Genuine Parts (GPC)

Q4 2011 Earnings Call

February 21, 2012 11:00 am ET

Executives

Carol B. Yancey - Senior Vice President of Finance and Corporate Secretary

Thomas Gallagher - Chairman and Member of Executive Committee

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

Analysts

Christopher Horvers - JP Morgan Chase & Co, Research Division

John Murphy - BofA Merrill Lynch, Research Division

Gregory S. Melich - ISI Group Inc., Research Division

Scot Ciccarelli - RBC Capital Markets, LLC, Research Division

Ryan Brinkman - Goldman Sachs Group Inc., Research Division

Mario Joseph Gabelli - GAMCO Investors, Inc.

Anthony F. Cristello - BB&T Capital Markets, Research Division

Richard J. Hilgert - Morningstar Inc., Research Division

Presentation

Operator

Good morning. My name is Jodie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Genuine Parts Company Fourth Quarter and Year-end Earnings Release Conference Call. [Operator Instructions] I would now like to turn the conference over to Ms. Carol Yancey, Senior Vice President of Finance. Please go ahead.

Carol B. 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 2012.

Before we begin this morning, please be advised that this call may involve forward-looking 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 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 normally do, Jerry Nix, our Vice Chairman and Chief Financial Officer and I will share the duties today. And once we've concluded our planned comments, we will look forward to answering any questions that you may have. And we're pleased to tell you that we look forward to having Paul Donahue, GPC's recently-elected President joining us on our April conference call.

Now earlier this morning, we released our fourth quarter and year-end 2011 results, and hopefully, you've had an 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 $3,014,000,000, which was up 7%. Net income was $135 million, which was up 14%, and earnings per share were $0.86 this year compared to $0.75 in the fourth quarter of 2010, and the EPS increase was 15%. And this enabled us to end 2011 with sales of $12,459,000,000, which was up 11%. Net income was $565.1 million, which was up 19%, and earnings per share were $3.58 this year compared to $3 last year, and that's an EPS increase of 19%.

Now we did see some moderation on our fourth quarter revenue growth and our 7% increase in the quarter was our lowest for the year. However, it is in line with the guidance that we provided at the end of Q3, and it is also on top of a 14% increase in the fourth quarter of 2010, which was our strongest quarterly performance of 2010. It's important to say that we continue to feel good about the progress that we're making on the revenue side.

And then we were pleased to be up 15% in earnings per share in the quarter, especially on top of a 21% EPS increase in the fourth quarter of 2010. These are solid results in our opinion and as the full year -- as are the full year increases and our 2011 results follow a very similar performance in 2010 when sales were up 11%, net income was up 19% and earnings per share were up 20%. So back-to-back good years from our perspective, and we entered 2012 with some positive momentum.

A review of the revenue results by business segment shows that our industrial-related businesses continue to produce the strongest performances. Motion Industries, our industrial distribution group, and EIS, our Electrical/Electronic business, were up 13% and 10%, respectively, in the quarter, and they were up 19% and 24%, respectively, for the year. In Motion's case, the 19% increase for the year follows a 22% increase in 2010.

Acquisitions added 2% to the quarterly increase and 3% to the year-to-date results, so you can see that the underlying industrial business remains solid. And as has been the case for some time now, these strong results are widespread across the business as evidenced by the fact that every geographic area was up double digits for the year.

Additionally, our top 10 product categories had double-digit increases. Our top 10 industry segments were up strong double digits as a group, and our top 20 customers were up over 20% on a combined basis. So the good results were broad-based, and they were quite consistent from a product, customer, industry segment and geographic perspective, and we're pleased with the overall sales strength and the balance that we see in our industrial business.

Moving onto the Electrical/Electronic segment, at plus 24% for the year, they obviously turned in another strong sales performance. Acquisitions added 7% to the quarterly increase and 11% for the year. And similar to the industrial operations, EIS enjoyed strong results in a number of different areas as evidenced by the fact that their top 25 customers were up over 20% for the year, and they were up 19% with their top 20 vendors.

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