Genuine Parts Company, a global distributor of automotive and industrial replacement parts best known for its NAPA network, announced record results for the second quarter ended June 30, 2023.
“We are pleased to report another solid quarter, which includes record sales and double-digit adjusted earnings growth. Our second-quarter performance, once again, highlights the value and benefit of our global automotive and industrial business mix and geographic diversity, which we believe are competitive advantages that differentiate GPC in the marketplace,” said Paul Donahue, chairman and chief executive officer.
“Our global team remains focused on the strategic initiatives we highlighted at our Investor Day in March, and we believe our One GPC Team approach is contributing to our strong financial performance. We want to thank all our GPC teammates for their hard work and continued dedication to serving our customers.”
Highlights
- Record Sales of $5.9 billion USD, Up 5.6%
- Diluted EPS of $2.44, Down 6.9%, or Up 10.9% from Adjusted Diluted EPS in 2022
- Updated 2023 Outlook:
- Reaffirms Revenue Growth of 4% to 6%
- Increases Diluted EPS to $9.15 to $9.30, Up from $8.95 to $9.10
- Reaffirms Cash From Operations of $1.3 Billion to $1.4 Billion
Second Quarter 2023 Results
Sales were $5.9 billion, a 5.6% increase compared to $5.6 billion in the same period of the prior year. The growth in sales is attributable to a 4.9% increase in comparable sales and a 1.8% benefit from acquisitions, partially offset by a 1.1% net unfavorable impact of foreign currency and other.
Net income was $344 million, or a diluted EPS of $2.44. This compares to net income of $373 million, or $2.62 per diluted share in the prior year period.
Net income of $344 million compares to adjusted net income of $313 million for the same three-month period of the prior year, an increase of 10.0%. On a per share diluted basis, net income was $2.44, an increase of 10.9% compared to adjusted diluted earnings per share of $2.20 last year. Refer to the reconciliation of GAAP net income to adjusted net income and GAAP diluted earnings per share and adjusted diluted earnings per share for more information. All figures in USD.
Second Quarter 2023 Segment Highlights
Automotive Parts Group
Global Automotive sales were $3.7 billion, up 5.4% from the same period in 2022, consisting of a 4.3% increase in comparable sales and a 2.6% benefit from acquisitions, net of a 1.5% unfavorable impact of foreign currency and other. Segment profit of $329 million increased 2.1%, with segment profit margin of 9.0% down 30 basis points from last year.
Industrial Parts Group
Industrial sales were $2.3 billion, up 5.9% from the same period in 2022, and reflecting a 6.0% increase in comparable sales and a 0.6% benefit from acquisitions, slightly offset by a 0.7% unfavorable impact of foreign currency. Segment profit of $283 million increased 25.7%, with segment profit margin of 12.5% up 190 basis points from the same period of the prior year.
“Global Automotive sales continue to benefit from our global diversification, as our businesses outside the U.S. posted mid-single-digit to double-digit growth in local currency in the second quarter,” said Will Stengel, President and Chief Operating Officer. “Our Industrial sales growth was broad based, with all product categories and major industries served growing from the prior year, allowing the Industrial team to post its twelfth consecutive quarter of margin expansion. The global GPC team delivered a solid second quarter and our teams remain focused on the consistent execution of our strategic initiatives. We believe our investments in our people, customer solutions, technology, supply chain and emerging technology will continue to enhance our capabilities and leadership positions.”
Six Months 2023 Results
Sales for the six months ended June 30, 2023 were $11.7 billion, up 7.2% from the same period in 2022. Net income for the six months was $648 million, or $4.58 per diluted share, an increase of 5.5% compared to $4.34 per diluted share in 2022. Net income of $648 million, or $4.58 per diluted share, compares to adjusted net income of $579 million, or adjusted diluted earnings per share of $4.06, in 2022, an increase of 12.8%.
Balance Sheet, Cash Flow and Capital Allocation
The company generated cash flow from operations of $457 million for the first six months of 2023. We used $226 million in cash for investing activities, including $205 million for capital expenditures and $106 million for acquisitions, net of $80 million in proceeds from the sale of our remaining investment in S.P. Richards and other investments. We also used $358 million in cash for financing activities, including $260 million for quarterly dividends paid to shareholders and $135 million for stock repurchases. Free cash flow was $252 million for the first six months of 2023. Refer to the reconciliation of GAAP net cash provided by operating activities to free cash flow for more information.
The company ended the quarter with $2.0 billion in total liquidity, consisting of $1.4 billion availability on the revolving credit facility and $530 million in cash and cash equivalents.
