Genuine Parts Company announced its results for the fourth quarter and twelve months ended December 31, 2022, with strong fourth quarter double-digit growth, and 17.1% year over year full-year sales increase.
Overall, Automotive Part Group segment growth was in high single digits for Q4 and full year, while sales activity for GPC’s Industrial Parts Group, which accounts for 38% of GPC sales, was up nearly 30%, largely due to an acquisition.
“The GPC team capped off a record-setting year with a strong fourth quarter highlighted by double-digit sales and earnings growth and continued margin expansion. We are incredibly proud of our progress throughout the year and thankful to our teammates across the globe for their ongoing commitment to excellence,” said Paul Donahue, Chairman and Chief Executive Officer of Genuine Parts Company.
“Working together, we have been agile in navigating the dynamics of the macro-economy and continue to deliver market share gains and drive positive momentum in our top and bottom-line results.”
All units in USD unless otherwise noted.
Fourth Quarter 2022 Results
Sales were $5.5 billion, a 15.0% increase compared to $4.8 billion in the same period of the prior year. The improvement is attributable to an 11.1% increase in comparable sales and an 8.0% benefit from acquisitions, partially offset by a 4.1% unfavorable impact of foreign currency and other.
Net income was $252 million, or a diluted EPS of $1.77. This compares to net income of $256 million, or $1.79 per diluted share in the prior year period.
Adjusted net income, which excludes an expense of $40 million, or $0.28 per diluted share, in non-recurring items primarily associated with a remeasurement of the company’s product liability reserve, costs related to the integration of Kaman Distribution Group (KDG) and a loss related to an investment in S.P. Richards, was $292 million, an increase of 13.8% compared to adjusted net income of $256 million for the same period of the prior year. On a per share diluted basis, adjusted net income was $2.05, an increase of 14.5% compared to $1.79 per diluted share in the prior year. Refer to the reconciliation of GAAP net income to adjusted net income for more information.
Fourth Quarter 2022 Highlights
- Sales of $5.5 billion, Up 15.0%
- Diluted EPS of $1.77
- Adjusted Diluted EPS of $2.05, Up 14.5%
Full Year 2022 Highlights
- Record sales of $22.1 billion, Up 17.1%
- Segment Profit Margin of 9.4%, Up 60 basis points
- Diluted EPS of $8.31
- Adjusted Diluted EPS of $8.34, Up 20.7% and a New Record
- Cash From Operations of $1.5 billion, Up 16.6%; Free Cash Flow of $1.1 billion, Up 13.6%
- Returned $719 million to Shareholders via Cash Dividends and Share Repurchases
2023 Outlook
- Revenue Growth of 4% to 6%
- Diluted EPS of $8.80 to $8.95
Fourth Quarter 2022 Segment Highlights
Automotive Parts Group (“Automotive”)
Global Automotive sales were $3.4 billion in the fourth quarter, up 7.6% from the same period in 2021, consisting of an 8.2% increase in comparable sales and a 4.8% benefit from acquisitions, net of a 5.4% unfavorable impact of foreign currency and other. Segment profit of $295 million increased 11.0%, with profit margin of 8.6% up 30 basis points from the same period of the prior year.
Industrial Parts Group (“Industrial”)
Industrial sales were $2.1 billion, up 29.6% from the same period in 2021, and reflecting a 16.7% increase in comparable sales and a 14.3% contribution from the KDG acquisition, slightly offset by a 1.4% unfavorable impact of foreign currency. Segment profit of $230 million increased 49.8%, with profit margin of 11.0% up 150 basis points from the same period of the prior year.
“The strength in Automotive sales was broad-based, with double-digit total sales growth in local currency in each of our global operations,” said Will Stengel, President and Chief Operating Officer.
“In addition, Industrial generated its seventh consecutive quarter of double-digit sales comps and tenth consecutive quarter of margin expansion, while continuing to execute well and create value with the accelerated integration of KDG. Our strong fourth quarter and record financial performance in 2022 are testaments to our teams’ hard work and dedication to serve our customers.”
Full Year 2022 Results
Sales in 2022 were $22.1 billion, a 17.1% increase from $18.9 billion in 2021. Net income for the twelve months was $1.2 billion, or $8.31 per diluted share. Adjusted net income, which excludes an expense of $5 million, or $0.03 per diluted share, in non-recurring items as described above as well as transaction and other costs related to the acquisition of KDG and a gain on the sale of certain real estate recorded in the prior quarters of 2022, was $1.2 billion, or $8.34 per diluted share, an increase of 20.7% compared to $6.91 per diluted share in the prior year. Refer to the reconciliation of GAAP net income to adjusted net income for more information.
