Genuine Parts Company results for the first quarter ended March 31, 2023 show growth in both topline and bottom line results that “exceeded expectations.”

“We are pleased with the continued strength and momentum in our business and excited to report results that exceeded our expectations for the quarter,” said Paul Donahue, Chairman and Chief Executive Officer.

“Our performance was a clear example of how our multi-year strategic transformation to a global Automotive and Industrial company is a competitive advantage that distinguishes GPC in the marketplace. We benefited from our business mix and the geographic diversity of our operations with continued strong performances in our international automotive businesses and in the industrial segment. We are extremely proud of the outstanding work by all our GPC teammates.”

First Quarter 2023 Results

Sales were $5.8 billion, an 8.9% increase compared to $5.3 billion in the same period of the prior year. The growth in sales is attributable to an 8.7% increase in comparable sales and a 2.4% benefit from acquisitions, partially offset by a 2.2% net unfavorable impact of foreign currency and other. All figures in USD.

Net income was $304 million, or a diluted EPS of $2.14. This compares to net income of $246 million, or $1.72 per diluted share in the prior year period.

Net income of $304 million compares to adjusted net income of $266 million for the same three-month period of the prior year, an increase of 14.4%. On a per share diluted basis, net income was $2.14, an increase of 15.1% compared to adjusted diluted earnings per share of $1.86 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.

First Quarter 2023 Segment Highlights

Automotive Parts Group (“Automotive”)

Global Automotive sales were $3.5 billion, up 7.0% from the same period in 2022, consisting of a 6.6% increase in comparable sales and a 3.5% benefit from acquisitions, net of a 3.1% unfavorable impact of foreign currency and other.

Segment profit of $264 million was essentially unchanged from 2022, with segment profit margin of 7.5% down 60 basis points from last year.

Industrial Parts Group (“Industrial”)

Industrial sales were $2.3 billion, up 11.9% from the same period in 2022, and reflecting a 12.1% increase in comparable sales and a 0.6% benefit from acquisitions, slightly offset by a 0.8% unfavorable impact of foreign currency. Segment profit of $262 million increased 39.1%, with profit margin of 11.6% up 230 basis points from the same period of the prior year.

“Global Automotive sales were driven by the strong performance of our businesses outside the U.S., which helped to partially offset a slow start to the year in our U.S. automotive business,” said Will Stengel, President and Chief Operating Officer. “In the Industrial segment, however, our broad-based strength in sales drove our eighth consecutive quarter of double-digit sales comps. The Industrial team is also operating well, posting the eleventh consecutive quarter of margin expansion. Our first quarter performance is a clear reflection of our balanced portfolio and One GPC approach to executing our strategic initiatives and taking care of our customers.”

Balance Sheet, Cash Flow and Capital Allocation

The company generated cash flow from operations of $198 million for the first three months of 2023. We used $45 million in cash for investing activities, including $88 million for capital expenditures and $40 million for M&A, net of $80 million in proceeds from the sale of investments. We also used $158 million in cash for financing activities, including $126 million  for quarterly dividends paid to shareholders and $68 million for stock repurchases. Free cash flow was $109 million for the first three 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 $2.1 billion in total liquidity, consisting of $1.4 billion availability on the revolving credit facility and $651 million in cash and cash equivalents. 

2023 Outlook

The company is updating full-year 2023 guidance previously provided in its earnings release on February 23, 2023 and at its Investor Day on March 23, 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.

“We are pleased with the solid start to 2023 and continue to expect another strong year of profitable growth. Our updated outlook for the full year reflects the confidence in our strategic plans and ability to execute through continued economic uncertainty. We believe GPC is well-positioned with the financial strength and flexibility to support our growth plans and provide for disciplined capital allocation and enhanced shareholder value,” Mr. Donahue concluded.

		Outlook 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		$8.80 to $8.95		$8.95 to $9.10
Adjusted diluted earnings per share		$8.80 to $8.95		$8.95 to $9.10
Effective tax rate		Approximately 25%		Approximately 25%
Net cash provided by operating activities		$1.2 billion to $1.4 billion		$1.3 billion to $1.4 billion
Free cash flow		$800 million to $1.0 billion		$900 million to $1.0 billion

Conference Call

We will hold a conference call April 20, 2023 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 8846157. A replay will also be available on our website or at 877-344-7529, conference ID 8330727, two hours after the completion of the call.

FINANCIAL STATEMENTS
SOURCE: GENUINE PARTS COMPANY

GENUINE PARTS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
		Three Months Ended March 31,
(in thousands, except per share data)		2023		2022
Net sales		$     5,765,118		$     5,294,635
Cost of goods sold		3,751,717		3,468,688
Gross profit		2,013,401		1,825,947
Operating expenses:
Selling, administrative and other expenses		1,511,244		1,403,979
Depreciation and amortization		87,215		87,369
Provision for doubtful accounts		5,639		4,494
Total operating expenses		1,604,098		1,495,842
Non-operating expense (income):
Interest expense, net		16,864		19,850
Other		(11,967)		(15,461)
Total non-operating expense (income)		4,897		4,389
Income before income taxes		404,406		325,716
Income taxes		100,449		79,878
Net income		$        303,957		$        245,838
Dividends declared per common share		$          0.9500		$          0.8950
Basic earnings per share		$              2.16		$              1.73
Diluted earnings per share		$              2.14		$              1.72

