Genuine Parts pany(US:GPC)2024-10-22 17:20PART I Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flows, highlighting key financial changes and notes Condensed Consolidated Balance Sheets Total assets increased to $20.26 billion by September 30, 2024, driven by inventory and goodwill, while liabilities also rose, resulting in a slight equity increase Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $10,709,502 | $9,605,852 | | Merchandise Inventories, net | $5,527,034 | $4,676,686 | | Goodwill | $3,034,339 | $2,734,681 | | Total Assets | $20,259,178 | $17,968,454 | | Total Current Liabilities | $9,123,408 | $7,827,109 | | Trade Accounts Payable | $6,100,534 | $5,499,536 | | Long-term Debt | $3,806,950 | $3,550,930 | | Total Liabilities | $15,549,024 | $13,551,469 | | Total Equity | $4,710,154 | $4,416,985 | Condensed Consolidated Statements of Income Nine-month net sales slightly increased to $17.72 billion, but net income decreased to $771.0 million due to higher operating expenses and restructuring costs Income Statement Summary (in thousands, except per share data) | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net Sales | $17,716,396 | $17,504,726 | | Gross Profit | $6,453,399 | $6,257,385 | | Total Operating Expenses | $5,413,464 | $4,929,022 | | Restructuring and other costs | $153,825 | $0 | | Income Before Income Taxes | $1,008,975 | $1,323,555 | | Net Income | $771,020 | $999,649 | | Diluted EPS | $5.51 | $7.08 | Condensed Consolidated Statements of Cash Flows Operating cash flow remained stable at $1.10 billion, while investing activities used $1.25 billion due to acquisitions, and financing activities provided $124.8 million Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $1,096,225 | $1,082,446 | | Net Cash Used in Investing Activities | ($1,245,192) | ($473,429) | | Acquisitions of businesses | ($954,207) | ($218,177) | | Net Cash Provided by (Used in) Financing Activities | $124,828 | ($599,019) | | Net (Decrease) Increase in Cash | ($23,889) | $1,174 | | Cash and Cash Equivalents at End of Period | $1,078,118 | $654,637 | Notes to Condensed Consolidated Financial Statements Key notes detail $1.1 billion in acquisitions, a $200 million global restructuring program, planned U.S. pension termination, and $3.3 billion in supply chain finance obligations - The company acquired various businesses for approximately $1.1 billion in the first nine months of 2024, including two of the largest independent NAPA Auto Parts store owners, MPEC and Walker, resulting in goodwill of $270 million4243 - A global restructuring initiative was initiated in February 2024, incurring $161 million in costs for the nine months ended Sep 30, 2024, with total expected costs up to $200 million and substantial completion by the end of 20254950 - The Board approved the termination of the frozen U.S. qualified defined benefit pension plan, effective September 30, 2024, with a non-cash, pre-tax settlement charge of approximately $620 million expected upon settlement in late 2025 or early 202640 - The company utilizes voluntary Supply Chain Finance (SCF) programs, with outstanding payment obligations to financial institutions under these programs totaling $3.3 billion as of September 30, 202429 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q3 2024 results, noting a 2.5% sales increase driven by acquisitions, a 35.5% net income decline, and a strong $2.6 billion liquidity position Results of Operations Q3 2024 net sales increased 2.5% to $6.0 billion, but net income declined 35.5% to $227 million due to higher expenses and restructuring costs Q3 2024 vs Q3 2023 Performance (in thousands) | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $5,970,198 | $5,824,602 | 2.5% | | Gross Profit | $2,198,441 | $2,109,241 | 4.2% | | Net Income | $226,582 | $351,198 | (35.5)% | | Diluted EPS | $1.62 | $2.49 | (34.9)% | - Key drivers for the 35.5% decline in Q3 net income include fixed cost deleveraging from lower comparable sales and increased costs related to personnel, rent, acquisitions, technology investments, depreciation, restructuring, and