Balance Sheet, Cash Flow and Capital Allocation
The company generated cash flow from operations of $1.5 billion in 2022, a 16.6% increase from $1.3 billion in 2021 driven primarily by higher net income and effective management of our working capital. We used $1.7 billion in cash for investing activities, primarily in connection with the acquisition of KDG, in addition to $340 million for capital expenditures. It also had $205 million in cash provided by financing activities, which includes $961 million of net proceeds from debt primarily related to the KDG acquisition. This was partially offset by quarterly dividends of $496 million paid to shareholders and $223 million of share repurchases. Free cash flow was $1.1 billion, a 13.6% increase from $992 million for the twelve months in 2021.
The company ended the quarter and year with $2.2 billion in total liquidity, consisting of $1.5 billion availability on the revolving credit facility and $653 million in cash and cash equivalents.
2023 Outlook
In consideration of several factors, the company is establishing full-year 2023 guidance. 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 guidance, which is outlined in the table below.
| Year Ended 12/31/2023 | ||
| Total sales growth | 4% to 6% | |
| Automotive sales growth | 4% to 6% | |
| Industrial sales growth | 4% to 6% | |
| Diluted earnings per share | $8.80 to $8.95 | |
| Adjusted diluted earnings per share | $8.80 to $8.95 | |
| Effective tax rate | Approx. 25% | |
| Net cash provided by operating activities | $1.2 billion to $1.4 billion | |
| Free cash flow | $800 million to $1.0 billion |
“We had an exceptional 2022 which included celebrating our 95th year of operations. We have quickly turned our attention to the year ahead and, while the macro-environment remains uncertain, we are confident in our strategic plans to drive sustained sales and earnings growth, continued margin expansion and strong cash flow. We believe our progress in these key areas, combined with a strong balance sheet, position GPC with the financial strength and flexibility to pursue strategic growth opportunities while also returning capital to shareholders,” Mr. Donahue concluded.
Conference Call
Genuine Parts Company will hold a conference call February 24 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 the company’s investor relations website. The call is also available by dialing 888-317-6003, conference ID 0079869. A replay will also be available on the company’s website or at 877-344-7529 conference ID 1162108, two hours after the completion of the call.
| GENUINE PARTS COMPANY AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF INCOME (LOSS) | ||||||||
| (UNAUDITED) | ||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||
| (in thousands, except per share data) | 2022 | 2021 | 2022 | 2021 | ||||
| Net sales | $ 5,523,650 | $ 4,803,209 | $22,095,973 | $18,870,510 | ||||
| Cost of goods sold | 3,549,959 | 3,109,760 | 14,355,869 | 12,236,374 | ||||
| Gross profit | 1,973,691 | 1,693,449 | 7,740,104 | 6,634,136 | ||||
| Operating expenses: | ||||||||
| Selling, administrative and other expenses | 1,531,883 | 1,279,265 | 5,758,295 | 5,162,506 | ||||
| Depreciation and amortization | 87,997 | 72,594 | 347,819 | 290,971 | ||||
| Provision for doubtful accounts | 6,252 | 3,509 | 19,791 | 17,739 | ||||
| Total operating expenses | 1,626,132 | 1,355,368 | 6,125,905 | 5,471,216 | ||||
| Non-operating expenses (income): | ||||||||
| Interest expense, net | 15,569 | 14,297 | 73,887 | 62,150 | ||||
| Other | (5,393) | (22,122) | (32,290) | (99,576) | ||||
| Total non-operating expenses (income) | 10,176 | (7,825) | 41,597 | (37,426) | ||||
| Income before income taxes | 337,383 | 345,906 | 1,572,602 | 1,200,346 | ||||
| Income taxes | 85,407 | 89,907 | 389,901 | 301,556 | ||||
| Net income (loss) | $ 251,976 | $ 255,999 | $ 1,182,701 | $ 898,790 | ||||
| Dividends declared per common share | $ 0.895 | $ 0.815 | $ 3.580 | $ 3.260 | ||||
