Genuine Parts Company announced recently its results for the fourth quarter and 12 months ended Dec. 31, 2020.
“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 CEO of Genuine Parts Company.
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 year.
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 12 months ended Dec. 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 12 months. Net income from continuing operations was $163.4 million and diluted earnings per share were $1.13 for the 12 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 CFO. “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,” 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.”