1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2001 Commission File Number 1-5690 -------------- ------ GENUINE PARTS COMPANY --------------------- (Exact name of registrant as specified in its charter) GEORGIA 58-0254510 ------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2999 CIRCLE 75 PARKWAY, ATLANTA, GEORGIA 30339 - ---------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (770) 953-1700 -------------- Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date (the close of the period covered by this report). 172,009,081 ----------- (Shares of Common Stock) ================================================================================
2 PART 1 - FINANCIAL INFORMATION FORM 10-Q Item 1 - Financial Statements GENUINE PARTS COMPANY and SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> Mar. 31, Dec. 31, 2001 2000 ------------ ------------ (Unaudited) (in thousands) <S> <C> <C> ASSETS CURRENT ASSETS Cash and cash equivalents ...................................................... $ 49,186 $ 27,738 Trade accounts receivable, less allowance for doubtful accounts (2001 - $11,761; 2000 - $7,370) .......................... 1,094,723 1,031,662 Inventories - at lower of cost (substantially last-in, first-out method) or market .................................................... 1,865,894 1,864,334 Prepaid expenses and other accounts ............................................ 71,219 95,747 ------------ ------------ TOTAL CURRENT ASSETS .................................................. 3,081,022 3,019,481 Goodwill, less accumulated amortization (2001 - $38,081; 2000 - $37,680) ....... 444,955 451,435 Other assets ................................................................... 284,375 275,938 Total property, plant and equipment, less allowance for depreciation (2001 - $438,603; 2000 - $436,942) ............................ 380,327 395,260 ------------ ------------ TOTAL ASSETS ................................................................... $ 4,190,679 $ 4,142,114 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable ............................................................... $ 603,420 $ 635,499 Current portion of long-term debt and other borrowings ......................... 166,936 151,452 Income taxes payable ........................................................... 58,263 37,043 Dividends payable .............................................................. 49,082 47,494 Other current liabilities ...................................................... 95,075 116,825 ------------ ------------ TOTAL CURRENT LIABILITIES ............................................. 972,776 988,313 Long-term debt ................................................................. 822,606 770,581 Deferred income taxes .......................................................... 77,814 77,814 Minority interests in subsidiaries ............................................. 45,074 44,600 SHAREHOLDERS' EQUITY Stated capital: Preferred Stock, par value - $1 per share Authorized - 10,000,000 shares - None Issued ............................ -0- -0- Common Stock, par value - $1 per share Authorized - 450,000,000 shares Issued - 2001 - 172,009,081; 2000 - 172,389,688 ......................... 172,009 172,390 Accumulated other comprehensive income ......................................... (31,468) (13,041) Retained earnings .............................................................. 2,131,868 2,101,457 ------------ ------------ TOTAL SHAREHOLDERS' EQUITY ............................................ 2,272,409 2,260,806 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..................................... $ 4,190,679 $ 4,142,114 ============ ============ </TABLE> See notes to condensed consolidated financial statements. 2
3 FORM 10-Q GENUINE PARTS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) <TABLE> <CAPTION> Three Months Ended March 31, ---------------------------- 2001 2000 ---------- ---------- (000 omitted except per share data) <S> <C> <C> Net sales ...................................................................... $2,054,972 $2,070,992 Cost of goods sold ............................................................. 1,431,813 1,450,940 ---------- ---------- 623,159 620,052 Selling, administrative & other expenses ....................................... 474,370 467,323 ---------- ---------- Income before income taxes ..................................................... 148,789 152,729 Income taxes ................................................................... 59,516 61,000 ---------- ---------- NET INCOME ..................................................................... $ 89,273 $ 91,729 ========== ========== Basic and diluted net income per common share .................................. $ .52 $ .52 ========== ========== Dividends declared per common share ............................................ $ .285 $ .275 ========== ========== Average common shares outstanding .............................................. 172,087 176,774 Dilutive effect of stock options and non-vested restricted stock awards ........ 739 300 ---------- ---------- Average common shares outstanding - assuming dilution .......................... 172,826 177,074 ========== ========== </TABLE> 3