| Basic earnings per share | $ 1.79 | $ 1.80 | $ 8.36 | $ 6.27 | ||||
| Diluted earnings per share | $ 1.77 | $ 1.79 | $ 8.31 | $ 6.23 | ||||
| Weighted average common shares outstanding | 141,049 | 142,275 | 141,468 | 143,435 | ||||
| Dilutive effect of stock options and non-vested restricted stock awards | 923 | 778 | 854 | 786 | ||||
| Weighted average common shares outstanding — assuming dilution | 141,972 | 143,053 | 142,322 | 144,221 |
| GENUINE PARTS COMPANY AND SUBSIDIARIES | ||||||||
| SEGMENT INFORMATION | ||||||||
| (UNAUDITED) | ||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||
| Net sales: | ||||||||
| Automotive | $ 3,433,057 | $ 3,190,133 | $13,666,634 | $12,544,131 | ||||
| Industrial | 2,090,593 | 1,613,076 | 8,429,339 | 6,326,379 | ||||
| Total net sales | $ 5,523,650 | $ 4,803,209 | $22,095,973 | $18,870,510 | ||||
| Segment profit: | ||||||||
| Automotive | $ 295,199 | $ 265,841 | $ 1,191,674 | $ 1,073,427 | ||||
| Industrial | 230,306 | 153,773 | 886,636 | 595,232 | ||||
| Total segment profit | 525,505 | 419,614 | 2,078,310 | 1,668,659 | ||||
| Interest expense, net | (15,568) | (14,297) | (73,886) | (62,150) | ||||
| Corporate expense | (81,481) | (44,813) | (269,364) | (174,842) | ||||
| Intangible asset amortization | (38,697) | (25,034) | (157,437) | (103,273) | ||||
| Other unallocated costs | (52,376) | 10,436 | (5,021) | (128,048) | ||||
| Income before income taxes | $ 337,383 | $ 345,906 | $ 1,572,602 | $ 1,200,346 | ||||
| The following table presents a summary of the other unallocated costs: | ||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||
| Other unallocated costs: | ||||||||
| Gain on sales of real estate | $ — | $ — | $ 102,803 | $ — | ||||
| Gain on insurance proceeds | — | 3,862 | 1,507 | 3,862 | ||||
| Product liability adjustment | (28,730) | — | (28,730) | — | ||||
| Product liability damages award | — | — | — | (77,421) | ||||
| Loss on software disposal | — | — | — | (61,063) | ||||
| Gain on equity investment | — | 10,229 | — | 10,229 | ||||
| Transaction and other costs | (23,646) | (3,655) | (80,601) | (3,655) | ||||
| Total other unallocated costs (1) | $ (52,376) | $ 10,436 | $ (5,021) | $ (128,048) |
| (1) Refer to the reconciliation of GAAP net income to adjusted net income for explanation of adjustments. |
| GENUINE PARTS COMPANY AND SUBSIDIARIES | ||||
| CONSOLIDATED BALANCE SHEETS | ||||
| (UNAUDITED) | ||||
| As of December 31, | ||||
| (in thousands, except share and per share data) | 2022 | 2021 | ||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ 653,463 | $ 714,701 | ||
| Trade accounts receivable, less allowance for doubtful accounts (2022 – $53,872; 2021 – $44,425) | 2,188,868 | 1,797,955 | ||
| Merchandise inventories, net | 4,441,649 | 3,889,919 | ||
| Prepaid expenses and other current assets | 1,532,759 | 1,353,847 | ||
| Total current assets | 8,816,739 | 7,756,422 | ||
| Goodwill | 2,588,113 | 1,915,307 | ||
| Other intangible assets, net | 1,812,510 | 1,406,401 | ||
| Property, plant and equipment, less accumulated depreciation (2022 – $1,435,677; 2021 – $1,339,706) | 1,326,014 | 1,234,399 | ||
| Operating lease assets | 1,104,678 | 1,053,689 | ||
| Other assets | 847,325 | 985,884 | ||
| Total assets | $ 16,495,379 | $ 14,352,102 | ||
| Liabilities and equity | ||||
| Current liabilities: | ||||
| Trade accounts payable | $ 5,456,550 | $ 4,804,939 | ||
| Current portion of debt | 252,029 | — | ||
| Other current liabilities | 1,851,340 | 1,660,768 | ||
| Dividends payable | 126,191 | 115,876 | ||
| Total current liabilities | 7,686,110 | 6,581,583 | ||
| Long-term debt | 3,076,794 | 2,409,363 | ||
| Operating lease liabilities | 836,019 | 789,175 | ||
| Pension and other post-retirement benefit liabilities | 197,879 | 265,134 | ||
| Deferred tax liabilities | 391,163 | 280,778 | ||
| Other long-term liabilities | 502,967 | 522,779 | ||
| 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 – 140,941,649 shares and 2021 – 142,180,683 shares | 140,941 | 142,181 | ||
| Additional paid-in capital | 140,324 | 119,975 | ||
