Genuine Parts Company announced its results for the fourth quarter and twelve months ended December 31, 2020 and reinstated full-year guidance for 2021.
“Our fourth quarter results reflect the benefit of our ongoing strategic actions, despite the continued challenges of COVID-19. The GPC team was agile in adapting to dynamic conditions and executed on our initiatives to deliver customer value, operational efficiencies and strong financial results. We are grateful to our 50,000 associates for their unwavering commitment to excellence while responding to unprecedented business and economic conditions,” said Paul Donahue, Chairman and Chief Executive Officer of Genuine Parts Company.
Fourth Quarter 2020 Highlights
- – Sales of $4.3 billion, Down 0.7%
- – Diluted EPS from Continuing Operations $1.18, Up 119%
- – Adjusted Diluted EPS from Continuing Operations $1.52, Up 19.7%
Full Year 2020 Highlights
- – Sales $16.5 billion, Down 5.6%; Excluding Divestitures, Down 2.3%
- – Diluted EPS from Continuing Operations $1.13, Down 74%
- – Adjusted Diluted EPS from Continuing Operations $5.27, Down 0.8%
- – Cash Flow from Operations of $2.0 billion
- – Returned $549 million to Shareholders via Cash Dividends and Share Repurchases
- – Introduces 2021 Outlook for Revenue Growth of 4% to 6% and Diluted EPS of $5.55 to $5.75
Fourth Quarter 2020 Results
Sales from continuing operations were $4.3 billion, a 0.7% decrease from the same period in 2019. The decrease in sales was primarily attributable to a 2.8% decline in comparable sales, partially offset by a 0.8% benefit from acquisitions and a 1.3% net benefit of foreign currency and other.
Net income from continuing operations was $171.6 million, or a diluted earnings per share of $1.18. This compares to net income from continuing operations of $79.0 million, or $0.54 per diluted share in the prior year period. Excluding the impact of restructuring, an inventory adjustment, and transaction and other costs, adjusted net income from continuing operations was $221.0 million compared to $185.7 million a year ago. Adjusted net income per diluted share from continuing operations was $1.52, a 19.7% increase compared to $1.27 per diluted share last year1.
Donahue continued, “Automotive sales were led by strong growth in Australasia, while the pace of recovery slowed in Europe and North America relative to the previous quarter. In response, our team was focused on our strategic priorities to strengthen our supply chain, improve our inventory availability and enable our sales team to build positive sales momentum. Industrial sales were much improved from the prior quarter and grew progressively stronger through the last three months of the year. These top line results, combined with further gross margin improvement and lower operating expenses, drove expanded operating margins in both our automotive and industrial businesses and strong earnings growth. We also finished the year with a strong balance sheet, ample liquidity and robust cash flow.”
Fourth Quarter 2020 Segment Results
Automotive Parts Group
Automotive sales were $2.8 billion in the fourth quarter, up 0.7% from 2019 and representing 66% of total Company revenues. The increase consisted of a 0.9% contribution from acquisitions and a 1.8% net benefit of foreign currency, offset by a 2.0% decrease in comparable sales. Segment profit of $240.1 million increased 19.4%, with profit margin of 8.5%, up 130 basis points from 2019.
Industrial Parts Group
Industrial sales were $1.4 billion in the fourth quarter, down 3.3% from 2019 and representing 34% of total Company revenues. The decrease in sales was comprised of a 4.4% decrease in comparable sales, partially offset by a 0.6% contribution from acquisitions and a 0.5% net benefit of foreign currency. Segment profit of $133.4 million increased 5.1%, with profit margin of 9.3%, up 70 basis points from 2019.
Full Year 2020 Results
Sales from continuing operations for the twelve months ended December 31, 2020 were $16.5 billion, a 5.6% decrease compared to $17.5 billion in 2019. Excluding divestitures, net sales from continuing operations were down 2.3% for the twelve months. Net income from continuing operations was $163.4 million and diluted earnings per share were $1.13 for the twelve months, compared to $646.5 million, or $4.42 per share in 2019. Excluding items which impact comparability with prior periods, the Company’s adjusted net income from continuing operations was $765.0 million, or $5.27 per share, compared to $776.8 million, or $5.31 per share in 2019.