interest expense56 Segment Performance Q3 2024 Automotive sales grew 4.8% to $3.8 billion but profit fell 18.6%, while Industrial sales decreased 1.2% to $2.2 billion with an 8.5% profit decline Q3 2024 Segment Performance (in thousands) | Segment | Net Sales | % Change from Q3 2023 | Segment Profit | % Change from Q3 2023 | | :--- | :--- | :--- | :--- | :--- | | Automotive | $3,799,789 | 4.8% | $262,195 | (18.6)% | | Industrial | $2,170,409 | (1.2)% | $258,753 | (8.5)% | - Automotive segment profit margin decreased from 8.9% to 6.9% in Q3, while Industrial segment profit margin decreased from 12.9% to 11.9%, both impacted by inflation in personnel and rent costs6970 Non-GAAP Financial Measures Non-GAAP measures show Q3 2024 adjusted net income of $263.0 million and adjusted EBITDA of $476.7 million, reflecting core operational performance Reconciliation of GAAP Net Income to Adjusted Net Income (Q3 2024, in thousands) | Description | Amount | | :--- | :--- | | GAAP Net Income | $226,582 | | Restructuring and other costs | $41,023 | | Acquisition and integration related costs | $4,273 | | Tax impact of adjustments | ($8,865) | | Adjusted Net Income | $263,013 | Reconciliation of GAAP Net Income to Adjusted EBITDA (Q3 2024, in thousands) | Description | Amount | | :--- | :--- | | GAAP Net Income | $226,582 | | Depreciation and amortization | $106,036 | | Interest expense, net | $27,818 | | Income taxes | $71,011 | | Total adjustments (restructuring, etc.) | $45,296 | | Adjusted EBITDA | $476,743 | Financial Condition, Liquidity and Capital Resources The company maintains a strong $2.6 billion liquidity position, issued $750 million in senior notes, and increased its annual dividend to $4.00 per share - Total liquidity as of September 30, 2024, was $2.6 billion, comprising $1.1 billion in cash and $1.5 billion available under the revolving credit facility86 - Issued $750 million of 4.95% Senior Notes due 2029 in August 2024 to repay other debt and for general corporate purposes86 - The company announced a 5.3% dividend increase in 2024 to an annual rate of $4.00 per share, marking the 68th consecutive year of increased dividends86 Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk exposure since December 31, 2023 - There have been no material changes in the company's market risk exposure since December 31, 202387 Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the reporting period88 - No material changes to the company's internal control over financial reporting occurred during the quarter ended September 30, 202489 PART II Legal Proceedings The company faces 2,617 pending product liability lawsuits, with $235 million accrued for claims as of September 30, 2024 - The company faces approximately 2,617 pending product liability lawsuits4791 - An amount of $235 million was accrued for pending and future product liability claims as of September 30, 202447 Risk Factors The company refers to its 2023 Annual Report on Form 10-K for a comprehensive discussion of risk factors - The company refers to its 2023 Annual Report on Form 10-K for a comprehensive discussion of risk factors92 Unregistered Sales of Equity Securities and Use of Proceeds In Q3 2024, the company repurchased 271,707 shares at an average of $139.12 per share, with 7.8 million shares remaining for repurchase Issuer Purchases of Equity Securities (Q3 2024) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2024 | 102,784 | $138.64 | | August 2024 | 119,661 | $140.39 | | September 2024 | 49,262 | $137.02 | | Total | 271,707 | $139.12 | - Approximately 7.8 million shares remain available for repurchase under the board-authorized plan as of September 30, 202493 Other Information No directors or executive officers adopted, modified, or terminated Rule 10b5-1 trading plans during Q3 2024 - No directors or executive officers adopted, modified, or terminated a Rule 10b5-1 trading plan during Q3 202494 Exhibits This section lists filed exhibits, including CEO/CFO certifications and XBRL data files - Filed exhibits include CEO/CFO certifications and XBRL interactive data files95