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Text: We appreciate you joining us today.
We are pleased to report terrific financial performance driven by the consistent execution of our strategic priorities, and the ongoing recovery in the global markets.
In summary, the quarter was highlighted by, continued strong sales trends, which we believe led to market share gains, gross margin gains, then improved operational efficiencies that drove margin expansion, and record quarterly earnings, and the effective deployment of capital for growth and productivity investments, bolt-on acquisitions, the dividend and share repurchases.
Taking a look at our second quarter financial results, total sales were $4.8 billion, up 25% from last year and improved sequentially from plus 9% in the first quarter.
For your additional perspective our second quarter sales were 12% higher than in Q2 2019.
Gross margin was also strong representing our 15th consecutive quarterly increase, and we further improved our productivity with the ongoing execution of our expense initiatives.
As a result, segment profit increased 35% and our segment margin improved 65 basis points to 9.2% which represents our strongest margin in two decades.
Adjusted net income was $253 million and adjusted diluted earnings per share were $1.74, up 32%.
Total sales for Global Automotive were a record $3.2 billion, a 28% increase from 2020, and up 15% from the second quarter of 2019, and marks the first quarter in our 93-year history with auto sales exceeding the $3 billion mark.
On a comp basis sales were up 21% and on a two-year stack comp sales were up 8.5%.
Our comp sales in the second quarter were driven by double-digit year-over-year comp sales in each of our automotive operations.
Automotive segment profit margin improved to 9.1%, up 30 basis points from 2020 and an increase of 90 basis points from 2019.
This expansion was supported by strong operating results across all of our operations.
The automotive recovery reflects our focus on key growth initiatives, as well as several market tailwinds and these include the broad economic recovery and strengthening consumer demand, favorable weather trends, inflation and our ability to pass along price increases to our customers.
Finally, solid industry fundamentals, which have been further accelerated by a surge in used car market and improving miles driven.
While these market tailwinds are encouraging, we also see continued headwinds, which we continue to closely monitor.
These would include the spread of the delta coronavirus variant and its potential impact on the global economy, global supply chain disruptions, ongoing labor shortages in our operations, and the impact of inflation on our cost such as wages and freight.
Turning next to our regional highlights, our GPC teammates in Europe built on their excellent start to the year achieving the strongest sales growth among our operations with comp sales up 34%.
Each concrete posted substantial sales growth while our U.K. team continues to outperform.
The positive momentum in Europe reflects improving market conditions and favorable weather trends, as well as our focus on key sales initiatives, inventory availability and excellent customer service.
In particular, we have seen exceptional results from our key accounts partners and the ongoing expansion and roll out of the NAPA brand.
In our Asia-Pac business, sales were in line with the mid-to-high teen comps we have had in this market now for four consecutive quarters, commercial sales outperformed retail, although both customer segments posted strong growth.
The Repco and NAPA brands performed well and collectively are capturing market share.
The NAPA network continues to build and we have now more than 50 NAPA locations operating across Australia and New Zealand, in addition to our 400 plus Repco stores.
In North America, comp sales increased 20% in the U.S. and were up 12% in Canada, where lockdowns in key markets such as Quebec and Ontario have been headwinds for several quarters now.
Sales in the U.S. were driven by strong growth in both the commercial and retail segments, with DIFM sales outperforming DIY for the first time since before the pandemic began to take hold in Q1 of 2020.
The strengthening commercial sales environment is significant for us, as it accounts for 80% of our total U.S. Automotive revenue.
The strong recovery in the commercial sector contributed to record average daily sales volume in our U.S. Automotive business in June.
Our sales drivers by product category include brake, tools and equipment and under car, which all outperformed.
In addition, both retail and commercial ticket and traffic counts were strong for the second consecutive quarter, so another really positive trend.
By Customer segment, retail sales remained strong throughout the quarter with low double-digit sales growth on top of a healthy sales increase in the second quarter of last year.
While the DIY market is pulling back from the highs of 2020, we are optimistic our ongoing investments will create sustainable retail growth.
For commercial sales each of our Customer segments posted double-digit growth, which we attribute to the broad automotive recovery and investments in our sales team, our sales programs and our supply chain among other initiatives.
This quarter our strongest growth was with our major account partners and NAPA AutoCare centers.
We were also pleased with the growth in sales to our fleet and government accounts.
This was the first quarter of positive year-over-year sales growth for this group, since before the pandemic, as they lag the overall automotive recovery in the U.S.
We view this improvement as a meaningful indicator for further growth in the quarters ahead.
As the automotive recovery continues, we expect our commercial sales opportunities to outpace retail, consistent with the long-term growth outlook of the aftermarket industry.
