<PAGE> 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 June 30, 1998 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).
178,688,612
-----------
(Shares of Common Stock)
================================================================================
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
GENUINE PARTS COMPANY and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS June 30, Dec. 31,
1998 1997
---------- ----------
(Unaudited)
(in thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................................. $ 64,840 $ 72,823
Trade accounts receivable, net of allowance for doubtful accounts......... 781,848 686,551
Inventories - at lower of cost (substantially last-in,
first-out method) or market............................................... 1,331,442 1,321,597
Prepaid and other current accounts........................................ 30,267 12,580
---------- ----------
TOTAL CURRENT ASSETS............................................. 2,208,397 2,093,551
Investments and other assets.............................................. 289,357 288,298
Total property, plant and equipment, less allowance
for depreciation (1998 - $276,681; 1997 - $251,929)....................... 375,278 372,514
---------- ----------
$2,873,032 $2,754,363
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ......................................................... $ 457,906 $ 405,141
Revolving line of credit.................................................. 20,000 36,000
Income taxes.............................................................. 23,082 14,372
Dividends payable......................................................... 44,717 43,436
Other current liabilities................................................. 55,105 57,989
---------- ----------
TOTAL CURRENT LIABILITIES........................................ 600,810 556,938
Long-term debt............................................................ 209,428 209,490
Deferred income taxes..................................................... 89,049 89,049
Minority interests in subsidiaries........................................ 50,374 39,418
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 - 1998 - 178,688,612; 1997 - 178,947,976.................... 178,689 178,948
Retained earnings......................................................... 1,744,682 1,680,520
---------- ----------
TOTAL SHAREHOLDERS' EQUITY....................................... 1,923,371 1,859,468
---------- ----------
$2,873,032 $2,754,363
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 3
GENUINE PARTS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ ------------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(000 omitted except per share data)
<S> <C> <C> <C> <C>
Net sales....................................... $1,619,383 $1,510,456 $3,152,521 $2,968,102
Cost of goods sold.............................. 1,141,980 1,065,336 2,228,382 2,093,715
---------- ---------- ---------- ----------
477,403 445,120 924,139 874,387
Selling, administrative & other expenses........ 335,446 306,705 649,954 609,410
---------- ---------- ---------- ----------
Income before income taxes...................... 141,957 138,415 274,185 264,977
Income taxes.................................... 56,073 54,674 108,303 104,641
---------- ---------- ---------- ----------
NET INCOME...................................... $ 85,884 $ 83,741 $ 165,882 $ 160,336
========== ========== ========== ==========
Basic net income per common share............... $ .48 $ .47 $ .93 $ .89
========== ========== ========== ==========
Diluted net income per common share............. $ .48 $ .46 $ .92 $ .89
========== ========== ========== ==========
Dividends declared per common share............. $ .25 $ .24 $ .50 $ .48
========== ========== ========== ==========
Average common shares outstanding............... 178,859 180,018 178,840 179,980
Dilutive effect of stock options and
non-vested restricted stock awards........... 588 734 624 724
---------- ---------- ---------- ----------
Average common shares outstanding,
assuming dilution............................ 179,447 180,752 179,464 180,704
========== ========== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
GENUINE PARTS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------
(000 omitted)
Cash Provided By:
1998 1997
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................................................ $ 165,882 $ 160,336
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation........................................................................ 31,618 29,014
Other............................................................................... 2,859 2,967
Changes in operating assets and liabilities:
Trade accounts receivable......................................................... (95,297) (68,802)
Merchandise inventories........................................................... (9,845) 1,164
Trade accounts payable............................................................ 52,765 235
Income taxes payable.............................................................. 8,710 371
Other operating assets and liabilities............................................ (20,571) (24,768)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES................................................ 136,121 100,517
INVESTING ACTIVITIES:
Purchase of property, plant and equipment............................................. (40,124) (47,127)
Other investing activities............................................................ 4,683 4,531
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES.................................................... (35,441) (42,596)
FINANCING ACTIVITIES:
Proceeds from revolving line of credit, net........................................... (16,000) 38,000
Dividends paid........................................................................ (88,156) (83,450)
Purchase of stock..................................................................... (20,756) (12,693)
Other financing activities............................................................ 16,249 7,930
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES.................................................... (108,663) (50,213)
--------- --------
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS..................................... (7,983) 7,708
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD......................................... 72,823 67,373
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................................... $ 64,840 $ 75,081
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
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. However, 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 six months ended June 30, 1998, are not
necessarily indicative of results for the entire year. Comprehensive income is
not materially different from net income.
Note B - Subsequent Event
On July 1, 1998, the Company completed the acquisition of EIS, Inc. ("EIS").