2023 Outlook
The company is updating full-year 2023 guidance previously provided in its earnings release on April 20, 2023. 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 updating its guidance, which is outlined in the table below.
| For the Year Ending December 31, 2023 | ||||
| Previous Outlook | Updated Outlook | |||
| Total sales growth | 4% to 6% | 4% to 6% | ||
| Automotive sales growth | 4% to 6% | 4% to 6% | ||
| Industrial sales growth | 4% to 6% | 4% to 6% | ||
| Diluted earnings per share | $8.95 to $9.10 | $9.15 to $9.30 | ||
| Adjusted diluted earnings per share | $8.95 to $9.10 | $9.15 to $9.30 | ||
| Effective tax rate | Approximately 25% | Approximately 25% | ||
| Net cash provided by operating activities | $1.3 billion to $1.4 billion | $1.3 billion to $1.4 billion | ||
| Free cash flow | $900 million to $1.0 billion | $900 million to $1.0 billion | ||
“We are very pleased with the solid start to 2023. And, with the strong earnings growth in the second quarter, we are once again raising our outlook for 2023 earnings per share. As we look forward, we remain confident in our strategic plans and will continue to invest to strengthen our business and achieve both our near-term and long-term financial targets while returning capital to shareholders through the dividend and share repurchases,” Mr. Donahue concluded.
Conference Call
We will held a conference call today July 20 to discuss the results of the quarter. A supplemental earnings deck is available for reference at http://genuineparts.investorroom.com. A replay will also be available on the GPC website or at 877-344-7529, conference ID 9035640, two hours after the completion of the call.
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 United Kingdom, Ireland, Germany, Poland, the Netherlands, Belgium, Spain and Portugal. 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 17 countries and has approximately 58,000 employees. Further information is available at www.genpt.com.
| GENUINE PARTS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) | ||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| (in thousands, except per share data) | 2023 | 2022 | 2023 | 2022 | ||||
| Net sales | $ 5,915,006 | $ 5,602,414 | $ 11,680,124 | $ 10,897,049 | ||||
| Cost of goods sold | 3,780,263 | 3,641,615 | 7,531,980 | 7,110,303 | ||||
| Gross profit | 2,134,743 | 1,960,799 | 4,148,144 | 3,786,746 | ||||
| Operating expenses: | ||||||||
| Selling, administrative and other expenses | 1,581,653 | 1,364,015 | 3,092,897 | 2,767,994 | ||||
| Depreciation and amortization | 90,873 | 85,890 | 178,088 | 173,259 | ||||
| Provision for doubtful accounts | 8,322 | 2,899 | 13,961 | 7,393 | ||||
| Total operating expenses | 1,680,848 | 1,452,804 | 3,284,946 | 2,948,646 | ||||
| Non-operating expense (income): | ||||||||
| Interest expense, net | 16,455 | 20,248 | 33,319 | 40,098 | ||||
| Other | (16,649) | (3,820) | (28,616) | (19,281) | ||||
| Total non-operating expense (income) | (194) | 16,428 | 4,703 | 20,817 | ||||
| Income before income taxes | 454,089 | 491,567 | 858,495 | 817,283 | ||||
| Income taxes | 109,595 | 119,038 | 210,044 | 198,916 | ||||
| Net income | $ 344,494 | $ 372,529 | $ 648,451 | $ 618,367 | ||||
| Dividends declared per common share | $ 0.9500 | $ 0.8950 | $ 1.9000 | $ 1.7900 | ||||
| Basic earnings per share | $ 2.45 | $ 2.63 | $ 4.61 | $ 4.36 | ||||
| Diluted earnings per share | $ 2.44 | $ 2.62 | $ 4.58 | $ 4.34 | ||||
| Weighted average common shares outstanding | 140,574 | 141,581 | 140,688 | 141,747 | ||||
| Dilutive effect of stock options and non- vested restricted stock awards | 673 | 723 | 808 | 835 | ||||
| Weighted average common shares outstanding – assuming dilution | 141,247 | 142,304 | 141,496 | 142,582 | ||||
| GENUINE PARTS COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (UNAUDITED) | ||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||
| Net sales: | ||||||||
| Automotive | $ 3,654,999 | $ 3,467,494 | $ 7,160,826 | $ 6,743,115 | ||||
| Industrial | 2,260,007 | 2,134,920 | 4,519,298 | 4,153,934 | ||||
| Total net sales | $ 5,915,006 | $ 5,602,414 | $ 11,680,124 | $ 10,897,049 | ||||
| Segment profit: | ||||||||
| Automotive | $ 329,347 | $ 322,553 | $ 593,767 | $ 587,126 | ||||