We are confident in our growth strategy and our initiatives to deliver customer value and sell more parts for more cars across our global automotive operations.
We also remain focused on enhancing our inventory availability, strengthening our supply chain, and investing in our omni-channel capabilities while expanding our global store footprint to further strengthen our competitive positioning.
But now, let's discuss the global Industrial Parts Group.
Total sales for this group were $1.6 billion, a 20% increase from last year, and up 7% from 2019.
Comp sales rose 16% and reflect the fourth consecutive quarter of improving sales trends.
A strong sales environment combined with the execution of our operational initiatives drove a 9.5% segment margin, which is up a 130 basis point from both 2020 and 2019.
The ongoing market recovery over the last 12 months is in-line with the strengthening industrial economy and the overall increase in activity we have seen across much of our customer base.
The Purchasing Managers Index measured 60.6 in June, reflecting healthy levels of industrial expansion and marrying trends we have seen throughout the majority of this year.
Likewise, industrial production increased by 5.5% in the second quarter representing the fourth consecutive quarter of expansion.
Diving deeper into our Q2 sales, we experienced strong sales trends across each of our industries served and our product categories other than safety supplies, which had extraordinary sales in 2020 due to the pandemic.
Several industry sectors stood out as their sales increased by 30% or more over last year, including equipment and machinery, automotive, aggregate and cement, equipment rental and oil and gas.
In addition, our newly added fulfillment and logistics industry sector experienced tremendous growth.
In the past several years of expanding this segment, we have found our broad offering of products and services fits well with the needs of these customers.
To drive this growth.
We remain focused on several strategic initiatives, which include the build-out of our Industrial omni-channel capabilities with solid growth in digital sales via Motion.com.
Our new inside sales center, which was established in 2019, is generating incremental sales from new Motion customers and we see room for further growth.
The expansion of our services and value-add solutions businesses in areas such as equipment repair, conveyance and automation.
Over the last few years we have made several bolt-on acquisitions to build scale and continue to target additional M&A opportunities to further enhance our capabilities in these key areas.
Enhanced pricing and product category management strategies to maximize profitable growth the further optimization and automation of our supply chain network to improve operational productivity while delivering exceptional customer service.
We are encouraged by Industrial strong financial performance in the second quarter and the positive momentum we see in the overall industrial market.
We believe the Motion team is well positioned to capitalize on this momentum and enhance our market leadership position.
So in summary, each of our businesses did an exceptional job of operating through the quarter and we couldn't be more proud and grateful for their strong Q2 performance.
I'd like to personally congratulate the entire global GPC team for the hard work an impressive result.
The teams continue to build momentum and execute well.
We remain focused on our defined strategic initiatives.
And despite the global uncertainties that continue to impact our operations we're pleased with the strong sales growth, operating leverage and cash flow performance this quarter.
Last quarter, we outlined our plan to create value as we leverage GPC global capabilities to simplify and integrate our operations, we do so to improve the customer experience, to increase the speed and efficiency of execution and to deliver winning performance.
This includes continuous investments to position GPC for near and long-term profitable growth.
The key pillars of our investments include talent, sales effectiveness, digital, supply chain and emerging technologies.
Around the globe the teams executed well against our strategic priorities.
For example, on talent, we announced last month that Naveen Krishna joined the company, as Chief Information and Digital Officer.
Naveen will help lead our strategy and execution for all technology and digital initiatives.
He comes to GPC with more than 25 years of technology experience with companies such as Macy's, Home Depot, Target and FedEx.
Other examples of recent talent investments include category management, field sales and services, indirect sourcing, pricing, diversity equity inclusion, digital, data and inventory leadership to name a few.
Investment in our people is always a priority as we execute our mission to be an employer of choice.
To highlight other examples of our initiative momentum in local execution, Paul and I recently had the opportunity to spend time in person with our European team mates, and they showcased great examples of the strategic initiatives and winning team performance.
For example, we discuss details of the growth plans for a recent bolt-on investment Winparts, an online leader of automotive parts and accessories.
We expect this investment to provide new capabilities and accelerate our European digital vision.
We visited a best-in-class distribution facility in the Netherlands that increased operating productivity by approximately 20% over the past few years with the automation investments and process excellence initiatives.
We received an update on the consolidation of 10 back office shared service centers in France to one national location in France to drive cost and process efficiencies, and we saw first hand the power and differentiation of the NAPA brand in the local market.
Although, these are only a few select examples in Europe in each of our automotive and industrial businesses, we see similar examples of focus, strategic execution that are delivering results.
We also executed well on our acquisition strategy during the quarter.
The M&A environment is active and we remain disciplined to pursue strategic and value creating transactions.
