GENUINE PARTS CO
10-Qs and 10-Ks
PROXIES
Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Washington, D.C. 20549
Form 10-K
|
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the fiscal year ended December 31, 2010 | ||
|
or
|
||
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from to | ||
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
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
|
|
2999 Circle 75 Parkway, Atlanta, Georgia
(Address of principal executive offices) |
30339
(Zip Code) |
770-953-1700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
| Title of Each Class | Name of Each Exchange on Which Registered | |
|
Common Stock, $1 par value per share
|
New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
þ
No
o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Exchange
Act. Yes
o
No
þ
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
þ
No
o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes
þ
No
o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule
12b-2
of the
Exchange Act. (Check one):
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes
o
No
þ
As of June 30, 2010, the aggregate market value of the
registrant’s common stock held by non-affiliates of the
registrant was approximately $6,009,155,000 based on the closing
sale price as reported on the New York Stock Exchange.
Indicate the number of shares outstanding of each of the
issuer’s classes of common stock, as of the latest
practicable date.
| Class | Outstanding at February 10, 2011 | |
|
Common Stock, $1 par value per share
|
157,656,559 shares |
Specifically identified portions of the Company’s
definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on April 18, 2011 are incorporated
by reference into Part III of this
Form 10-K.
TABLE OF CONTENTS
Table of Contents
PART I
.
| ITEM 1 . | BUSINESS . |
Genuine Parts Company, a Georgia corporation incorporated on
May 7, 1928, is a service organization engaged in the
distribution of automotive replacement parts, industrial
replacement parts, office products and electrical/electronic
materials through our four operating segments, each described in
more detail below. In 2010, business was conducted throughout
the United States, in Canada and in Mexico from approximately
2,000 locations. As of December 31, 2010, the Company
employed approximately 29,500 persons.
As used in this report, the “Company” refers to
Genuine Parts Company and its subsidiaries, except as otherwise
indicated by the context; and the terms “automotive
parts” and “industrial parts” refer to
replacement parts in each respective category.
Financial Information about
Segments
.
For financial information regarding
segments as well as our geographic areas of operation, refer to
Note 10 of Notes to Consolidated Financial Statements
beginning on
page F-1.
Available Information
. The
Company’s internet website can be found at www.genpt.com.
The Company makes available, free of charge through its internet
website, access to the Company’s annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
proxy statements and other reports, and any amendments to these
documents, as soon as reasonably practicable after such material
is filed with or furnished to the Securities and Exchange
Commission (“SEC”). Additionally, our corporate
governance guidelines, codes of conduct and ethics, and charters
of the Audit Committee and the Compensation, Nominating and
Governance Committee of our Board of Directors, as well as
information regarding our director nominating process and our
procedure for shareholders and other interested parties to
communicate with our Board of Directors, are available on our
website.
In Part III of this
Form 10-K,
we incorporate certain information by reference to our proxy
statement for our 2011 annual meeting of shareholders. We expect
to file that proxy statement with the SEC on or about
February 25, 2011, and we will make it available online at
the same time at
http://www.proxydocs.com/gpc.
Please refer to the proxy statement when it is available.
AUTOMOTIVE
PARTS GROUP
The Automotive Parts Group, the largest division of the Company,
distributes automotive replacement parts and accessory items.
The Company is the largest member, with approximately 95%
ownership, of the National Automotive Parts Association
(“NAPA”), a voluntary trade association formed in 1925
to provide nationwide distribution of automotive parts. In
addition to over 420,000 available part numbers, the Company, in
conjunction with NAPA, offers complete inventory, cataloging,
marketing, training and other programs in the automotive
aftermarket.
During 2010, the Company’s Automotive Parts Group included
NAPA automotive parts distribution centers and automotive parts
stores (“auto parts stores” or “NAPA AUTO PARTS
stores”) owned and operated in the United States by
the Company; NAPA and Traction automotive parts distribution
centers and auto parts stores in the United States and Canada
owned and operated by the Company and NAPA Canada/UAP Inc.
(“NAPA Canada/UAP”), a
wholly-owned
subsidiary of the Company; auto parts stores and distribution
centers in the United States operated by corporations in which
the Company owned either a noncontrolling or controlling
interest; auto parts stores in Canada operated by corporations
in which UAP owns a 50% interest; import automotive parts
distribution centers in the United States owned by the Company
and operated by its Altrom America division; import automotive
parts distribution centers in Canada owned and operated by
Altrom Canada Corporation (“Altrom Canada”), a
wholly-owned
subsidiary of the Company; distribution centers in the United
States owned by Balkamp, Inc. (“Balkamp”), a
wholly-owned subsidiary of the Company; rebuilding and
distribution plants in the United States owned by the
Company and operated by its Rayloc division; and automotive
parts distribution centers and automotive parts stores in
Mexico, owned and operated by Grupo Auto Todo, S.A. de C.V.
(“Auto Todo”), a wholly-owned subsidiary of the
Company.
2
Table of Contents
The Company has a 15% interest in Mitchell Repair Information
(“MRIC”), a subsidiary of Snap-on Incorporated. MRIC
is a leading automotive diagnostic and repair information
company with over 40,000 North American subscribers linked to
its services and information databases. MRIC’s core
product, “Mitchell
ON-DEMAND,”
is a premier electronic repair information source in the
automotive aftermarket.
The Company’s NAPA automotive parts distribution centers
distribute replacement parts (other than body parts) for
substantially all motor vehicle makes and models in service in
the United States, including imported vehicles, trucks, SUVs,
buses, motorcycles, recreational vehicles and farm vehicles. In
addition, the Company distributes replacement parts for small
engines, farm equipment and heavy duty equipment. The
Company’s inventories also include accessory items for such
vehicles and equipment, and supply items used by a wide variety
of customers in the automotive aftermarket, such as repair
shops, service stations, fleet operators, automobile and truck
dealers, leasing companies, bus and truck lines, mass
merchandisers, farms, industrial concerns and individuals who
perform their own maintenance and parts installation. Although
the Company’s domestic automotive operations purchase from
approximately 100 different suppliers, approximately 52% of 2010
automotive parts inventories were purchased from 10 major
suppliers. Since 1931, the Company has had return privileges
with most of its suppliers, which have protected the Company
from inventory obsolescence.
Distribution System
. In 2010, the
Company operated 58 domestic NAPA automotive parts distribution
centers located in 39 states and approximately 1,000
domestic company-owned NAPA AUTO PARTS stores located in
42 states. At December 31, 2010, the Company owned
either a noncontrolling or controlling interest in two
corporations, which operated approximately 19 auto parts stores
in three states, and a wholly-owned subsidiary corporation
operating three distribution centers in two states.
NAPA Canada/UAP, founded in 1926, is a Canadian leader in the
distribution and marketing of replacement parts and accessories
for automobiles and trucks. NAPA Canada/UAP employs
approximately 3,500 people and operates a network of 12
distribution centers supplying approximately 590 NAPA stores and
98 Traction wholesalers. Traction is a supplier of parts to
small and large fleet owners and operators and, together with
NAPA stores, is a significant supplier to the mining and
forestry industries. The NAPA stores and Traction in Canada
include approximately 189 company owned stores, 30 joint
venture or progressive owners in which NAPA Canada/UAP owns a
50% interest and approximately 469 independently owned stores.
NAPA and Traction operations supply bannered installers and
independent installers in all provinces of Canada, as well as
networks of service station and repair shops operating under the
banners of national accounts. UAP is a licensee of the
NAPA
®
name in Canada.
In Canada, Altrom Canada Corp. operates 15 import automotive
parts distribution centers. In the United States, Altrom America
operates two import automotive parts distribution centers.
In Mexico, Auto Todo owns and operates 10 distribution centers,
four auto parts stores and four tire centers. Auto Todo is a
licensee of the
NAPA
®
name in Mexico.
The Company’s domestic distribution centers serve
approximately 4,700 independently owned NAPA AUTO PARTS stores
located throughout the United States. NAPA AUTO PARTS stores, in
turn, sell to a wide variety of customers in the automotive
aftermarket. Collectively, these independent automotive parts
stores account for approximately 66% of the Company’s total
U.S. Automotive sales and 27% of the Company’s total
sales, with no automotive parts store or group of automotive
parts stores with individual or common ownership accounting for
more than 0.25% of the total sales of the Company.
Products
. Distribution centers have
access to over 420,000 different parts and related supply items.
Each item is cataloged and numbered for identification and
accessibility. Significant inventories are carried to provide
for fast and frequent deliveries to customers. Most orders are
filled and shipped the same day as received. The majority of
sales are on terms that require payment within 30 days of
the statement date. The Company does not manufacture any of the
products it distributes. The majority of products are
distributed under the
NAPA
®
name, a mark licensed to the Company by NAPA, which is important
to the sales and marketing of these products. Traction sales
also include products distributed under the HD Plus name, a
proprietary line of automotive parts for the heavy duty truck
market.
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Table of Contents
Related Operations
. Balkamp, a
wholly-owned subsidiary of the Company, distributes a wide
variety of replacement parts and accessory items for passenger
cars, heavy-duty vehicles, motorcycles and farm equipment. In
addition, Balkamp distributes service items such as testing
equipment, lubricating equipment, gauges, cleaning supplies,
chemicals and supply items used by repair shops, fleets, farms
and institutions. Balkamp packages many of the 45,000 products,
which constitute the “Balkamp” line of products that
are distributed to the members of NAPA. These products are
categorized into over 250 different product groups purchased
from approximately 600 domestic suppliers and 100 foreign
manufacturers. In addition, Balkamp operates two Redistribution
Centers that provide NAPA with over 1,900 SKUs of oils,
chemicals and procurement items.
BALKAMP
®
,
a federally registered trademark, is important to the sales and
marketing promotions of the Balkamp organization. Balkamp has
three distribution centers located in Indianapolis and
Plainfield, Indiana, and West Jordan, Utah.
The Company, through its Rayloc division, operates four
facilities where certain small automotive parts are rebuilt or
distributed to the members of NAPA under the
NAPA
®
brand name.
Rayloc
®
is a mark licensed to the Company by NAPA.
The Company’s Heavy Vehicle Parts Group operates as TW
Distribution, with one warehouse location in Atlanta, Georgia,
which serves 23 Traction Heavy Duty parts stores in the United
States, of which 15 are company-owned and eight are
independently owned. This group distributes heavy vehicle parts
through the NAPA system and direct to small fleet owners and
operators.
Segment Data
. In the year ended
December 31, 2010, sales from the Automotive Parts Group
were approximately 50% of the Company’s net sales, as
compared to 52% in 2009 and 48% in 2008. For additional segment
information, see Note 10 of Notes to Consolidated Financial
Statements set forth beginning on
page F-1.
Service to NAPA AUTO PARTS Stores
. The
Company believes that the quality and the range of services
provided to its automotive parts customers constitute a
significant advantage for its automotive parts distribution
system. Such services include fast and frequent delivery,
obsolescence protection, parts cataloging (including the use of
electronic NAPA AUTO PARTS catalogs) and stock adjustment
through a continuing parts classification system which, as
initiated by the Company from time to time, allows independent
retailers (“jobbers”) to return certain merchandise on
a scheduled basis. The Company offers its NAPA AUTO PARTS store
customers various management aids, marketing aids and service on
topics such as inventory control, cost analysis, accounting
procedures, group insurance and retirement benefit plans, as
well as marketing conferences and seminars, sales and
advertising manuals and training programs. Point of
sale/inventory management is available through
TAMS
®
(Total Automotive Management Systems), a computer system
designed and developed by the Company for the NAPA AUTO PARTS
stores.
In association with NAPA, the Company has developed and refined
an inventory classification system to determine optimum
distribution center and auto parts store inventory levels for
automotive parts stocking based on automotive registrations,
usage rates, production statistics, technological advances and
other similar factors. This system, which undergoes continuous
analytical review, is an integral part of the Company’s
inventory control procedures and comprises an important feature
of the inventory management services that the Company makes
available to its NAPA AUTO PARTS store customers. Over the last
10 years, losses to the Company from obsolescence have been
insignificant and the Company attributes this to the successful
operation of its classification system, which involves product
return privileges with most of its suppliers.
Competition
. The automotive parts
distribution business is highly competitive. The Company
competes with automobile manufacturers (some of which sell
replacement parts for vehicles built by other manufacturers as
well as those that they build themselves), automobile dealers,
warehouse clubs and large automotive parts retail chains. In
addition, the Company competes with the distributing outlets of
parts manufacturers, oil companies, mass merchandisers,
including national retail chains, and with other parts
distributors and retailers. The Automotive Parts Group competes
primarily on product offering, service, brand recognition and
price. Further information regarding competition in the industry
is set forth in “Item 1A. Risk Factors — We
Face Substantial Competition in the Industries in Which We Do
Business.”
NAPA
. The Company is a member of the
National Automotive Parts Association, a voluntary association
formed in 1925 to provide nationwide distribution of automotive
replacement parts. NAPA, which neither buys nor
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Table of Contents
sells automotive parts, functions as a trade association whose
members in 2010 operated 64 distribution centers located
throughout the United States, 58 of which were owned and
operated by the Company. NAPA develops marketing concepts and
programs that may be used by its members. It is not involved in
the chain of distribution.
Among the automotive lines that each NAPA member purchases and
distributes are certain lines designated, cataloged, advertised
and promoted as “NAPA” lines. The members are not
required to purchase any specific quantity of parts so
designated and may, and do, purchase competitive lines from
other supply sources.
The Company and the other NAPA members use the federally
registered trademark
NAPA
®
as part of the trade name of their distribution centers and
parts stores. The Company contributes to NAPA’s national
advertising program, which is designed to increase public
recognition of the NAPA name and to promote NAPA product lines.
The Company is a party, together with other members of NAPA and
NAPA itself, to a consent decree entered by the Federal District
Court in Detroit, Michigan, on May 4, 1954. The consent
decree enjoins certain practices under the federal antitrust
laws, including the use of exclusive agreements with
manufacturers of automotive parts, allocation or division of
territories among several NAPA members, fixing of prices or
terms of sale for such parts among such members, and agreements
to adhere to any uniform policy in selecting parts customers or
determining the number and location of, or arrangements with,
auto parts customers.
INDUSTRIAL
PARTS GROUP
The Industrial Parts Group is operated as Motion Industries,
Inc. (“Motion”), a wholly-owned subsidiary of the
Company headquartered in Birmingham, Alabama. Motion distributes
industrial replacement parts and related supplies such as
bearings, mechanical and electrical power transmission,
industrial automation, hose, hydraulic and pneumatic components,
industrial supplies and material handling products to MRO
(maintenance, repair and operation) and OEM (original equipment
manufacturer) customers throughout the United States, Canada and
Mexico.
In Canada, industrial parts are distributed by Motion Industries
(Canada), Inc. (“Motion Canada”) and BC Bearing
Engineers Limited. The Mexican market is served by Motion Mexico
S de RL de CV (“Motion Mexico”). These organizations
operate in the Company’s North American structure.
In March 2010, the Company acquired BC Bearing Engineers Limited
and its wholly-owned subsidiary, US Bearings & Things,
Inc., a long-established bearing and power transmission
distributor. BC Bearing Engineers joined Motion Industries with
22 locations throughout western Canada, and
U.S. Bearings & Things with 21 branches in
the western United States. In 2010, the Company also acquired
TechCan Services, a full-service asset repair, fabrication and
engineering business located in Alberta, Canada.
As of December 31, 2010, the Industrial Parts Group served
more than 140,000 customers in all types of industries located
throughout North America, including the food, forest products,
primary metal, paper, mining, automotive, petrochemical and
pharmaceutical industries; as well as strategically targeted
specialty industries such as power generation, wastewater
treatment facilities, wind power generation, solar power,
government projects, pipelines, railroad, ports, and others.
Motion services all manufacturing and processing industries with
access to a database of 4.3 million parts. Additionally,
late in 2010, Motion Industries was awarded a Government
Services Administration (GSA) schedule becoming a supplier to
provide government agencies in the U.S. access to more than
985,000 product and replacement parts.
This group provides customers with supply chain efficiencies,
achieved through inventory management and logistical solutions
coupled with Motion Industries’ vast product knowledge and
system capabilities. The Company meets the MRO demand of a large
and fragmented market with high levels of service in the areas
of asset management, inventory and logistics management, product
application and utilization management processes. A highly
developed supply chain with vendor partnerships and customer
connectivity are enhanced by Motion’s leading
e-business
capabilities, such as MiSupplierConnect, which provides
integration between the Company’s information technology
network and suppliers’ systems, creating numerous benefits
for both the supplier and customer.
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Table of Contents
Distribution System
. In North America,
the Industrial Parts Group operated 488 branches, 9 distribution
centers and 46 service centers as of December 31, 2010. The
distribution centers stock and distribute more than 92,000
different items purchased from more than 468 different
suppliers. The service centers provide hydraulic, hose and
mechanical repairs for customers. Approximately 37% of 2010
total industrial product purchases were made from 10 major
suppliers. Sales are generated from the Industrial Parts
Group’s branches located in 47 states, Puerto Rico,
nine provinces in Canada, and Mexico. Each branch has warehouse
facilities that stock significant amounts of inventory
representative of the products used by customers in the
respective market area served.
Products
. The Industrial Parts Group
distributes a wide variety of parts and products to its
customers, primarily industrial concerns. Products include such
items as hoses, belts, bearings, pulleys, pumps, valves, chains,
gears, sprockets, speed reducers, electric motors, and
industrial supplies. In recent years, Motion expanded its
offering to include systems and automation products in response
to the increasing sophistication of motion control and process
automation for full systems integration of plant equipment.
Manufacturing trends and government policies have led to
opportunities in the “green” and energy-efficient
product markets, leading to product offerings such as
energy-efficient motors and drives, recyclable and
environmentally friendly parts and supplies. The nature of this
group’s business demands the maintenance of adequate
inventories and the ability to promptly meet demanding delivery
requirements. Virtually all of the products distributed are
installed by the customer or used in plant and facility
maintenance activities. Most orders are filled immediately from
existing stock and deliveries are normally made within
24 hours of receipt of order. The majority of all sales are
on open account. Motion has ongoing purchase agreements with
existing customers that represent approximately 40% of the
annual sales volume.
Supply Agreements
. Non-exclusive
distributor agreements are in effect with most of the Industrial
Parts Group’s suppliers. The terms of these agreements
vary; however, it has been the experience of the Industrial
Parts Group that the custom of the trade is to treat such
agreements as continuing until breached by one party or until
terminated by mutual consent. The Company has return privileges
with most of its suppliers, which has protected the Company from
inventory obsolescence.
Segment Data
. In the year ended
December 31, 2010, sales from the Company’s Industrial
Parts Group approximated 31% of the Company’s net sales, as
compared to 29% in 2009 and 32% in 2008. For additional segment
information, see Note 10 of Notes to Consolidated Financial
Statements set forth beginning on
page F-1.
Competition
. The industrial parts
distribution business is highly competitive. The Industrial
Parts Group competes with other distributors specializing in the
distribution of such items, general line distributors and others
who provide similar services. To a lesser extent, the Industrial
Parts Group competes with manufacturers that sell directly to
the customer. The Industrial Parts Group competes primarily on
the breadth of product offerings, service and price. Further
information regarding competition in the industry is set forth
in “Item 1A. Risk Factors — We Face
Substantial Competition in the Industries in Which We Do
Business.”
OFFICE
PRODUCTS GROUP
The Office Products Group, operated through S. P. Richards
Company (“S. P. Richards”), a wholly owned subsidiary
of the Company, is headquartered in Atlanta, Georgia. S. P.
Richards is engaged in the wholesale distribution of a broad
line of office and other business related products to business
product resellers that are used in the daily operation of
businesses, schools, offices and other institutions. Office
products fall into the general categories of computer supplies,
imaging products, office furniture, office machines, general
office products, school supplies, cleaning and breakroom
supplies, and healthcare products.
The Office Products Group is represented in Canada through S. P.
Richards Canada, a wholly-owned subsidiary of the Company
headquartered near Toronto, Ontario. S. P. Richards Canada
services office product resellers throughout Canada from
locations in Vancouver, Toronto, Calgary, Edmonton and Winnipeg.
Distribution System
. The Office
Products Group distributes more than 50,000 items to nearly
4,000 business product resellers throughout the United States
and Canada from a network of 43 distribution centers. In 2010,
the Company completed the installation of new pick to voice
technology in all U.S. distribution centers. In addition,
new conveyors with inline scales and automated sortation were
installed in four distribution centers and energy
6
Table of Contents
conservation projects creating better lighting, lower energy
usage and usage of motion sensitive lighting were completed in
12 distribution centers. This network of strategically located
distribution centers provides overnight delivery of the
Company’s comprehensive product offering. Approximately 50%
of the Company’s 2010 total office products purchases were
made from 10 major suppliers.
The Office Products Group sells strictly to resellers of office
products. These resellers include independently owned office
product dealers, national office product superstores and mass
merchants, large contract stationers, mail order companies,
Internet resellers and college bookstores. Resellers are offered
comprehensive marketing programs, which include print and
electronic catalogs and flyers, electronic content for reseller
websites, and education and training resources.
Products
. The Office Products Group
distributes computer supplies including storage media, printer
supplies and computer accessories; office furniture including
desks, credenzas, chairs, chair mats, partitions, files and
computer furniture; office machines including telephones,
answering machines, calculators, fax machines, multi-function
copiers, printers, digital cameras, laminators and shredders;
general office supplies including desk accessories, business
forms, accounting supplies, binders, filing supplies, report
covers, writing instruments, envelopes, note pads, copy paper,
mailroom supplies, drafting supplies and audiovisual supplies;
school supplies including bulletin boards, teaching aids and art
supplies; healthcare products; janitorial supplies including
cleaning supplies, paper towels and trash can liners; and
breakroom supplies including napkins, utensils, snacks and
beverages. S. P. Richards has return privileges with most of its
suppliers, which have protected the Company from inventory
obsolescence.
While the Company’s inventory includes products from over
400 of the industry’s leading manufacturers worldwide, S.
P. Richards also markets products under its eight proprietary
brands. These brands include:
SPARCO
tm
,
an economical line of office supply basics;
Compucessory
®
,
a line of computer accessories;
Lorell
tm
,
a line of office furniture; NATURE
SAVER
®
,
an offering of recycled products; Elite
Image
®
,
a line of new and remanufactured toner cartridges, premium
papers and labels;
Integra
tm
,
a line of writing instruments; Genuine
Joe
®
,
a line of cleaning and breakroom products; and Business
Source
tm
,
a line of basic office supplies available only to independent
resellers. The Company launched its
FurnitureAdvantage
tm
program in 2010 which provides resellers with an additional
6,000 furniture items made available to consumers in 7 to
10 days. The Company also introduced
PrintSmart
tm
,
a fully featured managed print solution allowing resellers to
serve this growing segment of the market.
Segment Data
. In the year ended
December 31, 2010, sales from the Company’s Office
Products Group approximated 15% of the Company’s net sales,
as compared to 16% in 2009 and 2008. For additional segment
information, see Note 10 of Notes to Consolidated Financial
Statements set forth beginning on
page F-1.
Competition
. The office products
distribution business is highly competitive. In the distribution
of its product offering to resellers, S. P. Richards competes
with many other wholesale distributors, as well as with certain
manufacturers of office products. S. P. Richards competes
primarily on price, product offerings, service, marketing
programs and brand recognition. Further information regarding
competition in the industry is set forth in “Item 1A.
Risk Factors — We Face Substantial Competition in the
Industries in Which We Do Business.”
