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Genuine Parts Company Reports Operating Results (10-Q)

May 07, 2012 | About:
10qk

10qk

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Genuine Parts Company (GPC) filed Quarterly Report for the period ended 2012-03-31.

Genuine Parts has a market cap of $10.07 billion; its shares were traded at around $65.04 with a P/E ratio of 17.4 and P/S ratio of 0.8. The dividend yield of Genuine Parts stocks is 3.1%. Genuine Parts had an annual average earning growth of 5.4% over the past 10 years. GuruFocus rated Genuine Parts the business predictability rank of 4-star.

Highlight of Business Operations:

Sales for the Automotive Parts Group increased 6% in the three month period ended March 31, 2012, as compared to the same period in the previous year. The increase in this groups revenues was primarily due to higher sales volume with both retail and commercial customers. This was partially offset by slight pricing deflation and unfavorable foreign exchange rates associated with our Canadian and Mexican businesses. These two factors negatively impacted sales in the first quarter of 2012 by less than 1%. We expect sales in the Automotive Parts Group to continue to increase as the economy continues to improve and we continue to successfully implement our business initiatives. The Industrial Products Groups sales increased by 12% for the three month period ended March 31, 2012, as compared to the same period in 2011. Approximately 11% of this increase was due to increased volumes and acquisitions contributed the remaining 1% for this period. Price inflation was not a material factor to sales in the first quarter of 2012. Industrial market indices, such as Industrial Production and Capacity Utilization, trended positively over the three months ended March 31, 2012, indicating ongoing improvement in the manufacturing sector of the economy served by the Industrial Parts Group. As a result, we expect sales in our Industrial Products Group will continue to grow. Sales for the Office Products Group decreased by approximately 2% for the three month period ended March 31, 2012, as compared to the same period in 2011. Sales volume for this group declined by approximately 4% in the first quarter of 2012 and this was partially offset by price inflation of approximately 2%. The overall office products industry continues to experience soft market conditions, and we expect sales to remain flat or improve slightly as a result. Sales for the Electrical/Electronic Materials Group increased 5% for the three month period ended March 31, 2012, as compared to the same period of the previous year. Sales volume was down by approximately 2% in the first quarter and price deflation, including the impact of copper pricing decreased sales by approximately 3% for the three month period ended March 31, 2012, as compared to the same period of the previous year. Acquisitions contributed approximately 10% to sales for the first quarter 2012 as compared to the same period of the prior year. We expect continued growth for this group over the remainder of the year.

Cost of goods sold for the first quarter of 2012 was $2.26 billion, a 6% increase from $2.13 billion for the first quarter of 2011. The increase in cost of goods sold for the first quarter was primarily related to the sales increase for the same period. As a percentage of net sales, cost of goods sold represented 71.1% of net sales for the three month period ended March 31, 2012, as compared to 71.5% for the same period of the prior year. Our cost of sales includes the total cost of merchandise sold, including freight expenses associated with moving merchandise from our vendors to our distribution centers and retail stores, vendor income and inventory adjustments. Gross profit as a percentage of net sales may fluctuate based on (i) changes in merchandise costs and related vendor income, (ii) variations in product and customer mix, (iii) price changes in response to competitive pressures and (iv) physical inventory adjustments.

Total operating expenses of $690.9 million decreased to 21.7% of net sales for the first quarter of 2012, as compared to $656.8 million, or 22.1% for the same period of the prior year. The decrease in operating expenses as a percentage of net sales for the first quarter ended March 31, 2012 is due to approximately $10 million in cost savings initiatives recognized in the period as well as the benefit of greater expense leverage associated with our 7% sales growth for the three month period ended March 31, 2012. Our operating expenses are substantially comprised of compensation and benefit costs for the Companys personnel. Other major expense categories include facility occupancy costs for headquarters, distribution center and store operations, insurance costs, accounting, legal and professional services, transportation and delivery costs, travel and advertising. Managements ongoing cost control measures in these areas have served to improve the Companys cost structure.

The Automotive Parts Groups operating profit increased 17% in the first quarter of 2012 and its operating profit margin increased to 7.7% for the three months ended March 31, 2012, as compared to 7.0% in the same period of the prior year. For the three month period ended March 31, 2012, operating profit margin for this group improved due to cost savings and improved expense leverage on increased revenues. The Industrial Products Group had a 28% increase in operating profit in the first quarter of 2012 compared to the first quarter of 2011, and the operating profit margin for this group in the first quarter of 2012 increased to 7.5% as compared to 6.6% in the same period of the previous year. The improved operating profit margin for this group is due to the combination of increased volume incentives, cost savings and greater expense leverage on sales growth. For the three month period ended March 31, 2012, the Office Products Groups operating profit remained unchanged as compared to the same period of the prior year. The Office Products Groups operating profit margin increased to 8.8% for the three month period ended March 31, 2012, as compared to 8.6% in the same three month period ended March 31, 2011. The increase in operating profit margin for this group relates to the positive impact of 2% price inflation and ongoing initiatives to reduce costs. The Electrical/Electronic Materials Group increased its operating profit by 19% in the first quarter, and its operating profit margin increased to 8.1% as compared to 7.2% in the first quarter of the previous year. The improvement in operating profit and operating profit margin for this group is primarily due to the positive margin impact of decreases in copper pricing as well as cost savings for the three month period ended March 31, 2012.

Accounts receivable increased $144.5 million or 10% from December 31, 2011, which is due to the Companys overall sales increase. Inventory was in-line with the inventory balance at December 31, 2011. Goodwill and other intangible assets increased $13.1 million or 5% from December 31, 2011, in association with one acquisition in the three month period ended March 31, 2012. Other assets increased $181.8 million or 67% compared to December 31, 2011, which primarily reflects the Companys 30% investment in the Exego Group for approximately $164.6 million. Accounts payable increased $119.1 million or 8% from December 31, 2011. This change is primarily due to more favorable payment terms and other payables initiatives negotiated with our vendors in the three months ended March 31, 2012. The Companys debt is discussed below.

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10qk
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