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Text: We appreciate you joining us today and hope you're staying safe and well.
We are pleased with the strong start to 2021 and ongoing recovery in our automotive and industrial businesses.
The GPC team remained focused on solid execution and in delivering strong financial results through improving sales trends, increasing operational efficiencies and enhancing customer value.
Through the quarter, we operated thoughtfully with the physical and mental well-being of our employees the top priority as our 50,000-plus GPC teammates are the core of our success.
Turning now to our first quarter financial results.
Total sales for the quarter were $4.5 billion, up 9% from last year and significantly improved from the 1% sales decrease in the fourth quarter of 2020.
Gross margin was also a positive, representing our 14th consecutive quarter of year-over-year gross margin expansion and our teams in the field continued to do a great job of managing our expenses through ongoing cost actions and the carryover of expense reductions implemented last year.
These results drove a 41% increase in operating profit and an 8.1% operating margin, which is up 180 basis points from the first quarter of last year.
Our strong operating performance drove net income of $218 million and diluted earnings per share of $1.50, up 88%.
We also continued to fortify our balance sheet ensuring ample liquidity and solid cash flow.
We are proud of our teams and we are encouraged by our results and we intend to build on this momentum throughout 2021.
Turning now to our business segments.
Automotive represented 66% of total sales in the first quarter and Industrial was 34%.
By region, 73% of revenues were attributable to North America with 16% in Europe and 11% in Asia-Pac.
Total sales for Global Automotive were $3 billion, a 14% increase from 2020 and much improved from a 1% increase in Q4 of 2020.
Comp sales were up 8%, improved from a 2% decrease in the fourth quarter and segment profit margin was up 250 basis points, driven by strong operating results in each of our automotive operations.
Sales were driven by positive sales comps across all our operations with 15% comps in Europe and Asia-Pac, 7% comps in the US and 3% comps in Canada.
The ongoing global economic recovery, including financial stimulus in the US, improving inventory availability, favorable weather conditions and our focus on key growth initiatives were all sales drivers in the quarter.
We would add that while we continue to expect a reasonable level of inflation as we move through 2021, price inflation was not a factor in our first quarter sales.
In Europe, sales were much improved from Q4 as our team capitalized on the strengthening sales environment, despite lockdown throughout the region.
In addition, initiatives to grow key accounts, enhance inventory availability and the ongoing launch of the NAPA brand continued to prove effective in driving profitable growth and market share gains.
For the quarter, our teams in France and the UK outperformed in the region with strong double-digit sales comps.
We would also call out a much improved performance by our team in the Benelux region.
The strong sales recovery combined with excellent expense controls produced a 500-basis point improvement in operating margin.
So a terrific start to the year for our European operations.
In Asia-Pac, our Automotive sales remained in line with the mid-teen growth we experienced through the second half of 2020.
For the quarter both retail and commercial sales held strong as the region operated through multiple lockdowns associated with the pandemic.
Retail sales, which represent over 40% of our total sales volume through our Repco stores continued to outperform posting a 33% increase in March and plus 24% in the quarter.
Our commercial sales continued to accelerate as well posting double-digit sales growth in the quarter.
We continued to benefit from the strength in online sales, which reached record highs at three times pre-COVID levels.
Finally building on the NAPA brand name has been well received and we remain focused on growing our NAPA presence in the region.
Summing it up, this group continues to perform at a very high level on both the top and bottom lines, resulting in a 150-basis point improvement and profit margin for the quarter.
In North America comp sales in the US were up 7% helping this business post a 180-basis point increase in profit margins.
In Canada, we operated through a variety of regional lockdowns which impacted our larger markets of Ontario and Quebec.
Comp sales were up 3% and operating margin was up 130 basis points.
Sales in the US, which posted its strongest quarterly comp since the first quarter of 2015, were driven by solid growth in both the retail and commercial segments.
This was our first quarter of positive commercial comps since pre-pandemic and our team produced record sales volumes in the month of March.
In addition, both ticket and traffic counts were positive on both our retail and commercial transactions, marking our first increase in traffic counts since several quarters.
By region, the Atlantic, Midwest and West Groups posted the strongest growth, although we would also call out our Northeast Group, which produced solid growth in the quarter.
This is notable as this region of the US has been most affected by the COVID-19 lockdowns over the past 13 months.
Likewise, we would add that product sales in categories such as batteries, tools and equipment and brakes were strong this quarter.
We are especially encouraged to see the rebound in our brakes business which generally is a positive indicator for our commercial business.