ELECTRICAL/ELECTRONIC
MATERIALS GROUP
The Electrical/Electronic Materials Group was formed on
July 1, 1998 through the acquisition of EIS, Inc.
(“EIS”), a wholly-owned subsidiary of the Company
headquartered in Atlanta, Georgia. This Group distributes
materials to more than 20,000 electrical and electronic
manufacturers in North America. With 33 branch locations in the
United States, Puerto Rico, the Dominican Republic, Mexico and
Canada, this Group distributes over 100,000 items including
wire and cable, insulating and conductive materials, assembly
tools and test equipment. EIS also has three manufacturing
facilities that provide custom fabricated parts.
Distribution System
. The
Electrical/Electronic Materials Group provides distribution
services to OEM’s, motor repair shops and a broad variety
of industrial assembly markets. EIS actively utilizes its
e-commerce
Internet site to present its products to customers while
allowing these on-line visitors to conveniently purchase from a
large product assortment.
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Electrical and electronic products are distributed from
warehouse locations in major user markets throughout the United
States, as well as in Mexico and Canada. The Company has return
privileges with some of its suppliers, which have protected the
Company from inventory obsolescence.
Products
. The Electrical/Electronic
Materials Group distributes a wide variety of products to
customers from over 350 vendors. These products include custom
fabricated flexible materials that are used as components within
a customer’s manufactured finished product in a variety of
market segments. Among the products distributed and fabricated
are such items as magnet wire, conductive materials, electrical
wire and cable, insulating and shielding materials, assembly
tools, test equipment, adhesives and chemicals, pressure
sensitive tapes, solder, anti-static products and thermal
management products. To meet the prompt delivery demands of its
customers, this Group maintains large inventories. The majority
of sales are on open account. Approximately 45% of 2010 total
Electrical/Electronic Materials Group purchases were made from
10 major suppliers.
Integrated Supply
. The
Electrical/Electronic Materials Group’s integrated supply
programs are a part of the marketing strategy, as a greater
number of customers — especially national
accounts — are given the opportunity to participate in
this low-cost, high-service capability. The Group developed AIMS
(Advanced Inventory Management System), a totally integrated,
highly automated solution for inventory management. The
Group’s Integrated Supply offering also includes SupplyPro,
an electronic vending dispenser used to eliminate costly tool
cribs, or in-house stores, at customer warehouse facilities.
Segment Data
. In the year ended
December 31, 2010, sales from the Company’s
Electrical/Electronic Materials Group approximated 4% of the
Company’s net sales, as compared to 3% in 2009 and 4% in
2008. For additional segment information, see Note 10 of
Notes to Consolidated Financial Statements set forth beginning
on
page F-1.
Competition
. The electrical and
electronics distribution business is highly competitive. The
Electrical/Electronic Materials Group competes with other
distributors specializing in the distribution of electrical and
electronic products, general line distributors and, to a lesser
extent, manufacturers that sell directly to customers. EIS
competes primarily on factors of price, product offerings and
service. Further information regarding competition in the
industry is set forth in “Item 1A. Risk
Factors — We Face Substantial Competition in the
Industries in Which We Do Business.”
| ITEM 1A . | RISK FACTORS . |
FORWARD-LOOKING
STATEMENTS
Some statements in this report, as well as in other materials we
file with the SEC or otherwise release to the public and in
materials that we make available on our website, constitute
forward-looking statements that are subject to the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. Senior officers may also make verbal statements to
analysts, investors, the media and others that are
forward-looking. Forward-looking statements may relate, for
example, to future operations, prospects, strategies, financial
condition, economic performance (including growth and earnings),
industry conditions and demand for our products and services.
The Company cautions that its forward-looking statements involve
risks and uncertainties, and while we believe that our
expectations for the future are reasonable in view of currently
available information, you are cautioned not to place undue
reliance on our forward-looking statements. Actual results or
events may differ materially from those indicated in our
forward-looking statements as a result of various important
factors. Such factors include, but are not limited to, those
discussed below.
Forward-looking statements are only as of the date they are
made, and the Company undertakes no duty to update its
forward-looking statements except as required by law. You are
advised, however, to review any further disclosures we make on
related subjects in our subsequent
Forms 10-Q,
Form 8-K
and other reports to the SEC.
Set forth below are the material risks and uncertainties that,
if they were to occur, could materially and adversely affect our
business or could cause our actual results to differ materially
from the results contemplated by the forward-looking statements
in this report and in the other public statements we make.
Please be aware that these risks may change over time and other
risks may prove to be important in the future. New risks may
emerge at any
8
Table of Contents
time, and we cannot predict such risks or estimate the extent to
which they may affect our business, financial condition, results
of operations or the trading price of our securities.
Our
business will be adversely affected if demand for our products
slows.
Our business depends on customer demand for the products that we
distribute. Demand for these products depends on many factors.
With respect to our automotive group, the primary factors are:
| • | the number of miles vehicles are driven annually, as higher vehicle mileage increases the need for maintenance and repair; | |
| • | the quality of the vehicles manufactured by the original vehicle manufacturers and the length of the warranty or maintenance offered on new vehicles; | |
| • | the number of vehicles in current service that are six years old and older, as these vehicles are typically no longer under the original vehicle manufacturers’ warranty and will need more maintenance and repair than newer vehicles; | |
| • | gas prices, as increases in gas prices may deter consumers from using their vehicles; | |
| • | changes in travel patterns which may cause consumers to rely more on other transportation; | |
| • | restrictions on access to diagnostic tools and repair information imposed by the original vehicle manufacturers or by governmental regulation, as consumers may be forced to have all diagnostic work, repairs and maintenance performed by the vehicle manufacturers’ dealer networks; and | |
| • | the economy generally, which in declining conditions may cause consumers to defer vehicle maintenance and repair and defer discretionary spending. |
With respect to our industrial parts group, the primary factors
are:
| • | the level of industrial production and manufacturing capacity utilization, as these indices reflect the need for industrial replacement parts; | |
| • | changes in manufacturing reflected in the level of the Institute for Supply Management’s Purchasing Managers Index, as an index reading of 50 or more implies an expanding manufacturing economy, while a reading below 50 implies contracting manufacturing economy; | |
| • | the consolidation of certain of our manufacturing customers and the trend of manufacturing operations being moved overseas; and | |
| • | the economy in general. |
With respect to our office products group, the primary factors
are:
| • | the level of unemployment, especially as it relates to white collar and service jobs, as this impacts the need for business products; and | |
| • | the economy in general. |
With respect to our electrical/electronic materials group, the
primary factors are:
| • | changes in manufacturing reflected in the level of the Institute for Supply Management’s Purchasing Managers Index, as an index reading of 50 or more implies an expanding manufacturing economy, while a reading below 50 implies contracting manufacturing economy; and | |
| • | the economy in general. |
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Uncertainty
and/or deterioration in general macro-economic conditions,
including unemployment, inflation or deflation, high energy
costs, uncertain credit markets, or other economic conditions,
could have a negative impact on our business, financial
condition, results of operations and cash flows.
Our business and operating results may in the future be
adversely affected by uncertain global economic conditions,
including instability in credit markets, declining consumer and
business confidence, fluctuating commodity prices, volatile
exchange rates, and other challenges that could affect the
global economy. Both our commercial and retail customers may
experience deterioration of their financial resources, which
could result in existing or potential customers delaying or
canceling plans to purchase our products. Our vendors could
experience similar conditions, which could impact their ability
to fulfill their obligations to us. Future weakness in the
global economy could adversely affect our results of operations,
financial condition and cash flows in future periods.
We
depend on our relationships with our vendors, and a disruption
of our vendor relationships or a disruption in our vendors’
operations could harm our business.
As a distributor of automotive replacement parts, industrial
parts, office products and electrical/electronic materials, our
business depends on developing and maintaining close and
productive relationships with our vendors. We depend on our
vendors to sell us quality products at favorable prices. Many
factors outside our control, including, without limitation, raw
material shortages, inadequate manufacturing capacity, labor
disputes, transportation disruptions or weather conditions,
could adversely affect our vendors’ ability to deliver to
us quality merchandise at favorable prices in a timely manner.
Furthermore, financial or operational difficulties with a
particular vendor could cause that vendor to increase the cost
of the products or decrease the quality of the products we
purchase from it. Vendor consolidation could also limit the
number of suppliers from which we may purchase products and
could materially affect the prices we pay for these products. In
our automotive business, the number of vendors could decrease
considerably, and the prices charged to us by the remaining
vendors could increase, to the extent that vehicle production
slows due to a decline in consumer spending and, possibly, the
failure of one or more of the large automobile manufacturers. We
would suffer an adverse impact if our vendors limit or cancel
the return privileges that currently protect us from inventory
obsolescence.
We
face substantial competition in the industries in which we do
business.
The sale of automotive and industrial parts, office products and
electrical materials is highly competitive and impacted by many
factors, including name recognition, product availability,
customer service, anticipating changing customer preferences,
store location, and pricing pressures. Because we seek to offer
competitive prices, if our competitors reduce their prices, we
may be forced to reduce our prices, which could result in a
material decline in our revenues and earnings. Increased
competition among distributors of automotive and industrial
parts, office products and electronic materials, including
internet-related initiatives, could cause a material adverse
effect on our results of operations. The Company anticipates no
decline in competition in any of its four business segments in
the foreseeable future.
In particular, the market for replacement automotive parts is
highly competitive and subjects us to a wide variety of
competitors. We compete primarily with national and regional
auto parts chains, independently owned regional and local
automotive parts and accessories stores, automobile dealers that
supply manufacturer replacement parts and accessories, mass
merchandisers and wholesale clubs that sell automotive products
and regional and local full service automotive repair shops.
Furthermore, the automotive aftermarket has experienced
consolidation in recent years. Consolidation among our
competitors could further enhance their financial position,
provide them with the ability to provide more competitive prices
to customers for whom we compete, and allow them to achieve
increased efficiencies in their consolidated operations that
enable them to more effectively compete for customers. If we are
unable to continue to develop successful competitive strategies
or if our competitors develop more effective strategies, we
could lose customers and our sales and profits may decline.
10
Table of Contents
We may
not be able to successfully implement our business initiatives
in each of our four business segments to grow our sales and
earnings, which could adversely affect our business, financial
condition, results of operations and cash flows.
We have implemented numerous initiatives in each of our four
business segments to grow sales and earnings, including the
introduction of new and expanded product lines, geographic
expansion (including acquisitions), sales to new markets,
enhanced customer marketing programs and a variety of gross
margin and cost savings initiatives. If we are unable to
implement these initiatives efficiently and effectively, or if
these initiatives are unsuccessful, our business, financial
condition, results of operations and cash flows could be
adversely affected.
Successful implementation of these initiatives also depends on
factors specific to the automotive parts industry and the other
industries in which we operate and numerous other factors that
may be beyond our control. In addition to the other risk factors
contained in this “Item 1A. Risk Factors,”
adverse changes in the following factors could undermine our
business initiatives and have a material adverse affect on our
business, financial condition, results of operations and cash
flows:
| • | the competitive environment in our end markets may force us to reduce prices below our desired pricing level or increase promotional spending; | |
| • | our ability to anticipate changes in consumer preferences and to meet customers’ needs for our products in a timely manner; | |
| • | our ability to successfully enter new markets; | |
| • | our ability to effectively manage our costs; | |
| • | our ability to continue to grow through acquisitions and successfully integrate acquired businesses in our existing operations; and | |
| • | the economy in general. |
Because
we are involved in litigation from time to time and are subject
to numerous laws and governmental regulations, we could incur
substantial judgments, fines, legal fees and other
costs.
We are sometimes the subject of complaints or litigation from
customers, employees or other third parties for various actions.
The damages sought against us in some of these litigation
proceedings are substantial. Although we maintain liability
insurance for some litigation claims, if one or more of the
claims were to greatly exceed our insurance coverage limits or
if our insurance policies do not cover a claim, this could have
a material adverse affect on our business, financial condition,
results of operations and cash flows.
Additionally, we are subject to numerous federal, state and
local laws and governmental regulations relating to
environmental protection, product quality standards, building
and zoning requirements, as well as employment law matters. If
we fail to comply with existing or future laws or regulations,
we may be subject to governmental or judicial fines or
sanctions, while incurring substantial legal fees and costs. In
addition, our capital expenses could increase due to remediation
measures that may be required if we are found to be noncompliant
with any existing or future laws or regulations.
| ITEM 1B . | UNRESOLVED STAFF COMMENTS . |
Not applicable.
| ITEM 2 . | PROPERTIES . |
The Company’s headquarters and Automotive Parts Group
headquarters are located in two adjacent office buildings owned
by the Company in Atlanta, Georgia.
The Company’s Automotive Parts Group currently operates 58
NAPA Distribution Centers in the United States distributed among
eight geographic divisions. Approximately 90% of the
distribution center properties are owned by the Company. At
December 31, 2010, the Company operated approximately 1,000
NAPA AUTO PARTS stores
11
Table of Contents
located in 42 states, and the Company owned either a
noncontrolling or controlling interest in approximately
19 additional auto parts stores located in three states.
Other than NAPA AUTO PARTS stores located within Company owned
distribution centers, the majority of the automotive parts
stores in which the Company has an ownership interest were
operated in leased facilities. In addition, NAPA Canada/UAP
operates 12 distribution centers and approximately 189
automotive parts and Traction stores in Canada, and Auto Todo
operates ten distribution centers and eight stores and tire
centers in Mexico. These operations are conducted in leased
facilities.
The Company’s Automotive Parts Group also operates three
Balkamp distribution centers, four Rayloc rebuilding and
distribution facilities and two transfer and shipping
facilities. Finally, Altrom Canada operates 15 import parts
distribution centers, Altrom America operates two import parts
distribution centers and the Heavy Vehicle Parts Group operates
one TW distribution center, which serves 23 Traction stores of
which 15 are company owned and located in the US. These
operations are operated in leased facilities.
The Company’s Industrial Parts Group, operating through
Motion and Motion Canada, operates nine distribution centers, 46
service centers and 488 branches. Approximately 90% of these
branches are operated in leased facilities.
The Company’s Office Products Group operates 38 facilities
in the United States and five facilities in Canada distributed
among the Group’s five geographic divisions. Approximately
75% of these facilities are operated in leased buildings.
The Company’s Electrical/Electronic Materials Group
operates in 30 locations in the United States, one location in
Puerto Rico, one location in the Dominican Republic, three
locations in Mexico and one location in Canada. All of this
Group’s 36 facilities are operated in leased buildings
except one facility, which is owned.
We believe that our facilities on the whole are in good
condition, are adequately insured, are fully utilized and are
suitable and adequate for the conduct of our current operations.
For additional information regarding rental expense on leased
properties, see Note 4 of Notes to Consolidated Financial
Statements set forth beginning on
page F-1.
| ITEM 3 . | LEGAL PROCEEDINGS . |
The Company is subject to various legal and governmental
proceedings, many involving routine litigation incidental to the
businesses, including approximately 1,900 product liability
lawsuits resulting from its national distribution of automotive
parts and supplies. Many of these involve claims of personal
injury allegedly resulting from the use of automotive parts
distributed by the Company. While litigation of any type
contains an element of uncertainty, the Company believes that
its defense and ultimate resolution of pending and reasonably
anticipated claims will continue to occur within the ordinary
course of the Company’s business and that resolution of
these claims will not have a material adverse effect on the
Company’s business, results of operations or financial
condition.
| ITEM 4 . | [Removed and Reserved .] |
12
Table of Contents
PART II
.
| ITEM 5 . | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES . |
Market
Information Regarding Common Stock
The Company’s common stock is traded on the New York Stock
Exchange under the ticker symbol “GPC”. The following
table sets forth the high and low sales prices for the common
stock as reported on the New York Stock Exchange and dividends
per share of common stock paid during the last two fiscal years:
| Sales Price of Common Shares | ||||||||||||||||
| 2010 | 2009 | |||||||||||||||
| High | Low | High | Low | |||||||||||||
|
Quarter
|
||||||||||||||||
|
First
|
$ | 43.63 | $ | 36.94 | $ | 39.82 | $ | 24.93 | ||||||||
|
Second
|
45.42 | 38.00 | 36.18 | 29.18 | ||||||||||||
|
Third
|
45.32 | 38.81 | 39.75 | 32.36 | ||||||||||||
|
Fourth
|
51.61 | 44.13 | 39.00 | 34.91 | ||||||||||||
| Dividends Declared per Share | ||||||||
| 2010 | 2009 | |||||||
|
Quarter
|
||||||||
|
First
|
$ | 0.41 | $ | 0.40 | ||||
|
Second
|
0.41 | 0.40 | ||||||
|
Third
|
0.41 | 0.40 | ||||||
|
Fourth
|
0.41 | 0.40 | ||||||
13
Table of Contents
Stock
Performance Graph
Set forth below is a line graph comparing the yearly dollar
change in the cumulative total shareholder return on the
Company’s Common Stock against the cumulative total
shareholder return of the Standard and Poor’s 500 Stock
Index and a peer group composite index structured by the Company
as set forth below for the five year period that commenced
December 31, 2005 and ended December 31, 2010. This
graph assumes that $100 was invested on December 31, 2005
in Genuine Parts Company Common Stock, the S&P 500 Stock
Index (the Company is a member of the S&P 500, and its
cumulative total shareholder return went into calculating the
S&P 500 results set forth in the graph) and the peer group
composite index as set forth below and assumes reinvestment of
all dividends.
Comparison
of five year cumulative total shareholder return
Genuine Parts Company, S&P 500 Index and peer group
composite index
|
Cumulative Total Shareholder Return
|
||||||||||||||||||||||||||||||
| $ at Fiscal Year End | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||||||||||
|
Genuine Parts Company
|
100.00 | 111.40 | 112.03 | 95.20 | 100.16 | 140.73 | ||||||||||||||||||||||||
|
S&P 500
|
100.00 | 115.79 | 122.15 | 76.95 | 97.31 | 111.97 | ||||||||||||||||||||||||
|
Peer Index
|
100.00 | 107.58 | 116.74 | 56.79 | 143.06 | 144.85 | ||||||||||||||||||||||||
In constructing the peer group composite index (“Peer
Index”) for use in the stock performance graph above, the
Company used the shareholder returns of various publicly held
companies (weighted in accordance with each company’s stock
market capitalization at December 31, 2005 and including
reinvestment of dividends) that compete with the Company in
three industry segments: automotive parts, industrial parts and
office products (each group of companies included in the Peer
Index as competing with the Company in a separate industry
segment is hereinafter referred to as a “Peer Group”).
Included in the automotive parts Peer Group are those companies
making up the Dow Jones U.S. Auto Parts Index (the Company
is a member of such industry group, and its individual
shareholder return was included when calculating the Peer Index
results set forth in the performance graph). Included in the
industrial parts Peer Group are Applied Industrial Technologies,
Inc. and Kaman Corporation and included in the office products
Peer Group is United Stationers Inc. The Peer Index does not
break out a separate electrical/electronic peer group due to the
fact that there is currently no true market comparative to EIS.
The electrical/electronic component of sales is redistributed to
the Company’s other segments on a pro rata basis to
calculate the final Peer Index.
14
Table of Contents
In determining the Peer Index, each Peer Group was weighted to
reflect the Company’s annual net sales in each industry
segment. Each industry segment of the Company comprised the
following percentages of the Company’s net sales for the
fiscal years shown:
| Industry Segment | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||||
|
Automotive Parts
|
51 | % | 49 | % | 49 | % | 48 | % | 52 | % | 50 | % | ||||||||||||
|
Industrial Parts
|
29 | % | 30 | % | 31 | % | 32 | % | 29 | % | 31 | % | ||||||||||||
|
Office Products
|
17 | % | 17 | % | 16 | % | 16 | % | 16 | % | 15 | % | ||||||||||||
|
Electrical/Electronic Materials
|
3 | % | 4 | % | 4 | % | 4 | % | 3 | % | 4 | % | ||||||||||||
Holders
As of December 31, 2010, there were 5,483 holders of record
of the Company’s common stock. The number of holders of
record does not include beneficial owners of the common stock
whose shares are held in the names of various dealers, clearing
agencies, banks, brokers and other fiduciaries.
Sales
of Unregistered Securities
All of our sales of securities in 2010 were registered under the
Securities Act of 1933, as amended.
Issuer
Purchases of Equity Securities
The following table provides information about the purchases of
shares of the Company’s common stock during the three month
period ended December 31, 2010:
|
Total Number of
|
Maximum Number of
|
|||||||||||||||
|
Total
|
Shares Purchased as
|
Shares That May Yet
|
||||||||||||||
|
Number of
|
Average
|
Part of Publicly
|
be Purchased Under
|
|||||||||||||
|
Shares
|
Price Paid
|
Announced Plans or
|
the Plans or
|
|||||||||||||
| Period | Purchased(1) | per Share | Programs(2) | Programs | ||||||||||||
|
October 1, 2010 through October 31, 2010
|
98,149 | $ | 46.53 | 33,393 | 16,063,252 | |||||||||||
|
November 1, 2010 through November 30, 2010
|
146,866 | $ | 47.32 | 85,900 | 15,977,352 | |||||||||||
|
December 1, 2010 through December 31, 2010
|
173,278 | $ | 50.69 | 875 | 15,976,477 | |||||||||||
|
Totals
|
418,293 | $ | 48.53 | 120,168 | 15,976,477 | |||||||||||
| (1) | Includes shares surrendered by employees to the Company to satisfy tax withholding obligations in connection with the vesting of shares of restricted stock, the exercise of stock options and/or tax withholding obligations. | |
| (2) | On August 21, 2006 and November 17, 2008, the Board of Directors authorized and announced the repurchase of 15 million shares and 15 million shares, respectively. The authorization for these repurchase plans continues until all such shares have been repurchased or the repurchase plan is terminated by action of the Board of Directors. Approximately 1.0 million shares authorized in the repurchase plan announced in 2006 and all 15 million shares authorized in 2008 remain to be repurchased by the Company. There were no other publicly announced plans outstanding as of December 31, 2010. |
15
Table of Contents
| ITEM 6 . | SELECTED FINANCIAL DATA . |
The following table sets forth certain selected historical
financial and operating data of the Company as of the dates and
for the periods indicated. The following selected financial data
are qualified by reference to, and should be read in conjunction
with, the consolidated financial statements, related notes and
other financial information set forth beginning on
page F-1,
as well as in “Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of
Operations” of this report.
| Year Ended December 31, | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||||
|
Net sales
|
$ | 11,207,589 | $ | 10,057,512 | $ | 11,015,263 | $ | 10,843,195 | $ | 10,457,942 | ||||||||||
|
Cost of goods sold
|
7,954,645 | 7,047,750 | 7,742,773 | 7,625,972 | 7,353,447 | |||||||||||||||
|
Operating and non-operating expenses, net
|
2,491,161 | 2,365,597 | 2,504,022 | 2,400,478 | 2,333,579 | |||||||||||||||
|
Income before taxes
|
761,783 | 644,165 | 768,468 | 816,745 | 770,916 | |||||||||||||||
|
Income taxes
|
286,272 | 244,590 | 293,051 | 310,406 | 295,511 | |||||||||||||||
|
Net income
|
$ | 475,511 | $ | 399,575 | $ | 475,417 | $ | 506,339 | $ | 475,405 | ||||||||||
|
Weighted average common shares outstanding during
year — assuming dilution
|
158,461 | 159,707 | 162,986 | 170,135 | 172,486 | |||||||||||||||
|
Per common share:
|
||||||||||||||||||||
|
Diluted net income
|
$ | 3.00 | $ | 2.50 | $ | 2.92 | $ | 2.98 | $ | 2.76 | ||||||||||
|
Dividends declared
|
1.64 | 1.60 | 1.56 | 1.46 | 1.35 | |||||||||||||||
|
December 31 closing stock price
|
51.34 | 37.96 | 37.86 | 46.30 | 47.43 | |||||||||||||||
|
Long-term debt, less current maturities
|
250,000 | 500,000 | 500,000 | 250,000 | 500,000 | |||||||||||||||
|
Total equity
|
2,802,714 | 2,629,372 | 2,393,378 | 2,782,946 | 2,610,707 | |||||||||||||||
|
Total assets
|
$ | 5,465,044 | $ | 5,004,689 | $ | 4,786,350 | $ | 4,774,069 | $ | 4,496,984 | ||||||||||
| ITEM 7 . | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . |
OVERVIEW
Genuine Parts Company is a service organization engaged in the
distribution of automotive replacement parts, industrial
replacement parts, office products and electrical/electronic
materials. The Company has a long tradition of growth dating
back to 1928, the year we were founded in Atlanta, Georgia. In
2010, the Company conducted business throughout the United
States, Canada, Mexico and Puerto Rico from approximately 2,000
locations.