4 FORM 10-Q GENUINE PARTS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) <TABLE> <CAPTION> Three Months Ended Mar. 31, ---------------------------- (000 omitted) 2001 2000 ---------- ---------- <S> <C> <C> OPERATING ACTIVITIES: Net income ............................................................................ $ 89,273 $ 91,729 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ....................................................... 23,038 23,824 Other ............................................................................... 4,251 2,424 Changes in operating assets and liabilities ......................................... (88,971) (22,923) ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES ................................................ 27,591 95,054 INVESTING ACTIVITIES: Purchase of property, plant and equipment ............................................. (12,114) (19,897) Acquisitions of businesses and other investing activities ............................. (2,168) (29,484) ---------- ---------- NET CASH USED IN INVESTING ACTIVITIES .................................................... (14,282) (49,381) FINANCING ACTIVITIES: Proceeds from credit facilities, net of payments ...................................... 67,509 56,866 Stock options exercised ............................................................... 114 -- Dividends paid ........................................................................ (47,407) (45,489) Purchase of stock ..................................................................... (12,077) (22,326) ---------- ---------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ...................................... 8,139 (10,949) ---------- ---------- NET INCREASE IN CASH AND CASH EQUIVALENTS ................................................ 21,448 34,724 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ......................................... 27,738 45,735 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................................... $ 49,186 $ 80,459 ========== ========== </TABLE> See notes to condensed consolidated financial statements. 4
5 FORM 10-Q NOTES TO FINANCIAL STATEMENTS Note A - Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the Annual Report on Form 10-K of Genuine Parts Company for the year ended December 31, 2000. Accordingly, the quarterly financial statements and related disclosures should be read in conjunction with the 2000 Annual Report on Form 10-K. The preparation of interim financial statements requires management to make estimates and assumptions for the amounts reported in the condensed consolidated financial statements. Specifically, the Company makes estimates in its interim financial statements for certain inventory adjustments and volume rebates earned. Volume rebates are estimated based upon cumulative and projected purchasing levels. Inventory adjustments are estimated on an interim basis and adjusted in the fourth quarter to reflect year-end valuation and book to physical results. The estimates for interim reporting may change upon final determination at year-end, and such changes may be significant. In the opinion of management, all adjustments necessary to a fair statement of the operations of the interim period have been made. These adjustments are of a normal recurring nature. The results of operations for the three months ended March 31, 2001 are not necessarily indicative of results for the entire year. Note B - Segment Information <TABLE> <CAPTION> THREE MONTH PERIOD ENDED MARCH 31 2001 2000 ------------ ------------ (In thousands) <S> <C> <C> Net sales: Automotive $ 982,824 $ 1,005,310 Industrial 583,929 594,348 Office products 370,719 337,584 Electrical/electronic materials 124,685 140,762 Other (7,185) (7,012) ------------ ------------ Total net sales $ 2,054,972 $ 2,070,992 ============ ============ Operating profit: Automotive $ 81,967 $ 84,991 Industrial 45,222 49,814 Office products 43,632 38,073 Electrical/electronic materials 5,205 6,333 ------------ ------------ Total operating profit 176,026 179,211 Interest expense (15,685) (15,160) Other, net (11,552) (11,322) ------------ ------------ Income before income taxes $ 148,789 $ 152,729 ============ ============ </TABLE> In connection with a 2000 management reporting change, certain corporate expenses were reclassified to the Automotive segment for 2000. Additionally, for management purposes, net sales by segment excludes the effect of certain discounts, incentives and freight billed to customers. The line item "other" represents the net effect of the discounts, incentives and freight billed to customers which are reported as a component of net sales in the Company's consolidated statements of income. 5
6 FORM 10-Q Note C - Comprehensive Income Total comprehensive income was $70,846,000 and $88,200,000 for the three month periods ended March 31, 2001 and 2000, respectively. The difference between total comprehensive income and net income was due to foreign currency translation adjustments and adjustments to the fair value of derivative instruments resulting from the adoption of SFAS 133 (See Note D - New Accounting Pronouncements), as detailed below: <TABLE> <CAPTION> For the Three Months Ended March 31, 2001 2000 (000's) ---------- ---------- <S> <C> <C> Net Income $ 89,273 $ 91,729 Foreign currency translation, net of taxes (6,828) (3,529) Unrealized loss on derivative instruments, net of taxes (11,599) -- ---------- ---------- Total other comprehensive loss (18,427) (3,529) ---------- ---------- Comprehensive income $ 70,846 $ 88,200 ========== ========== </TABLE> Note D - New Accounting Pronouncements The Company enters into interest rate swap agreements to manage interest rate risk, thereby reducing exposure to future interest rate movements. Under interest rate swap agreements, the parties agree to exchange, at specific intervals, the difference between the fixed rate and floating rate interest amounts calculated by reference to an agreed notional amount. