Genuine Parts Company

Good day, and welcome to the Genuine Parts Company fourth quarter and full year earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by a zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I'd now like to turn the conference over to Sid Jones, Senior Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining us today for the Genuine Parts Company fourth quarter and full year 2021 earnings conference call. With me today are Paul Taniou, our Chairman and Chief Executive Officer, Will Stangle, our President, and Carol Yancey, our Executive Vice President and Chief Financial Officer. As a reminder, today's conference call and webcast include a slide presentation that can be found on the Genuine Parts Company Investor Relations website. Please be advised this call may include certain non-GAAP financial measures, which may be referred to during today's discussion of our results as reported under generally accepted accounting principles. A reconciliation of these measures is provided in the earnings press release issued this morning, which is also posted in the investor section of our website. Today's call may also involve forward-looking statements regarding the company and its businesses, The company's actual results could differ materially from any forward-looking statements due to several important factors described in the company's latest SEC filing, including this morning's press release. The company assumes no obligation to update any forward-looking statements made during this call. Now, I'll turn the call over to Paul for his remarks.

Thank you, Sid, and good morning. Welcome to our fourth quarter 2021 earnings conference call. The GPC team finished the year with a strong fourth quarter, further building on the positive momentum of the first nine months of 2021. We are proud of our progress through the year and thankful to our 52,000 teammates for their hard work and ongoing commitment to excellence. With a tailwind of strong industry fundamentals, we executed on our key strategic priorities to accelerate sales, improve gross margin, and enhance operational efficiencies, which resulted in double-digit sales and earnings growth for both the quarter and full year. Our earnings growth and continued focus on working capital improvements also helped us to deliver strong cash flow. So just a tremendous effort by our global teams. They were laser-focused throughout the year and successfully navigated the ongoing challenges of the global supply chain, COVID disruptions, and inflationary pressures. In early January, we successfully closed on our acquisition of Command Distribution Group, an industrial distributor of power transmission, automation, and fluid power solutions. We are integrating this highly synergistic acquisition into our motion business to enhance our scale and further strengthen our market-leading position. We are pleased to welcome the Command team to GPC, and we look forward to creating significant shareholder value as a premier leader in industrial solutions. Turning to our fourth quarter financial results, total sales were $4.8 billion, a 13% increase from last year, with broad strength across all our businesses. We delivered our 17th consecutive quarter of gross margin expansion, and our teams drove cost initiatives to enhance productivity and offset inflationary pressures. These efforts led to an 18% increase in the quarter in adjusted earnings per share. Total sales for the global automotive group were $3.2 billion for the quarter, a 13% increase from 2020. On a comp basis, sales were up 11% from 2020, with our U.S. business posting the strongest year-over-year comps and each of our international operations achieving high single-digit sales comps. In addition, we experienced a steady sales cadence throughout the quarter with double-digit total sales increases in all three months. The ongoing economic recovery has led to strong customer demand. Improving miles driven, delays of new car production, and rising used car prices are keeping more cars on the road longer, generating increased repairs and maintenance. Our strategic growth initiatives are proving effective as well. We continue to work closely with global suppliers to manage through product delays and logistical challenges to improve inventory availability. Additionally, our pricing actions have contributed positively to sales and maintain margins throughout the inflationary environment in the latter half of 2021. In the fourth quarter, we also added 130,000 SKUs to our e-catalog with the integration of auto accessories garage. We were also pleased to expand our global store footprint with the addition of several bolt-on acquisitions. In total, we added more than 50 net new stores across our network, with most of these coming in the fourth quarter. Finally, as we look ahead to April, we are excited for the launch of the new AAA-branded premium batteries. This battery will be available to all consumers with a focus on the 62 million AAA cardholders and 5,400 approved auto repair centers. Looking next at our automotive highlights by region, total U.S. sales were up 15%, with comp sales up 13% from last year. In Canada, total sales were up 11%, with comp sales up 9% from 2020. The growth in Canada was much improved from the third quarter as the easing of lockdowns drove strong demand throughout the end of the year. In the U.S., sales to both commercial and retail customers were up double digits, with positive ticket and traffic counts for the fourth consecutive quarter. Likewise, sales were strong across a broad range of products, with categories such as chassis, exhaust, brakes, and ride control all outperforming. Our DIY business remains strong, trending well above historical growth rates for the past several quarters. While initially driven by the increase in DIY demand due to COVID, we have sustained