We recorded consolidated net sales of $11.2 billion for the
year ended December 31, 2010, an increase of 11% compared
to $10.1 billion in 2009. Consolidated net income for the
year ended December 31, 2010 was $476 million, up 19%
from $400 million in 2009. The improving market conditions
in the industries that we serve combined with our internal
growth initiatives drove the Company’s strong performance
in 2010.
The 11% sales growth in 2010 follows a 9% decrease in revenues
in 2009 and a 2% increase in revenues in 2008. Our 19% increase
in net income follows a 16% and 6% decrease in net income in
2009 and 2008, respectively. Throughout this three year period,
the Company has implemented a variety of initiatives in each of
our four business segments to grow sales and earnings, including
the introduction of new and expanded product lines, geographic
expansion (including acquisitions), sales to new markets,
enhanced customer marketing programs and a variety of gross
margin and cost savings initiatives. The effects of the economic
slowdown, which we began to experience in the final quarter of
2008, adversely impacted the benefit of these initiatives
through 2009. In 2010, however, the recovering economy served to
further support the benefits of our internal growth initiatives.
With regard to the December 31, 2010 consolidated balance
sheet, the Company’s cash balance of $530 million was
up $193 million or 57% from $337 million at
December 31, 2009. This increase marks the second
consecutive year the Company has significantly improved its cash
position and relates to the increase in net income in 2010 and
an improved working capital position for both years. Accounts
receivable increased by approximately 15%,
16
Table of Contents
relatively in-line with our sales increase in the fourth quarter
of the year and inventory was up slightly, including
acquisitions. Accounts payable increased $281 million or
26% from the prior year, due primarily to improved payment terms
with certain suppliers and other ongoing payables initiatives
such as a procurement card program. Total debt outstanding at
December 31, 2010 was unchanged from $500 million at
December 31, 2009.
RESULTS
OF OPERATIONS
Our results of operations are summarized below for the three
years ended December 31, 2010, 2009 and 2008.
| Year Ended December 31, | ||||||||||||||||
| 2010 | 2009 | 2008 | ||||||||||||||
| (In thousands except per share data) | ||||||||||||||||
|
Net Sales
|
$ | 11,207,589 | $ | 10,057,512 | $ | 11,015,263 | ||||||||||
|
Gross Profit
|
3,252,944 | 3,009,762 | 3,272,490 | |||||||||||||
|
Net Income
|
475,511 | 399,575 | 475,417 | |||||||||||||
|
Diluted Earnings Per Share
|
3.00 | 2.50 | 2.92 | |||||||||||||
Net
Sales
Consolidated net sales for the year ended December 31, 2010
totaled $11.2 billion, an 11% increase from 2009 driven by
sales growth in all four of our business segments. The
Industrial and Electrical business segments experienced the
greatest percentage increases for the year, as the manufacturing
sector of the economy was much stronger in 2010 relative to
2009. These businesses also benefited from acquisitions in 2010.
Sales for the Automotive business segment were much improved in
2010 as well, primarily due to the benefits of well executed
internal initiatives and the overall improvement in the economy.
Cumulatively, prices in 2010 were up approximately 1% in the
Automotive segment, up approximately 3% in the Industrial
segment, up approximately 4% in the Electrical segment and
approximately flat in the Office segment.
Consolidated net sales for the year ended December 31, 2009
totaled $10.1 billion, a 9% decrease from 2008. Each of our
four businesses experienced sales decreases, with the Industrial
and Electrical business segments showing the most significant
declines, as the manufacturing sector of the economy was
severely impacted by the weak economic conditions, which we
began to experience in the latter part of 2008. The general
weakness in demand resulting from lower consumer spending and
industrial production and higher unemployment appeared to
stabilize over the last half of 2009. Among the four quarters in
2009, the fourth quarter was the strongest period for sales in
each business segment. Cumulatively, prices in 2009 were down
approximately 3% in the Automotive segment, approximately flat
in the Industrial segment and up approximately 4% in the Office
segment and 2% in the Electrical segment.
Automotive
Group
Net sales for the Automotive Group (“Automotive”) were
$5.6 billion in 2010, an increase of 7% from 2009. Sales
improved in 2010 due to the successful execution of our sales
initiatives and the stronger economy, which drove increased
demand for automotive maintenance and supply items. Automotive
revenues were up 6% in the first quarter, followed by 7%
increases in the second and third quarters, and a 9% increase in
the fourth quarter. Other factors impacting our Automotive sales
for the year include the effect of currency, which positively
impacted sales by approximately 2%.
Automotive sales were $5.2 billion in 2009, a decrease of
2% from 2008. Sales were impacted by the soft economy in 2009,
which reduced the overall level of consumer spending and,
specifically, the demand for automotive maintenance and supply
items. The first half of the year proved to be the most
challenging, with Automotive sales down 7% and 5% in the first
and second quarters, respectively. Sales were down 1% in the
third quarter followed by a 6% increase in the fourth quarter.
Other factors impacting our Automotive sales for the year
include acquisitions, which had an approximately 1% positive
effect on sales, and the effect of currency, which negatively
impacted sales by approximately 2%.
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Industrial
Group
Net sales for Motion Industries, our Industrial Group
(“Industrial”), were $3.5 billion in 2010, an
increase of 22% compared to 2009. Several factors contributed to
the sales increase for this group, including the positive impact
of their internal sales initiatives and the strong rebound in
the manufacturing sector of the economy served by Industrial.
This was evidenced by the ongoing improvement in the
manufacturing industrial production and capacity utilization
indices, which this group tends to track. Also in 2010, sales
were positively impacted by acquisitions, which accounted for
approximately 5% of Industrial’s sales growth for the year.
As a result of these several factors, Industrial revenues were
up 9% in the first quarter of 2010, up 26% in the second
quarter, then up 29% and 24% in the third and fourth quarters,
respectively.
Net sales were $2.9 billion in 2009, a decrease of 18%
compared to 2008. Through the first three quarters of the year,
sales were especially weak for this group due to the effects of
very low manufacturing activity, as evidenced by the reported
levels of manufacturing industrial production and capacity
utilization and its negative impact on demand for industrial
products. This weakness was widespread, as we experienced sales
declines in nearly all of our major customer categories. The
industrial indices we follow showed some early signs of
stabilization in the third quarter and we observed a slight
strengthening in these indicators as we entered the fourth
quarter. Industrial sales were down 11% in the fourth quarter,
which marked a significant improvement from the declines of the
first three quarters of the year. In 2009, sales were positively
impacted by several acquisitions, which contributed
approximately 3% to sales for the year.
Office
Group
Net sales for S.P. Richards, our Office Products Group
(“Office”), were $1.6 billion in 2010, up
slightly compared to the prior year. Office revenues stabilized
in 2010 relative to prior year trends, although the office
products industry continued to experience soft market conditions
throughout the year as a result of reduced business spending and
the ongoing impact of elevated unemployment levels. Sales
decreased approximately 1% in the first and second quarters,
were flat in the third quarter and were up by 3% in the fourth
quarter of 2010. The fourth quarter increase is significant, as
the industry-wide slowdown in office products consumption has
pressured this group for several years and the fourth quarter of
2010 marks the first positive sales comparison for Office since
the second quarter of 2007.
Net sales were $1.6 billion in 2009, down 5% compared to
2008 and the third consecutive year of decreased revenues for
Office. This three year sales trend reflects the negative impact
of higher white collar and service unemployment on office
products consumption, which has affected the office products
industry since 2007. In 2009, sales improved sequentially, with
decreases of 7%, 6%, 5% and 4% in the first, second, third and
fourth quarters, respectively. For the year, sales were
positively impacted by three acquisitions completed in 2008,
which contributed nearly 3% to sales in Office. The increase in
net sales due to acquisitions, as well as our sales initiatives,
was more than offset by the prevailing poor conditions in the
office products industry.
Electrical
Group
Net sales for EIS, our Electrical and Electronic Group
(“Electrical”), increased to $450 million in
2010, up 30% from 2009. Electrical sales increased by 16% in the
first quarter, and this was followed by increases of 32% in the
second quarter, 31% in the third quarter and 40% in the fourth
quarter. The revenue growth in 2010 was driven by our sales
initiatives, which were strongly supported by manufacturing
expansion during the year, as measured by the Institute for
Supply Management’s Purchasing Managers Index. In addition,
acquisitions in 2010 contributed approximately 9% to
Electrical’s sales growth for the year.
Net sales decreased to $346 million in 2009, down 26% from
2008. Electrical sales declined by 25% in the first quarter, 34%
in the second quarter and 30% in the third quarter. For the
fourth quarter, sales were down 12%. Manufacturing contraction,
as measured by the Institute for Supply Management’s
Purchasing Managers Index, was evident through June and then
began to stabilize and improve over the last half of the year.
This factor explains the quarterly sales trends at Electrical in
2009. Acquisitions had less than a 1% positive impact on
Electrical sales in 2009.
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Cost
of Goods Sold
Cost of goods sold was $8.0 billion, $7.0 billion and
$7.7 billion in 2010, 2009 and 2008, respectively. The 13%
increase in cost of goods sold from 2009 to 2010 is directly
related to the sales increase for the same period. Cost of goods
sold represented 71.0% of net sales in 2010, 70.1% of net sales
in 2009 and 70.3% of net sales in 2008. The increase in cost of
goods sold as a percent of net sales in 2010 relative to 2009
and 2008 reflects the impact of certain pricing adjustments
implemented in Automotive during 2009 as well as ongoing
competitive pricing pressures in Office. These factors more than
offset our gross margin initiatives to enhance our pricing
strategies, promote and sell higher margin products and minimize
material acquisition costs.
In 2010, all four of our business segments experienced vendor
price increases, although the Automotive and Office increases
were relatively immaterial. In 2009, our Office and Electrical
business segments experienced vendor price increases. Industrial
was flat and Automotive pricing was down for the year. In 2008,
all four of our business segments experienced vendor price
increases. In any year where we experience price increases, we
are able to work with our customers to pass most of these along
to them.
Operating
Expenses
Selling, administrative and other expenses
(“SG&A”) increased by $147 million or 7% to
$2.4 billion in 2010, representing 21.1% of net sales and
down from 22.1% of net sales in 2009. SG&A expenses as a
percentage of net sales improved from the prior year due
primarily to the benefit of greater expense leverage associated
with the 11% sales increase for the year. In addition,
management’s ongoing cost control measures in areas such as
personnel, freight, fleet and logistics have served to further
improve the Company’s cost structure. After reducing the
size of its workforce by approximately 12% during 2008 and 2009,
the Company added back only 1% of that in 2010 (including
acquisitions), despite the 11% increase in revenues. In total,
of the estimated $70 million cost savings in 2009, the
Company estimates that it added back approximately
$20 million in costs in 2010, primarily associated with the
increase in sales and earnings. Our management teams remain
focused on the ongoing assessment of the appropriate cost
structure in our businesses. Depreciation and amortization
expense in 2010 was $89 million, down slightly from 2009.
The provision for doubtful accounts was $11 million in
2010, down 61% from $28 million in 2009. The decrease in
bad debt expense reflects a much improved collections
environment in 2010 relative to the prior year. We believe the
Company is adequately reserved for bad debts at
December 31, 2010.
In 2009, SG&A was $2.2 billion, down $140 million
or 6% from 2008 and representing 22.1% of net sales. This
compared to 21.4% of net sales in 2008. This percentage increase
was primarily due to the loss of expense leverage associated
with the 9% sales decrease for the year. During 2009, management
implemented extensive cost control initiatives to offset this
loss of leverage. These measures eliminated approximately
$70 million in operating costs and helped drive the
decrease in absolute SG&A dollars for the year.
Depreciation and amortization expense in 2009 was
$90 million, up slightly from 2008. The provision for
doubtful accounts was $28 million in 2009, up 17% from a
$24 million bad debt expense in 2008.
Total share-based compensation expense for the years ended
December 31, 2010, 2009 and 2008 was $7.0 million,
$8.6 million, and $13.0 million, respectively. Refer
to Note 5 of the Consolidated Financial Statements for
further information regarding share-based compensation.
Non-Operating
Expenses and Income
Non-operating expenses consist primarily of interest. Interest
expense was $28 million in 2010 and 2009 and
$32 million in 2008. The decrease in expense relative to
2008 is the result of an improved interest rate on certain
long-term debt, effective November 2008.
In “Other”, interest income net of noncontrolling
interests has increased in each of the last two years due
primarily to our improved cash position and the elimination of
certain noncontrolling interests in 2009.
Income
Before Income Taxes
Income before income taxes was $762 million in 2010, an
increase of 18.3% from $644 million in 2009. As a
percentage of net sales, income before income taxes was 6.8% in
2010, reflecting an increase from 6.4% in 2009. In
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2009, income before income taxes of $644 million was down
16.0% from $768 million in 2008 and as a percentage of net
sales was 6.4%, a decrease from 7.0% in 2008.
Automotive
Group
Automotive income before income taxes as a percentage of net
sales, which we refer to as operating margin, increased to 7.5%
in 2010 from 7.4% in 2009. The improvement in operating margin
for 2010 is attributed to the benefit of greater expense
leverage associated with Automotive’s 7% sales increase for
the year. Automotive’s initiatives to grow sales and
control costs are intended to further improve its operating
margin in the years ahead.
Automotive’s operating margin increased to 7.4% in 2009
from 7.2% in 2008. The improvement in operating margin for 2009
is attributed to the benefit of cost reduction measures
implemented during 2008 and 2009.
Industrial
Group
Industrial’s operating margin increased to 7.3% in 2010
from 5.6% in 2009. The increase in operating margin in 2010 is
due to the combination of greater expense leverage associated
with a 22% sales increase, cost savings and increased volume
incentives. Industrial will continue to focus on its sales
initiatives and cost controls to further improve its operating
margin in the years ahead.
Industrial’s operating margin decreased to 5.6% in 2009
from 8.4% in 2008. The decrease in operating margin in 2009 was
primarily a reflection of the extreme downturn in industrial
demand that we began to experience in the fourth quarter of
2008. These conditions led to lower sales volumes in 2009, which
severely impacted our expense leverage despite significant cost
reduction efforts.
Office
Group
The operating margin in Office increased to 8.0% in 2010 from
7.7% in 2009. The increase in operating margin in 2010 reflects
the positive impact of our cost savings initiatives combined
with the benefit of higher volume incentives from suppliers. The
increase in incentives was due to our fourth quarter sales
growth and related increase in purchase volumes, which allowed
us to achieve higher program growth tiers with suppliers.
The operating margin in Office was 7.7% in 2009, down from 8.3%
in 2008. The prevailing weakness in the office products industry
that began in 2007 continued to pressure the operating margin at
Office in 2009.
Electrical
Group
The operating margin in Electrical decreased to 6.9% in 2010
from 7.3% in 2009. The decrease in operating margin is mainly
due to escalating copper prices during the year, which generally
do not affect profit dollars, but negatively impact margins as
copper is generally billed to customers at cost. The margin
pressures associated with this industry standard pricing
practice for copper more than offset the benefits of a stronger
manufacturing sector in 2010 and greater expense leverage
associated with a 30% sales increase.
The operating margin in Electrical decreased to 7.3% in 2009
from 7.9% in 2008. The decrease in operating margin was
primarily a function of weak market conditions. This factor
outweighed the benefits of Electrical’s sales initiatives
and expense savings.
Income
Taxes
The effective income tax rate of 37.6% in 2010 was down from
38.0% in 2009. The decrease from 2009 is attributable to
favorable foreign income taxes for the year. The income tax rate
decreased to 38.0% in 2009 from 38.1% in 2008. The decrease from
the 2008 rate is mainly due to tax-free income in 2009
associated with a Company retirement plan.
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Table of Contents
Net
Income
Net income was $476 million in 2010, an increase of 19%
from $400 million in 2009. On a per share diluted basis,
net income was $3.00 in 2010 compared to $2.50 in 2009, up 20%.
Net income in 2010 was 4.2% of net sales compared to 4.0% of net
sales in 2009.
Net income of $400 million in 2009 was down 16% from
$475 million in 2008. On a per share diluted basis, net
income of $2.50 in 2009 was down 14% compared to $2.92 in 2008.
Net income in 2009 was 4.0% of net sales compared to 4.3% of net
sales in 2008.
FINANCIAL
CONDITION
Our cash balance of $530 million at December 31, 2010
was up $193 million or 57% from December 31, 2009, due
primarily to the increase in net income in 2010 and an improved
working capital position relative to 2009. The Company’s
accounts receivable balance at December 31, 2010 increased
by approximately 15% from the prior year, which reflects the
Company’s 14% sales increase for the fourth quarter of
2010. Inventory at December 31, 2010 was up slightly from
December 31, 2009, which is well below the Company’s
increase in sales and primarily attributable to acquisitions.
Accounts payable increased $281 million or approximately
26% from December 31, 2009 due primarily to increased
inventory purchases related to the Company’s sales
increase, improved payment terms with certain suppliers and
other payables initiatives such as the ongoing expansion of our
procurement card program. Goodwill and other intangible assets
increased by $38 million or 22% from December 31, 2009
due to the Company’s acquisitions during the year. The
change in our December 31, 2010 balance for the pension and
other post-retirement benefits liabilities, down
$41 million or approximately 14% from December 31,
2009, is primarily due to a change in funded status of the
Company’s pension and other post-retirement plans in 2010
and a $91 million pension contribution during the year.
LIQUIDITY
AND CAPITAL RESOURCES
The Company’s sources of capital consist primarily of cash
flows from operations, supplemented as necessary by private
issuances of debt and bank borrowings. We have $500 million
of total debt outstanding at December 31, 2010, of which
$250 million matures in November 2011 and is accounted for
as current debt at December 31, 2010. The remaining
$250 million matures in November 2013. In addition, the
Company has available a $350 million unsecured revolving
line of credit. No amounts were outstanding under the line of
credit at December 31, 2010 and 2009. The capital and
credit markets were volatile over the last few years, although
these conditions did not materially impact our access to these
markets. Currently, we believe that our cash on hand and
available short-term and long-term sources of capital are
sufficient to fund the Company’s operations, including
working capital requirements, scheduled debt payments, interest
payments, capital expenditures, benefit plan contributions,
income tax obligations, dividends, share repurchases and
contemplated acquisitions.
The ratio of current assets to current liabilities was 2.2 to 1
at December 31, 2010, and before consideration of current
debt, was 2.6 to 1. This compares to 2.9 to 1 at
December 31, 2009. Our liquidity position remains solid.
The Company’s $500 million in total debt outstanding
at December 31, 2010 is unchanged from 2009.
Sources
and Uses of Net Cash
A summary of the Company’s consolidated statements of cash
flows is as follows:
| Year Ended December 31, | Percent Change | |||||||||||||||||||
| Net Cash Provided by (Used in): | 2010 | 2009 | 2008 | 2010 vs. 2009 | 2009 vs. 2008 | |||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Operating Activities
|
$ | 678,663 | $ | 845,298 | $ | 530,309 | (20 | )% | 59 | % | ||||||||||
|
Investing Activities
|
(172,348 | ) | (264,420 | ) | (214,334 | ) | (35 | )% | 23 | % | ||||||||||
|
Financing Activities
|
(320,569 | ) | (330,383 | ) | (472,573 | ) | (3 | )% | (30 | )% | ||||||||||
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Net Cash
Provided by Operating Activities:
The Company continues to generate cash and net cash provided by
operating activities totaled $679 million in 2010. This
reflects a 20% decrease from 2009, as working capital as a
source of cash was $129 million less in 2010 relative to
2009 and pension contributions in 2010 increased by $35 million
from 2009. These items were partially offset by a
$76 million increase in net income. Net cash provided by
operating activities of $845 million in 2009 represents a
59% increase from 2008 and primarily relates to the
$368 million net decrease in cash used for working capital
requirements, including accounts receivable, inventory and
accounts payable, net of the $76 million decrease in net
income from 2008.
Net Cash
Used in Investing Activities:
Net cash flow used in investing activities was $172 million
in 2010 compared to $264 million in 2009, a decrease of
35%. Cash used for acquisitions of businesses in 2010 was
$44 million less than in 2009, while capital expenditures
increased by $16 million for the year. The decrease in
investing activities was primarily due to a $73 million
purchase of properties under a construction and lease agreement
in 2009. This transaction also explains the increase in
investing activities in 2009 from 2008, net of a
$36 million decrease in capital expenditures in 2009 from
2008. Cash used for acquisitions of businesses in 2009 was
relatively consistent with 2008.
Net Cash
Used in Financing Activities:
The Company used $321 million of cash in financing
activities in 2010, a 3% decrease from the $330 million
used in financing activities in 2009. Cash used in financing
activities in 2009 was down 30% from the $473 million used
in 2008. For the three years presented, net cash used in
financing activities was primarily for dividends paid to
shareholders and repurchases of the Company’s common stock.
The Company paid dividends to shareholders of $258 million,
$254 million and $252 million during 2010, 2009 and
2008, respectively. The Company expects this trend of increasing
dividends to continue in the foreseeable future. During 2010,
2009 and 2008, the Company repurchased $75 million,
$26 million and $273 million, respectively, of the
Company’s common stock. We expect to remain active in our
share repurchase program, but the amount and value of shares
repurchased will vary annually.
Notes
and Other Borrowings
The Company maintains a $350 million unsecured revolving
line of credit with a consortium of financial institutions,
which matures in December 2012 and bears interest at LIBOR plus
.30% (0.56% at December 31, 2010). At December 31,
2010 and 2009, no amounts were outstanding under the line of
credit. Due to the workers’ compensation and insurance
reserve requirements in certain states, the Company also had
unused letters of credit of approximately $50 million
outstanding at December 31, 2010 and 2009.
At December 31, 2010, the Company had unsecured Senior
Notes outstanding under a $500 million financing
arrangement as follows: $250 million, Series B, 6.23%
fixed, due 2011; and $250 million senior unsecured note,
4.67% fixed, due 2013. These borrowings contain covenants
related to a maximum
debt-to-capitalization
ratio and certain limitations on additional borrowings. At
December 31, 2010, the Company was in compliance with all
such covenants. The weighted average interest rate on the
Company’s outstanding borrowings was approximately 5.45% at
December 31, 2010 and 2009. Total interest expense, net of
interest income, for all borrowings was $26.6 million,
$27.1 million and $29.8 million in 2010, 2009 and
2008, respectively.
