Genuine Parts (GPC)

Q4 2010 Earnings Call

February 22, 2011 11:00 am ET

Executives

Jerry Nix - Vice Chairman, Chief Financial Officer, Principal Accounting Officer and Executive Vice President of Finance

Carol Yancey - Senior Vice President of Finance and Corporate Secretary

Thomas Gallagher - Chairman of the Board, Chief Executive Officer, President and Member of Executive Committee

Analysts

Michael Montani - ISI Group Inc.

Matthew Fassler - Goldman Sachs Group Inc.

Elizabeth Lane - BofA Merrill Lynch

Scot Ciccarelli - RBC Capital Markets, LLC

Presentation

Operator

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Good morning, my name is Christa, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Genuine Parts Company Fourth Quarter 2010 Results Conference Call. [Operator Instructions] I would now like to turn the call over to Ms. Carol Yancey, Senior Vice President of Finance. Ms. Yancey, you may begin the conference.

Carol Yancey

Thank you. Good morning, and thank you for joining us today for the Genuine Parts Fourth Quarter Conference Call to discuss our earnings results and the outlook for 2011.

Before we begin this morning, please be advised that this call may involve forward-looking statements, such as projections of revenue, earnings, capital structure or other financial items, statements on the plans and objectives of the company and its management, statements of future economic performance and assumptions underlying those statements regarding the company and its businesses. The company's actual results could differ materially from any forward-looking statements due to several important factors described in the company's latest SEC filings. The company assumes no obligation to update any forward-looking statements made during this call.

We will begin this morning with comments from Tom Gallagher, our Chairman, President and CEO. Tom?

Thomas Gallagher

Thank you, Carol. And I would like to add my welcome to each of you on the call today and to say that we appreciate you taking the time to be with us this morning. As we customarily do, Jerry Nix, our Vice Chairman and Chief Financial Officer, and I, will split the duties on this call. And once we have concluded our remarks, we will look forward to answering any questions that you may have.

Earlier this morning, we released our fourth quarter and year end 2010 results and hopefully, you've had an enough opportunity to review them. But for those who may not have seen the numbers as yet, a quick recap shows that sales for the quarter were $2,808,000,000, which was up 14%. Net income was $118.7 million, which was up 20%, and earnings per share was $0.75 this year compared to $0.62 in the fourth quarter of 2010 and EPS increase was 21%.

For the full year, sales were $11,208,000,000, which was up 11%. Net income was $475.5 million, which was up 19%, and earnings per share were $3 per share compared to $2.50 last year, and that's an EPS increase of 20%. So we feel that 2010 turned out to be a good year for us, and we were pleased with the way that the year developed sequentially. On the revenue side, we were up 6% in the first quarter, followed by a 12% increase in the second quarter, 13% in Q3 and 14% in Q4. On the EPS side, we're up 13% in the first quarter, 20% in the second, 24% in the third, and 21% in the fourth. So a fairly steady and consistent picture all year long. And looking at the revenue results by business segment, as has been the case all year, our two industrial-related businesses, Motion Industries and EIS, generated the strongest increases for us. Motion was up 24% in the quarter and EIS was up 40%. Acquisitions completed during 2010 helped augment the numbers in each case, but the underlying business remains strong. Motion was plus 18% without acquisition impact and EIS was plus 17%, and both of these show the good progress being made in growing the core business. For the full year, Motion was up 22% and EIS was up 30%, and organic growth or growth without acquisitions for both motion and EIS, was plus 16%. And looking a bit deeper into the Motion results for the full year, it's interesting to note that we had double-digit increases in every one of our top 12 product categories. Additionally, our top 10 industry groups were up 20% in total with automotive, equipment and machinery and iron and steel having the biggest increases, and then the construction-related industries having the smallest increases. And then our top 25 customers were up 25% as a group. So the good results were broad-based from a product, customer and geographic perspective as well, and we were pleased with the overall sales strength and the balance in our industrial business.

And the comments on the Electrical business are very much the same. Our top 25 customers were up 20% in total for the year, and this drove a similar increase for us with our top 20 suppliers. Additionally, we saw a consistent results across our product categories and geographically as well. So both Motion and EIS turned in strong and well-balanced performances for us, and based upon the encouraging external indices like industrial production, manufacture capacity utilization and the ISM Purchasing Managers Index combined with the solid internal growth initiatives, we look for continued good results from each of these businesses in the quarters ahead.

Now before leaving the industrial-related businesses, we do want to mention that Motion did complete two smaller complementary type acquisitions as of January 31 of this year: Dayton Supply & Tool Company as a distributor of industrial supplies with three locations in Ohio, and D.P. Brown as a bearing, belting, and power transmission distributor with three locations in Michigan and one in Ohio. Both of these companies fit nicely into Motion's existing business platform and combined revenues are just over $60 million per year.

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