On the retail side, which continues to outperform with strong double-digit growth, we continued to drive sales via investments in retail specialists and store refreshes, as well as targeted promotions.
We would also call out our ongoing omnichannel investments and the increase in B2C online sales, which reached record levels in the quarter and were up 150% from the prior year.
Our commercial sales, our other wholesale category of independent garage customers, continued to generate strong growth.
We have been encouraged by the number of new accounts we are serving.
Clearly our investments in increasing the number of professional salespeople on the street has been effective in attracting new customers to NAPA.
We were also pleased to see improved sales with our NAPA AutoCare and major account customers which posted positive sales growth for the first time in several quarters.
Sales to the fleet and government group were down year-over-year, but sequentially improved from the fourth quarter and we look for further improvement in sales for this segment.
As we look ahead, we are excited for the growth opportunities we see for our Global Automotive segment.
We expect further improvement in aftermarket fundamentals such as increased miles driven, a growing vehicle fleet and an increase in vehicles aged six to 12 years, all favorable for the industry.
We can assure you we remain focused on our initiatives to deliver customer value and ultimately sell more parts for more cars.
These plans include further enhancing our inventory availability, strengthening our supply chain and investing in our omnichannel capabilities.
In addition, we expect to expand our global store footprint with additional bolt-on acquisitions, changeovers and new greenfield stores to further enhance our competitive positioning.
So now let's discuss the global Industrial Parts Group.
Total sales for this group were $1.5 billion, flat with last year.
Comp sales were down 2%, improved from the 4% decrease in Q4 and reflecting the third consecutive quarter of improving sales trends.
March was a breakout month with the North American Motion team posting a 7% increase in average daily sales and achieving record sales volumes.
This was a tremendous accomplishment and another turning point for GPC in our emergence from the pandemic.
The ongoing recovery over the last nine months is in line with the continued improvement in the industrial economy which you can see in several key indicators for our business.
For perspective, PMI was 64.7% in March, an increase of 4.2 points from December 31st.
In addition, industrial production increased by 2.5% in the first quarter, the third consecutive quarter of expansion, following the significant downturn in the second quarter of 2020.
Importantly, we can see these positive indicators translating to more activity with our customers, which are operating at higher run rates as well as releasing capital project orders.
The strengthening sales environment, along with our initiatives to drive growth and control cost produced an 80 basis point margin improvement with segment profit margin at 8.3% versus 7.5% last year.
Diving deeper into our Q1 sales.
We will start by saying that inflation remains a non-factor in our numbers thus far.
That said, we are seeing more pricing activity and expect another year of 1% to 2% price inflation from our suppliers.
For the quarter, we experienced improving sales trend among virtually all product categories and industries served.
We were especially encouraged by the recovery in the equipment and machinery aggregate and cement and wood and lumber sectors, all key industry groups for us.
In addition, we continue to benefit from the build-out of our omnichannel capabilities with digital sales up two times from the first quarter in 2020.
A key driver of our digital growth relates to our inside sales center which is generating incremental sales to new Motion customers.
While still a relatively small percentage of total sales, we are excited by the potential for future sales growth.
We also remain focused on growing our services and solution businesses to expand our expertise and sales opportunities in areas such as equipment repair, conveyance and automation.
We have made several bolt-on acquisitions to build scale in these areas and our services and solutions capabilities remain a key consideration in our overall M&A strategy for the Industrial business.
to further ensure profitable sales growth, we continue to enhance our pricing and category management strategies.
In addition, we plan to continue to optimize our supply chain network and further improve our productivity, while delivering exceptional customer service.
Closing out our Industrial comments.
We remain bullish about our Motion business and we are excited to see this team moving back into a growth mode.
So now I'll conclude my remarks by providing a brief update on our ESG initiatives.
As outlined in our Corporate Sustainability Report, GPC embraces our responsibility to innovate in ways that provide for our environment, our associates and the communities in which we operate.
In Q1 we expanded our training and development programs to ensure personal growth and enhance our comprehensive well-being program focused on the emotional, financial and physical health of our GPC teammates.
Additionally, we continue to make progress in the advancement of our corporate commitment to diversity and inclusion, we are actively recruiting talent that is representative of the communities we serve, training our teammates to mitigate unconscious bias and model inclusive behaviors while strengthening partnerships that support our D&I initiatives.
Finally, we remain focused on our mission to be good corporate citizens where we both work and live.
Since 1928, we have been giving back to communities and causes that make a difference and that legacy continues in 2021.