Contractual
and Other Obligations
In October 2007, the Company entered into a sale-leaseback
transaction with a financial institution. In connection with the
transaction, the Company sold certain automotive retail store
properties and immediately leased the properties back over a
lease term of twenty years. The lease was classified as an
operating lease. Net proceeds from the transaction amounted to
approximately $56 million. The Company realized a net gain
of approximately $20 million, which was deferred and is
being amortized over the lease term.
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Table of Contents
The following table shows the Company’s approximate
obligations and commitments, including interest due on credit
facilities, to make future payments under specified contractual
obligations as of December 31, 2010:
Contractual
Obligations
| Payment Due by Period | ||||||||||||||||||||
|
Less Than
|
Over
|
|||||||||||||||||||
| Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Credit facilities
|
$ | 548,329 | $ | 275,952 | $ | 272,377 | $ | — | $ | — | ||||||||||
|
Capital leases
|
2,215 | 408 | 642 | 483 | 682 | |||||||||||||||
|
Operating leases
|
505,043 | 124,370 | 168,553 | 84,023 | 128,097 | |||||||||||||||
|
Total contractual cash obligations
|
$ | 1,055,587 | $ | 400,730 | $ | 441,572 | $ | 84,506 | $ | 128,779 | ||||||||||
Due to the uncertainty of the timing of future cash flows
associated with the Company’s unrecognized tax benefits at
December 31, 2010, the Company is unable to make reasonably
reliable estimates of the period of cash settlement with the
respective taxing authorities. Therefore, $50 million of
unrecognized tax benefits have been excluded from the
contractual obligations table above. Refer to Note 6 of the
Consolidated Financial Statements for a discussion on income
taxes.
Purchase orders or contracts for the purchase of inventory and
other goods and services are not included in our estimates. We
are not able to determine the aggregate amount of such purchase
orders that represent contractual obligations, as purchase
orders may represent authorizations to purchase rather than
binding agreements. Our purchase orders are based on our current
distribution needs and are fulfilled by our vendors within short
time horizons. The Company does not have significant agreements
for the purchase of inventory or other goods specifying minimum
quantities or set prices that exceed our expected requirements.
The Company guarantees the borrowings of certain independently
owned automotive parts stores (independents) and certain other
affiliates in which the Company has a noncontrolling equity
ownership interest (affiliates). The Company’s maximum
exposure to loss as a result of its involvement with these
independents and affiliates is generally equal to the total
borrowings subject to the Company’s guarantee. To date, the
Company has had no significant losses in connection with
guarantees of independents’ and affiliates’
borrowings. The following table shows the Company’s
approximate commercial commitments as of December 31, 2010:
Other
Commercial Commitments
| Amount of Commitment Expiration per Period | ||||||||||||||||||||
|
Total Amounts
|
Less Than
|
Over
|
||||||||||||||||||
| Committed | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Line of credit
|
$ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
|
Standby letters of credit
|
50,419 | 50,419 | — | — | — | |||||||||||||||
|
Guaranteed borrowings of independents and affiliates
|
200,926 | 29,747 | 118,661 | 52,518 | — | |||||||||||||||
|
Total commercial commitments
|
$ | 251,345 | $ | 80,166 | $ | 118,661 | $ | 52,518 | $ | — | ||||||||||
In addition, the Company sponsors defined benefit pension plans
that may obligate us to make contributions to the plans from
time to time. Contributions in 2010 were $91 million. We
expect to make a $52 million cash contribution to our
qualified defined benefit plans in 2011, and contributions
required for 2011 and future years will depend on a number of
unpredictable factors including the market performance of the
plans’ assets and future changes in interest rates that
affect the actuarial measurement of the plans’ obligations.
Share
Repurchases
In 2010, the Company repurchased approximately 1.8 million
shares and the Company had remaining authority to purchase
approximately 16.0 million shares at December 31, 2010.
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CRITICAL
ACCOUNTING POLICIES
General
Management’s Discussion and Analysis of Financial Condition
and Results of Operations is based upon our consolidated
financial statements, which have been prepared in accordance
with U.S. generally accepted accounting principles. The
preparation of our consolidated financial statements requires
management to make estimates, assumptions and judgments that
affect the reported amounts of assets, liabilities, net sales
and expenses and related disclosure of contingent assets and
liabilities. Management bases its estimates on historical
experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions or conditions.
We describe in this section certain critical accounting policies
that require us to make significant estimates, assumptions and
judgments. An accounting policy is deemed to be critical if it
requires an accounting estimate to be made based on assumptions
about matters that are uncertain at the time the estimate is
made and if different estimates that reasonably could have been
used, or changes in the accounting estimates that are reasonably
likely to occur periodically, could materially impact the
consolidated financial statements. Management believes the
following critical accounting policies reflect its most
significant estimates and assumptions used in the preparation of
the consolidated financial statements. For further information
on the critical accounting policies, see Note 1 of the
Consolidated Financial Statements.
Inventories —
Provisions for Slow Moving and Obsolescence
The Company identifies slow moving or obsolete inventories and
estimates appropriate loss provisions related thereto.
Historically, these loss provisions have not been significant as
the vast majority of the Company’s inventories are not
highly susceptible to obsolescence and are eligible for return
under various vendor return programs. While the Company has no
reason to believe its inventory return privileges will be
discontinued in the future, its risk of loss associated with
obsolete or slow moving inventories would increase if such were
to occur.
Allowance
for Doubtful Accounts — Methodology
The Company evaluates the collectability of accounts receivable
based on a combination of factors. Initially, the Company
estimates an allowance for doubtful accounts as a percentage of
net sales based on historical bad debt experience. This initial
estimate is periodically adjusted when the Company becomes aware
of a specific customer’s inability to meet its financial
obligations (e.g., bankruptcy filing) or as a result of changes
in the overall aging of accounts receivable. While the Company
has a large customer base that is geographically dispersed, a
general economic downturn in any of the industry segments in
which the Company operates could result in higher than expected
defaults and, therefore, the need to revise estimates for bad
debts. For the years ended December 31, 2010, 2009 and
2008, the Company recorded provisions for bad debts of
$10.6 million, $28.5 million, and $23.9 million,
respectively.
Consideration
Received from Vendors
The Company enters into agreements at the beginning of each year
with many of its vendors that provide for inventory purchase
incentives. Generally, the Company earns inventory purchase
incentives upon achieving specified volume purchasing levels or
other criteria. The Company accrues for the receipt of these
incentives as part of its inventory cost based on cumulative
purchases of inventory to date and projected inventory purchases
through the end of the year. While management believes the
Company will continue to receive consideration from vendors in
2011 and beyond, there can be no assurance that vendors will
continue to provide comparable amounts of incentives in the
future or that we will be able to achieve the specified volumes
necessary to take advantage of such incentives.
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Table of Contents
Impairment
of Property, Plant and Equipment and Goodwill and Other
Intangible Assets
At least annually, the Company evaluates property, plant and
equipment, goodwill and other intangible assets for potential
impairment indicators. The Company’s judgments regarding
the existence of impairment indicators are based on market
conditions and operational performance, among other factors.
Future events could cause the Company to conclude that
impairment indicators exist and that assets associated with a
particular operation are impaired. Evaluating for impairment
also requires the Company to estimate future operating results
and cash flows which require judgment by management. Any
resulting impairment loss could have a material adverse impact
on the Company’s financial condition and results of
operations.
Employee
Benefit Plans
The Company’s benefit plan committees in the U.S. and
Canada establish investment policies and strategies and
regularly monitor the performance of the Company’s pension
plan assets. The pension plan investment strategy implemented by
the Company’s management is to achieve long-term objectives
and invest the pension assets in accordance with the applicable
pension legislation in the U.S. and Canada and fiduciary
standards. The long-term primary objectives for the pension plan
funds are to provide for a reasonable amount of long-term growth
of capital without undue exposure to risk, protect the assets
from erosion of purchasing power and provide investment results
that meet or exceed the pension plan’s actuarially assumed
long term rate of return. The Company’s investment strategy
with respect to pension plan assets is to generate a return in
excess of the passive portfolio benchmark (50% S&P 500
Index, 5% Russell Mid Cap Index, 10% Russell 2000 Index, 5% MSCI
EAFE Index, and 30% BarCap U.S. Govt/Credit).
We make several critical assumptions in determining our pension
plan liabilities and related pension expense. We believe the
most critical of these assumptions are the expected rate of
return on plan assets and the discount rate. Other assumptions
we make relate to employee demographic factors such as rate of
compensation increases, mortality rates, retirement patterns and
turnover rates.
Based on the investment policy for the pension plans, as well as
an asset study that was performed based on the Company’s
asset allocations and future expectations, the Company’s
expected rate of return on plan assets for measuring 2011
pension expense or income is 7.87% for the plans. The asset
study forecasted expected rates of return for the approximate
duration of the Company’s benefit obligations, using
capital market data and historical relationships.
The discount rate is chosen as the rate at which pension
obligations could be effectively settled and is based on capital
market conditions as of the measurement date. We have matched
the timing and duration of the expected cash flows of our
pension obligations to a yield curve generated from a broad
portfolio of high-quality fixed income debt instruments to
select our discount rate. Based upon this cash flow matching
analysis, we selected a weighted average discount rate for the
plans of 5.74% at December 31, 2010.
Net periodic benefit cost for our defined benefit pension plans
was $21.9 million, $7.3 million and $46.9 million
for the years ended December 31, 2010, 2009 and 2008,
respectively. The decreasing trend in pension cost from 2008 to
2009 was primarily due to the curtailment and subsequent
remeasurement which is discussed below, and the change in
assumptions for the rate of return on plan assets, the discount
rate and the rate of compensation increases. Refer to
Note 7 of the Consolidated Financial Statements for more
information regarding employee benefit plans.
In April 2009, the Company recorded a $4.3 million non-cash
curtailment adjustment in connection with a reorganization,
which reduced the expected years of future service of employees
covered by the U.S. defined benefit pension plan.
In July 2009, the Company announced changes to the
U.S. postretirement benefit plan. Effective January 1,
2010, future retirees no longer receive employer-provided
medical benefits and current pre-65 retirees no longer receive
employer-provided post-65 benefits (beyond an access-only
arrangement).
25
Table of Contents
QUARTERLY
RESULTS OF OPERATIONS
The following is a summary of the quarterly results of
operations for the years ended December 31, 2010 and 2009:
| Three Months Ended | ||||||||||||||||
| March 31, | June 30, | Sept. 30, | Dec. 31, | |||||||||||||
| (In thousands except per share data) | ||||||||||||||||
|
2010
|
||||||||||||||||
|
Net Sales
|
$ | 2,602,115 | $ | 2,847,186 | $ | 2,950,560 | $ | 2,807,728 | ||||||||
|
Gross Profit
|
760,475 | 822,310 | 853,031 | 817,128 | ||||||||||||
|
Net Income
|
100,609 | 124,467 | 131,785 | 118,650 | ||||||||||||
|
Earnings Per Share:
|
||||||||||||||||
|
Basic
|
.63 | .79 | .84 | .75 | ||||||||||||
|
Diluted
|
.63 | .78 | .83 | .75 | ||||||||||||
|
2009
|
||||||||||||||||
|
Net Sales
|
$ | 2,444,496 | $ | 2,535,045 | $ | 2,606,757 | $ | 2,471,214 | ||||||||
|
Gross Profit
|
732,201 | 744,855 | 765,246 | 767,460 | ||||||||||||
|
Net Income
|
89,159 | 103,610 | 107,639 | 99,167 | ||||||||||||
|
Earnings Per Share:
|
||||||||||||||||
|
Basic
|
.56 | .65 | .67 | .62 | ||||||||||||
|
Diluted
|
.56 | .65 | .67 | .62 | ||||||||||||
We recorded the quarterly earnings per share amounts as if each
quarter was a discrete period. As a result, the sum of the basic
and diluted earnings per share will not necessarily total the
annual basic and diluted earnings per share.
The preparation of interim consolidated financial statements
requires management to make estimates and assumptions for the
amounts reported in the interim condensed consolidated financial
statements. Specifically, the Company makes estimates and
assumptions in its interim consolidated financial statements for
the accrual of bad debts, inventory adjustments and discount and
volume incentives earned, among others. Bad debts are accrued
based on a percentage of sales, and volume incentives are
estimated based upon cumulative and projected purchasing levels.
Inventory adjustments are accrued on an interim basis and
adjusted in the fourth quarter based on the annual October 31
book-to-physical
inventory adjustment. The methodology and practices used in
deriving estimates and assumptions for interim reporting
typically results in adjustments upon accurate determination at
year-end. The effect of these adjustments in 2010 and 2009 was
not significant.
| ITEM 7A . | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . |
Although the Company does not face material risks related to
interest rates and commodity prices, the Company is exposed to
changes in foreign currency rates with respect to foreign
currency denominated operating revenues and expenses.
Foreign
Currency
The Company has translation gains or losses that result from
translation of the results of operations of an operating
unit’s foreign functional currency into U.S. dollars
for consolidated financial statement purposes. The
Company’s principal foreign currency exchange exposure is
the Canadian dollar, which is the functional currency of our
Canadian operations. Foreign currency exchange exposure
particularly in regard to the Canadian dollar and, to a lesser
extent, the Mexican peso, positively impacted our results for
the year ended December 31, 2010.
During 2010 and 2009, it was estimated that a 10% shift in
exchange rates between those foreign functional currencies and
the U.S. dollar would have impacted translated net sales by
approximately $140 million and $104 million,
respectively.
26
Table of Contents
| ITEM 8 . | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . |
The information required by this Item 8 is set forth in a
separate section of this report. See “Index to Consolidated
Financial Statements and Financial Statement Schedules”
beginning on
page F-1.
| ITEM 9 . | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . |
None.
| ITEM 9A . | CONTROLS AND PROCEDURES . |
Management’s
conclusion regarding the effectiveness of disclosure controls
and procedures
As of the end of the period covered by this report, an
evaluation was performed under the supervision and with the
participation of the Company’s management, including the
Chief Executive Officer (CEO) and Chief Financial Officer (CFO),
of the effectiveness of the Company’s disclosure controls
and procedures, as such term is defined in SEC
Rule 13a-15(e).
Based on that evaluation, the Company’s management,
including the CEO and CFO, concluded that the Company’s
disclosure controls and procedures were effective, as of the end
of the period covered by this report, to provide reasonable
assurance that information required to be disclosed in the
Company’s reports under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the SEC’s
rules and forms, and that such information is accumulated and
communicated to the Company’s management, including the CEO
and CFO, as appropriate, to allow timely decisions regarding
required disclosure.
Management’s
report on internal control over financial reporting
A report of management’s assessment of our internal control
over financial reporting, as such term is defined in SEC
Rule 13a-15(f),
as of December 31, 2010 is set forth in a separate section
of this report. See “Index to Consolidated Financial
Statements and Financial Statement Schedules” beginning on
page F-1.
The attestation report called for by Item 308(b) of
Regulation S-K
is incorporated herein by reference to the Report of Independent
Registered Public Accounting Firm on Internal Control over
Financial Reporting, set forth in a separate section of this
report. See “Index to Consolidated Financial Statements and
Financial Statement Schedules” beginning on
page F-1.
Changes
in internal control over financial reporting
There have been no changes in the Company’s internal
control over financial reporting during the Company’s
fourth fiscal quarter ended December 31, 2010 that have
materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial
reporting.
| ITEM 9B . | OTHER INFORMATION . |
None.
27
Table of Contents
PART III
.
| ITEM 10 . | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . |
EXECUTIVE
OFFICERS OF THE COMPANY
Executive officers of the Company are elected by the Board of
Directors and each serves at the pleasure of the Board of
Directors until his successor has been elected and qualified, or
until his earlier death, resignation, removal, retirement or
disqualification. The current executive officers of the Company
are:
Thomas C. Gallagher,
age 63, has been President of
the Company since 1990, Chief Executive Officer since August
2004 and Chairman of the Board since February 2005.
Mr. Gallagher served as Chief Operating Officer of the
Company from 1990 until August 2004.
Jerry W. Nix,
age 65, was appointed as a director of
the Company and elected Vice-Chairman by the Board of Directors
in November 2005. He is Executive Vice President-Finance and
Chief Financial Officer of the Company, a position he has held
since 2000. Previously, Mr. Nix held the position of Senior
Vice President-Finance from 1990 to 2000.
Robert J. Susor,
age 65, has been the Executive Vice
President of the Company since 2003. Mr. Susor previously
served as Senior Vice President-Market Development from 1991 to
2003. Mr. Susor will be retiring as of April 30, 2011.
Paul D. Donahue,
age 54, was appointed President of
the Automotive Parts Group in July 2009 and is also Executive
Vice President of the Company, a position he has held since
August 2007. Previously, Mr. Donahue was President and
Chief Operating Officer of S.P. Richards Company from 2004 to
2007 and was Executive Vice President — Sales and
Marketing in 2003, the year he joined the Company.
Bruce Clayton,
age 64, has been the Senior Vice
President-Human Resources at the Company since November 2004.
Previously, Mr. Clayton held the position of Vice
President-Risk Management and Employee Services from June 2000
to November 2004.
Further information required by this item is set forth under the
heading “Nominees for Director”, under the heading
“Corporate Governance — Code of Conduct and
Ethics”, under the heading “Corporate Governance
-Board Committees — Audit Committee”, under the
heading “Corporate Governance — Director
Nominating Process” and under the heading
“Section 16(a) Beneficial Ownership Reporting
Compliance” of the Proxy Statement and is incorporated
herein by reference.
| ITEM 11 . | EXECUTIVE COMPENSATION . |
Information required by this item is set forth under the
headings “Executive Compensation”, “Additional
Information Regarding Executive Compensation”, “2010
Grants of Plan-Based Awards”, “2010 Outstanding Equity
Awards at Fiscal Year-End”, “2010 Option Exercises and
Stock Vested”, “2010 Pension Benefits”,
“2010 Nonqualified Deferred Compensation”, “Post
Termination Payments and Benefits”, “Compensation,
Nominating and Governance Committee Report”,
“Compensation, Nominating and Governance Committee
Interlocks and Insider Participation” and “Director
Compensation” of the Proxy Statement and is incorporated
herein by reference.
| ITEM 12 . | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS . |
Certain information required by this item is set forth below.
Additional information required by this item is set forth under
the headings “Security Ownership of Certain Beneficial
Owners” and “Security Ownership of Management” of
the Proxy Statement and is incorporated herein by reference.
28
Table of Contents
Equity
Compensation Plan Information
The following table gives information as of December 31,
2010 about the common stock that may be issued under all of the
Company’s existing equity compensation plans:
|
(c)
|
||||||||||||
|
Number of Securities
|
||||||||||||
|
Remaining Available for
|
||||||||||||
|
(a)
|
(b)
|
Future Issuance Under
|
||||||||||
|
Number of Securities to
|
Weighted Average
|
Equity Compensation
|
||||||||||
|
be Issued upon Exercise
|
Exercise Price of
|
Plans (Excluding
|
||||||||||
|
of Outstanding Options,
|
Outstanding Options,
|
Securities
|
||||||||||
| Plan Category | Warrants and Rights (1) | Warrants and Rights | Reflected in Column (a)) | |||||||||
|
Equity Compensation Plans Approved by Shareholders:
|
2,993,367 | (2) | $ | 39.87 | -0- | |||||||
| 3,397,249 | (3) | $ | 41.64 | 4,498,872 | (5) | |||||||
|
Equity Compensation Plans Not Approved by Shareholders:
|
62,002 | (4) | n/a | 937,998 | ||||||||
|
Total
|
6,452,618 | — | 5,436,870 | |||||||||
| (1) | Reflects the maximum number of shares issuable pursuant to the exercise or conversion of stock options, stock appreciation rights, restricted stock units and common stock equivalents. The actual number of shares issued upon exercise of stock appreciation rights is calculated based on the excess of fair market value of our common stock on date of exercise and the grant price of the stock appreciation rights. | |
| (2) | Genuine Parts Company 1999 Long-Term Incentive Plan, as amended | |
| (3) | Genuine Parts Company 2006 Long-Term Incentive Plan | |
| (4) | Genuine Parts Company Director’s Deferred Compensation Plan, as amended | |
| (5) | All of these shares are available for issuance pursuant to grants of full-value stock awards. |
| ITEM 13 . | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE . |
Information required by this item is set forth under the
headings “Corporate Governance — Independent
Directors” and “Transactions with Related
Persons” of the Proxy Statement and is incorporated herein
by reference.
| ITEM 14 . | PRINCIPAL ACCOUNTING FEES AND SERVICES . |
Information required by this item is set forth under the heading
“Proposal 5. Ratification of Selection of Independent
Auditors” of the Proxy Statement and is incorporated herein
by reference.
29
Table of Contents
PART IV
.
| ITEM 15 . | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . |
(a) Documents filed as part of this report
(1) Financial Statements
The following consolidated financial statements of Genuine Parts
Company and subsidiaries are included in this Annual Report on
Form 10-K.
See, also, the Index to Consolidated Financial Statements on
Page F-1.
Report of independent registered public accounting firm on
internal control over financial reporting
Report of independent registered public accounting firm on the
financial statements
Consolidated balance sheets — December 31, 2010
and 2009
Consolidated statements of income — Years ended
December 31, 2010, 2009 and 2008
Consolidated statements of equity — Years ended
December 31, 2010, 2009 and 2008
Consolidated statements of cash flows — Years ended
December 31, 2010, 2009 and 2008
Notes to consolidated financial statements —
December 31, 2010
(2) Financial Statement Schedules
The following consolidated financial statement schedule of
Genuine Parts Company and subsidiaries, set forth immediately
following the consolidated financials statements of Genuine
Parts Company and Subsidiaries, is filed pursuant to
Item 15(c):
Schedule II — Valuation and Qualifying Accounts
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions or
are inapplicable, and therefore have been omitted.
(3) Exhibits.
The following exhibits are filed as part of or incorporated by
reference in this report. Exhibits that are incorporated by
reference to documents filed previously by the Company under the
Securities Exchange Act of 1934, as amended, are filed with the
Securities and Exchange Commission under File
No. 1-5690.