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities". This statement requires the fair value of derivatives to be recorded as assets or liabilities. Gains or losses resulting from changes in the fair values of derivatives would be accounted for currently in earnings or comprehensive income depending on the purpose of the derivatives and whether they qualify for hedge accounting treatment. The Company adopted SFAS 133 on January 1, 2001. The adoption resulted in a $6,226,000 charge to other comprehensive income, net of tax, from a cumulative effect of a change in accounting principle, and a corresponding decrease in shareholders' equity in the Company's financial statements as of January 1, 2001. This adoption had no significant effect on net income. The fair value of the liability for all such interest rate swap agreements was approximately $9,579,000 on January 1, 2001 and $19,330,000 at March 31, 2001. In 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements", ("SAB 101"). SAB 101, which was required to be adopted in the fourth quarter of 2000, had no impact on the Company's revenue recognition policies. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Sales for the quarter were $2.0 billion, down 1% over the same period in 2000. Net income in the quarter was down 2.7% to $89.3 million. On a per-share diluted basis, net income in the quarter was 52(cent), even with the same quarter of the prior year. Sales for the Automotive Parts Group decreased 2% for the quarter. The sales decrease is attributed to a weakening of the economy. Sales for the Industrial Parts Group decreased 2% for the quarter reflecting reduced production in the industrial sector. The Office Products Group was up 10% for the quarter reflecting increased product offerings, new marketing programs and an expanded customer base. Sales for EIS, the Electrical/Electronic Materials Group, decreased 11% for the quarter due to a reduction in the manufacture of electrical products. Cost of goods sold stayed consistent as a percentage of sales and decreased 1% in total in line with the sales decrease. Selling, administrative and other expenses increased 2% for the quarter and the percentage of selling, administrative and other expenses to net sales increased slightly, reflecting higher operating costs including salaries and freight expenses. The Company is currently a party to several interest rate swap agreements. The change in the fair value of these agreements in the first quarter of 2001 was $9.75 million. The ratio of current assets to current liabilities is 3.2 to 1 and the Company's cash position is good. 6
7 FORM 10-Q Forward-Looking Statements: The Private Securities Litigation Reform Act of 1995 (the Act) provides a safe harbor for forward-looking statements made by or on behalf of the Company. The Company and its representatives may from time to time make written or verbal forward-looking statements, including statements contained in our Company's filings with the Securities and Exchange Commission and in our reports to shareholders. All statements which address operating performance, events or developments that we expect or anticipate will occur in the future, including statements relating to revenue, market share and net income growth, or statements expressing general optimism about future operating results, are forward-looking statements within the meaning of the Act. The forward-looking statements are and will be based on management's then current views and assumptions regarding future events and operating performance. There are many factors which could cause actual results to differ materially from those anticipated by statements made herein. Such factors include, but are not limited to, changes in general economic conditions, the growth rate of the market for the Company's products and services, the ability to maintain favorable supplier arrangements and relationships, competitive product and pricing pressures, the effectiveness of the Company's promotional, marketing and advertising programs, changes in laws and regulations, including changes in accounting and taxation guidance, the uncertainties of litigation, as well as other risks and uncertainties discussed from time to time in the Company's filings with the Securities and Exchange Commission. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits are filed as part of this report: Exhibit 3.1 Restated Articles of Incorporation of the Company (incorporated herein by reference from the Company's Annual Report on Form 10-K, dated March 3, 1995). Exhibit 3.2 Bylaws of the Company, as amended (incorporated herein by reference from the Company's Annual Report on Form 10-K, dated March 12, 2001). (b) No reports on Form 8-K were filed by the registrant during the quarter ended March 31, 2001. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Genuine Parts Company --------------------------------------------- (Registrant) Date April 30, 2001 /s/ Jerry Nix -------------- --------------------------------------------- Jerry W. Nix Executive Vice President - Finance (Principal Financial and Accounting Officer) 7