| Industrial | 283,372 | 225,472 | 545,359 | 413,825 | ||||
| Total segment profit | 612,719 | 548,025 | 1,139,126 | 1,000,951 | ||||
| Interest expense, net | (16,455) | (20,248) | (33,319) | (40,098) | ||||
| Intangible asset amortization | (40,625) | (39,630) | (79,747) | (79,324) | ||||
| Corporate expense | (101,550) | (73,312) | (167,565) | (115,063) | ||||
| Other unallocated income, net (1) | — | 76,732 | — | 50,817 | ||||
| Income before income taxes | $ 454,089 | $ 491,567 | $ 858,495 | $ 817,283 | ||||
| (1) The following table presents a summary of the other unallocated income, net: | ||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||
| Other unallocated income, net: | ||||||||
| Gain on sale of real estate (2) | $ — | $ 102,803 | $ — | $ 102,803 | ||||
| Gain on insurance proceeds (3) | — | 873 | — | 1,507 | ||||
| Transaction and other costs (4) | — | (26,944) | — | (53,493) | ||||
| Total other unallocated income, net | $ — | $ 76,732 | $ — | $ 50,817 | ||||
| (2) | Adjustment reflects a gain on the sale of real estate that had been leased to S.P. Richards. |
| (3) | Adjustment reflects insurance recoveries in excess of losses incurred on inventory, property, plant and equipment and other fire-related costs. |
| (4) | 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) | June 30, 2023 | December 31, 2022 | ||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ 530,105 | $ 653,463 | ||
| Trade accounts receivable, less allowance for doubtful accounts (2023 – $60,480; 2022 – $53,872) | 2,554,171 | 2,188,868 | ||
| Merchandise inventories, net | 4,512,874 | 4,441,649 | ||
| Prepaid expenses and other current assets | 1,486,556 | 1,532,759 | ||
| Total current assets | 9,083,706 | 8,816,739 | ||
| Goodwill | 2,627,031 | 2,588,113 | ||
| Other intangible assets, less accumulated amortization | 1,778,378 | 1,812,510 | ||
| Property, plant and equipment, less accumulated depreciation (2023 – $1,509,715; 2022 – $1,435,677) | 1,441,757 | 1,326,014 | ||
| Operating lease assets | 1,142,140 | 1,104,678 | ||
| Other assets | 868,623 | 847,325 | ||
| Total assets | $ 16,941,635 | $ 16,495,379 | ||
| Liabilities and equity | ||||
| Current liabilities: | ||||
| Trade accounts payable | $ 5,570,566 | $ 5,456,550 | ||
| Current portion of debt | 417,630 | 252,029 | ||
| Dividends payable | 133,491 | 126,191 | ||
| Other current liabilities | 1,778,107 | 1,851,340 | ||
| Total current liabilities | 7,899,794 | 7,686,110 | ||
| Long-term debt | 2,986,138 | 3,076,794 | ||
| Operating lease liabilities | 862,549 | 836,019 | ||
| Pension and other post–retirement benefit liabilities | 197,783 | 197,879 | ||
| Deferred tax liabilities | 397,801 | 391,163 | ||
| Other long-term liabilities | 511,776 | 502,967 | ||
| 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 – 2023 – 140,467,550 shares; 2022 – 140,941,649 shares | 140,468 | 140,941 | ||
| Additional paid-in capital | 153,748 | 140,324 | ||
| Accumulated other comprehensive loss | (1,011,857) | (1,032,542) | ||
| Retained earnings | 4,788,852 | 4,541,640 | ||
| Total parent equity | 4,071,211 | 3,790,363 | ||
| Noncontrolling interests in subsidiaries | 14,583 | 14,084 | ||
| Total equity | 4,085,794 | 3,804,447 | ||
| Total liabilities and equity | $ 16,941,635 | $ 16,495,379 | ||
| GENUINE PARTS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||
| Six Months Ended June 30, | ||||
| (in thousands) | 2023 | 2022 | ||
| Operating activities: | ||||
| Net income | $ 648,451 | $ 618,367 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 178,088 | 173,259 | ||
| Share-based compensation | 36,945 | 17,882 | ||
| Excess tax benefits from share-based compensation | (6,431) | (3,137) | ||
| Gain on sale of real estate | — | (102,803) | ||
| Changes in operating assets and liabilities | (400,050) | 87,417 | ||
| Net cash provided by operating activities | 457,003 | 790,985 | ||
| Investing activities: | ||||
| Purchases of property, plant and equipment | (205,336) | (152,976) | ||
| Proceeds from sale of property, plant and equipment | 4,762 | 140,841 | ||
| Proceeds from sale of investments | 80,482 | — | ||
| Acquisitions and other investing activities | (106,028) | (1,531,318) | ||
| Net cash used in investing activities | (226,120) | (1,543,453) | ||