The Company will furnish a copy of any exhibit upon request to
the Company’s Corporate Secretary.
| Exhibit 3 | .1 | Amended and Restated Articles of Incorporation of the Company, as amended April 23, 2007. (Incorporated herein by reference from the Company’s Current Report on Form 8-K, dated April 23, 2007.) | ||
| Exhibit 3 | .2 | By-laws of the Company, as amended and restated August 20, 2007. (Incorporated herein by reference from the Company’s Current Report on Form 8-K, dated August 20, 2007.) | ||
| Exhibit 4 | .2 | Specimen Common Stock Certificate. (Incorporated herein by reference from the Company’s Registration Statement on Form S-1, Registration No. 33-63874.) | ||
| Exhibit 4 | .3 | Note Purchase Agreement, dated November 30, 2001, for the sale of Series A Senior Notes due November 30, 2008, and the sale of Series B Senior Notes due November 30, 2011. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 7, 2002.) |
Instruments with respect to long-term debt where the total
amount of securities authorized there under does not exceed 10%
of the total assets of the Registrant and its subsidiaries on a
consolidated basis have not been filed. The Registrant agrees to
furnish to the Commission a copy of each such instrument upon
request.
| Exhibit 10 | .1* | The Genuine Parts Company Tax-Deferred Savings Plan, effective January 1, 1993. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 3, 1995.) |
30
Table of Contents
| Exhibit 10 | .2* | Amendment No. 1 to the Genuine Parts Company Tax-Deferred Savings Plan, dated June 1, 1996, effective June 1, 1996. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 7, 2005.) | ||
| Exhibit 10 | .3* | Genuine Parts Company Death Benefit Plan, effective July 15, 1997. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 10, 1998.) | ||
| Exhibit 10 | .4* | Amendment No. 2 to the Genuine Parts Company Tax-Deferred Savings Plan, dated April 19, 1999, effective April 19, 1999. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 10, 2000.) | ||
| Exhibit 10 | .5* | The Genuine Parts Company Original Deferred Compensation Plan, as amended and restated as of August 19, 1996. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 8, 2004.) | ||
| Exhibit 10 | .6* | Amendment to the Genuine Parts Company Original Deferred Compensation Plan, dated April 19, 1999, effective April 19, 1999. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 10, 2000.) | ||
| Exhibit 10 | .7* | Amendment No. 3 to the Genuine Parts Company Tax-Deferred Savings Plan, dated November 28, 2001, effective July 1, 2001. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 7, 2002.) | ||
| Exhibit 10 | .8* | Genuine Parts Company 1999 Long-Term Incentive Plan, as amended and restated as of November 19, 2001. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 21, 2003.) | ||
| Exhibit 10 | .9* | Amendment No. 4 to the Genuine Parts Company Tax-Deferred Savings Plan, dated June 5, 2003, effective June 5, 2003. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 8, 2004.) | ||
| Exhibit 10 | .10* | Genuine Parts Company Directors’ Deferred Compensation Plan, as amended and restated effective January 1, 2003, and executed November 11, 2003. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 8, 2004.) | ||
| Exhibit 10 | .11* | Description of Director Compensation. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 7, 2005.) | ||
| Exhibit 10 | .12* | Genuine Parts Company Stock Appreciation Rights Agreement. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 7, 2005.) | ||
| Exhibit 10 | .13* | Amendment No. 5 to the Genuine Parts Company Tax-Deferred Savings Plan, dated December 28, 2005, effective January 1, 2006. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 3, 2006.) | ||
| Exhibit 10 | .14* | Amendment No. 2 to the Genuine Parts Company Death Benefit Plan, dated November 9, 2005, effective April 1, 2005. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 3, 2006.) | ||
| Exhibit 10 | .15* | Genuine Parts Company 2006 Long-Term Incentive Plan, effective April 17, 2006. (Incorporated herein by reference from the Company’s Current Report on Form 8-K, dated April 18, 2006.) | ||
| Exhibit 10 | .16* | Amendment to the Genuine Parts Company 2006 Long-Term Incentive Plan, dated November 20, 2006, effective November 20, 2006. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated February 28, 2007.) | ||
| Exhibit 10 | .17* | Amendment No. 1 to the Genuine Parts Company Directors’ Deferred Compensation Plan, dated November 19, 2007, effective January 1, 2008. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated February 29, 2008.) | ||
| Exhibit 10 | .18* | Amendment No. 6 to the Genuine Parts Company Tax-Deferred Savings Plan, dated November 28, 2007, effective January 1, 2008. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated February 29, 2008.) | ||
| Exhibit 10 | .19* | Amendment No. 2 to the Genuine Parts Company 2006 Long-Term Incentive Plan, dated November 19, 2007, effective November 19, 2007. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated February 29, 2008.) | ||
| Exhibit 10 | .20* | Genuine Parts Company Performance Restricted Stock Unit Award Agreement. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated February 29, 2008.) |
31
Table of Contents
| Exhibit 10 | .21* | Genuine Parts Company Restricted Stock Unit Award Agreement. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated February 29, 2008.) | ||
| Exhibit 10 | .22* | Specimen Change in Control Agreement, as amended and restated as of November 19, 2007. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated February 29, 2008.) | ||
| Exhibit 10 | .23* | Genuine Parts Company Supplemental Retirement Plan, as amended and restated as of January 1, 2009. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated February 27, 2009.) | ||
| Exhibit 10 | .24* | Genuine Parts Company 2009 Annual Incentive Bonus Plan, dated March 31, 2009, effective January 1, 2009. (Incorporated herein by reference from the Company’s Quarterly Report on Form 10-Q dated May 7, 2009). | ||
| Exhibit 10 | .25* | Amendment No. 1 to the Genuine Parts Company Supplemental Retirement Plan, as amended and restated as of January 1, 2009, dated August 16, 2010, effective August 16, 2010. | ||
| Exhibit 10 | .26* | Amendment No. 2 to the Genuine Parts Company Supplemental Retirement Plan, as amended and restated as of January 1, 2009, dated November 16, 2010, effective January 1, 2011. | ||
| Exhibit 10 | .27* | Amendment No. 7 to the Genuine Parts Company Tax-Deferred Savings Plan, dated November 16, 2010, effective January 1, 2011. |
| * | Indicates management contracts and compensatory plans and arrangements. |
|
Exhibit 21
|
Subsidiaries of the Company. | |
|
Exhibit 23
|
Consent of Independent Registered Public Accounting Firm. | |
|
Exhibit 31.1
|
Certification signed by Chief Executive Officer pursuant to SEC Rule 13a-14(a). | |
|
Exhibit 31.2
|
Certification signed by Chief Financial Officer pursuant to SEC Rule 13a-14(a). | |
|
Exhibit 32.1
|
Statement of Chief Executive Officer of Genuine Parts Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). | |
|
Exhibit 32.2
|
Statement of Chief Financial Officer of Genuine Parts Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). | |
|
Exhibit 101
|
Interactive data files pursuant to Rule 405 of Regulation S-T: | |
| i) the Consolidated Balance Sheets as of December 31, 2010 and 2009; (ii) the Consolidated Statements of Income for the Years ended December 31, 2010, 2009 and 2008; (iii) the Consolidated Statements of Equity for the Years ended December 31, 2010, 2009 and 2008; (iv) the Consolidated Statements of Cash Flows for Years ended December 31, 2010, 2009 and 2008; (v) the Notes to the Consolidated Financial Statements, tagged as blocks of text; and (vi) Financial Statement Schedule II - Valuation and Qualifying Accounts. |
(b) Exhibits
See the response to Item 15(a)(3) above.
(c) Financial Statement Schedules
See the response to Item 15(a)(2) above.
32
Table of Contents
SIGNATURES
.
Pursuant to the requirements of Section 13 or 15(d) 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
|
/s/ Thomas
C. Gallagher
|
2/25/11 |
/s/ Jerry
W. Nix
|
2/25/11 | |||
|
|
|
|||||
|
Thomas C. Gallagher
|
(Date) | Jerry W. Nix | (Date) | |||
|
Chairman, President and Chief Executive Officer
|
Vice Chairman and Chief Financial and Accounting Officer | |||||
Table of Contents
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
|
/s/ Dr. Mary
B. Bullock
|
2/21/11 |
/s/ Jean
Douville
|
2/21/11 | |||
|
|
|
|||||
|
Dr. Mary B. Bullock
|
(Date) | Jean Douville | (Date) | |||
|
Director
|
Director | |||||
|
/s/ Thomas
C. Gallagher
|
2/21/11 |
/s/ George
C. Guynn
|
2/21/11 | |||
|
|
|
|||||
|
Thomas C. Gallagher
|
(Date) | George C. Guynn | (Date) | |||
| Director | Director | |||||
|
Chairman, President and Chief Executive
Officer (Principal Executive Officer) |
||||||
|
/s/ John
R. Holder
|
2/21/11 |
/s/ John
D. Johns
|
2/21/11 | |||
|
|
|
|||||
|
John R. Holder
|
(Date) | John D. Johns | (Date) | |||
|
Director
|
Director | |||||
|
/s/ Michael
M. E. Johns
|
2/21/11 |
/s/ J.
Hicks Lanier
|
2/21/11 | |||
|
|
|
|||||
|
Michael M. E. Johns
|
(Date) | J. Hicks Lanier | (Date) | |||
|
Director
|
Director | |||||
|
/s/ Robert
C. Loudermilk, Jr.
|
2/21/11 |
/s/ Wendy
B. Needham
|
2/21/11 | |||
|
|
|
|||||
|
Robert C. Loudermilk, Jr.
|
(Date) | Wendy B. Needham | (Date) | |||
|
Director
|
Director | |||||
|
/s/ Jerry
W. Nix
|
2/21/11 |
/s/
Larry L. Prince
|
2/21/11 | |||
|
|
|
|||||
|
Jerry W. Nix
|
(Date) | Larry L. Prince | (Date) | |||
|
Director
|
Director | |||||
| Vice Chairman and Chief Financial Officer (Principal Financial and Accounting Officer) | ||||||
|
/s/ Gary
W. Rollins
|
2/21/11 | |||||
|
|
||||||
|
Gary W. Rollins
|
(Date) | |||||
|
Director
|
||||||
Table of Contents
ANNUAL
REPORT ON
FORM 10-K
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL
STATEMENT SCHEDULE
| Page | ||||
| F-2 | ||||
| F-3 | ||||
| F-4 | ||||
| F-5 | ||||
| F-6 | ||||
| F-7 | ||||
| F-8 | ||||
| F-9 | ||||
| S-1 | ||||
F-1
Table of Contents
Report of
Management
Genuine
Parts Company
Management’s
Responsibility for the Financial Statements
We have prepared the accompanying consolidated financial
statements and related information included herein for the years
ended December 31, 2010, 2009 and 2008. The opinion of
Ernst & Young LLP, the Company’s independent
registered public accounting firm, on those consolidated
financial statements is included herein. The primary
responsibility for the integrity of the financial information
included in this annual report rests with management. Such
information was prepared in accordance with generally accepted
accounting principles appropriate in the circumstances based on
our best estimates and judgments and giving due consideration to
materiality.
Management’s
Report on Internal Control over Financial Reporting
The management of Genuine Parts Company and its subsidiaries
(the “Company”) is responsible for establishing and
maintaining adequate internal control over financial reporting
as defined in
Rule 13a-15(f)
under the Securities Exchange Act of 1934.
The Company’s internal control system was designed to
provide reasonable assurance to the Company’s management
and to the board of directors regarding the preparation and fair
presentation of the Company’s published consolidated
financial statements. The Company’s internal control over
financial reporting includes those policies and procedures that:
i. pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company;
ii. provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with U.S. generally accepted
accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of
management and directors of the Company; and
iii. provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition
of the Company’s assets that could have a material effect
on the financial statements.
All internal control systems, no matter how well designed, have
inherent limitations and may not prevent or detect
misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of
compliance with the policies or procedures may deteriorate.
The Company’s management, including our Chief Executive
Officer and Chief Financial Officer, assessed the effectiveness
of the Company’s internal control over financial reporting
as of December 31, 2010.
In making this assessment, it used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in “Internal Control-Integrated Framework.”
Based on this assessment, management concluded that, as of
December 31, 2010, the Company’s internal control over
financial reporting was effective.
Ernst & Young LLP has issued an audit report on the
Company’s operating effectiveness of internal control over
financial reporting as of December 31, 2010. This report
appears on
page F-3.
Audit
Committee Responsibility
The Audit Committee of Genuine Parts Company’s Board of
Directors is responsible for reviewing and monitoring the
Company’s financial reports and accounting practices to
ascertain that they are within acceptable limits of sound
practice in such matters. The membership of the Committee
consists of non-employee Directors. At periodic meetings, the
Audit Committee discusses audit and financial reporting matters
and the internal audit function with representatives of
financial management and with representatives from
Ernst & Young LLP.
/s/ Jerry
W. Nix
JERRY W. NIX
Vice Chairman and Chief Financial Officer
February 25, 2011
F-2
Table of Contents
Report of
Independent Registered Public Accounting Firm on Internal
Control over Financial Reporting
The Board
of Directors and Shareholders of Genuine Parts Company
We have audited Genuine Parts Company’s internal control
over financial reporting as of December 31, 2010, based on
criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Genuine Parts
Company’s management is responsible for maintaining
effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over
financial reporting included in the accompanying
Management’s Report on Internal Control Over Financial
Reporting section of the accompanying Report of Management. Our
responsibility is to express an opinion on the company’s
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Genuine Parts Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2010, based on the COSO
criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Genuine Parts Company as of
December 31, 2010 and 2009, and the related consolidated
statements of income, equity, and cash flows for each of the
three years in the period ended December 31, 2010 of
Genuine Parts Company and our report dated February 25,
2011 expressed an unqualified opinion thereon.
/s/ Ernst &
Young LLP
Atlanta, Georgia
February 25, 2011
F-3
Table of Contents
Report of
Independent Registered Public Accounting Firm on the Financial
Statements
The
Board of Directors and Shareholders of Genuine Parts
Company
We have audited the accompanying consolidated balance sheets of
Genuine Parts Company as of December 31, 2010 and 2009, and
the related consolidated statements of income, equity, and cash
flows for each of the three years in the period ended
December 31, 2010. Our audits also included the financial
statement schedule listed in the Index at Item 15(a). These
financial statements and schedule are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Genuine Parts Company at December 31,
2010 and 2009, and the consolidated results of its operations
and its cash flows for each of the three years in the period
ended December 31, 2010, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Genuine Parts Company’s internal control over financial
reporting as of December 31, 2010, based on criteria
established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 25, 2011 expressed
an unqualified opinion thereon.
/s/ Ernst &
Young LLP
Atlanta, Georgia
February 25, 2011
F-4
Table of Contents
| December 31 | ||||||||
| 2010 | 2009 | |||||||
| (In thousands, except share data and per share amounts) | ||||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$ | 529,968 | $ | 336,803 | ||||
|
Trade accounts receivable, net
|
1,364,406 | 1,187,075 | ||||||
|
Merchandise inventories, net
|
2,224,717 | 2,214,076 | ||||||
|
Prepaid expenses and other current assets
|
295,796 | 294,874 | ||||||
|
Total current assets
|
4,414,887 | 4,032,828 | ||||||
|
Goodwill and other intangible assets, less accumulated
amortization
|
209,548 | 171,532 | ||||||
|
Deferred tax asset
|
157,392 | 167,722 | ||||||
|
Other assets
|
199,087 | 147,583 | ||||||
|
Property, plant, and equipment:
|
||||||||
|
Land
|
72,636 | 69,829 | ||||||
|
Buildings, less allowance for depreciation (2010 —
$174,134; 2009 — $171,903)
|
218,967 | 212,859 | ||||||
|
Machinery and equipment, less allowance for depreciation
(2010 — $555,053; 2009 — $519,272)
|
192,527 | 202,336 | ||||||
|
Net property, plant, and equipment
|
484,130 | 485,024 | ||||||
| $ | 5,465,044 | $ | 5,004,689 | |||||
|
LIABILITIES AND EQUITY
|
||||||||
|
Current liabilities:
|
||||||||
|
Trade accounts payable
|
$ | 1,374,930 | $ | 1,094,347 | ||||
|
Current portion of debt
|
250,000 | — | ||||||
|
Accrued compensation
|
143,480 | 106,432 | ||||||
|
Other accrued expenses
|
115,659 | 100,931 | ||||||
|
Dividends payable
|
64,600 | 63,586 | ||||||
|
Income taxes payable
|
23,145 | 42,988 | ||||||
|
Total current liabilities
|
1,971,814 | 1,408,284 | ||||||
|
Long-term debt
|
250,000 | 500,000 | ||||||
|
Pension and other post-retirement benefit liabilities
|
258,807 | 300,197 | ||||||
|
Other long-term liabilities
|
181,709 | 166,836 | ||||||
|
Equity:
|
||||||||
|
Preferred stock, par value $1 per share — authorized
10,000,000 shares; none issued
|
— | — | ||||||
|
Common stock, par value $1 per share — authorized
450,000,000 shares; issued and outstanding 157,636,261 in
2010 and 158,917,846 shares in 2009
|
157,636 | 158,918 | ||||||
|
Accumulated other comprehensive loss
|
(298,352 | ) | (309,897 | ) | ||||
|
Retained earnings
|
2,934,535 | 2,772,309 | ||||||
|
Total parent equity
|
2,793,819 | 2,621,330 | ||||||
|
Noncontrolling interests in subsidiaries
|
8,895 | 8,042 | ||||||
|
Total equity
|
2,802,714 | 2,629,372 | ||||||
| $ | 5,465,044 | $ | 5,004,689 | |||||
See accompanying notes.
F-5
Table of Contents
| Year Ended December 31 | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands, except per share amounts) | ||||||||||||
|
Net sales
|
$ | 11,207,589 | $ | 10,057,512 | $ | 11,015,263 | ||||||
|
Cost of goods sold
|
7,954,645 | 7,047,750 | 7,742,773 | |||||||||
|
Gross margin
|
3,252,944 | 3,009,762 | 3,272,490 | |||||||||
|
Operating expenses:
|
||||||||||||
|
Selling, administrative, and other expenses
|
2,366,667 | 2,219,935 | 2,359,829 | |||||||||
|
Depreciation and amortization
|
89,332 | 90,411 | 88,698 | |||||||||
|
Provision for doubtful accounts
|
10,597 | 28,463 | 23,883 | |||||||||
|
Total operating expenses
|
2,466,596 | 2,338,809 | 2,472,410 | |||||||||
|
Non-operating expenses (income):
|
||||||||||||
|
Interest expense
|
28,061 | 27,885 | 31,721 | |||||||||
|
Other
|
(3,496 | ) | (1,097 | ) | (109 | ) | ||||||
|
Total non-operating expenses
|
24,565 | 26,788 | 31,612 | |||||||||
|
Income before income taxes
|
761,783 | 644,165 | 768,468 | |||||||||
|
Income taxes
|
286,272 | 244,590 | 293,051 | |||||||||
|
Net income
|
$ | 475,511 | $ | 399,575 | $ | 475,417 | ||||||
|
Basic net income per common share
|
$ | 3.01 | $ | 2.51 | $ | 2.93 | ||||||
|
Diluted net income per common share
|
$ | 3.00 | $ | 2.50 | $ | 2.92 | ||||||
|
Weighted average common shares outstanding
|
158,032 | 159,410 | 162,351 | |||||||||
|
Dilutive effect of stock options and non-vested restricted stock
awards
|
429 | 297 | 635 | |||||||||
|
Weighted average common shares outstanding — assuming
dilution
|
158,461 | 159,707 | 162,986 | |||||||||
See accompanying notes.
F-6
Table of Contents
|
Accumulated
|
Non-
|
|||||||||||||||||||||||||||||||
|
Additional
|
Other
|
Total
|
controlling
|
|||||||||||||||||||||||||||||
| Common Stock |
Paid-In
|
Comprehensive
|
Retained
|
Parent
|
Interests in
|
Total
|
||||||||||||||||||||||||||
| Shares | Amount | Capital | Loss | Earnings | Equity | Subsidiaries | Equity | |||||||||||||||||||||||||
| (In thousands, except share and per share amounts) | ||||||||||||||||||||||||||||||||
|
Balance at January 1, 2008
|
166,065,250 | $ | 166,065 | $ | — | $ | (123,715 | ) | $ | 2,674,366 | $ | 2,716,716 | $ | 66,230 | $ | 2,782,946 | ||||||||||||||||
|
Net income
|
— | — | — | — | 475,417 | 475,417 | — | 475,417 | ||||||||||||||||||||||||
|
Foreign currency translation adjustment
|
— | — | — | (112,150 | ) | — | (112,150 | ) | — | (112,150 | ) | |||||||||||||||||||||
|
Pension and postretirement benefit adjustment, net of income
taxes of $160,695
|
— | — | — | (242,697 | ) | — | (242,697 | ) | — | (242,697 | ) | |||||||||||||||||||||
|
Comprehensive income
|
120,570 | 120,570 | ||||||||||||||||||||||||||||||
|
Cash dividends declared, $1.56 per share
|
— | — | — | — | (253,166 | ) | (253,166 | ) | — | (253,166 | ) | |||||||||||||||||||||
|
Stock options exercised, net of income taxes of $586
|
157,643 | 158 | 77 | — | — | 235 | — | 235 | ||||||||||||||||||||||||
|
Share-based compensation
|
— | — | 12,977 | — | — | 12,977 | — | 12,977 | ||||||||||||||||||||||||
|
Purchase of stock
|
(6,780,385 | ) | (6,780 | ) | (13,054 | ) | — | (253,166 | ) | (273,000 | ) | — | (273,000 | ) | ||||||||||||||||||
|
Noncontrolling interest activities
|
— | — | — | — | — | — | 2,816 | 2,816 | ||||||||||||||||||||||||
|
Balance at December 31, 2008
|
159,442,508 | 159,443 | — | (478,562 | ) | 2,643,451 | 2,324,332 | 69,046 | 2,393,378 | |||||||||||||||||||||||
|
Net income
|
— | — | — | — | 399,575 | 399,575 | — | 399,575 | ||||||||||||||||||||||||
|
Foreign currency translation adjustment
|
— | — | — | 77,963 | — | 77,963 | — | 77,963 | ||||||||||||||||||||||||
|
Pension and postretirement benefit adjustment, net of income
taxes of $61,702
|
— | — | — | 90,702 | — | 90,702 | — | 90,702 | ||||||||||||||||||||||||
|
Comprehensive income
|
568,240 | 568,240 | ||||||||||||||||||||||||||||||
|
Cash dividends declared, $1.60 per share
|
— | — | — | — | (254,995 | ) | (254,995 | ) | — | (254,995 | ) | |||||||||||||||||||||
|
Stock options exercised, net of income taxes of $684
|
197,718 | 198 | 996 | — | — | 1,194 | — | 1,194 | ||||||||||||||||||||||||
|
Share-based compensation
|
— | — | 8,578 | — | — | 8,578 | — | 8,578 | ||||||||||||||||||||||||
|
Purchase of stock
|
(722,380 | ) | (723 | ) | (9,574 | ) | — | (15,722 | ) | (26,019 | ) | — | (26,019 | ) | ||||||||||||||||||
|
Noncontrolling interest activities
|
— | — | — | — | — | — | 2,161 | 2,161 | ||||||||||||||||||||||||
|
Purchase of remaining noncontrolling interest in Balkamp,
Inc.
|
— | — | — | — | — | — | (63,165 | ) | (63,165 | ) | ||||||||||||||||||||||
|
Balance at December 31, 2009
|
158,917,846 | 158,918 | — | (309,897 | ) | 2,772,309 | 2,621,330 | 8,042 | 2,629,372 | |||||||||||||||||||||||
|
Net income
|
— | — | — | — | 475,511 | 475,511 | — | 475,511 | ||||||||||||||||||||||||
|
Foreign currency translation adjustment
|
— | — | — | 33,742 | — | 33,742 | — | 33,742 | ||||||||||||||||||||||||
|
Pension and postretirement benefit adjustment, net of income
taxes of $(11,083)
|
— | — | — | (22,197 | ) | — | (22,197 | ) | — | (22,197 | ) | |||||||||||||||||||||
|
Comprehensive income
|
487,056 | 487,056 | ||||||||||||||||||||||||||||||
|
Cash dividends declared, $1.64 per share
|
— | — | — | — | (258,912 | ) | (258,912 | ) | — | (258,912 | ) | |||||||||||||||||||||
|
Stock options exercised, including tax benefit of $3,251
|
564,288 | 564 | 11,772 | — | — | 12,336 | — | 12,336 | ||||||||||||||||||||||||
|
Share-based compensation
|
— | — | 7,016 | — | — | 7,016 | — | 7,016 | ||||||||||||||||||||||||
|
Purchase of stock
|
(1,845,873 | ) | (1,846 | ) | (18,788 | ) | — | (54,373 | ) | (75,007 | ) | — | (75,007 | ) | ||||||||||||||||||
|
Noncontrolling interest activities
|
— | — | — | — | — | — | 853 | 853 | ||||||||||||||||||||||||
|
Balance at December 31, 2010
|
157,636,261 | $ | 157,636 | $ | — | $ | (298,352 | ) | $ | 2,934,535 | $ | 2,793,819 | $ | 8,895 | $ | 2,802,714 | ||||||||||||||||
See accompanying notes.