GENUINE PARTS COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (UNAUDITED)
		Three Months Ended March 31,
(in thousands)		2023		2022
Net sales:
Automotive		$     3,505,827		$     3,275,621
Industrial		2,259,291		2,019,014
Total net sales		$      5,765,118		$     5,294,635
Segment profit:
Automotive		$        264,420		$        264,573
Industrial		261,987		188,353
Total segment profit		526,407		452,926
Interest expense, net		(16,864)		(19,850)
Intangible asset amortization		(39,122)		(39,694)
Corporate expense		(66,015)		(41,751)
Other unallocated costs (1)		—		(25,915)
Income before income taxes		$        404,406		$        325,716

(1)     The following table presents a summary of the other unallocated costs:

		Three Months Ended March 31,
(in thousands)		2022		2022
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, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents		$           651,183		$           653,463
Trade accounts receivable, less allowance for doubtful accounts (2023 – $56,236; 2022 – $53,872)		2,420,848		2,188,868
Merchandise inventories, net		4,579,590		4,441,649
Prepaid expenses and other current assets		1,532,810		1,532,759
Total current assets		9,184,431		8,816,739
Goodwill		2,599,770		2,588,113
Other intangible assets, less accumulated amortization		1,790,120		1,812,510
Property, plant and equipment, less accumulated depreciation (2023 – $1,476,073; 2022 – $1,435,677)		1,373,541		1,326,014
Operating lease assets		1,121,007		1,104,678
Other assets		838,663		847,325
Total assets		$      16,907,532		$      16,495,379
Liabilities and equity
Current liabilities:
Trade accounts payable		$        5,677,134		$        5,456,550
Current portion of debt		290,326		252,029
Dividends payable		133,737		126,191
Other current liabilities		1,816,327		1,851,340
Total current liabilities		7,917,524		7,686,110
Long-term debt		3,094,319		3,076,794
Operating lease liabilities		844,174		836,019
Pension and other post–retirement benefit liabilities		198,552		197,879
Deferred tax liabilities		391,526		391,163
Other long-term liabilities		521,801		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 – 140,545,475 shares; 2022 – 140,941,649 shares		140,545		140,941
Additional paid-in capital		147,690		140,324
Accumulated other comprehensive loss		(1,006,801)		(1,032,542)
Retained earnings		4,644,770		4,541,640
Total parent equity		3,926,204		3,790,363
Noncontrolling interests in subsidiaries		13,432		14,084
Total equity		3,939,636		3,804,447
Total liabilities and equity		$      16,907,532		$      16,495,379

GENUINE PARTS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		Three Months Ended March 31,
(in thousands)		2023		2022
Operating activities:
Net income		$        303,957		$        245,838
Adjustments to reconcile net income to net cash provided by operating    activities:
Depreciation and amortization		87,215		87,369
Share-based compensation		8,646		7,171
Excess tax benefits from share-based compensation		(584)		(714)
Changes in operating assets and liabilities		(201,727)		59,144
Net cash provided by operating activities		197,507		398,808
Investing activities:
Purchases of property, plant and equipment		(88,100)		(78,045)
Proceeds from sale of property, plant and equipment		1,971		5,895
Proceeds from sale of investments		80,482		—
Acquisitions and other investing activities		(39,589)		(1,348,795)
Net cash used in investing activities		(45,236)		(1,420,945)
Financing activities:
Proceeds from debt		693,400		2,890,000
Payments on debt		(652,138)		(1,784,585)
Shares issued from employee incentive plans		(1,265)		(1,063)
Dividends paid		(126,191)		(115,876)
Purchases of stock		(67,501)		(72,919)
Other financing activities		(4,118)		(1,593)
Net cash (used in) provided by financing activities		(157,813)		913,964
Effect of exchange rate changes on cash and cash equivalents		3,262		4,248
Net decrease in cash and cash equivalents		(2,280)		(103,925)
Cash and cash equivalents at beginning of period		653,463		714,701
Cash and cash equivalents at end of period		$        651,183		$        610,776

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)		2023		2022
GAAP net income		$              303,957		$              245,838
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		$             303,957		$             265,650
The table below represent amounts per common share assuming dilution:
		Three Months Ended March 31,
(in thousands, except per share data)		2023		2022
GAAP net income		$                   2.14		$                    1.72
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		$                   2.14		$                    1.86
Weighted average common shares outstanding – assuming dilution		141,725		142,842
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)		2023		2022
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, 2023
		Comparable Sales		Acquisitions		Foreign Currency		Other		GAAP Total Net Sales
Automotive		6.6 %		3.5 %		(3.2) %		0.1 %		7.0 %
Industrial		12.1 %		0.6 %		(0.8) %		— %		11.9 %
Total Net Sales		8.7 %		2.4 %		(2.3) %		0.1 %		8.9 %

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)		2023		2022
Net cash provided by operating activities		$                           197,507		$                           398,808
Purchases of property, plant and equipment		(88,100)		(78,045)
Free Cash Flow		$                           109,407		$                           320,763

		For the Year Ending December 31, 2023
		Previous Outlook		Updated Outlook
Net cash provided by operating activities		$1.2 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		$800 million to $1.0 billion		$900 million to $1.0 billion