| Financing activities: | ||||
| Proceeds from debt | 1,668,757 | 3,850,642 | ||
| Payments on debt | (1,602,138) | (2,872,124) | ||
| Shares issued from employee incentive plans | (23,155) | (14,420) | ||
| Dividends paid | (259,929) | (242,767) | ||
| Purchases of stock | (134,849) | (122,919) | ||
| Other financing activities | (6,436) | (13,901) | ||
| Net cash provided by (used in) financing activities | (357,750) | 584,511 | ||
| Effect of exchange rate changes on cash and cash equivalents | 3,509 | (27,613) | ||
| Net decrease in cash and cash equivalents | (123,358) | (195,570) | ||
| Cash and cash equivalents at beginning of period | 653,463 | 714,701 | ||
| Cash and cash equivalents at end of period | $ 530,105 | $ 519,131 | ||
| 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 June 30, | Six Months Ended June 30, | |||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||
| GAAP net income | $ 344,494 | $ 372,529 | $ 648,451 | $ 618,367 | ||||
| Adjustments: | ||||||||
| Gain on sale of real estate (1) | — | (102,803) | — | (102,803) | ||||
| Gain on insurance proceeds (2) | — | (873) | — | (1,507) | ||||
| Transaction and other costs (3) | — | 26,944 | — | 53,493 | ||||
| Total adjustments | — | (76,732) | — | (50,817) | ||||
| Tax impact of adjustments | — | 17,291 | — | 11,187 | ||||
| Adjusted net income | $ 344,494 | $ 313,088 | $ 648,451 | $ 578,737 | ||||
| The table below represent amounts per common share assuming dilution: | ||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| (in thousands, except per share data) | 2023 | 2022 | 2023 | 2022 | ||||
| GAAP net income | $ 2.44 | $ 2.62 | $ 4.58 | $ 4.34 | ||||
| Adjustments: | ||||||||
| Gain on sale of real estate (1) | — | (0.72) | — | (0.72) | ||||
| Gain on insurance proceeds (2) | — | (0.01) | — | (0.02) | ||||
| Transaction and other costs (3) | — | 0.19 | — | 0.38 | ||||
| Total adjustments | — | (0.54) | — | (0.36) | ||||
| Tax impact of adjustments | — | 0.12 | — | 0.08 | ||||
| Adjusted net income | $ 2.44 | $ 2.20 | $ 4.58 | $ 4.06 | ||||
| Weighted average common shares outstanding – assuming dilution | 141,247 | 142,304 | 141,496 | 142,582 | ||||
| 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 June 30, | Six Months Ended June 30, | |||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||
| Line item: | ||||||||
| Cost of goods sold | $ — | $ — | $ — | $ 5,000 | ||||
| Selling, administrative and other expenses | — | (75,859) | — | (54,310) | ||||
| Non-operating income: Other | — | (873) | — | (1,507) | ||||
| Total adjustments | $ — | $ (76,732) | $ — | $ (50,817) | ||||
| (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 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 June 30, 2023 | ||||||||||
| Comparable Sales | Acquisitions | Foreign Currency | Other | GAAP Total Net Sales | ||||||
| Automotive | 4.3 % | 2.6 % | (1.1) % | (0.4) % | 5.4 % | |||||
| Industrial | 6.0 % | 0.6 % | (0.7) % | — % | 5.9 % | |||||
| Total Net Sales | 4.9 % | 1.8 % | (0.9) % | (0.2) % | 5.6 % | |||||
| Six Months Ended June 30, 2023 | ||||||||||
| Comparable Sales | Acquisitions | Foreign Currency | Other | GAAP Total Net Sales | ||||||
| Automotive | 5.4 % | 3.0 % | (2.1) % | (0.1) % | 6.2 % | |||||
| Industrial | 9.0 % | 0.6 % | (0.8) % | — % | 8.8 % | |||||
| Total Net Sales | 6.8 % | 2.1 % | (1.6) % | (0.1) % | 7.2 % | |||||
| GENUINE PARTS COMPANY AND SUBSIDIARIES RECONCILIATION OF GAAP NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW (UNAUDITED) | ||||
| Six Months Ended June 30, | ||||
| (in thousands) | 2023 | 2022 | ||
| Net cash provided by operating activities | $ 457,003 | $ 790,985 | ||
| Purchases of property, plant and equipment | (205,336) | (152,976) | ||
| Free Cash Flow | $ 251,667 | $ 638,009 | ||
| For the Year Ending December 31, 2023 | ||||
| Previous Outlook | Updated Outlook | |||
| Net cash provided by operating activities | $1.3 billion to $1.4 billion | $1.3 billion to $1.4 billion | ||
| Purchases of property, plant and equipment | $375 million to $400 million | $375 million to $400 million | ||
| Free Cash Flow | $900 million to $1.0 billion | $900 million to $1.0 billion | ||
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