F-7
Table of Contents
| Year Ended December 31 | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Operating activities
|
||||||||||||
|
Net income
|
$ | 475,511 | $ | 399,575 | $ | 475,417 | ||||||
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
||||||||||||
|
Depreciation and amortization
|
89,332 | 90,411 | 88,698 | |||||||||
|
Excess tax (benefits) expense from share-based compensation
|
(3,251 | ) | 684 | 586 | ||||||||
|
Gain on sale of property, plant, and equipment
|
(1,685 | ) | (3,757 | ) | (2,086 | ) | ||||||
|
Deferred income taxes
|
11,994 | 27,899 | (40,023 | ) | ||||||||
|
Share-based compensation
|
7,016 | 8,578 | 12,977 | |||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Trade accounts receivable, net
|
(140,562 | ) | 69,258 | (19,695 | ) | |||||||
|
Merchandise inventories, net
|
44,865 | 194,743 | (20,709 | ) | ||||||||
|
Trade accounts payable
|
280,739 | 49,947 | (14,307 | ) | ||||||||
|
Other long-term assets
|
(48,423 | ) | (28,506 | ) | 49,729 | |||||||
|
Other, net
|
(36,873 | ) | 36,466 | (278 | ) | |||||||
| 203,152 | 445,723 | 54,892 | ||||||||||
|
Net cash provided by operating activities
|
678,663 | 845,298 | 530,309 | |||||||||
|
Investing activities
|
||||||||||||
|
Purchases of property, plant and equipment
|
(85,379 | ) | (69,445 | ) | (105,026 | ) | ||||||
|
Proceeds from sale of property, plant, and equipment
|
3,676 | 12,042 | 11,721 | |||||||||
|
Acquisition of businesses and other investments
|
(90,645 | ) | (134,203 | ) | (133,604 | ) | ||||||
|
Proceeds from disposal of businesses
|
— | — | 12,575 | |||||||||
|
Purchase of properties under construction and lease agreement
|
— | (72,814 | ) | — | ||||||||
|
Net cash used in investing activities
|
(172,348 | ) | (264,420 | ) | (214,334 | ) | ||||||
|
Financing activities
|
||||||||||||
|
Proceeds from debt
|
— | 795,000 | 1,283,000 | |||||||||
|
Payments on debt
|
— | (795,000 | ) | (1,283,000 | ) | |||||||
|
Stock options exercised
|
9,085 | 1,878 | 821 | |||||||||
|
Excess tax benefits (expense) from share-based compensation
|
3,251 | (684 | ) | (586 | ) | |||||||
|
Dividends paid
|
(257,898 | ) | (253,558 | ) | (251,808 | ) | ||||||
|
Purchase of stock
|
(75,007 | ) | (26,019 | ) | (273,000 | ) | ||||||
|
Changes in cash overdraft position
|
— | (52,000 | ) | 52,000 | ||||||||
|
Net cash used in financing activities
|
(320,569 | ) | (330,383 | ) | (472,573 | ) | ||||||
|
Effect of exchange rate changes on cash
|
7,419 | 18,531 | (7,462 | ) | ||||||||
|
Net increase (decrease) in cash and cash equivalents
|
193,165 | 269,026 | (164,060 | ) | ||||||||
|
Cash and cash equivalents at beginning of year
|
336,803 | 67,777 | 231,837 | |||||||||
|
Cash and cash equivalents at end of year
|
$ | 529,968 | $ | 336,803 | $ | 67,777 | ||||||
|
Supplemental disclosures of cash flow information
|
||||||||||||
|
Cash paid during the year for:
|
||||||||||||
|
Income taxes
|
$ | 275,979 | $ | 219,888 | $ | 338,859 | ||||||
|
Interest
|
$ | 28,061 | $ | 27,626 | $ | 31,297 | ||||||
See accompanying notes.
F-8
Table of Contents
Genuine
Parts Company and Subsidiaries
December 31, 2010
| 1. | Summary of Significant Accounting Policies |
Business
Genuine Parts Company and all of its majority-owned subsidiaries
(the Company) is a distributor of automotive replacement parts,
industrial replacement parts, office products, and
electrical/electronic materials. The Company serves a diverse
customer base through more than 2,000 locations in North America
and, therefore, has limited exposure from credit losses to any
particular customer, region, or industry segment. The Company
performs periodic credit evaluations of its customers’
financial condition and generally does not require collateral.
The Company has evaluated subsequent events through the date the
financial statements were issued.
Principles
of Consolidation
The consolidated financial statements include all of the
accounts of the Company. The net income attributable to
noncontrolling interests is not material to the Company’s
consolidated net income. Significant intercompany accounts and
transactions have been eliminated in consolidation.
Use of
Estimates
The preparation of the consolidated financial statements, in
conformity with U.S. generally accepted accounting
principles, requires management to make estimates and
assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results may
differ from those estimates and the differences could be
material.
Revenue
Recognition
The Company records revenue when the following criteria are met:
persuasive evidence of an arrangement exists, delivery has
occurred, the Company’s price to the customer is fixed and
determinable and collectability is reasonably assured. Delivery
is not considered to have occurred until the customer assumes
the risks and rewards of ownership.
Foreign
Currency Translation
The consolidated balance sheets and statements of income of the
Company’s foreign subsidiaries have been translated into
U.S. dollars at the current and average exchange rates,
respectively. The foreign currency translation adjustment is
included as a component of accumulated other comprehensive
(loss) income.
Cash
and Cash Equivalents
The Company considers all highly liquid investments with
maturities of three months or less when purchased to be cash
equivalents.
Trade
Accounts Receivable and the Allowance for Doubtful
Accounts
The Company evaluates the collectability of trade accounts
receivable based on a combination of factors. Initially, the
Company estimates an allowance for doubtful accounts as a
percentage of net sales based on historical bad debt experience.
This initial estimate is periodically adjusted when the Company
becomes aware of a specific customer’s inability to meet
its financial obligations (e.g., bankruptcy filing) or as a
result of changes in the overall aging of accounts receivable.
While the Company has a large customer base that is
geographically dispersed, a general economic downturn in any of
the industry segments in which the Company operates could result
in higher than expected defaults, and, therefore, the need to
revise estimates for bad debts. For the years ended
December 31, 2010, 2009, and 2008, the Company recorded
provisions for bad debts of approximately $10,597,000,
$28,463,000, and $23,883,000, respectively. At December 31,
2010 and 2009, the allowance for doubtful accounts was
approximately $15,599,000 and $16,590,000, respectively.
F-9
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
Merchandise
Inventories, Including Consideration Received From
Vendors
Merchandise inventories are valued at the lower of cost or
market. Cost is determined by the
last-in,
first-out (LIFO) method for a majority of automotive parts,
electrical/electronic materials, and industrial parts, and by
the
first-in,
first-out (FIFO) method for office products and certain other
inventories. If the FIFO method had been used for all
inventories, cost would have been approximately $383,094,000 and
$398,122,000 higher than reported at December 31, 2010 and
2009, respectively. During 2010, reductions in inventory levels
in industrial parts inventories resulted in liquidations of LIFO
inventory layers. The effect of the LIFO liquidation in 2010 was
to reduce cost of goods sold by approximately $25,000,000.
During 2009, reductions in inventory levels in industrial and
electrical parts inventories resulted in liquidations of LIFO
inventory layers. The effect of the LIFO liquidation in 2009 was
to reduce cost of goods sold by approximately $22,000,000.
The Company identifies slow moving or obsolete inventories and
estimates appropriate provisions related thereto. Historically,
these losses have not been significant as the vast majority of
the Company’s inventories are not highly susceptible to
obsolescence and are eligible for return under various vendor
return programs. While the Company has no reason to believe its
inventory return privileges will be discontinued in the future,
its risk of loss associated with obsolete or slow moving
inventories would increase if such were to occur.
The Company enters into agreements at the beginning of each year
with many of its vendors that provide for inventory purchase
incentives. Generally, the Company earns inventory purchase
incentives upon achieving specified volume purchasing levels or
other criteria. The Company accrues for the receipt of these
incentives as part of its inventory cost based on cumulative
purchases of inventory to date and projected inventory purchases
through the end of the year. While management believes the
Company will continue to receive consideration from vendors in
2011 and beyond, there can be no assurance that vendors will
continue to provide comparable amounts of incentives in the
future.
Prepaid
Expenses and Other Current Assets
Prepaid expenses and other current assets consist primarily of
prepaid expenses and amounts due from vendors.
Goodwill
and Other Intangible Assets
The Company reviews its goodwill and indefinite lived intangible
assets annually in the fourth quarter, or sooner if
circumstances indicate that the carrying amount may exceed fair
value. The present value of future cash flows approach was used
to determine any potential impairment. The Company determined
that these assets were not impaired and, therefore, no
impairments were recognized for the years ended
December 31, 2010, 2009, or 2008. If an impairment occurs
at a future date, it may have the effect of increasing the
volatility of the Company’s earnings.
Other
Assets
Other assets are comprised of the following:
| December 31 | ||||||||
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Retirement benefit assets
|
$ | 4,405 | $ | 7,642 | ||||
|
Deferred compensation benefits
|
17,205 | 15,490 | ||||||
|
Investment accounted for under the cost method
|
21,400 | 21,400 | ||||||
|
Cash surrender value of life insurance policies
|
68,348 | 59,890 | ||||||
|
Other
|
87,729 | 43,161 | ||||||
|
Total other assets
|
$ | 199,087 | $ | 147,583 | ||||
F-10
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
Property,
Plant, and Equipment
Property, plant, and equipment are stated at cost. Buildings
include certain leases capitalized at December 31, 2010 and
2009. Depreciation and amortization is primarily determined on a
straight-line basis over the following estimated useful life of
each asset: buildings and improvements, 10 to 40 years;
machinery and equipment, 5 to 15 years.
Long-Lived
Assets Other Than Goodwill
The Company assesses its long-lived assets other than goodwill
for impairment whenever facts and circumstances indicate that
the carrying amount may not be fully recoverable. To analyze
recoverability, the Company projects undiscounted net future
cash flows over the remaining life of such assets. If these
projected cash flows are less than the carrying amount, an
impairment would be recognized, resulting in a write-down of
assets with a corresponding charge to earnings. Impairment
losses, if any, are measured based upon the difference between
the carrying amount and the fair value of the assets.
Other
Long-Term Liabilities
Other long-term liabilities are comprised of the following:
| December 31 | ||||||||
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Post-employment and other benefit liabilities
|
$ | 28,325 | $ | 26,311 | ||||
|
Obligations under capital and other leases
|
12,622 | 13,504 | ||||||
|
Insurance liabilities
|
47,710 | 46,423 | ||||||
|
Deferred gain on sale-leaseback
|
16,515 | 17,496 | ||||||
|
Other taxes payable
|
49,097 | 39,973 | ||||||
|
Other
|
27,440 | 23,129 | ||||||
|
Total other long-term liabilities
|
$ | 181,709 | $ | 166,836 | ||||
The Company’s post-employment and other benefit liabilities
consist primarily of actuarially determined obligations and
deferred compensation plans. See Note 4 for further
discussion of the Company’s obligations under capital
leases and the sale-leaseback transaction. Other taxes payable
consists primarily of unrecognized tax benefits.
Insurance liabilities consist primarily of reserves for the
workers’ compensation program. The Company carries various
large risk deductible workers’ compensation policies for
the majority of workers’ compensation liabilities. The
Company records the workers’ compensation reserves based on
an analysis performed by an independent actuary. The analysis
calculates development factors, which are applied to total
reserves as provided by the various insurance companies who
underwrite the program. While the Company believes that the
assumptions used to calculate these liabilities are appropriate,
significant differences in actual experience or significant
changes in these assumptions may materially affect workers’
compensation costs.
Self-Insurance
The Company is self-insured for the majority of group health
insurance costs. A reserve for claims incurred but not reported
is developed by analyzing historical claims data provided by the
Company’s claims administrators. While the Company believes
that the assumptions used to calculate these liabilities are
appropriate, significant differences from historical trends may
materially impact financial results. These reserves are included
in accrued expenses in the accompanying consolidated balance
sheets as the expenses are expected to be paid within one year.
F-11
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
Accumulated
Other Comprehensive Loss
Accumulated other comprehensive loss is comprised of the
following:
| December 31 | ||||||||
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Foreign currency translation
|
$ | 129,255 | $ | 95,513 | ||||
|
Unrecognized net actuarial loss, net of tax
|
(460,937 | ) | (444,156 | ) | ||||
|
Unrecognized prior service credit, net of tax
|
33,330 | 38,746 | ||||||
|
Total accumulated other comprehensive loss
|
$ | (298,352 | ) | $ | (309,897 | ) | ||
Fair
Value of Financial Instruments
The carrying amounts reflected in the consolidated balance
sheets for cash and cash equivalents, trade accounts receivable
and trade accounts payable approximate their respective fair
values based on the short-term nature of these instruments. At
December 31, 2010 and 2009, the fair value of fixed rate
debt was approximately $529,000,000 and $533,000,000,
respectively. The fair value of fixed rate debt is designated as
Level 2 in the fair value hierarchy (i.e. significant
observable inputs) and is based primarily on the discounted
value of future cash flows using current market interest rates
offered for debt of similar credit risk and maturity.
Shipping
and Handling Costs
Shipping and handling costs are classified as selling,
administrative and other expenses in the accompanying
consolidated statements of income and totaled approximately
$150,000,000, $120,000,000, and $140,000,000 for the years ended
December 31, 2010, 2009, and 2008, respectively.
Advertising
Costs
Advertising costs are expensed as incurred and totaled
$36,800,000, $44,500,000, and $42,800,000 in the years ended
December 31, 2010, 2009, and 2008, respectively.
Accounting
for Legal Costs
The Company’s legal costs expected to be incurred in
connection with loss contingencies are expensed as such costs
are incurred.
Share-Based
Compensation
The Company maintains various long-term incentive plans, which
provide for the granting of stock options, stock appreciation
rights (SARs), restricted stock, restricted stock units (RSUs),
performance awards, dividend equivalents and other share-based
awards. SARs represent a right to receive upon exercise an
amount, payable in shares of common stock, equal to the excess,
if any, of the fair market value of the Company’s common
stock on the date of exercise over the base value of the grant.
The terms of such SARs require net settlement in shares of
common stock and do not provide for cash settlement. RSUs
represent a contingent right to receive one share of the
Company’s common stock at a future date. The majority of
awards previously granted vest on a pro-rata basis for periods
ranging from one to five years and are expensed accordingly on a
straight-line basis. The Company issues new shares upon exercise
or conversion of awards under these plans.
Net
Income per Common Share
Basic net income per common share is computed by dividing net
income by the weighted average number of common shares
outstanding during the year. The computation of diluted net
income per common share includes the
F-12
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
dilutive effect of stock options, stock appreciation rights and
non-vested restricted stock awards options. Options to purchase
approximately 4,500,000, 5,400,000 and 4,400,000 shares of
common stock ranging from $37 — $49 per share were
outstanding at December 31, 2010, 2009 and 2008,
respectively. These options were not included in the computation
of diluted net income per common share because the options’
exercise price was greater than the average market price of
common stock.
Recently
Issued Accounting Pronouncements
In June 2009, the FASB issued new guidance that addresses the
elimination of the concept of a qualifying special purpose
entity. It also replaces the quantitative-based risks and
rewards calculation for determining which enterprise has a
controlling financial interest in a variable interest entity
with an approach focused on identifying which enterprise has the
power to direct the activities of a variable interest entity and
the obligation to absorb losses of the entity or the right to
receive benefits from the entity. Additionally, the guidance
requires an ongoing assessment of whether a company is the
primary beneficiary of the entity. The Company adopted the new
guidance on January 1, 2010 and concluded that certain
independently controlled automotive parts stores for which the
Company guarantees debt are variable interest entities; however,
the Company is not the primary beneficiary. These entities are
discussed further in Note 8.
| 2. | Goodwill and Other Intangible Assets |
The changes in the carrying amount of goodwill during the years
ended December 31, 2010, 2009, and 2008 by reportable
segment, as well as other identifiable intangible assets,
consisting primarily of customer relationship intangible assets,
non-compete agreements, and trademarks, are summarized as
follows (in thousands):
| Goodwill | ||||||||||||||||||||||||
|
Electrical/
|
Identifiable
|
|||||||||||||||||||||||
|
Office
|
Electronic
|
Intangible
|
||||||||||||||||||||||
| Automotive | Industrial | Products | Materials | Assets | Total | |||||||||||||||||||
|
Balance as of January 1, 2008
|
$ | 24,187 | $ | 45,002 | $ | 2,131 | $ | — | $ | 11,133 | $ | 82,453 | ||||||||||||
|
Additions
|
19,767 | 25,834 | 8,423 | 2,870 | 27,548 | 84,442 | ||||||||||||||||||
|
Amortization
|
— | — | — | — | (2,861 | ) | (2,861 | ) | ||||||||||||||||
|
Foreign currency translation
|
(3,742 | ) | — | — | — | (1,467 | ) | (5,209 | ) | |||||||||||||||
|
Balance as of December 31, 2008
|
40,212 | 70,836 | 10,554 | 2,870 | 34,353 | 158,825 | ||||||||||||||||||
|
Additions
|
2 | 5,518 | — | — | 6,679 | 12,199 | ||||||||||||||||||
|
Amortization
|
— | — | — | — | (3,644 | ) | (3,644 | ) | ||||||||||||||||
|
Foreign currency translation
|
2,900 | — | — | — | 1,252 | 4,152 | ||||||||||||||||||
|
Balance as of December 31, 2009
|
43,114 | 76,354 | 10,554 | 2,870 | 38,640 | 171,532 | ||||||||||||||||||
|
Additions
|
— | 10,178 | — | 5,777 | 24,292 | 40,247 | ||||||||||||||||||
|
Amortization
|
— | — | — | — | (4,737 | ) | (4,737 | ) | ||||||||||||||||
|
Foreign currency translation
|
1,157 | 278 | — | — | 1,071 | 2,506 | ||||||||||||||||||
|
Balance as of December 31, 2010
|
$ | 44,271 | $ | 86,810 | $ | 10,554 | $ | 8,647 | $ | 59,266 | $ | 209,548 | ||||||||||||
| 3. | Credit Facilities |
There were no amounts subject to variable rates at
December 31, 2010 and 2009. The weighted average interest
rate on the Company’s outstanding borrowings was
approximately 5.45% at December 31, 2010 and 2009.
The Company maintains a $350,000,000 unsecured revolving line of
credit with a consortium of financial institutions that matures
in December 2012 and bears interest at LIBOR plus 0.30% (0.56%
at December 31, 2010).
F-13
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
The Company also has the option under this agreement to increase
its borrowing an additional $200,000,000. No amounts were
outstanding under this line of credit at December 31, 2010
and 2009. Certain borrowings contain covenants related to a
maximum
debt-to-capitalization
ratio and certain limitations on additional borrowings. At
December 31, 2010, the Company was in compliance with all
such covenants. Due to the workers’ compensation and
insurance reserve requirements in certain states, the Company
also had unused letters of credit of $50,419,000 and $50,403,000
outstanding at December 31, 2010 and 2009, respectively.
Amounts outstanding under the Company’s credit facilities
consist of the following:
| December 31 | ||||||||
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Unsecured term notes:
|
||||||||
|
November 30, 2001, Series B Senior Notes,
$250,000,000, 6.23% fixed, due November 30, 2011
|
$ | 250,000 | $ | 250,000 | ||||
|
November 30, 2008, Senior Unsecured Notes, $250,000,000,
4.67% fixed, due November 30, 2013
|
250,000 | 250,000 | ||||||
|
Total debt
|
500,000 | 500,000 | ||||||
|
Less debt due within one year
|
250,000 | — | ||||||
|
Long-term debt, excluding current portion
|
$ | 250,000 | $ | 500,000 | ||||
| 4. | Leased Properties |
In June 2003, the Company completed an amended and restated
master agreement to the $85,000,000 construction and lease
agreement (the Agreement). The lessor in the Agreement was an
independent third-party limited liability company, which had as
its sole member a publicly traded corporation. Properties
acquired by the lessor were constructed
and/or
then
leased to the Company under operating lease agreements. On
June 26, 2009, the Agreement expired. In accordance with
the Agreement, the Company purchased the properties from the
lessor for $72,814,000, including closing costs. The properties
are included in property, plant, and equipment in the
accompanying consolidated balance sheets.
Rent expense related to the Agreement is recorded under selling,
administrative, and other expenses in our consolidated
statements of income and was $489,000 and $2,586,000 for the
years ended December 31, 2009, and 2008, respectively.
In October 2007, the Company entered into a sale-leaseback
transaction with a financial institution. In connection with the
transaction, the Company sold certain automotive retail store
properties and immediately leased the properties back over a
lease term of twenty years. The lease was classified as an
operating lease. Net proceeds from the transaction amounted to
approximately $56,000,000. The Company realized a net gain of
approximately $20,000,000, which was deferred and is being
amortized over the lease term. The unamortized portion of the
deferred gain is included in other long-term liabilities in the
accompanying consolidated balance sheets.
At December 31, 2010 and 2009, buildings include $3,080,000
and $11,550,000 with accumulated depreciation of $1,787,000 and
$7,823,000, respectively, for capital leases of distribution
centers and stores. Depreciation expense for capital leases was
approximately $1,133,000, $1,828,000, and $2,267,000 in 2010,
2009, and 2008, respectively.
F-14
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
Future minimum payments, by year and in the aggregate, under the
capital and noncancelable operating leases with initial or
remaining terms of one year or more consisted of the following
at December 31, 2010 (in thousands):
|
Capital
|
Operating
|
|||||||
| Leases | Leases | |||||||
|
2011
|
$ | 408 | $ | 124,370 | ||||
|
2012
|
345 | 96,855 | ||||||
|
2013
|
297 | 71,698 | ||||||
|
2014
|
282 | 52,027 | ||||||
|
2015
|
201 | 31,996 | ||||||
|
Thereafter
|
682 | 128,097 | ||||||
|
Total minimum lease payments
|
2,215 | $ | 505,043 | |||||
|
Amounts representing interest
|
(922 | ) | ||||||
|
Present value of future minimum lease payments
|
$ | 1,293 | ||||||
Rental expense for operating leases was approximately
$147,886,000 in 2010, $153,523,000 in 2009, and $159,562,000 in
2008.
| 5. | Share-Based Compensation |
At December 31, 2010, total compensation cost related to
nonvested awards not yet recognized was approximately
$6,900,000. The weighted-average period over which this
compensation cost is expected to be recognized is approximately
three years. The aggregate intrinsic value for options and RSUs
outstanding at December 31, 2010 and 2009 was approximately
$67,100,000 and $17,500,000, respectively. The aggregate
intrinsic value for options and RSUs vested totaled
approximately $45,900,000 and $12,200,000 at December 31,
2010 and 2009, respectively. At December 31, 2010, the
weighted-average contractual life for outstanding and
exercisable options and RSUs was six and five years,
respectively. For the years ended December 31, 2010, 2009,
and 2008, $7,016,000, $8,578,000, and $12,977,000 of share-based
compensation cost was recorded, respectively. The total income
tax benefit recognized in the consolidated statements of income
for share-based compensation arrangements was approximately
$2,800,000, $3,400,000, and $5,200,000 for 2010, 2009, and 2008,
respectively. There have been no modifications to valuation
methodologies or methods during the years ended
December 31, 2010, 2009, and 2008.
