Genuine Parts Company announced its results for the second quarter ended June 30, 2022, with strong growth in its automotive and industrial segments.
“GPC achieved another record quarter, consisting of double-digit sales and earnings increases and a steady cadence of continued growth,” said Paul Donahue, Chairman and Chief Executive Officer.
“We are benefiting from the resiliency of our Automotive and Industrial businesses and the strategic mix of our operations. We want to thank our 53,000 talented GPC teammates for their exceptional work and commitment to excellence.”
Second Quarter 2022 Results
Sales were $5.6 billion, a 17.1% increase compared to $4.8 billion in the same period of the prior year. The sales growth reflects an 11.5% increase in comparable sales and an 8.8% benefit from acquisitions, partially offset by a 3.2% net unfavorable impact of foreign currency and other.
All figures in USD.
Net income was $373 million, or $2.62 per diluted earnings per share. This compares to net income of $196 million, or $1.36 per diluted share, in the prior year period.
Adjusted net income, which excludes a net benefit $59 million, or $0.42 per diluted share, in a non-recurring gain on the sale of S.P. Richards real estate partially offset by transaction and other costs related to the acquisition of Kaman Distribution Group (KDG), was $313 million, an increase of 23.9% compared to adjusted net income of $253 million for the same period of the prior year. On a per share diluted basis, adjusted net income was $2.20, an increase of 26.4% compared to $1.74 per diluted share last year. Refer to the reconciliation of GAAP net income to adjusted net income for more information.
Second Quarter 2022 Segment Highlights
Automotive Parts Group
Automotive sales were $3.5 billion, up 8.5% from the same period in 2021, improvement from an 8.4% global increase in comparable sales and a 4.5% contribution from acquisitions, net of a 4.4% unfavorable impact of foreign currency and other. Segment profit of $323 million increased 10.9%, with a segment profit margin of 9.3%, up 20 basis points from the same period of the prior year.
Industrial Parts Group
Industrial sales were $2.1 billion, up 34.5% from the same period in 2021, and reflecting a 17.8% increase in comparable sales and a 17.6% contribution from the acquisition of KDG, slightly offset by a 0.9% unfavorable impact of foreign currency. Segment profit of $225 million increased 49.9%, with profit margin of 10.6%, up 110 basis points from the same period of the prior year.
Will Stengel, President, stated, “Our second quarter results were driven by exceptional execution from our teammates along with the continued focus on our strategic investments, which delivered strong sales and margin expansion in both segments. In addition, we were pleased to further strengthen our balance sheet and generate continued strong cash flow.
“The strength in Automotive was broad-based across our global operations. Likewise, the continued strength in Industrial led to its fifth consecutive quarter of double-digit sales comps,” said Mr. Stengel.
Six Months 2022 Results
Sales for the six months ended June 30, 2022 were $10.9 billion, a 17.8% increase from $9.2 billion for the same period in 2021. Net income for the six months was $618 million, or $4.34 per diluted share. The Company’s adjusted net income was $579 million, or $4.06 per diluted share, an increase of 25.3% compared to $3.24 per diluted share last year.
Balance Sheet, Cash Flow and Capital Allocation
The Company generated operating cash flow from operations of $791 million during the first half of 2022, an increase from $704 million in the same period last year. The increase was driven primarily by higher net income and the effective management of our working capital. We used $1.5 billion in cash for investing activities, primarily in connection with the acquisition of KDG, in addition to $153 million for capital expenditures. We also had $585 million in cash provided by financing activities, which includes $1 billion of net proceeds from debt, primarily related to the KDG acquisition. This was partially offset by quarterly dividends of $243 million paid to shareholders and $123 million of share repurchases. Free cash flow was $638 million for the first half of 2022.
The Company ended the quarter with $2 billion in total liquidity, consisting of $1.5 billion availability on the revolving credit facility and $519 million 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 April 21, 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. 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 | 10% to 12% | 12% to 14% | ||
| Automotive sales growth | 5% to 7% | 6% to 8% | ||
| Industrial sales growth | 21% to 23% | 26% to 28% | ||
| Diluted earnings per share | $7.56 to $7.71 | $8.08 to $8.23 | ||
| Adjusted diluted earnings per share | $7.70 to $7.85 | $7.80 to $7.95 | ||
| 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 |
“We have had an exceptional first half of 2022, boosted by our Industrial business and success of our acquisition of KDG along with solid Automotive results. Our outlook for the full-year reflects our ongoing confidence in our businesses to execute our strategies despite a dynamic and uncertain external landscape,” Mr. Donahue concluded.