| Accumulated other comprehensive loss | (1,032,542) | (857,739) | ||
| Retained earnings | 4,541,640 | 4,086,325 | ||
| Total parent equity | 3,790,363 | 3,490,742 | ||
| Noncontrolling interests in subsidiaries | 14,084 | 12,548 | ||
| Total equity | 3,804,447 | 3,503,290 | ||
| Total liabilities and equity | $ 16,495,379 | $ 14,352,102 |
| GENUINE PARTS COMPANY AND SUBSIDIARIES | ||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
| (UNAUDITED) | ||||
| Year Ended December 31 | ||||
| (in thousands) | 2022 | 2021 | ||
| Operating activities: | ||||
| Net income | $ 1,182,701 | $ 898,790 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 347,819 | 290,971 | ||
| Deferred income taxes | 2,220 | 31,676 | ||
| Share-based compensation | 38,058 | 25,597 | ||
| Gain on sale of real estate | (102,803) | — | ||
| Other operating activities | 18,377 | 22,575 | ||
| Changes in operating assets and liabilities: | ||||
| Trade accounts receivable, net | (244,371) | (258,994) | ||
| Merchandise inventories, net | (380,420) | (329,237) | ||
| Trade accounts payable | 676,406 | 777,318 | ||
| Other assets and liabilities | (71,016) | (200,411) | ||
| Net cash provided by operating activities | 1,466,971 | 1,258,285 | ||
| Investing activities: | ||||
| Purchases of property, plant and equipment | (339,632) | (266,136) | ||
| Proceeds from sale of property, plant and equipment | 145,007 | 26,549 | ||
| Proceeds from divestitures of businesses | 33,604 | 17,738 | ||
| Proceeds from settlement of net investment hedge | 158,441 | — | ||
| Acquisitions and other investing activities | (1,681,660) | (284,315) | ||
| Net cash used in investing activities | (1,684,240) | (506,164) | ||
| Financing activities: | ||||
| Proceeds from debt | 5,108,641 | 892,694 | ||
| Payments on debt | (4,147,773) | (1,053,423) | ||
| Share-based awards exercised | (17,377) | (22,346) | ||
| Dividends paid | (495,917) | (465,649) | ||
| Purchase of stock | (222,726) | (333,599) | ||
| Other financing activities | (19,747) | (7,209) | ||
| Net cash provided by (used in) financing activities | 205,101 | (989,532) | ||
| Effect of exchange rate changes on cash and cash equivalents | (49,070) | (38,054) | ||
| Net decrease in cash and cash equivalents | (61,238) | (275,465) | ||
| Cash and cash equivalents at beginning of year | 714,701 | 990,166 | ||
| Cash and cash equivalents at end of year | $ 653,463 | $ 714,701 | ||
| Supplemental disclosures of cash flow information | ||||
| Cash paid during the year for: | ||||
| Income taxes | $ 362,859 | $ 305,326 | ||
| Interest | $ 73,368 | $ 65,732 |
| 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 December 31, | Twelve Months Ended December 31, | |||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||
| GAAP net income | $ 251,976 | $ 255,999 | $1,182,701 | $ 898,790 | ||||
| Adjustments: | ||||||||
| Gain on sales of real estate (1) | — | — | (102,803) | — | ||||
| Gain on insurance proceeds (2) | — | (3,862) | (1,507) | (3,862) | ||||
| Product liability adjustment (3) | 28,730 | — | 28,730 | — | ||||
| Product liability damages award (4) | — | — | — | 77,421 | ||||
| Loss on software disposal (5) | — | — | — | 61,063 | ||||
| Gain on equity investment (6) | — | (10,229) | — | (10,229) | ||||
| Transaction and other costs (7) | 23,646 | 3,655 | 80,601 | 3,655 | ||||
| Total adjustments | 52,376 | (10,436) | 5,021 | 128,048 | ||||
| Tax impact of adjustments | (12,788) | 10,661 | (137) | (29,828) | ||||
| Adjusted net income | $ 291,564 | $ 256,224 | $1,187,585 | $ 997,010 |
| The table below represent amounts per common share assuming dilution: | ||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||
| (in thousands, except per share data) | 2022 | 2021 | 2022 | 2021 | ||||
| GAAP net income per common share | $ 1.77 | $ 1.79 | $ 8.31 | $ 6.23 | ||||
| Adjustments: | ||||||||
| Gain on sales of real estate (1) | — | — | (0.72) | — | ||||
| Gain on insurance proceeds (2) | — | (0.03) | (0.01) | (0.03) | ||||