For the years ended December 31, 2010 and 2008 the fair
value for options and SARs granted was estimated using a
Black-Scholes option pricing model with the following
weighted-average assumptions, respectively: risk-free interest
rate of 3.6% and 3.5%; dividend yield of 4.6% and 3.0%; annual
historical volatility factor of the expected market price of the
Company’s common stock of 19% and 17%; an average expected
life and estimated turnover based on the historical pattern of
existing grants of eight years and 4.0% to 6.0%, respectively.
The fair value of RSUs is based on the price of the
Company’s stock on the date of grant. The Company had no
grant activity for the year ended December 31, 2009. The
total fair value of shares vested during the years ended
December 31, 2010, 2009, and 2008, was $9,200,000,
$13,200,000, and $14,900,000, respectively.
F-15
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
A summary of the Company’s share-based compensation
activity and related information is as follows:
| 2010 | ||||||||
|
Weighted-
|
||||||||
|
Average
|
||||||||
|
Exercise
|
||||||||
| Shares (1) | Price (2) | |||||||
| (In thousands) | ||||||||
|
Outstanding at beginning of year
|
6,749 | $ | 41 | |||||
|
Granted
|
1,126 | 43 | ||||||
|
Exercised
|
(1,121 | ) | 34 | |||||
|
Forfeited
|
(363 | ) | 45 | |||||
|
Outstanding at end of year (3)
|
6,391 | $ | 42 | |||||
|
Exercisable at end of year
|
4,829 | $ | 42 | |||||
|
Shares available for future grants
|
4,499 | |||||||
| (1) | Shares include Restricted Stock Units (RSUs). | |
| (2) | The weighted-average exercise price excludes RSUs. | |
| (3) | The exercise prices for options and SARs outstanding as of December 31, 2010 ranged from approximately $32 to $49. The weighted-average remaining contractual life of all options and SARs outstanding is approximately six years. |
The weighted-average grant date fair value of options and SARs
granted during the years 2010 and 2008 was $5.41 and $5.78,
respectively. The Company had no grant activity for the year
ended December 31, 2009. The aggregate intrinsic value of
options exercised during the years ended December 31, 2010,
2009, and 2008 was $15,700,000, $4,700,000, and $5,000,000.
In 2010, the Company granted approximately 1,002,000 SARs and
124,000 RSUs. In 2008, the Company granted approximately
1,385,000 SARs and 116,000 RSUs.
A summary of the Company’s nonvested share awards (RSUs)
activity is as follows:
|
Weighted-
|
||||||||
|
Average Grant
|
||||||||
|
Date Fair
|
||||||||
| Nonvested Share Awards (RSUs) | Shares | Value | ||||||
| (In thousands) | ||||||||
|
Nonvested at January 1, 2010
|
126 | $ | 42 | |||||
|
Granted
|
124 | 43 | ||||||
|
Vested
|
(72 | ) | 44 | |||||
|
Forfeited
|
(7 | ) | 47 | |||||
|
Nonvested at December 31, 2010
|
171 | $ | 44 | |||||
For the years ended December 31, 2010, 2009 and 2008
approximately $3,300,000, ($684,000), and ($586,000),
respectively, of excess tax benefits (expense) was classified as
a financing cash inflow (outflow).
| 6. | Income Taxes |
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and amounts used
for income tax purposes. Undistributed earnings of the
Company’s foreign subsidiaries are considered to be
indefinitely reinvested. As such, no U.S. federal and state
income taxes have been provided thereon, and it is not
practicable to determine the amount of the related
F-16
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
unrecognized deferred income tax liability. Significant
components of the Company’s deferred tax assets and
liabilities are as follows:
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Deferred tax assets related to:
|
||||||||
|
Expenses not yet deducted for tax purposes
|
$ | 163,367 | $ | 151,488 | ||||
|
Pension liability not yet deducted for tax purposes
|
279,204 | 267,544 | ||||||
|
Capital loss
|
24,580 | 24,780 | ||||||
|
Valuation allowance
|
(24,784 | ) | (24,780 | ) | ||||
| 442,367 | 419,032 | |||||||
|
Deferred tax liabilities related to:
|
||||||||
|
Employee and retiree benefits
|
178,806 | 150,294 | ||||||
|
Inventory
|
72,767 | 79,327 | ||||||
|
Property, plant and equipment
|
33,474 | 30,438 | ||||||
|
Other
|
17,728 | 19,047 | ||||||
| 302,775 | 279,106 | |||||||
|
Net deferred tax asset
|
139,592 | 139,926 | ||||||
|
Current portion of deferred tax liability
|
17,800 | 27,796 | ||||||
|
Non-current deferred tax asset
|
$ | 157,392 | $ | 167,722 | ||||
The current portion of the deferred tax liability is included in
income taxes payable in the consolidated balance sheets. The
Company has a capital loss carryforward of approximately
$61,500,000 that will expire in 2013.
The components of income tax expense are as follows:
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Current:
|
||||||||||||
|
Federal
|
$ | 221,770 | $ | 171,691 | $ | 261,250 | ||||||
|
State
|
36,291 | 28,591 | 45,167 | |||||||||
|
Foreign
|
16,217 | 16,409 | 26,657 | |||||||||
|
Deferred
|
11,994 | 27,899 | (40,023 | ) | ||||||||
| $ | 286,272 | $ | 244,590 | $ | 293,051 | |||||||
The reasons for the difference between total tax expense and the
amount computed by applying the statutory Federal income tax
rate to income before income taxes are as follows:
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Statutory rate applied to income
|
$ | 266,624 | $ | 225,458 | $ | 268,964 | ||||||
|
Plus state income taxes, net of Federal tax benefit
|
24,621 | 20,977 | 25,831 | |||||||||
|
Capital loss
|
— | — | (30,038 | ) | ||||||||
|
Capital loss — valuation allowance
|
— | — | 24,787 | |||||||||
|
Other
|
(4,973 | ) | (1,845 | ) | 3,507 | |||||||
| $ | 286,272 | $ | 244,590 | $ | 293,051 | |||||||
The Company or one of its subsidiaries files income tax returns
in the U.S. federal jurisdiction, various states, and
foreign jurisdictions. With few exceptions, the Company is no
longer subject to federal, state and local tax examinations by
tax authorities for years before 2006 or subject to
non-United
States income tax examinations for
F-17
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
years ended prior to 2002. The Company is currently under audit
in the United States and Canada. Some audits may conclude in the
next 12 months and the unrecognized tax benefits recorded
in relation to the audits may differ from actual settlement
amounts. It is not possible to estimate the effect, if any, of
the amount of such change during the next twelve months to
previously recorded uncertain tax positions in connection with
the audits. However, the Company does not anticipate total
unrecognized tax benefits will significantly change during the
year due to the settlement of audits and the expiration of
statutes of limitations.
A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows:
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Balance at beginning of year
|
$ | 33,322 | $ | 30,453 | $ | 28,329 | ||||||
|
Additions based on tax positions related to the current year
|
4,243 | 5,648 | 5,822 | |||||||||
|
Additions for tax positions of prior years
|
3,493 | 993 | 1,068 | |||||||||
|
Reductions for tax positions for prior years
|
(624 | ) | — | (190 | ) | |||||||
|
Reduction for lapse in statute of limitations
|
(451 | ) | (2,779 | ) | (4,193 | ) | ||||||
|
Settlements
|
(558 | ) | (993 | ) | (383 | ) | ||||||
|
Balance at end of year
|
$ | 39,425 | $ | 33,322 | $ | 30,453 | ||||||
The amount of gross tax effected unrecognized tax benefits,
including interest and penalties, as of December 31, 2010
and 2009 was approximately $50,216,000 and $41,013,000,
respectively, of which approximately $18,189,000 and
$15,129,000, respectively, if recognized, would affect the
effective tax rate. During the years ended December 31,
2010, 2009, and 2008, the Company paid interest and penalties of
approximately $272,000, $363,000, and $815,000, respectively.
The Company had approximately $10,791,000 and $7,691,000 of
accrued interest and penalties at December 31, 2010 and
2009, respectively. The Company recognizes potential interest
and penalties related to unrecognized tax benefits as a
component of income tax expense.
| 7. | Employee Benefit Plans |
The Company’s defined benefit pension plans cover most of
its employees in the U.S. and Canada. The plan covering
U.S. employees is noncontributory and benefits are based on
the employees’ compensation during the highest five of
their last ten years of credited service. The Canadian plan is
contributory and benefits are based on career average
compensation. The Company’s funding policy is to contribute
an amount equal to the minimum required contribution under
ERISA. The Company may increase its contribution above the
minimum if appropriate to its tax and cash position and the
plans’ funded position.
In 2008, the U.S. defined benefit plan was amended to
prohibit employees hired on or after March 1, 2008 from
participating in the plan. The plan was also amended to freeze
credited service for participants who do not meet certain age
and length of service requirements as of December 31, 2008.
However, the plan continues to reflect future pay increases for
all participants.
In April 2009, the Company recorded a $4,298,000 non-cash
curtailment adjustment in connection with a reorganization,
which reduced the expected years of future service of employees
covered by the U.S. defined benefit pension plan.
Curtailment accounting is required if an event eliminates, for a
significant number of employees, the accrual of defined benefits
for some or all of their future service.
The Company also sponsors supplemental retirement plans covering
employees in the U.S. and Canada and other postretirement
benefit plans in the U.S. The Company uses a measurement
date of December 31st for its pension and other
postretirement benefit plans.
F-18
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
In July 2009, the Company announced changes to the
U.S. postretirement benefit plan. Effective January 1,
2010, future retirees no longer receive employer-provided
medical benefits and current pre-65 retirees no longer receive
employer-provided post-65 medical benefits (beyond an
access-only arrangement).
|
Other Postretirement
|
||||||||||||||||
| Pension Benefits | Benefits | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||
|
Changes in benefit obligation
|
||||||||||||||||
|
Benefit obligation at beginning of year
|
$ | 1,502,084 | $ | 1,450,030 | $ | 13,511 | $ | 29,318 | ||||||||
|
Service cost
|
12,312 | 16,534 | — | 443 | ||||||||||||
|
Interest cost
|
95,453 | 93,493 | 605 | 1,264 | ||||||||||||
|
Plan participants’ contributions
|
3,672 | 3,219 | 3,787 | 3,735 | ||||||||||||
|
Plan amendments
|
1,148 | — | — | (13,182 | ) | |||||||||||
|
Actuarial loss (gain)
|
122,050 | (21,257 | ) | 340 | (1,190 | ) | ||||||||||
|
Exchange rate changes
|
7,082 | 15,311 | — | — | ||||||||||||
|
Gross benefits paid
|
(54,790 | ) | (48,027 | ) | (6,255 | ) | (7,349 | ) | ||||||||
|
Less Federal subsidy
|
N/A | N/A | 341 | 472 | ||||||||||||
|
Curtailments
|
— | (7,219 | ) | — | — | |||||||||||
|
Benefit obligation at end of year
|
$ | 1,689,011 | $ | 1,502,084 | $ | 12,329 | $ | 13,511 | ||||||||
The benefit obligations for the Company’s U.S. pension
plans included in the above were $1,542,469,000 and
$1,382,677,000 at December 31, 2010 and 2009, respectively.
The total accumulated benefit obligation for the Company’s
defined benefit pension plans was approximately $1,526,951,000
and $1,315,266,000 at December 31, 2010 and 2009,
respectively.
The assumptions used to measure the pension and other
postretirement plan benefit obligations for the plans at
December 31, 2010 and 2009, were:
|
Other Postretirement
|
||||||||||||||||
| Pension Benefits | Benefits | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Weighted-average discount rate
|
5.74 | % | 6.54 | % | 4.25 | % | 5.20 | % | ||||||||
|
Rate of increase in future compensation levels
|
3.39 | % | 3.75 | % | — | — | ||||||||||
A 7.75% annual rate of increase in the per capita cost of
covered health care benefits was assumed on December 31,
2010. The rate was assumed to decrease ratably to 4.75% at
December 31, 2016, and thereafter.
|
Other Postretirement
|
||||||||||||||||
| Pension Benefits | Benefits | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||
|
Changes in plan assets
|
||||||||||||||||
|
Fair value of plan assets at beginning of year
|
$ | 1,216,415 | $ | 977,867 | $ | — | $ | — | ||||||||
|
Actual return on plan assets
|
175,967 | 211,000 | — | — | ||||||||||||
|
Exchange rate changes
|
7,131 | 16,028 | — | — | ||||||||||||
|
Employer contributions
|
91,316 | 56,328 | 2,468 | 3,614 | ||||||||||||
|
Plan participants’ contributions
|
3,672 | 3,219 | 3,787 | 3,735 | ||||||||||||
|
Benefits paid
|
(54,790 | ) | (48,027 | ) | (6,255 | ) | (7,349 | ) | ||||||||
|
Fair value of plan assets at end of year
|
$ | 1,439,711 | $ | 1,216,415 | $ | — | $ | — | ||||||||
F-19
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
The fair values of plan assets for the Company’s
U.S. pension plans included in the above were
$1,294,348,000 and $1,092,787,000 at December 31, 2010 and
2009, respectively.
The asset allocations for the Company’s funded pension
plans at December 31, 2010 and 2009, and the target
allocation for 2011, by asset category were:
|
Target
|
Percentage of Plan Assets at
|
|||||||||||
|
Allocation
|
December 31 | |||||||||||
| 2011 | 2010 | 2009 | ||||||||||
|
Asset Category
|
||||||||||||
|
Equity securities
|
69 | % | 70 | % | 64 | % | ||||||
|
Debt securities
|
31 | % | 30 | % | 35 | % | ||||||
|
Real estate
|
0 | % | 0 | % | 1 | % | ||||||
| 100 | % | 100 | % | 100 | % | |||||||
The Company’s benefit plan committees in the U.S. and
Canada establish investment policies and strategies and
regularly monitor the performance of the funds. The pension plan
strategy implemented by the Company’s management is to
achieve long-term objectives and invest the pension assets in
accordance with the applicable pension legislation in the
U.S. and Canada, as well as fiduciary standards. The
long-term primary objectives for the pension plans are to
provide for a reasonable amount of long-term growth of capital,
without undue exposure to risk, protect the assets from erosion
of purchasing power, and provide investment results that meet or
exceed the pension plans’ actuarially assumed long-term
rates of return. The Company’s investment strategy with
respect to pension plan assets is to generate a return in excess
of the passive portfolio benchmark (50% S&P 500 Index, 5%
Russell Mid Cap Index, 10% Russell 2000 Index, 5% MSCI EAFE
Index, and 30% BarCap U.S. Govt/Credit).
The fair values of the plan assets as of December 31, 2010
and 2009, by asset category, are shown in the tables below.
Various inputs are considered when determining the value of the
Company’s pension plan assets. The inputs or methodologies
used for valuing securities are not necessarily an indication of
the risk associated with investing in these securities.
Level 1 represents observable market inputs that are
unadjusted quoted prices for identical assets or liabilities in
active markets. Level 2 represents other significant
observable inputs (including quoted prices for similar
securities, interest rates, credit risk, etc.) Level 3
represents significant unobservable inputs (including the
Company’s own assumptions in determining the fair value of
investments).
The valuation methods may produce a fair value calculation that
may not be indicative of net realizable value or reflective of
future fair values. Furthermore, while the Company believes its
valuation methods are appropriate and consistent with other
market participants, the use of different methodologies or
assumptions to determine the fair value of certain financial
instruments could result in a different fair value measurement
at the reporting date. Equity securities are valued at the
closing price reported on the active market on which the
individual securities are traded on the last day of the calendar
plan year. Debt securities including corporate bonds,
U.S. Government securities, and asset-backed securities are
valued using price evaluations reflecting the bid
and/or
ask
sides of the market for an investment as of the last day of the
calendar plan year. Real estate value is based on the last
appraised or interim valuation. The timing of the individual
property appraisals is spread throughout the four quarters of
the year.
F-20
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
| 2010 | ||||||||||||||||
|
Quoted Prices
|
||||||||||||||||
|
in Active
|
||||||||||||||||
|
Markets for
|
Significant
|
Significant
|
||||||||||||||
|
Identical
|
Observable
|
Unobservable
|
||||||||||||||
|
Assets
|
Inputs
|
Inputs
|
||||||||||||||
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Equity Securities
|
||||||||||||||||
|
Common stocks — mutual funds — equity
|
$ | 353,347 | $ | 353,347 | $ | — | $ | — | ||||||||
|
Genuine Parts Company
|
103,549 | 103,549 | — | — | ||||||||||||
|
Other stocks
|
551,516 | 551,516 | — | — | ||||||||||||
|
Debt Securities
|
||||||||||||||||
|
Short-term investments
|
38,126 | 38,126 | — | — | ||||||||||||
|
Cash & equivalents
|
26,976 | 26,976 | — | — | ||||||||||||
|
Government bonds
|
105,764 | 48,191 | 57,573 | — | ||||||||||||
|
Corporate bonds
|
122,749 | — | 122,749 | — | ||||||||||||
|
Asset-backed & mortgage backed securities
|
32,271 | — | 32,271 | — | ||||||||||||
|
Other-international
|
13,583 | 13,583 | — | — | ||||||||||||
|
Municipal bonds
|
1,914 | — | 1,914 | — | ||||||||||||
|
Mutual funds-fixed income
|
89,916 | — | 89,916 | — | ||||||||||||
|
Total
|
$ | 1,439,711 | $ | 1,135,288 | $ | 304,423 | $ | — | ||||||||
| 2009 | ||||||||||||||||
|
Quoted Prices
|
||||||||||||||||
|
in Active
|
||||||||||||||||
|
Markets for
|
Significant
|
Significant
|
||||||||||||||
|
Identical
|
Observable
|
Unobservable
|
||||||||||||||
|
Assets
|
Inputs
|
Inputs
|
||||||||||||||
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Equity Securities
|
||||||||||||||||
|
Common stocks — mutual funds — equity
|
$ | 258,124 | $ | 258,124 | $ | — | $ | — | ||||||||
|
Genuine Parts Company
|
76,563 | 76,563 | — | — | ||||||||||||
|
Other stocks
|
449,597 | 449,597 | — | — | ||||||||||||
|
Debt Securities
|
||||||||||||||||
|
Short-term investments
|
42,201 | 42,201 | — | — | ||||||||||||
|
Cash & equivalents
|
294 | 294 | — | — | ||||||||||||
|
Government bonds
|
92,468 | 48,627 | 43,841 | — | ||||||||||||
|
Corporate bonds
|
155,535 | — | 155,535 | — | ||||||||||||
|
Asset-backed & mortgage backed securities
|
34,746 | — | 34,746 | — | ||||||||||||
|
Other-international
|
15,011 | 14,994 | 17 | — | ||||||||||||
|
Municipal bonds
|
785 | — | 785 | — | ||||||||||||
|
Mutual funds-fixed income
|
86,899 | — | 86,899 | — | ||||||||||||
|
Real Estate
|
||||||||||||||||
|
Real estate
|
4,192 | — | — | 4,192 | ||||||||||||
|
Total
|
$ | 1,216,415 | $ | 890,400 | $ | 321,823 | $ | 4,192 | ||||||||
F-21
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
Equity securities include Genuine Parts Company common stock in
the amounts of $103,549,000 (7.2% of total plan assets) and
$76,563,000 (6.3% of total plan assets) at December 31,
2010 and 2009, respectively. Dividend payments received by the
plan on Company stock totaled approximately $3,308,000 and
$3,227,000 in 2010 and 2009, respectively. Fees paid during the
year for services rendered by parties in interest were based on
customary and reasonable rates for such services.
The changes in the fair value measurement of plan assets using
significant unobservable inputs (Level 3) during 2010
and 2009 were not material.
Based on the investment policy for the pension plans, as well as
an asset study that was performed based on the Company’s
asset allocations and future expectations, the Company’s
expected rate of return on plan assets for measuring 2011
pension cost or income is 7.87% for the plans. The asset study
forecasted expected rates of return for the approximate duration
of the Company’s benefit obligations, using capital market
data and historical relationships.
The following table sets forth the funded status of the plans
and the amounts recognized in the consolidated balance sheets at
December 31:
Amounts recognized in the consolidated balance sheets consist of:
|
Other Postretirement
|
||||||||||||||||
| Pension Benefits | Benefits | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||
|
Other long-term asset
|
$ | 4,405 | $ | 7,642 | $ | — | $ | — | ||||||||
|
Other current liability
|
(4,403 | ) | (3,595 | ) | (2,824 | ) | (3,030 | ) | ||||||||
|
Pension and other post-retirement liabilities
|
(249,302 | ) | (289,716 | ) | (9,505 | ) | (10,481 | ) | ||||||||
| $ | (249,300 | ) | $ | (285,669 | ) | $ | (12,329 | ) | $ | (13,511 | ) | |||||
Amounts recognized in accumulated other comprehensive loss
consist of:
|
Other Postretirement
|
||||||||||||||||
| Pension Benefits | Benefits | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||
|
Net actuarial loss
|
$ | 741,190 | $ | 715,678 | $ | 20,207 | $ | 21,625 | ||||||||
|
Prior service credit
|
(44,142 | ) | (52,270 | ) | (10,737 | ) | (11,795 | ) | ||||||||
| $ | 697,048 | $ | 663,408 | $ | 9,470 | $ | 9,830 | |||||||||
For the pension benefits, the following table reflects the total
benefits expected to be paid from the plans’ or the
Company’s assets. Of the pension benefits expected to be
paid in 2011, approximately $4,405,000 is expected to be paid
from employer assets. For pension benefits, expected employer
contributions reflect amounts expected to be contributed to
funded plans. For other postretirement benefits, the following
table’s employer contributions reflect only the
Company’s share of the benefit cost. The expected benefit
payments show the Company’s cost without regard to income
from federal subsidy payments received pursuant to the Medicare
Prescription Drug Improvement and Modernization Act of 2003
(MMA). Expected federal subsidy payments, which reduce the
Company’s cost for the plan, are shown separately.