Conference Call
We will hold a conference call July 27 2022 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 0479094. A replay will also be available on our website or at 877-344-7529, conference ID 2048254, two hours after the completion of the call.
About Genuine Parts Company
Founded in 1928, GPC is a global service organization engaged in the distribution of automotive and industrial replacement parts. Its 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, it serves global customers from an extensive network of more than 10,000 locations in 17 countries and has approximately 53,000 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) | 2022 | 2021 | 2022 | 2021 | ||||
| Net sales | $ 5,602,414 | $ 4,783,738 | $ 10,897,049 | $ 9,248,452 | ||||
| Cost of goods sold | 3,641,615 | 3,094,633 | 7,110,303 | 6,018,532 | ||||
| Gross profit | 1,960,799 | 1,689,105 | 3,786,746 | 3,229,920 | ||||
| Operating expenses: | ||||||||
| Selling, administrative and other expenses | 1,364,015 | 1,349,309 | 2,767,994 | 2,544,473 | ||||
| Depreciation and amortization | 85,890 | 73,960 | 173,259 | 146,256 | ||||
| Provision for doubtful accounts | 2,899 | 5,037 | 7,393 | 9,946 | ||||
| Total operating expenses | 1,452,804 | 1,428,306 | 2,948,646 | 2,700,675 | ||||
| Non-operating expense (income): | ||||||||
| Interest expense, net | 20,248 | 15,362 | 40,098 | 33,686 | ||||
| Other | (3,820) | (24,170) | (19,281) | (59,907) | ||||
| Total non-operating expense (income) | 16,428 | (8,808) | 20,817 | (26,221) | ||||
| Income before income taxes | 491,567 | 269,607 | 817,283 | 555,466 | ||||
| Income taxes | 119,038 | 73,111 | 198,916 | 141,260 | ||||
| Net income | $ 372,529 | $ 196,496 | $ 618,367 | $ 414,206 | ||||
| Dividends declared per common share | $ 0.8950 | $ 0.8150 | $ 1.7900 | $ 1.6300 | ||||
| Basic earnings per share | $ 2.63 | $ 1.36 | $ 4.36 | $ 2.87 | ||||
| Diluted earnings per share | $ 2.62 | $ 1.36 | $ 4.34 | $ 2.85 | ||||
| Weighted average common shares outstanding | 141,581 | 144,211 | 141,747 | 144,312 | ||||
| Dilutive effect of stock options and non- vested restricted stock awards | 723 | 772 | 835 | 846 | ||||
| Weighted average common shares outstanding – assuming dilution | 142,304 | 144,983 | 142,582 | 145,158 |
| GENUINE PARTS COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (UNAUDITED) | ||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||
| Net sales: | ||||||||
| Automotive | $ 3,467,494 | $ 3,196,299 | $ 6,743,115 | $ 6,149,464 | ||||
| Industrial | 2,134,920 | 1,587,439 | 4,153,934 | 3,098,988 | ||||
| Total net sales | $ 5,602,414 | $ 4,783,738 | $ 10,897,049 | $ 9,248,452 | ||||
| Segment profit: | ||||||||
| Automotive | $ 322,553 | $ 290,758 | $ 587,126 | $ 526,436 | ||||
| Industrial | 225,472 | 150,413 | 413,825 | 275,705 | ||||
| Total segment profit | 548,025 | 441,171 | 1,000,951 | 802,141 | ||||
| Interest expense, net | (20,248) | (15,362) | (40,098) | (33,686) | ||||
| Intangible asset amortization | (39,630) | (27,384) | (79,324) | (52,928) | ||||
| Corporate expense | (73,312) | (51,397) | (115,063) | (82,640) | ||||
| Other unallocated costs (1) | 76,732 | (77,421) | 50,817 | (77,421) | ||||
| Income before income taxes | $ 491,567 | $ 269,607 | $ 817,283 | $ 555,466 | ||||
| (1) The following table presents a summary of the other unallocated costs: | ||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||
| Other unallocated costs: | ||||||||
| Gain on sale of real estate (2) | $ 102,803 | $ — | $ 102,803 | $ — | ||||
| Gain on insurance proceeds (3) | $ 873 | $ — | $ 1,507 | $ — | ||||
| Product liability damages award (4) | — | (77,421) | — | (77,421) | ||||
| Transaction and other costs (5) | (26,944) | — | (53,493) | — | ||||
| Total other unallocated costs | $ 76,732 | $ (77,421) | $ 50,817 | $ (77,421) |