First I want to congratulate the global GPC team on the performance this quarter.
As Paul mentioned, our team delivered solid performance in the first quarter and have strong momentum.
The environment has improved compared to 2020, but we remain cautious as global uncertainty continues to be a part of doing business each day.
Areas of attention for us include COVID-19, inflation, global logistics and product and labor availability.
We also have more challenging year-over-year comparisons that will require sustained momentum during the second half of the year.
Despite the uncertainty, the GPC team is energized and focused to deliver performance.
I'll now share some additional perspective on our strategic initiatives in progress.
The foundation of our priorities is based on the customer experience and understanding their needs and working to exceed their expectations.
We are analyzing and listening to customer feedback and are corresponding to strength and opportunities.
In the simplest terms, our customers need us to be easy to do business with, reliable and helpful.
This independent data reinforces our priorities and serves as a guiding principle in terms of required action and strategic investment.
To deliver a best-in-class customer experience we have opportunities to simplify and integrate our existing operations.
The global teams are executing multi-year plans to realign teams, streamline processes, improve operational productivity and reduce costs.
These initiatives will not only create operating efficiency, but also enable faster team execution, deliver a better customer experience and accelerate profitable growth.
I'd like to highlight a few initiatives that illustrate our efforts to simplify and integrate.
For example, we're working to optimize facilities footprint and coverage, simplify and integrate disparate legacy IT systems, streamline back-office support functions, offshore non-customer facing functional activities and centralize GPC indirect sourcing processes as a few examples.
As we simplify and integrate, we're simultaneously investing in our core business and positioning for the future.
Our strong cash flow, solid capital structure and disciplined capital allocation provide the flexibility needed to continue to make these investments.
Key pillars of our core investments include talent, sales force effectiveness, digital supply chain and emerging vehicle technologies.
A few highlights of our progress across the key pillars during the quarter include.
We continue to take deliberate action across the globe to recognize high potential talent, infuse new capabilities into the organization and recruit diverse talent that is representative of the communities we serve.
Examples include category management, digital, emerging vehicle technology and field leadership roles to name a few.
Talent will always be a priority area of investment as we strive to be an employer of choice for teammates that share our GPC values and want to play a leadership role in our exciting future.
Two, sales force effectiveness.
Data and analytics to understand our unique customer segments, the different needs of each segment and associated strategies to serve the segment is a foundational element of sales force effectiveness.
The sales efforts reflect our omnichannel initiatives and include an increasing mix of both traditional selling and digital strategies.
As an example, the US automotive team revamped its sales intensity with new reporting tools to track customer visits, digital tools to communicate with field sales teammates and enhanced virtual product and skills training.
In addition, in 2021, the US automotive team adjusted compensation programs to better align incentives with profitable growth.
As I mentioned, digital is a foundational priority as we deliver a best-in-class customer experience and accelerate profitable growth.
Our businesses delivered excellent performance via digital channels in the quarter.
We continue to see strong increases versus prior year across our global digital channels.
Digital still represents a relatively small portion of our total sales and we're excited about the compelling digital vision our teams are executing.
Related, we continue to invest in foundational digital elements, including catalog, search and other critical customer experience elements, such as ease of ordering, pricing and analytics.
Our supply chain initiatives are focused to ensure we have the right product available in the right market at the right time.
We are continuously executing inventory, facility, productivity, logistics and technology strategies to achieve this goal.
One solid example is the success the US Industrial team enjoyed with recent facility automation investments that delivered a 500% labor productivity improvement.
Other select examples would be enhanced workforce management and delivery tracking tools in the US automotive business.
Lastly, emerging vehicle technologies.
We aspire to lead as it relates to the opportunities that emerging vehicle technologies present for our automotive industries.
We believe we have a unique position to leverage including our scaled global footprint, diverse portfolio, leading global brands, established customer-supplier relationships and one GPC team approach.
Through our planning process, we developed a multi-dimensional strategy to address electric vehicle trends.
A few select highlights include the alignment of talent 100% dedicated to developing and executing EV strategies, product and category management strategies with existing and new SKUs, global supplier councils with existing strategic partners, advisory groups leveraging our 25,000 global repair center relationships and partnerships with strategic EV market participants.
Lastly, strategic bolt-on acquisitions are a key part of our GPC growth strategy.
We utilize acquisitions to acquire new customers, further penetrate existing priority markets, enter new geographies, acquire product and service capabilities and acquire talent.
We also believe our acquisition capabilities position us well as we selectively consider and test new business models.