F-22
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
Information about the expected cash flows for the pension plans
and other post retirement benefit plans follows:
| Other Postretirement Benefits | ||||||||||||
|
Expected
|
||||||||||||
| Pension Benefits | Gross | Federal Subsidy | ||||||||||
| (In thousands) | ||||||||||||
|
Employer contribution
|
||||||||||||
|
2011 (expected)
|
$ | 51,666 | $ | 2,823 | $ | — | ||||||
|
Expected benefit payments
|
||||||||||||
|
2011
|
$ | 59,966 | $ | 2,975 | $ | (152 | ) | |||||
|
2012
|
66,053 | 2,302 | (147 | ) | ||||||||
|
2013
|
72,723 | 1,882 | (141 | ) | ||||||||
|
2014
|
78,646 | 1,667 | (135 | ) | ||||||||
|
2015
|
84,549 | 1,484 | (126 | ) | ||||||||
|
2016 through 2020
|
521,897 | 4,115 | (477 | ) | ||||||||
Net periodic benefit cost included the following components:
| Pension Benefits | Other Postretirement Benefits | |||||||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||||||||||
|
Service cost
|
$ | 12,312 | $ | 16,534 | $ | 53,311 | $ | — | $ | 443 | $ | 880 | ||||||||||||
|
Interest cost
|
95,453 | 93,493 | 90,300 | 605 | 1,264 | 1,614 | ||||||||||||||||||
|
Expected return on plan assets
|
(114,166 | ) | (113,370 | ) | (114,690 | ) | — | — | — | |||||||||||||||
|
Amortization of prior service (credit) cost
|
(6,979 | ) | (7,010 | ) | (24 | ) | (1,059 | ) | (225 | ) | 371 | |||||||||||||
|
Amortization of actuarial loss
|
35,264 | 21,990 | 17,962 | 1,759 | 1,759 | 1,616 | ||||||||||||||||||
|
Curtailment gain
|
— | (4,298 | ) | — | — | — | — | |||||||||||||||||
|
Net periodic benefit cost
|
$ | 21,884 | $ | 7,339 | $ | 46,859 | $ | 1,305 | $ | 3,241 | $ | 4,481 | ||||||||||||
Other changes in plan assets and benefit obligations recognized
in other comprehensive income are as follows:
| Pension Benefits | Other Postretirement Benefits | |||||||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
Current year actuarial loss (gain)
|
$ | 60,777 | $ | (125,816 | ) | $ | 488,384 | $ | 340 | $ | (1,190 | ) | $ | 1,282 | ||||||||||
|
Recognition of actuarial loss
|
(35,264 | ) | (21,990 | ) | (17,962 | ) | (1,759 | ) | (1,759 | ) | (1,616 | ) | ||||||||||||
|
Current year prior service cost (credit)
|
1,148 | — | (66,349 | ) | — | (13,182 | ) | — | ||||||||||||||||
|
Recognition of prior service cost (credit)
|
6,979 | 11,308 | 24 | 1,059 | 225 | (371 | ) | |||||||||||||||||
|
Total recognized in other comprehensive income
|
$ | 33,640 | $ | (136,498 | ) | $ | 404,097 | $ | (360 | ) | $ | (15,906 | ) | $ | (705 | ) | ||||||||
|
Total recognized in net periodic benefit cost and other
comprehensive income
|
$ | 55,524 | $ | (129,159 | ) | $ | 450,956 | $ | 945 | $ | (12,665 | ) | $ | 3,776 | ||||||||||
F-23
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
The estimated amounts that will be amortized from accumulated
other comprehensive loss into net periodic benefit cost in 2011
are as follows:
|
Other Post-
|
||||||||
|
Pension
|
retirement
|
|||||||
| Benefits | Benefits | |||||||
| (In thousands) | ||||||||
|
Actuarial loss
|
$ | 50,543 | $ | 1,733 | ||||
|
Prior service credit
|
(6,956 | ) | (1,059 | ) | ||||
|
Total
|
$ | 43,587 | $ | 674 | ||||
The assumptions used in measuring the net periodic benefit costs
for the plans follow:
| Pension Benefits | Other Postretirement Benefits | |||||||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
|
Weighted average discount rate
|
6.54 | % | 6.97 | % | 6.49 | % | 5.20 | % | 5.79 | % | 5.75 | % | ||||||||||||
|
Rate of increase in future compensation levels
|
3.75 | % | 3.75 | % | 3.75 | % | — | — | — | |||||||||||||||
|
Expected long-term rate of return on plan assets
|
8.00 | % | 8.00 | % | 8.25 | % | — | — | — | |||||||||||||||
A 7.5% annual rate of increase in the per capita cost of covered
health care benefits was assumed on December 31, 2009. The
rate was assumed to decrease ratably to 5% at December 31,
2014, and thereafter. The effect of a one-percentage-point
change in the assumed health care cost trend rate is not
significant.
The Company has two defined contribution plans that cover
substantially all of its domestic employees. The Company’s
matching contributions are determined based on the
employee’s participation in the U.S. pension plan.
Pension plan participants who continue earning credited service
after 2008 receive a matching contribution of 20% of the first
6% of the employee’s salary. Other employees receive a
matching contribution of 100% of the first 5% of the
employee’s salary. Total plan expense for both plans was
approximately $33,476,000 in 2010, $31,783,000 in 2009, and
$7,252,000 in 2008.
| 8. | Guarantees |
The Company guarantees the borrowings of certain independently
controlled automotive parts stores (independents) and certain
other affiliates in which the Company has a noncontrolling
equity ownership interest (affiliates). Presently, the
independents are generally consolidated by unaffiliated
enterprises that have a controlling financial interest through
ownership of a majority voting interest in the entity. The
Company has no voting interest or other equity conversion rights
in any of the independents. The Company does not control the
independents or the affiliates, but receives a fee for the
guarantee. The Company has concluded that the independents are
variable interest entities, but that the Company is not the
primary beneficiary. Specifically, the equity holders of the
independents have the power to direct the activities that most
significantly impact the entity’s economic performance
including, but not limited to, decisions about hiring and
terminating personnel, local marketing and promotional
initiatives, pricing and selling activities, credit decisions,
monitoring and maintaining appropriate inventories, and store
hours. Separately, the Company concluded the affiliates are not
variable interest entities. The Company’s maximum exposure
to loss as a result of its involvement with these independents
and affiliates is generally equal to the total borrowings
subject to the Company’s guarantee. While such borrowings
of the independents and affiliates are outstanding, the Company
is required to maintain compliance with certain covenants,
including a maximum debt to capitalization ratio and certain
limitations on additional borrowings. At December 31, 2010,
the Company was in compliance with all such covenants.
At December 31, 2010, the total borrowings of the
independents and affiliates subject to guarantee by the Company
were approximately $200,900,000. These loans generally mature
over periods from one to six years. In the event that the
Company is required to make payments in connection with
guaranteed obligations of the
F-24
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
independents or the affiliates, the Company would obtain and
liquidate certain collateral (e.g., accounts receivable and
inventory) to recover all or a portion of the amounts paid under
the guarantee. When it is deemed probable that the Company will
incur a loss in connection with a guarantee, a liability is
recorded equal to this estimated loss. To date, the Company has
had no significant losses in connection with guarantees of
independents’ and affiliates’ borrowings.
The Company has accrued for guarantees related to the
independents’ and affiliates’ borrowings as of
December 31, 2010 and 2009. These liabilities are not
material to the financial position of the Company and are
included in other long-term liabilities in the accompanying
consolidated balance sheets.
| 9. | Acquisitions |
During 2010, the Company acquired four companies in the
Industrial and Electrical Groups for approximately $90,645,000.
The Company allocated the purchase price to the assets acquired
and the liabilities assumed based on their fair values as of
their respective acquisition dates. The results of operations
for the acquired companies were included in the Company’s
consolidated statements of income beginning on their respective
acquisition dates. The Company recorded approximately
$40,247,000 of goodwill and other intangible assets associated
with the acquisitions. The Company is in the process of
analyzing the estimated values of assets and liabilities
acquired. The allocation of the purchase price is therefore
preliminary and subject to revision.
During 2009, the Company acquired eight companies in the
Industrial and Automotive Groups for approximately $71,038,000.
The Company allocated the purchase price to the assets acquired
and the liabilities assumed based on their fair values as of
their respective acquisition dates. The results of operations
for the acquired companies were included in the Company’s
consolidated statements of income beginning on their respective
acquisition dates. The Company recorded approximately
$12,199,000 of goodwill and other intangible assets associated
with the acquisitions.
On June 1, 2009, the Company acquired the remaining
noncontrolling interest in its consolidated subsidiary, Balkamp,
Inc., for approximately $63,165,000. The acquisition was
accounted for as an equity transaction and the associated
noncontrolling interest in the subsidiary’s equity was
eliminated as part of the transaction.
During 2008, the Company acquired eleven companies in the
Automotive, Industrial, Office Supply and Electrical/Electronic
Groups for approximately $133,604,000. The Company allocated the
purchase price to the assets acquired and the liabilities
assumed based on their fair values as of their respective
acquisition dates. The results of operations for the acquired
companies were included in the Company’s consolidated
statements of income beginning on their respective acquisition
dates. The Company recorded approximately $84,442,000 of
goodwill and other intangible assets associated with these
acquisitions.
| 10. | Segment Data |
The Company’s reportable segments consist of automotive,
industrial, office products, and electrical/electronic
materials. Within the reportable segments, certain of the
Company’s operating segments are aggregated since they have
similar economic characteristics, products and services, type
and class of customers, and distribution methods.
The Company’s automotive segment distributes replacement
parts (other than body parts) for substantially all makes and
models of automobiles, trucks, and other vehicles.
The Company’s industrial segment distributes a wide variety
of industrial bearings, mechanical and fluid power transmission
equipment, including hydraulic and pneumatic products, material
handling components, and related parts and supplies.
The Company’s office products segment distributes a wide
variety of office products, computer supplies, office furniture,
and business electronics.
F-25
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
The Company’s electrical/electronic materials segment
distributes a wide variety of electrical/electronic materials,
including insulating and conductive materials for use in
electronic and electrical apparatus.
Inter-segment sales are not significant. Operating profit for
each industry segment is calculated as net sales less operating
expenses excluding general corporate expenses, interest expense,
equity in income from investees, amortization, and
noncontrolling interests. Approximately $68,200,000,
$38,900,000, and $49,900,000 of income before income taxes was
generated in jurisdictions outside the United States for the
years ended December 31, 2010, 2009, and 2008,
respectively. Net sales and net long-lived assets by country
relate directly to the Company’s operations in the
respective country. Corporate assets are principally cash and
cash equivalents and headquarters’ facilities and equipment.
For management purposes, net sales by segment exclude 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.
F-26
Table of Contents
Genuine
Parts Company and Subsidiaries
Notes to
Consolidated Financial
Statements — (Continued)
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Net sales:
|
||||||||||||||||||||
|
Automotive
|
$ | 5,608,101 | $ | 5,225,389 | $ | 5,321,536 | $ | 5,311,873 | $ | 5,185,080 | ||||||||||
|
Industrial
|
3,521,863 | 2,885,782 | 3,514,661 | 3,350,954 | 3,107,593 | |||||||||||||||
|
Office products
|
1,641,963 | 1,639,018 | 1,732,514 | 1,765,055 | 1,779,832 | |||||||||||||||
|
Electrical/electronic materials
|
449,770 | 345,808 | 465,889 | 436,318 | 408,138 | |||||||||||||||
|
Other
|
(14,108 | ) | (38,485 | ) | (19,337 | ) | (21,005 | ) | (22,701 | ) | ||||||||||
|
Total net sales
|
$ | 11,207,589 | $ | 10,057,512 | $ | 11,015,263 | $ | 10,843,195 | $ | 10,457,942 | ||||||||||
|
Operating profit:
|
||||||||||||||||||||
|
Automotive
|
$ | 421,109 | $ | 387,945 | $ | 385,356 | $ | 413,180 | $ | 399,931 | ||||||||||
|
Industrial
|
255,616 | 162,353 | 294,652 | 281,762 | 257,022 | |||||||||||||||
|
Office products
|
131,746 | 126,104 | 144,127 | 156,781 | 166,573 | |||||||||||||||
|
Electrical/electronic materials
|
30,910 | 25,254 | 36,721 | 30,435 | 22,630 | |||||||||||||||
|
Total operating profit
|
839,381 | 701,656 | 860,856 | 882,158 | 846,156 | |||||||||||||||
|
Interest expense, net
|
(26,598 | ) | (27,112 | ) | (29,847 | ) | (21,056 | ) | (26,445 | ) | ||||||||||
|
Corporate expense
|
(45,451 | ) | (24,913 | ) | (55,119 | ) | (38,300 | ) | (44,341 | ) | ||||||||||
|
Intangible asset amortization
|
(4,737 | ) | (3,644 | ) | (2,861 | ) | (1,118 | ) | (463 | ) | ||||||||||
|
Other expense
|
(812 | ) | (1,822 | ) | (4,561 | ) | (4,939 | ) | (3,991 | ) | ||||||||||
|
Income before income taxes
|
$ | 761,783 | $ | 644,165 | $ | 768,468 | $ | 816,745 | $ | 770,916 | ||||||||||
|
Assets:
|
||||||||||||||||||||
|
Automotive
|
$ | 2,854,461 | $ | 2,825,693 | $ | 2,799,901 | $ | 2,785,619 | $ | 2,625,846 | ||||||||||
|
Industrial
|
955,241 | 865,431 | 1,025,292 | 969,666 | 910,734 | |||||||||||||||
|
Office products
|
694,166 | 619,612 | 638,854 | 659,838 | 669,303 | |||||||||||||||
|
Electrical/electronic materials
|
113,757 | 76,716 | 95,655 | 101,419 | 105,623 | |||||||||||||||
|
Corporate
|
637,871 | 445,705 | 67,823 | 175,074 | 123,224 | |||||||||||||||
|
Goodwill and other intangible assets
|
209,548 | 171,532 | 158,825 | 82,453 | 62,254 | |||||||||||||||
|
Total assets
|
$ | 5,465,044 | $ | 5,004,689 | $ | 4,786,350 | $ | 4,774,069 | $ | 4,496,984 | ||||||||||
|
Depreciation and amortization:
|
||||||||||||||||||||
|
Automotive
|
$ | 63,942 | $ | 65,554 | $ | 65,309 | $ | 65,810 | $ | 52,565 | ||||||||||
|
Industrial
|
7,208 | 7,611 | 7,632 | 8,565 | 7,941 | |||||||||||||||
|
Office products
|
9,737 | 9,685 | 9,825 | 9,159 | 9,518 | |||||||||||||||
|
Electrical/electronic materials
|
1,414 | 1,666 | 1,572 | 1,566 | 1,394 | |||||||||||||||
|
Corporate
|
2,294 | 2,251 | 1,499 | 1,484 | 1,542 | |||||||||||||||
|
Intangible asset amortization
|
4,737 | 3,644 | 2,861 | 1,118 | 463 | |||||||||||||||
|
Total depreciation and amortization
|
$ | 89,332 | $ | 90,411 | $ | 88,698 | $ | 87,702 | $ | 73,423 | ||||||||||
|
Capital expenditures:
|
||||||||||||||||||||
|
Automotive
|
$ | 46,888 | $ | 53,911 | $ | 72,628 | $ | 91,359 | $ | 111,644 | ||||||||||
|
Industrial
|
4,307 | 2,987 | 7,575 | 8,340 | 6,187 | |||||||||||||||
|
Office products
|
29,866 | 5,782 | 9,539 | 13,294 | 6,002 | |||||||||||||||
|
Electrical/electronic materials
|
1,957 | 676 | 1,406 | 2,340 | 904 | |||||||||||||||
|
Corporate
|
2,361 | 6,089 | 13,878 | 315 | 1,307 | |||||||||||||||
|
Total capital expenditures
|
$ | 85,379 | $ | 69,445 | $ | 105,026 | $ | 115,648 | $ | 126,044 | ||||||||||
|
Net sales:
|
||||||||||||||||||||
|
United States
|
$ | 9,793,820 | $ | 8,935,651 | $ | 9,716,029 | $ | 9,609,225 | $ | 9,314,970 | ||||||||||
|
Canada
|
1,327,552 | 1,078,799 | 1,219,759 | 1,158,515 | 1,071,095 | |||||||||||||||
|
Mexico
|
100,325 | 81,547 | 98,812 | 96,460 | 94,578 | |||||||||||||||
|
Other
|
(14,108 | ) | (38,485 | ) | (19,337 | ) | (21,005 | ) | (22,701 | ) | ||||||||||
|
Total net sales
|
$ | 11,207,589 | $ | 10,057,512 | $ | 11,015,263 | $ | 10,843,195 | $ | 10,457,942 | ||||||||||
|
Net long-lived assets:
|
||||||||||||||||||||
|
United States
|
$ | 398,318 | $ | 402,937 | $ | 352,314 | $ | 337,136 | $ | 353,315 | ||||||||||
|
Canada
|
80,978 | 78,502 | 67,731 | 85,532 | 72,556 | |||||||||||||||
|
Mexico
|
4,834 | 3,585 | 3,220 | 3,321 | 3,389 | |||||||||||||||
|
Total net long-lived assets
|
$ | 484,130 | $ | 485,024 | $ | 423,265 | $ | 425,989 | $ | 429,260 | ||||||||||
F-27
Table of Contents
Annual
Report on
Form 10-K
Item 15(c)
Financial
Statement Schedule II — Valuation and Qualifying
Accounts
Genuine Parts Company and Subsidiaries
Genuine Parts Company and Subsidiaries
|
Balance at
|
Charged
|
Balance at
|
||||||||||||||
|
Beginning
|
to Costs
|
End
|
||||||||||||||
| of Period | and Expenses | Deductions | of Period | |||||||||||||
|
Year ended December 31, 2008:
|
||||||||||||||||
|
Reserves and allowances deducted from asset accounts:
|
||||||||||||||||
|
Allowance for uncollectible accounts
|
$ | 15,520,805 | $ | 23,882,674 | $ | (20,815,910 | ) 1 | $ | 18,587,569 | |||||||
|
Year ended December 31, 2009:
|
||||||||||||||||
|
Reserves and allowances deducted from asset accounts:
|
||||||||||||||||
|
Allowance for uncollectible accounts
|
$ | 18,587,569 | $ | 28,463,029 | $ | (30,460,819 | ) 1 | $ | 16,589,779 | |||||||
|
Year ended December 31, 2010:
|
||||||||||||||||
|
Reserves and allowances deducted from asset accounts:
|
||||||||||||||||
|
Allowance for uncollectible accounts
|
$ | 16,589,779 | $ | 10,597,432 | $ | (11,588,299 | ) 1 | $ | 15,598,912 | |||||||
| 1 | Uncollectible accounts written off, net of recoveries. |
S-1
Table of Contents
ANNUAL
REPORT ON
FORM 10-K
INDEX OF
EXHIBITS
The following exhibits are filed (or furnished, if so indicated)
herewith as a part of this Report:
| 10 | .25* | Amendment No. 1 to the Genuine Parts Company Supplemental Retirement Plan, as amended and restated as of January 1, 2009, dated August 16, 2010, effective August 16, 2010. | ||
| 10 | .26* | Amendment No. 2 to the Genuine Parts Company Supplemental Retirement Plan, as amended and restated January 1, 2009, dated November 16, 2010, effective January 1, 2011. | ||
| 10 | .27* | Amendment No. 7 to the Genuine Parts Company Tax-Deferred Savings Plan, dated November 16, 2010, effective January 1, 2011. | ||
| 21 | Subsidiaries of the Company. | |||
| 23 | Consent of Independent Registered Public Accounting Firm. | |||
| 31 | .1 | Certification signed by the Chief Executive Officer pursuant to SEC Rule 13a-14(a). | ||
| 31 | .2 | Certification signed by the Chief Financial Officer pursuant to SEC Rule 13a-14(a). | ||
| 32 | .1 | Statement of Chief Executive Officer of Genuine Parts Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). | ||
| 32 | .2 | Statement of Chief Financial Officer of Genuine Parts Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). | ||
| 101 | Interactive data files pursuant to Rule 405 of Regulation S-T. |
The following exhibits are incorporated by reference as set
forth in Item 15 of this
Form 10-K:
| — 3 | .1 | Amended and Restated Articles of Incorporation of the Company, amended April 23, 2007. | ||
| — 3 | .2 | By-Laws of the Company as amended and restated August 20, 2007. | ||
| — 4 | .2 | Specimen Common Stock Certificate. | ||
| — 4 | .3 | Note Purchase Agreement dated November 30, 2001. |
Instruments with respect to long-term debt where the total
amount of securities authorized there under does not exceed 10%
of the total assets of the Registrant and its subsidiaries on a
consolidated basis have not been filed. The Registrant agrees to
furnish to the Commission a copy of each such instrument upon
request.
| — 10 | .1* | The Genuine Parts Company Restated Tax-Deferred Savings Plan, effective January 1, 1993. | ||
| — 10 | .2* | Amendment No. 1 to the Genuine Parts Company Tax-Deferred Savings Plan, dated June 1, 1996, effective June 1, 1996. | ||
| — 10 | .3* | Genuine Parts Company Death Benefit Plan, effective July 15, 1997. | ||
| — 10 | .4* | Amendment No. 2 to the Genuine Parts Company Tax-Deferred Savings Plan, dated April 19, 1999, effective April 19, 1999. | ||
| — 10 | .5* | The Genuine Parts Company Original Deferred Compensation Plan, as amended and restated as of August 19, 1996. | ||
| — 10 | .6* | Amendment to the Genuine Parts Company Original Deferred Compensation Plan, dated April 19, 1999, effective April 19, 1999. | ||
| — 10 | .7* | Amendment No. 3 to the Genuine Parts Company Tax-Deferred Savings Plan, dated November 28, 2001, effective July 1, 2001. | ||
| — 10 | .8* | Genuine Parts Company 1999 Long-Term Incentive Plan, as amended and restated as of November 19, 2001. | ||
| — 10 | .9* | Amendment No. 4 to the Genuine Parts Company Tax-Deferred Savings Plan, dated June 5, 2003, effective June 5, 2003. | ||
| — 10 | .10* | Genuine Parts Company Directors’ Deferred Compensation Plan, as amended and restated effective January 1, 2003, and executed November 11, 2003. | ||
| — 10 | .11* | Description of Director Compensation. | ||
| — 10 | .12* | Genuine Parts Company Stock Appreciation Rights Agreement. | ||
| — 10 | .13* | Amendment No. 5 to the Genuine Parts Company Tax-Deferred Savings Plan. | ||
| — 10 | .14* | Amendment No. 2 to the Genuine Parts Company Death Benefit Plan. |
Table of Contents
| — 10 | .15* | Genuine Parts Company 2006 Long-Term Incentive Plan, effective April 17, 2006. | ||
| — 10 | .16* | Amendment to the Genuine Parts Company 2006 Long-Term Incentive Plan, dated November 20, 2006, effective November 20, 2006. | ||
| — 10 | .17* | Amendment No. 1 to the Genuine Parts Company Directors’ Deferred Compensation Plan, dated November 19, 2007, effective January 1, 2008. | ||
| — 10 | .18* | Amendment No. 6 to the Genuine Parts Company Tax-Deferred Savings Plan, dated November 28, 2007, effective January 1, 2008. | ||
| — 10 | .19* | Amendment No. 2 to the Genuine Parts Company 2006 Long-Term Incentive Plan, dated November 19, 2007, effective November 19, 2007. | ||
| — 10 | .20* | Genuine Parts Company Performance Restricted Stock Unit Award Agreement. | ||
| — 10 | .21* | Genuine Parts Company Restricted Stock Unit Award Agreement. | ||
| — 10 | .22* | Specimen Change in Control Agreement, as amended and restated as of November 19, 2007. | ||
| — 10 | .23* | Genuine Parts Company Supplemental Retirement Plan, as amended and restated as of January 1, 2009. | ||
| — 10 | .24* | Genuine Parts Company 2009 Annual Incentive Bonus Plan, dated March 31, 2009, effective January 1, 2009. |
| * | Indicates management contracts and compensatory plans and arrangements. |
TABLE OF CONTENTS
Part IprintItem 1. BusinessprintItem 1A. Risk FactorsprintItem 1B. Unresolved Staff CommentsprintItem 2. PropertiesprintItem 3. Legal ProceedingsprintItem 4. [removed and Reserved.]printPart IIprintItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesprintItem 6. Selected Financial DataprintItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 7A. Quantitative and Qualitative Disclosures About Market RiskprintItem 8. Financial Statements and Supplementary DataprintItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureprintItem 9A. Controls and ProceduresprintItem 9B. Other InformationprintPart IIIprintItem 10. Directors, Executive Officers and Corporate GovernanceprintItem 11. Executive CompensationprintItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersprintItem 13. Certain Relationships and Related Transactions, and Director IndependenceprintItem 14. Principal Accounting Fees and ServicesprintPart IVprintItem 15. Exhibits and Financial Statement SchedulesprintItem 15(c)print