that growth through a number of initiatives, including enhanced in-store merchandising, training and development, and the continued rollout of customer services such as Afterpay, which offers existing and new customers buy now, pay later options. This program is in 1,200 stores today and currently available for all online purchases. NAPA Online B2C sales continue to be our fastest growing sales channel, up over 40% in Q4 and 53% for the full year, a 3X increase from our 2019 volume. The strength in commercial sales was driven by high team growth to our major account partners, and sales to our Napa Auto Care Center customers were up low teens. The surge in members continued through the fourth quarter, and we ended the year with nearly 18,000 Napa Auto Care Centers, an increase of over 800 shops from 2020. Rounding out our commercial segments, fleet, government, and other wholesale customers posted low double-digit sales growth for the quarter, so strong results across all our commercial accounts. In Europe, our AAG team continued to perform well with total sales up 14% and comp sales up 7% from last year. Our team delivered solid results across each of our seven markets, with the UK and Benelux each posting 20% plus growth. Our teams on the ground continue to expand our market share across all important key account segments, as well as accelerating the rollout of NAPA-branded products. In addition, we are pleased to report our 2021 acquisitions of Wind Parts, an online provider of parts and accessories, and J&S, a multi-store operation based in Ireland, both are performing above expectations. In our Asia-Pac business, total sales were up 11% from 2020, with comp sales up 9% from last year and up a strong 25% on a two-year stack. Both commercial and retail sales continue to perform well, with growth for the Repco and Napa brands driven by accelerated digital strategy, Napa store expansion, and the Q4 reopening of key metro markets. So now, let's discuss the global industrial segment. Total sales for this group were $1.6 billion for the quarter, a 13% increase from last year, with comp sales up 12% from 2020. This is our third consecutive quarter of double-digit comps for this segment, driven by strong growth in both our North American and Australasian industrial businesses. The sales cadence was consistent through the quarter with double-digit sales growth in all three months. The continued improvement in our industrial sales trends reflects the benefits of our growth initiatives and ongoing strength of the industrial economy. Our industrial team delivered positive sales growth across virtually all major product categories and industries we serve, including double-digit increases in the majority of our industry groups. These include sectors such as equipment and machinery, iron and steel, automotive, and aggregate and cement, among others. Our industrial team continues to execute several initiatives to drive profitable growth. Our omni-channel build-outs have accelerated e-commerce growth and is driving sales with new customers. We are encouraged by the incremental sales for our inside sales center and on motion.com. We have expanded our industrial services and value-add solutions capabilities in areas such as equipment repair, conveyance, and automation. And our enhanced strategy to compete in a dynamic pricing environment provides us a competitive advantage while also helping us offset inflationary pressures. Our motion team made tremendous progress with these initiatives in the quarter and the year, and we expect to make further progress again in 2022. In addition, we continue to look for strategic M&A opportunities to further boost our products and services offerings and expand our footprint. The added scale, presence, and capabilities through the KDG acquisition is a great example. checking several boxes with its core power transmission and bearings business and automation and fluid power industrial services and solutions. KDG's highly complementary growth and productivity strategies, product offering, and value-added services provide tremendous synergies and growth prospects. Our motion team is actively bringing together the world-class talent and industrial expertise of these two organizations to build an even stronger business. In 2021, we remain focused on the positive impact of sustainable business practices. We updated our 2021 sustainability report, highlighting our progress in promoting diversity, equity, and inclusion, and reducing the environmental impact of our operations. Today, we are in process of measuring our global emissions and building a strategy for targeted improvement. We will be sharing additional highlights as we move through 2022. Finally, as most of you are probably aware, we announced last month that Carol will be retiring in May after an exceptional 30-year career. As our CFO for the past nine years, Carol's leadership and countless contributions were integral to the significant growth and strong financial performance of the company. She will be greatly missed by all of us. We were pleased to announce that Bert Napier will be stepping in as our next CFO. Bert is a strategic financial executive with a diverse background spanning 25 years, including the past 16 years with FedEx, serving most recently as EBP Finance and Treasurer. Bert also served as President of FedEx Express Europe and CEO of TNT Express. We are confident Bert's strong financial background, along with his extensive international experience, will make him a great addition to the GPC team. Carol and Bert will work together over the next few months to ensure an orderly and seamless transition. Carol will be with us for our first quarter earnings call in April, and Bert will join us on the call as well. We look forward to introducing Bert to all of you in the months ahead. Now, I'll turn the call over to Will. Will?