Our acquisition pipeline remains active and actionable given the fragmentation of our markets.
We believe our scale, market-leading brands, global footprint and unique culture position us to be an acquirer of choice.
We will remain selective and disciplined as we execute this important part of our strategy.
Similar to the approach utilized for our 2019 cost savings plan, the global teams develop tools in a monthly cadence to create visibility and status on initiatives.
This approach not only helps drive performance but also helps to share best practices around the globe as one GPC team.
In summary, I hope today's remarks reinforce our sense of focus and global teamwork.
We will remain agile as the global environment continues to evolve.
And we will remain focused on what we can control as we execute through the balance of the year and beyond.
And I'll now turn it to Carol to review the financial performance details.
We will begin with a review of our key financial information and then we will provide an update on our full-year outlook for 2021.
Total GPC sales were $4.5 billion in the first quarter, up 9% from last year and improved from the 0.7% decrease in the fourth quarter.
Gross margin was 34.5%, a 60-basis point improvement compared to 33.9% in the first quarter last year.
Our steady progress in improving gross margin continues to reflect the positive impact of a number of initiatives, including our pricing and global sourcing strategies.
And we also benefited from a sales mix shift to higher gross margin operations.
We would add that the level of supplier incentives in the quarter were in line with last year and neutral to gross margin.
And as Paul mentioned earlier, there was minimal impact of price inflation in our first-quarter sales and this is true for gross margin as well.
As we move through the year, we will continue to execute on our initiatives to drive additional gross margin gains via positive product mix shifts, strategic pricing tools and analytics, global sourcing advantages and also strategic category management initiatives.
Our selling, administrative and other expenses were $1.2 billion in the first quarter, up 4.6% from last year, or up 5.3% from last year's adjusted SG&A.
This reflects an improvement to 26.8% of sales this year, which is down nearly 100 basis points from 27.7% last year.
So tremendous progress and primarily due to the favorable impact of our cost savings generated in 2020 as well as ongoing cost control measures and also improved leverage on our stronger sales growth.
Our progress in these areas was slightly offset by rising costs and freight expenses which we're closely managing and planned increases in our technology spend which supports our strategic initiatives as Will covered earlier.
Our total operating and non-operating expenses were $1.3 billion in the first quarter, up 2.2% from last year or up 2.1% compared to last year's adjusted expenses.
First quarter expenses include the benefit of approximately $20 million related to gains on the sale of real estate and favorable retirement plan valuation adjustments that are recorded to the other non-operating income line.
All in, our total expenses for the quarter improved to 28.1% of sales, down 190 basis points from 30% in 2020.
Total segment profit in the first quarter was $361 million, up a strong 41% on the 9% sales increase.
And our segment profit margin was 8.1% compared to 6.3% last year, a 180 basis point increase.
In comparison to 2019, our segment profit margin has improved by 100 basis points.
So solid improvement and our strongest first quarter profit margin since 2015, a reflection of the positive momentum we're building in our businesses.
Our net interest expense of $18 million was down from $20 million in 2020 due to the decrease in total debt and more favorable interest rates relative to last year.
The corporate expense line was $31 million in the quarter, down from $55 million in 2020 due primarily to the favorable real estate gains and retirement plan adjustment discussed earlier.
Our tax rate for the first quarter was 23.8% in line with the reported rate last year and improved from the prior year adjusted rate of 26.5%.
This improvement primarily relates to the favorable tax impact of stock options exercised as well as the previously mentioned real estate gains and retirement plan adjustments.
Our first quarter net income from continuing operations was $218 million with diluted earnings per share of $1.50.
This compares to $0.84 per diluted share in the prior year or an adjusted diluted earnings per share of $0.80 for an 88% increase.
So now let's turn to our first quarter results by segment.
Our Automotive revenue for the first quarter was $3 billion, up 14% from the prior year.
Segment profit of $236 million was up a strong 65% with profit margin at 8% compared to 5.5% margin in the first quarter last year.
The 250 basis point increase in margin was driven by the continued recovery in the Automotive business and the execution of our growth and operating initiatives.
We were pleased to have each of our automotive businesses expand their margins for the third consecutive quarter.
In addition, we're encouraged that our first quarter margin also compares favorably to the first quarter of 2019, up 120 basis points.
So a broad recovery across our operations and we look for a continued progress in the quarters ahead.
Our Industrial sales were $1.5 billion in the quarter, flat with last year and improved sequentially for the third consecutive quarter, which is consistent with the strengthening industrial economy.