| (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 reflects damages reinstated by the Washington Supreme Court order on July 8, 2021 in connection with a 2017 automotive product liability claim. |
| (5) | Adjustment primarily reflects legal and professional, restructuring, lease termination and other costs associated with the January 3, 2022 acquisition and subsequent integration of KDG. These costs also include a $17 million impairment charge 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. |
| GENUINE PARTS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||
| (in thousands, except share and per share data) | June 30, 2022 | June 30, 2021 | ||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ 519,131 | $ 987,389 | ||
| Trade accounts receivable, less allowance for doubtful accounts (2022 – $57,413; 2021 – $43,751) | 2,235,453 | 1,899,978 | ||
| Merchandise inventories, net | 4,296,191 | 3,679,113 | ||
| Prepaid expenses and other current assets | 1,475,493 | 1,155,114 | ||
| Total current assets | 8,526,268 | 7,721,594 | ||
| Goodwill | 2,538,240 | 1,922,544 | ||
| Other intangible assets, less accumulated amortization | 1,853,222 | 1,461,886 | ||
| Property, plant and equipment, less accumulated depreciation (2022 – $1,370,095; 2021 – $1,336,175) | 1,236,859 | 1,175,953 | ||
| Operating lease assets | 1,067,614 | 1,059,068 | ||
| Other assets | 1,015,984 | 744,937 | ||
| Total assets | $ 16,238,187 | $ 14,085,982 | ||
| Liabilities and equity | ||||
| Current liabilities: | ||||
| Trade accounts payable | $ 5,409,587 | $ 4,729,240 | ||
| Current portion of debt | 14,118 | 48,094 | ||
| Dividends payable | 126,716 | 117,536 | ||
| Other current liabilities | 1,743,439 | 1,626,325 | ||
| Total current liabilities | 7,293,860 | 6,521,195 | ||
| Long-term debt | 3,304,223 | 2,472,980 | ||
| Operating lease liabilities | 800,672 | 798,079 | ||
| Pension and other post–retirement benefit liabilities | 263,314 | 255,175 | ||
| Deferred tax liabilities | 407,763 | 230,463 | ||
| Other long-term liabilities | 514,792 | 562,945 | ||
| 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 – 141,280,841 shares; 2021 – 143,301,673 shares | 141,281 | 143,302 | ||
| Additional paid-in capital | 123,388 | 111,972 | ||
| Accumulated other comprehensive loss | (953,228) | (1,003,554) | ||
| Retained earnings | 4,329,115 | 3,982,159 | ||
| Total parent equity | 3,640,556 | 3,233,879 | ||
| Noncontrolling interests in subsidiaries | 13,007 | 11,266 | ||
| Total equity | 3,653,563 | 3,245,145 | ||
| Total liabilities and equity | $ 16,238,187 | $ 14,085,982 |
| GENUINE PARTS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||
| Six Months Ended June 30, | ||||
| (in thousands) | 2022 | 2021 | ||
| Operating activities: | ||||
| Net income | $ 618,367 | $ 414,206 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 173,259 | 146,256 | ||
| Share-based compensation | 17,882 | 14,521 | ||
| Gain on sale of real estate | (102,803) | — | ||
| Intangible asset impairment | 17,061 | — | ||
| Excess tax benefits from share-based compensation | (3,137) | (6,627) | ||
| Changes in operating assets and liabilities | 70,356 | 136,074 | ||
| Net cash provided by operating activities | 790,985 | 704,430 | ||
| Investing activities: | ||||
| Purchases of property, plant and equipment | (152,976) | (89,993) | ||
| Proceeds from sale of property, plant and equipment | 140,841 | 22,065 | ||
| Proceeds from divestitures of businesses | 26,102 | 13,705 | ||
| Acquisitions of businesses and other investing activities | (1,557,420) | (97,168) | ||
| Net cash used in investing activities | (1,543,453) | (151,391) | ||
| Financing activities: | ||||
| Proceeds from debt | 3,850,642 | 31,599 | ||
| Payments on debt | (2,872,124) | (142,295) | ||
| Share-based awards exercised | (14,420) | (19,330) | ||
| Dividends paid | (242,767) | (231,627) | ||
| Purchases of stock | (122,919) | (184,365) | ||
| Other financing activities | (13,901) | (2,159) | ||