For example, in addition to WInparts, we completed several other bolt-on acquisitions to deliver growth, add capabilities and create value.
The North American and European automotive teams completed various store acquisitions that increase our position in key strategic geographies and extend existing customer relationships.
Our automotive team in Asia-Pac, also executed two bolt-on strategic acquisitions including Rare Spares a market leader in the niche segment of automotive restoration parts and accessories and PARts DB, a leading cloud-based product and supplier data platform that will enhance our e-commerce and data capabilities.
We enter the third quarter with strong momentum, as our automotive and industrial markets recover and we execute our plans.
We continue to analyze and respond to areas that challenge our daily operations such as COVID-19, inflation, global logistics and product and labor availability.
For example, the global and local procurement teams partner closely with all levels of our suppliers to effectively assess product availabilities and delivery trends.
We have processes in place, backed with data and analytics to create visibility into direct and indirect inflation trends.
We utilize GPC scale and relationships including dedicated GPC resources in Asia to address our global logistics needs, and we continue to address labor challenges with competitive pay and benefits, flexible work programs, creative incentives to attract talent, a differentiated culture and compelling career opportunities.
We believe our team is well positioned to remain agile, as we focus on what we can control and navigate these macro global headwinds.
Overall, we're very pleased with our performance through the first half of the year and look forward to sharing our continued progress next quarter.
Total GPC sales were $4.8 billion in the second quarter up 25%.
Our gross margin improved to 35.3%, an increase from 33.8% last year or up a 120 basis points from an adjusted gross margin of 34.1%.
Our improvement in gross margin was primarily driven by the increase in supplier incentives, although, we also continue to benefit from channel and geographical mix shifts positive product mix, strategic category management initiatives including pricing and global sourcing strategies.
In the second quarter, there was significant pricing activity with our suppliers, resulting in product cost inflation.
We were positioned to pass these increases on to our customers and the impact of price inflation was neutral to gross margin.
We estimate a 1.5% impact of inflation in automotive sales for the quarter and a 1% impact in industrial.
Based on the current environment, we expect this to increase further through the second half of the year.
Our total adjusted operating and non-operating expenses are $1.3 billion in the second quarter, up 28% from last year and 28.1% of sales.
The increase in last year reflects the impact of several factors including the prior-year benefit of approximately a $150 million in temporary savings related to the pandemic.
The balance primarily relates to the increase in variable costs on the $1 billion in additional year-over-year sales.
And to a lesser extent, we experience rising cost pressures in areas such as wages, incentive compensations, freights, rents and health insurance, which we are managing.
We also invested in projects associated with our transformation and other strategic initiatives to drive growth and enhance productivity.
So overall, we continue to operate in line with our plans for the year and we remain focused on gaining additional efficiency in the quarters ahead, as you heard from Paul and Will.
On a segment basis, our total segment profit in the second quarter was $441 million, up a strong 35%.
Our segment profit margin was 9.2% compared to 8.6% last year a 65 basis point year-over-year improvement and up a 100 basis points from 2019.
So strong operating results, and a reflection of the work we have done to streamline our operations and optimize our portfolio over the last several years.
We would add that for the full year, we continue to expect our segment profit margin to improve by 20 to 30 basis points from 2020 or 60 to 70 basis points from 2019.
This would represent our strongest margin in five years.
Our tax rate for the second quarter was 27.2% on an adjusted basis up from 24.1% last year.
The increase in rate primarily reflects our higher U.K. tax rate, partially offset by stock compensation excess tax benefits.
Second quarter net income from continuing operations was $196 million with diluted earnings per share of $1.36.
Our adjusted net income was $253 million or $1.74 per share, which compares to $191 million or $1.32 per share in the prior year, a 32% increase.
Turning to our second quarter results by segment.
Our automotive revenue was $3.2 billion, up 28% from last year.
Segment profit was $291 million, up 33%, with profit margin improved to 9.1%, up 30 basis points from 2020 and a 90 basis point increase from 2019.
We attribute the margin gain to the positive market conditions in our automotive business and our team's intense focus on the execution of our growth and operating initiatives.
We're encouraged by the positive momentum we will carry into the balance of the year.
Our Industrial sales were $1.6 billion in the quarter, up 20% from 2020.
Segment profit of $150 million was up 38% from a year ago and profit margin improved to a strong 9.5%, a 130 basis point increase from both 2020 and 2019.
So with the strengthening sales environment and continued operational improvements, this group continues to post excellent operating results and we expect Industrial to perform well through the balance of the year.
Now, let's turn our comments to the balance sheet.
At June 30th, our total accounts receivable is up 4% despite the strong sales increase, this is primarily due to the additional sale of $300 million in receivables in the second half of 2020.