Balance Sheet, Cash Flow and Capital Allocation
The Company generated operating cash flow from continuing operations of $2.0 billion in 2020, an increase from $833 million in 2019, driven primarily by working capital initiatives, including the sale of accounts receivable that increased operating cash flows by $800 million. Free cash flow was $1.9 billion, an increase from $555 million in 2019. The Company also generated $183 million in cash flow from investing activities and used $1.5 billion of cash flow in financing activities.
The Company improved its debt position in the fourth quarter by issuing $500 million in public debt and refinancing its revolving credit facility. The Company ended the year with $2.9 billion in total liquidity, consisting of $1.9 billion in unused credit capacity and $1.0 billion in cash and cash equivalents. For the year, the Company reduced debt by $749 million, or 22%, and is in compliance with all its debt covenants.
“While we chose to prudently conserve cash and carefully monitor our capital deployment through much of 2020 due to COVID-19, we reinvested in our businesses via essential capital expenditures and a few bolt-on acquisitions. The Company also returned $549 million to shareholders, including $453 million in dividends and $96 million in share repurchases,” said Carol Yancey, Executive Vice President and Chief Financial Officer. “We enter 2021 with an excellent balance sheet, including a strong cash position and ample liquidity, to support our growth plans and provide for disciplined, value creating capital allocation. As we gain greater visibility into the macro environment, we expect to resume more normal levels of capital allocation, including the reinvestment in our business.”
“The year 2020 was extraordinary in every respect,” Mr. Donahue concluded. “The COVID-19 pandemic has been incredibly challenging, but the global GPC team proved resilient and up to the challenge. Despite economic and market uncertainties, we remained focused on our strategic growth initiatives and cost actions. Notably, we further streamlined our operations with the divestiture of our Business Products segment, which helped optimize our portfolio and strengthened our focus on the global automotive and industrial businesses. We are extremely proud of our team for their many accomplishments in a difficult year and excited to move forward into 2021 as a stronger, more agile Company well-positioned to drive strong sales growth, earnings and cash flow.”
Genuine Parts Company is reinstating its practice of providing full-year guidance. The Company considered its current growth plans, strategic initiatives, recent business trends, global economic outlook and the continued uncertainty of COVID-19 and its potential impact on our results, in establishing its full-year 2021 guidance as outlined in the table below. The Company will update full-year guidance during 2021, as appropriate.
|Year Ended 12/31/2021|
|Total sales growth||4% to 6%|
|Automotive sales growth||4% to 6%|
|Industrial sales growth||3% to 5%|
|Diluted earnings per share||$5.55 to $5.75|
|Effective tax rate||24.5% to 25.5%|
|Net cash provided by operating activities||$1.0 billion to $1.2 billion|
|Capital expenditures||$275 million to $325 million|
Genuine Parts Company will hold a conference call February 17, at 11:00 a.m. Eastern time to discuss the results of the quarter and future outlook. 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 website at http://genuineparts.investorroom.com.
The call is also available by dialing 877-407-0789, conference ID 13715052. A replay will also be available on the Company’s website or at 844-512-2921, conference ID 13715052, two hours after the completion of the call until 12:00 a.m. Eastern time on March 3, 2021.
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 U.K., Germany, Poland, the Netherlands and Belgium. 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 14 countries.
Further information is available at www.genpt.com.
1 Adjusted net income from continuing operations, adjusted diluted net income from continuing operations per common share, sales excluding divestitures and free cash flow referred in this press release are non-GAAP financial measures. Please refer to the supplemental information presented below for reconciliations of the non-GAAP financial measures used in this release to the most comparable GAAP financial measure and related disclosures.