| Net cash provided by (used in) financing activities | 584,511 | (548,177) | ||
| Effect of exchange rate changes on cash and cash equivalents | (27,613) | (7,639) | ||
| Net (decrease) increase in cash and cash equivalents | (195,570) | (2,777) | ||
| Cash and cash equivalents at beginning of period | 714,701 | 990,166 | ||
| Cash and cash equivalents at end of period | $ 519,131 | $ 987,389 |
| 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) | 2022 | 2021 | 2022 | 2021 | ||||
| GAAP net income | $ 372,529 | $ 196,496 | $ 618,367 | $ 414,206 | ||||
| Adjustments: | ||||||||
| Gain on sale of real estate (1) | (102,803) | — | (102,803) | — | ||||
| Gain on insurance proceeds (2) | (873) | — | (1,507) | — | ||||
| Product liability damages award (3) | — | 77,421 | — | 77,421 | ||||
| Transaction and other costs (4) | 26,944 | — | 53,493 | — | ||||
| Total adjustments | (76,732) | 77,421 | (50,817) | 77,421 | ||||
| Tax impact of adjustments | 17,291 | (21,322) | 11,187 | (21,322) | ||||
| Adjusted net income | $ 313,088 | $ 252,595 | $ 578,737 | $ 470,305 | ||||
| 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) | 2022 | 2021 | 2022 | 2021 | ||||
| GAAP net income | $ 2.62 | $ 1.36 | $ 4.34 | $ 2.85 | ||||
| Adjustments: | ||||||||
| Gain on sale of real estate (1) | (0.72) | — | (0.72) | — | ||||
| Gain on insurance proceeds (2) | (0.01) | — | (0.02) | — | ||||
| Product liability damages award (3) | — | 0.53 | — | 0.53 | ||||
| Transaction and other costs (4) | 0.19 | — | 0.38 | — | ||||
| Total adjustments | (0.54) | 0.53 | (0.36) | 0.53 | ||||
| Tax impact of adjustments | 0.12 | (0.15) | 0.08 | (0.14) | ||||
| Adjusted net income | $ 2.20 | $ 1.74 | $ 4.06 | $ 3.24 | ||||
| Weighted average common shares outstanding – assuming dilution | 142,304 | 144,983 | 142,582 | 145,158 | ||||
| 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) | 2022 | 2021 | 2022 | 2021 | ||||
| Line item: | ||||||||
| Cost of goods sold | $ — | $ — | $ 5,000 | $ — | ||||
| Selling, administrative and other expenses | (75,859) | 77,421 | (54,310) | 77,421 | ||||
| Non-operating expense (income): Other | (873) | — | (1,507) | — | ||||
| Total adjustments | $ (76,732) | $ 77,421 | $ (50,817) | $ 77,421 |
| (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 reflects damages reinstated by the Washington Supreme Court order on July 8, 2021 in connection with a 2017 automotive product liability claim. |
| (4) | Adjustment primarily reflects legal and professional, restructuring, lease termination and other costs associated with the January 3, 2022 acquisition and subsequent integration of KDG. These costs also include a $17 million impairment charge 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. |
| GENUINE PARTS COMPANY AND SUBSIDIARIES CHANGE IN NET SALES SUMMARY (UNAUDITED) | ||||||||||
| Three Months Ended June 30, 2022 | ||||||||||
| Comparable Sales | Acquisitions | Foreign Currency | Other | GAAP Total Net Sales | ||||||
| Automotive | 8.4 % | 4.5 % | (4.6) % | 0.2 % | 8.5 % | |||||
| Industrial | 17.8 % | 17.6 % | (0.9) % | — % | 34.5 % | |||||
| Total Net Sales | 11.5 % | 8.8 % | (3.3) % | 0.1 % | 17.1 % | |||||
| Six months ended June 30, 2022 | ||||||||||
| Comparable Sales | Acquisitions | Foreign Currency | Other | GAAP Total Net Sales | ||||||
| Automotive | 9.3 % | 3.9 % | (3.5) % | — % | 9.7 % | |||||
| Industrial | 17.0 % | 17.7 % | (0.7) % | — % | 34.0 % | |||||
| Total Net Sales | 11.8 % | 8.6 % | (2.6) % | — % | 17.8 % |
| 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) | 2022 | 2021 | ||
| Net cash provided by operating activities | $ 790,985 | $ 704,430 | ||
| Purchases of property, plant and equipment | (152,976) | (89,993) | ||
| Free Cash Flow | $ 638,009 | $ 614,437 | ||
| 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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