| Product liability adjustment (3) | 0.20 | — | 0.20 | — | ||||
| Product liability damages award (4) | — | — | — | 0.54 | ||||
| Loss on software disposal (5) | — | — | — | 0.42 | ||||
| Gain on equity investment (6) | — | (0.07) | — | (0.07) | ||||
| Transaction and other costs (7) | 0.17 | 0.03 | 0.56 | 0.03 | ||||
| Total adjustments | 0.37 | (0.07) | 0.03 | 0.89 | ||||
| Tax impact of adjustments | (0.09) | 0.07 | — | (0.21) | ||||
| Adjusted diluted net income per common share | $ 2.05 | $ 1.79 | $ 8.34 | $ 6.91 | ||||
| Weighted average common shares outstanding – assuming dilution | 141,972 | 143,053 | 142,322 | 144,221 |
| 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 consolidated statements of income (loss). | ||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||
| Cost of goods sold | $ — | $ — | $ 5,000 | $ — | ||||
| Selling, administrative and other expenses | 43,376 | 3,655 | (7,472) | 142,139 | ||||
| Restructuring costs | — | — | — | — | ||||
| Goodwill impairment charge | — | — | — | — | ||||
| Non-operating (income): Other | 9,000 | (14,091) | 7,493 | (14,091) | ||||
| Total adjustments | $ 52,376 | $ (10,436) | $ 5,021 | $ 128,048 |
| (1) | Adjustment reflects a gain on the sale of real estate that had been leased to S.P. Richards. |
| (2) | Adjustment reflects insurance recoveries in excess of losses incurred on inventory, property, plant and equipment and other fire-related costs. |
| (3) | Adjustment to remeasure the product liability reserve for a revised estimate of the number of claims to be incurred in future periods, among other assumptions. |
| (4) | Adjustment reflects damages reinstated by the Washington Supreme Court order on July 8, 2021 in connection with a 2017 automotive product liability claim. |
| (5) | Adjustment reflects a loss on an internally developed software project that was disposed of due to a change in management strategy related to advances in alternative technologies. |
| (6) | Adjustment relates to gains recognized upon remeasurement of certain equity investments to fair value upon acquiring the remaining equity of those entities. |
| (7) | Adjustment for 2022 primarily includes costs of $67 million associated with the January 3, 2022 acquisition and integration of KDG which includes a $17 million impairment charge. The impairment charge was driven by a decision to retire certain legacy trade names, classified as other intangible assets, prior to the end of their estimated useful lives as part of executing our KDG integration and rebranding strategy. Separately, this adjustment includes an $11 million loss related to an investment. Adjustment for 2021 include transaction and other costs related to acquisitions. |
| GENUINE PARTS COMPANY AND SUBSIDIARIES | ||||||||||
| CHANGE IN NET SALES SUMMARY | ||||||||||
| (UNAUDITED) | ||||||||||
| Three Months Ended December 31, 2022 | ||||||||||
| Comparable Sales | Acquisitions | Foreign Currency | Other | GAAP Total Net Sales | ||||||
| Automotive | 8.2 % | 4.8 % | (5.5) % | 0.1 % | 7.6 % | |||||
| Industrial | 16.7 % | 14.3 % | (1.4) % | — % | 29.6 % | |||||
| Total Net Sales | 11.1 % | 8.0 % | (4.2) % | 0.1 % | 15.0 % | |||||
| Twelve Months Ended December 31, 2022 | ||||||||||
| Comparable Sales | Acquisitions | Foreign Currency | Other | GAAP Total Net Sales | ||||||
| Automotive | 9.0 % | 4.5 % | (4.5) % | (0.1) % | 8.9 % | |||||
| Industrial | 17.3 % | 16.8 % | (0.9) % | — % | 33.2 % | |||||
| Total Net Sales | 11.8 % | 8.6 % | (3.3) % | — % | 17.1 % |
| GENUINE PARTS COMPANY AND SUBSIDIARIES | ||||
| RECONCILIATION OF GAAP NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW | ||||
| (UNAUDITED) | ||||
| Twelve Months Ended December 31, | ||||
| (in thousands) | 2022 | 2021 | ||
| Net cash provided by operating activities | $ 1,466,971 | $1,258,285 | ||
| Purchases of property, plant and equipment | (339,632) | (266,136) | ||
| Free Cash Flow | $ 1,127,339 | $ 992,149 |
SOURCE Genuine Parts Company
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