Our segment profit of $125 million was up 10% from a year ago and profit margin was up 80 basis points to 8.3% compared to 7.5% last year.
The improved margin for Industrial reflects the third consecutive quarter of margin expansion in both our North American and Australasian industrial businesses and it's also up by 90 basis points from the first quarter of 2019.
So another quarter of strong operating results for Industrial, which we expect to continue with stronger sales growth projected through the remainder of the year.
So now, let's turn our comments to the balance sheet.
We continue to operate with a strong balance sheet and ample liquidity and the financial strength to support our growth strategy.
At March 31st, total accounts receivable is down 27% from last year, which is primarily a function of the $800 million in receivables sold in 2020.
Our inventory was up 6% from the prior year and accounts payable increased 14%.
And our AP to inventory ratio improved to 124% from 116% in the last year.
We are pleased with our progress in improving our overall working capital position and we continue to believe we have opportunities for further improvement.
Our total debt is $2.6 billion at March 31, down $1 billion or 28% from last March and down $60 million from December 31st of 2020.
We significantly improved our debt position throughout the course of 2020 with the issuance of new public debt and a new revolving credit agreement that provide for expanded credit capacity and more favorable rates.
With these positive changes to our debt structure, our total debt to adjusted EBITDA has improved to 1.8 times from 2.5 times last year.
Additionally, we closed the first quarter with $2.6 billion in available liquidity, which is up from $1.1 billion at March 31st last year and in line with December 31st.
We also continue to generate strong cash flow, generating $300 million in cash from operations in the first quarter, which is up from $28 million in the first quarter last year.
With a strong start to the year, including the increase in net income and the improvement in working capital, we continue to expect cash from operations to be in the $1 billion to $1.2 billion range and free cash flow of $700 million to $900 million.
Our key priorities for cash include the reinvestment in our businesses through capital expenditures, M&A, the dividend and share repurchases.
We invested $48 million in capital expenditures in the first quarter, an increase from $39 million in 2020.
Looking forward, we have plans for additional investments in our businesses to drive growth and improve efficiencies and productivity.
We continue to expect total capital expenditures of approximately $300 million for the year.
As you heard from Will earlier, strategic acquisitions remain an important component of our long-term growth strategy.
We continue to cultivate a strong pipeline of targeted names and we expect to make additional strategic bolt-on acquisitions to complement both our Global Automotive and Industrial segments in the months and quarters ahead.
In the first quarter we paid a cash dividend of $114 million to our shareholders.
The Company has paid a cash dividend to shareholders every year since going public in 1928 and our 2021 dividend of $3.26 per share represents our 65th consecutive annual increase in the dividend.
We have actively participated in a share repurchase program since 1994.
While there were no repurchases in the first quarter, the Company is currently authorized to repurchase up to 14.5 million additional shares and we will resume share repurchases in the months and quarters ahead.
Turning to our outlook for 2021.
In arriving at our updated guidance, we considered several factors including our past performance, current growth plans and strategic initiatives, recent business trends, the potential for foreign currency fluctuations, inflation and the global economic outlook.
In addition, we consider the continued uncertainties due to 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 5% to plus 7%, an increase from our previous guidance of plus 4% to plus 6%.
As usual, these growth rates exclude the benefit of any unannounced future acquisitions.
By business, we are guiding to plus 5% to plus 7% total sales growth for the Automotive segment, an increase from plus 4% to plus 6% and a total sales increase of plus 4% to plus 6% for the Industrial segment, an increase from plus 3% to plus 5%.
On the earnings side, we are raising our guidance for diluted earnings per share to a range of $5.85 to $6.05, which is up 11% to 15% from 2020.
This represents an increase from our previous guidance of $5.55 to $5.75.
We enter the second 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.
Looking ahead, the GPC team is excited for the ongoing recovery in the global economy and the growth prospects we see for both Auto and Industrial.
Our strong balance sheet provides us the financial flexibility to pursue strategic growth opportunities and we remain focused on executing our plans to capture profitable growth, generate strong cash flow and drive shareholder value.
As a result, we are optimistic that we can deliver strong financial results in the quarters ahead.

user
q1 gaap earnings per share $1.50 from continuing operations.
q1 sales rose 9.1 percent to $4.5 billion.
raises 2021 outlook for revenue growth and diluted eps.
sees 2021 total sales growth 5% to 7%.
sees 2021 earnings per share $5.85 to $6.05.
sees 2021 free cash flow $700 million to $900 million.

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