純正零件 (GPC) 2013 Q4 法說會逐字稿

Good morning. My name is Bridget and I will be your conference operator today. At this time I would like to welcome everyone to the Genuine Parts Company fourth-quarter and 2013 earnings conference call.

(Operator Instructions) Now I would like to turn the call over to Sid Jones, Vice President of Investor Relations. Mr. Jones, you may begin your conference.

Good morning. Thank you for joining us today for the Genuine Parts fourth-quarter and 2013 conference call to discuss our earnings results and outlook for 2014.

Before we begin this morning, please be advised that this call may 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 filings. The Company assumes no obligation to update any forward-looking statements made during this call.

This morning we will begin the comments from Tom Gallagher, our Chairman and CEO. Tom?

Thank you, Sid. I would like to add my welcome to each of you on the call today and to say that we appreciate you taking the time to be with us this morning.

Paul Donahue, the President of Genuine Parts Company, along with Carol Yancey, our Executive Vice President and Chief Financial Officer, and I will each handle a portion of today's call. Once we've completed our individual comments, we will look forward to addressing any specific questions that you may have.

Earlier this morning we released our fourth-quarter and year-end results, and hopefully you have all had an opportunity to review them. But for those that may not have seen the numbers as yet, a quick recap shows sales for the quarter were $3.518 billion, which was up 13%. Net income was $150.5 million, which was down 6% on a reported basis but up 3% on a comparative basis, taking into consideration the one-time pension curtailment gain of $23.5 million in the fourth quarter of 2012.

Earnings per share were $0.97 this year versus $1.03 last year, which was down 6% on a reported basis but up 4% on a comparative basis. For the full year, sales were $14.078 billion, which was up 8%. Net income was $685 million, up 6%, and earnings per share were $4.40 this year versus $4.14 last year. And that's an EPS increase of 6%.

Sales, net income, and earnings per share each reached record levels for us in 2013, which we were pleased to see. We were also pleased that our fourth-quarter results in each of these areas helped us to slightly outperform the full-year guidance that was provided at the end of the third quarter, indicating a bit stronger fourth quarter than we had originally anticipated.

As we look at our segment results, we continue to see the automotive operations outperforming our nonautomotive businesses by a pretty good margin. Paul will comment on automotive in a few minutes, but just to help illustrate this point, automotive sales were up 18.5% for the year while the combined nonautomotive operations were down 1.3%, which shows quite a contrast in performance. And I will make a few comments about each of the nonautomotive businesses starting with Industrial.

2013 was a challenging year for Motion Industries right from the outset. First-quarter sales were down 2% followed by a 1% decrease in the second quarter and a 2.5% decrease in Q3. We were a bit encouraged by the 3% increase in the final quarter, however, and Motion ended the year down about 0.5%.

If we look at the results by customer category, as a group those customers in the automotive, food products, pulp and paper, and lumber and wood products segments, among others, each showed nice growth for the year. Our challenges were primarily in the equipment and machinery category, largely a result of several heavy equipment manufacturers who experienced sluggish demand both in North America and in their export markets. And as a result, the equipment and machinery segment was down for the year.

We are encouraged, however, by the fact that nine of our top 10 customer categories have positive growth for the year. And this, combined with historically healthy Industrial production and capacity utilization levels, as well as our recently completed Industrial acquisition of CSI in Western Canada, all position us to look for a stronger performance from our Industrial operations in 2014.

Moving on to EIS, our Electrical segment, it is very much a similar story to the Industrial business, with decreases of 5%, 4%, and 5% over the first three followed by a positive fourth quarter of plus 6% aided by an acquisition completed at the end of October. And EIS ended the year down 2%.

There were a number of factors that influenced the EIS results in 2013, including the impact of sequestration on their defense contractor customers and also the fairly significant decline in copper pricing. However, as we look forward we are a bit more optimistic. Although copper pricing may continue to be a bit of a headwind, at least in the early part of 2014, business seems to be improving and a bit more stable for our defense contractor customers.

Additionally, we entered 2014 with two consecutive quarters showing the ISM Purchasing Managers' Index above 50, which is a stronger position than we found ourselves in going into 2013. In addition, over the past few months we have completed a couple of strategic bolt-on type acquisitions for EIS. The combination of improving end-market conditions and the recent acquisitions put EIS in a position to deliver a much stronger performance in 2014.

The final of our nonautomotive businesses is Office Products. After the positive results in the fourth quarter of 2012, we went into 2013 cautiously optimistic. However, we saw conditions soften again as we worked our way through the year and we were down 1% in the first quarter, down 3% in quarters two and three, and down 4% in the final quarter. And we ended the year down 3%.

In looking at the office product results from the product category side, we had positive results for the year in cleaning and break room supplies, as well as in the furniture category. But then these increases were offset by decreases in the technology and core office supplies categories.

On the customer side, the mega-channel grew modestly for us for the year but our independent reseller segment was down, as it had been through all four quarters of the year. So it was a difficult year for our Office Products team, and of our four business segments, this is the one that will be the most challenged in 2014 due to continued end-market sluggishness.

With that said, however, we will still be looking for an improved year from Office Products in the year ahead. The combination of continued product and customer portfolio initiatives and the recently completed acquisition in the janitorial supply category should enable us to produce modest growth in the year ahead.

So that's a quick overview of the three nonautomotive businesses. We will now ask Paul to give you an update on the automotive operations.