Inventory was up 10%, consistent with our commitment to provide for inventory availability and our accounts payable increased 26%.
Our AP-to-inventory ratio improved to 129% from 112% last year.
We remain pleased with our progress in improving our overall working capital position.
Our total debt is $2.5 billion, down $700 million or 22% from June of 2020 and down $160 million from December 31 of 2020.
We closed the second quarter was $2.5 billion in available liquidity and our total debt-to-adjusted EBITDA has improved to 1.6 times from 2.9 times last year.
Our team has done an excellent job of improving our capital structure over the last year.
We continue to generate strong cash flow with another $400 million in cash from operations in the second quarter and $700 million for the six months.
For the full year, we expect our earnings growth and working capital to drive $1.2 billion to $1.4 billion in cash from operations and free cash flow of $900 million to $1.1 billion.
Our key priorities for cash remain the reinvestment in our businesses through capital expenditures, M&A, the dividends and share repurchases.
We have invested $90 million in capital expenditures thus far in the year and we expect these investments to pick up further in the quarters ahead, as we execute on additional investments to drive organic growth and improve efficiencies and productivity in our operations.
As Will mentioned earlier strategic acquisitions remain an important component of our long-term growth strategy.
We've used approximately $97 million in cash for acquisitions through these six months and we continue to cultivate a strong pipeline of targeted names and expect to make additional strategic and bolt-on acquisitions to complement both our Global Automotive and Industrial segments as we move forward.
Consistent with our long-standing dividend policy, we have also paid a total cash dividend of more than $232 million to our shareholders through the first half of this year.
This reflects a 2021 annual dividend of $3.26 per share and represents our 65th consecutive annual increase in the dividend.
Finally, as part of our share repurchase program, we have been active with share buybacks since 1994.
In the second quarter, we used $184 million to acquire 1.4 million shares.
The company is currently authorized to repurchase up to 13 million additional shares and we expect to remain active in this program in the quarters ahead.
In arriving at our updated guidance, we considered several factors, including our past performance and recent business trends, current growth plans and strategic initiatives, the potential for foreign exchange fluctuations, inflation and the global economic outlook.
We also consider the continued uncertainties due to the market disruptions such as with COVID-19 and its potential impact on our results.
With these factors in mind, we expect total sales for 2021 to be in the range of plus 10% to plus 12%, an increase from our previous guidance of plus 5% to plus 7%.
As usual, this excludes the benefit of any unannounced future acquisitions.
By business, we are guiding to plus 11% to plus 13% total sales growth for the Automotive segment, an increase from the plus 5% to plus 7%, and a total sales increase of plus 6% to plus 8% for the Industrial segment an increase from the plus 4% to plus 6%.
On the earnings side, we are raising our guidance for adjusted diluted earnings per share to a range of $6.20 to $6.35, which is up 18% to 20% from 2020.
This represents an increase from our previous guidance of $5.85 to $6.05.
We enter the third quarter, focused on our initiatives to meet or exceed these targeted results and we look forward to reporting on our financial performance as we go through the year.
We are pleased with our progress in capturing profitable growth, generating strong cash flow and driving shareholder value.
This quarter's 25% total sales growth reflects the benefits of the strengthening global economy and positive sales environment in both our automotive and industrial businesses.
Importantly, this dual recovery allows us to leverage the full scale of one GPC, which we believe creates significant value.
Our team also executed well and produced our 15th consecutive quarter of gross margin expansion, while further improving our productivity via ongoing expense initiatives.
Our global team network and disciplined focus in these areas enabled us to report strong operating results and record quarterly earnings.
Our exceptional balance sheet provides us with the financial flexibility to pursue strategic growth opportunities via investments in organic and acquisitive growth, while also returning capital to shareholders through the dividend and share repurchases.
The GPC team is focused on executing our growth strategy and operational initiatives to further enhance our financial performance in the remainder of 2021 and beyond.

user
compname reports q2 earnings per share of $1.36.
q2 earnings per share $1.36 from continuing operations.
q2 sales $4.8 billion versus refinitiv ibes estimate of $4.33 billion.
q2 adjusted earnings per share $1.74 from continuing operations.
adjusts 2021 outlook for revenue growth, diluted earnings per share and adjusted diluted eps.
in compliance with all covenants connected to its notes and other borrowings.
sees full-year 2021 total sales growth 10% to 12%.
sees full-year 2021 adjusted diluted earnings per share $6.20 to $6.35.
sees full-year 2021 free cash flow $900 million to $1.1 billion.
sees full-year 2021 net cash provided by operating activities $1.2 billion to $1.4 billion.

assistant