Genuine Parts acquired EIS in exchange for a combination of cash and Genuine
Parts Company common stock totaling approximately $200 million. EIS, founded in
1950 in Atlanta, Georgia, is a leading wholesale distributor of materials and
supplies to the electrical and electronic industries.
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Genuine Parts Company (the "Company") reported record sales and earnings in the
second quarter of 1998. Sales for the quarter were $1.6 billion, up 7% over the
same period in 1997. Net income in the quarter advanced 3% to $86 million. On a
per-share diluted basis, net income in the quarter was $.48 versus $.46 in the
same quarter of the prior year, an increase of 4%.
For the six months ended June 30, 1998, sales totaled $3.15 billion, up 6% over
the first half of 1997, while net income was $166 million, an increase of 3%.
Diluted earnings per share were $.92 for the first six months of 1998 and $.89
for the same period in 1997, an increase of 3%.
Sales for the Automotive Parts Group advanced 7% for the quarter and 4% for the
first six months, reflecting positive sales improvement in the automotive
aftermarket. Sales for the Industrial Parts Group increased 11% for the quarter
and for the six months ended June 30, 1998, reflecting excellent service and
programs and continued geographic expansion. The Office Products Group was up
2.4% for the quarter and 3% for the six month period, reflecting an extremely
competitive office products industry with sluggish industry growth. Cost of
goods sold increased slightly as a percentage of net sales over the same periods
the prior year. Selling, administrative and other expenses increased 9% for the
quarter and 7% for the six months. The percentage of selling, administrative and
other expenses to net sales for the quarter and for the six month period
increased slightly, due mostly to increased salaries, employee benefits, and
store upgrade expenses.
The ratio of current assets to current liabilities remains very good at 3.7 to 1
and the Company's cash position is excellent.
PART II - OTHER INFORMATION
Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1998 Annual Meeting of Shareholders of the Company was held on April 20,
1998, pursuant to notice given to shareholders of record on February 12, 1998,
at which date there were 178,803,145 shares of Common Stock outstanding. At the
Annual Meeting, the shareholders elected three Class III directors with terms to
expire at the 2001 Annual Meeting and two Class II directors with terms to
expire at the 2000 Annual Meeting. As to the following named individuals, the
holders of 153,096,026 shares of the Company's Common Stock voted in favor of
their election, and the holders of 4,296,502 shares withheld authority for their
election.
Class II
--------
Richard W. Courts, II
Larry L. Prince
5
<PAGE> 6
Class III
----------
Jean Douville
J. Hicks Lanier
Alana S. Shepherd
The following individual's term of office as a director continued after the
Annual Meeting:
<TABLE>
<CAPTION>
Class I Class II
------- --------
<S> <C>
Bradley Currey, Jr. James B. Williams
Robert P. Forrestal
Thomas C. Gallagher
Lawrence G. Steiner
</TABLE>
The shareholders also ratified the selection of Ernst & Young LLP as independent
auditors of the Company for 1998. The holders of 156,799,540 shares of Common
Stock voted in favor of the ratification, holders of 99,264 shares voted
against, holders of 493,724 shares abstained, and there were no broker
non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
<TABLE>
<S> <C>
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 5, 1993).
Exhibit 27 Financial Data Schedule (for SEC use only).
</TABLE>
(b) No reports on Form 8-K were filed by the registrant during the quarter
ended June 30, 1998.
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 July 30, 1998 /s/ Jerry W. Nix
------------- ---------------------------------------
Jerry W. Nix
Senior Vice President - Finance
/s/ George W. Kalafut
---------------------------------------
George W. Kalafut
Executive Vice President - Finance and
Administration (Principal Financial and
Accounting Officer)
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GENUINE PARTS COMPANY FOR THE SIX MONTHS ENDED JUNE 30,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 64,840
<SECURITIES> 0
<RECEIVABLES> 781,848
<ALLOWANCES> 7,375
<INVENTORY> 1,331,442
<CURRENT-ASSETS> 2,208,397
<PP&E> 375,278
<DEPRECIATION> 276,681
<TOTAL-ASSETS> 2,873,032
<CURRENT-LIABILITIES> 600,810
<BONDS> 209,428
0
0
<COMMON> 178,689
<OTHER-SE> 1,744,682
<TOTAL-LIABILITY-AND-EQUITY> 2,873,032
<SALES> 3,152,521
<TOTAL-REVENUES> 3,152,521
<CGS> 2,228,382
<TOTAL-COSTS> 649,954
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 274,185
<INCOME-TAX> 108,303
<INCOME-CONTINUING> 165,882
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 165,882
<EPS-PRIMARY> .93
<EPS-DILUTED> .92
</TABLE>
