ASSETS | 7,581,612 | 6,194,062 | |||||
| Goodwill and other intangible assets, less accumulated amortization | 3,618,426 | 1,608,466 | |||||
| Deferred tax assets | 39,830 | 129,539 | |||||
| Other assets | 588,238 | 497,553 | |||||
| Net property, plant and equipment | 931,288 | 737,206 | |||||
| TOTAL ASSETS | $ | 12,759,394 | $ | 9,166,826 | |||
| LIABILITIES AND EQUITY | |||||||
| CURRENT LIABILITIES | |||||||
| Trade accounts payable | $ | 3,773,149 | $ | 3,230,985 | |||
| Current portion of debt | 751,614 | 475,000 | |||||
| Income taxes payable | 28,144 | 65,270 | |||||
| Dividends payable | 105,649 | 99,824 | |||||
| Other current liabilities | 1,098,916 | 708,754 | |||||
| TOTAL CURRENT LIABILITIES | 5,757,472 | 4,579,833 | |||||
| Long-term debt | 2,564,111 | 550,000 | |||||
| Pension and other post-retirement benefit liabilities | 200,253 | 287,589 | |||||
| Deferred tax liabilities | 184,383 | 49,328 | |||||
| Other long-term liabilities | 491,794 | 467,732 | |||||
| Common stock | 146,738 | 147,394 | |||||
| Retained earnings | 4,182,599 | 4,021,848 | |||||
| Accumulated other comprehensive loss | (819,258) | (950,269) | |||||
| TOTAL PARENT EQUITY | 3,510,079 | 3,218,973 | |||||
| Noncontrolling interests in subsidiaries | $ | 51,302 | $ | 13,371 | |||
| TOTAL EQUITY | 3,561,381 | 3,232,344 | |||||
| TOTAL LIABILITIES AND EQUITY | $ | 12,759,394 | $ | 9,166,826 | |||
| GENUINE PARTS COMPANY and SUBSIDIARIES | |||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| Three Months Ended March 31, | |||||||
| 2018 | 2017 | ||||||
| (Unaudited) | |||||||
| (in thousands) | |||||||
| OPERATING ACTIVITIES: | |||||||
| Net income | $ | 176,576 | $ | 160,160 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 58,363 | 38,132 | |||||
| Share-based compensation | 3,686 | 2,717 | |||||
| Excess tax benefits from share-based compensation | (2,517) | (1,546) | |||||
| Changes in operating assets and liabilities | (97,741) | (97,643) | |||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 138,367 | 101,820 | |||||
| INVESTING ACTIVITIES: | |||||||
| Purchases of property, plant and equipment | (31,633) | (24,806) | |||||
| Acquisitions and other investing activities | (38,588) | (106,236) | |||||
| NET CASH USED IN INVESTING ACTIVITIES | (70,221) | (131,042) | |||||
| FINANCING ACTIVITIES: | |||||||
| Proceeds from debt | 1,201,441 | 1,005,000 | |||||
| Payments on debt | (1,153,750) | (855,000) | |||||
| Share-based awards exercised, net of taxes paid | (4,176) | (1,624) | |||||
| Dividends paid | (99,000) | (97,584) | |||||
| Purchase of stock | — | (91,984) | |||||
| NET CASH USED IN FINANCING ACTIVITIES | (55,485) | (41,192) | |||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | (1,587) | 5,452 | |||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 11,074 | (64,962) | |||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 314,899 | 242,879 | |||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 325,973 | $ | 177,917 | |||
| GENUINE PARTS COMPANY and SUBSIDIARIES | |||||||
| Reconciliation of GAAP Net Income to Adjusted Net Income | |||||||
| Three Months Ended March 31, | |||||||
| 2018 | 2017 | ||||||
| (Unaudited) | |||||||
| (in thousands, except per share data) | |||||||
| GAAP net income | $ | 176,576 | $ | 160,160 | |||
| Diluted net income per common share | $ | 1.20 | $ | 1.08 | |||
| Add after-tax adjustments: | |||||||
| Transaction-related costs | 9,883 | — | |||||
| Adjusted net income | $ | 186,459 | $ | 160,160 | |||
| Adjusted diluted net income per common share | $ | 1.27 | $ | 1.08 | |||
SOURCE Genuine Parts Company
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