Thank you, Tom. Good morning, everyone, and welcome to our fourth-quarter conference call. Good to be with you today and to have an opportunity to provide an update on the fourth-quarter performance of our automotive business.

As was mentioned in both our second- and third-quarter conference calls, we are now including in our automotive recap results from GPC Asia Pacific, which was consolidated into our results on April 1. To kick off our automotive report we can tell you that despite the challenging economic environment in this region, our Australasian business continues to perform as expected throughout both Australia and New Zealand, and we are encouraged with the progress we've seen thus far. This group, led by CEO John Moller, has put plans in motion to have another solid year in 2014.

As Tom mentioned in his opening remarks, our automotive business grew top-line revenue about 25% in the fourth quarter. To further explain, the numbers breakout as follows: acquisitions contributed 19%, up to 25%; our core business grew 7%; and currency had a negative impact of 1%.

Now let me take you through our North American numbers and provide an overview of our fourth-quarter performance. As mentioned earlier, our team delivered a 7% sales increase for the quarter. In evaluating our performance, we are encouraged to see that all regions of the US are positively contributing to our sales growth.

The top performers in the quarter, not surprisingly, were those that were most impacted by the colder winter temperatures. So our division stretching from the Plains across the Great Lakes to the Northeast led the way for us in the fourth quarter. These colder temperatures provided positive momentum for a number of our key product categories as well.

That said, the most recent extreme weather in some Southern states, as well as up and down the Eastern seaboard, has forced numerous store and customer closures and has had a negative impact on our business. The net-net of all this extreme weather we believe will be a positive for our automotive business in the long run.

Now turning to our US company-owned store group, comparable same-store sales growth in the fourth quarter came in at plus 7%. This improved performance gives us three consecutive quarters of strong same-store sales growth.

As a reminder, after a slow start to 2013, our team posted a 5% increase in Q2 followed by a 4% increase in Q3. So we are delighted to report steady and consistent growth throughout the year. Our sales growth in Q4 was once again driven by a healthy 7% increase in our commercial and wholesale business. Diving deeper into our commercial results, our non-fleet related business turned in another stronger quarter generating a 9% increase. This segment was supported by double-digit sales growth among our major customers as well as double-digit growth from our 15,000-plus NAPA AutoCare Centers. We are very pleased with the progress our team continues to make in this all-important segment of our business.

Our fleet business held steady at 5.7% growth. Again, a positive sign as we head into the new year. Our average wholesale ticket value increased low single digits and our average number of tickets was up mid single digits in this segment of our business for the second consecutive quarter. We are encouraged by both of these trends.

The fourth quarter was also the strongest of the year for our retail business as our team generated a 3% increase. Both our average ticket value and our average number of tickets grew in the low to mid single-digit range. It is encouraging to see that the initiatives our team has focused on are beginning to drive improved results.

From a product category standpoint, we continue to see improved sales in our Electrical category, primarily driven by our NAPA battery business. Not surprisingly, the colder winter temperatures throughout much of the country also drove increases in both our starter and alternator businesses. Our Electrical business was a key contributor throughout 2013 and this group has gotten off to another impressive start to 2014.

An additional positive product trend is our improved sales in our all-important brake business. This is significant as we experienced slowing in this critical category in 2012 and into the first quarter of 2013. We began to see our business ramp up in Q2 and we have experienced double-digit increases in both Q3 and Q4. This improved performance confirms the initiatives to put into place at succeeding in getting our brake business back on track.

So in summary, we are encouraged to see both our North American and Australasian automotive operations report another quarter of solid results. We remain positive about the core fundamentals of the automotive aftermarket and the growth opportunities available to us in both the retail and commercial sectors.

Many of the key metrics remain positive. The average cost of fuel has declined in many regions of the country and this serves to drive the all-important miles-driven metric, which is trending up despite a very slight 0.1% decline in the month of November. The average age of vehicles on the road remains in excess of 11 years and deferred maintenance remains at historically high numbers.

All of these fundamentals are trending in the right direction and should continue to drive industrywide growth in 2014 and beyond.

So in closing, we are pleased with our fourth-quarter results and encouraged by the sequential improvement we saw throughout 2013. We are very proud of our management team and know they remain committed to driving profitable growth in 2014. While we have much work ahead of us, we remain optimistic that the initiatives we have put into play are having a positive impact on our results.

We would like to personally thank all of our associates, both at NAPA North America and at GPC Asia Pac in Australia and New Zealand for their efforts in the fourth quarter and throughout 2013.

So that completes our overview of the automotive business. At this time I will hand the call over to Carol to get us started with a review of our financial results. Carol?

Thank you, Paul. We will get started with review of our fourth-quarter and full-year income statements and our segment information and then we will review a few key balance sheet items. Tom will come back and wrap it up, and then we will open the call up for your questions.

As Tom mentioned, our total revenues were $3.5 billion for the fourth quarter, an increase of 13% from last year and for the 12 months total sales of $14.1 billion, up 8% from 2012, and another record sales level for Genuine Parts Company. Before the positive impact of our fourth-quarter acquisitions and the GPC Asia Pacific acquisition on April 1, 2013, our total revenues were up 4% in the fourth quarter and this was offset by a 1% headwind from currency. For the year, total sales are up 1% before acquisitions, reflecting a 4% underlying sales increase for our automotive group, offset by a 1% sales decrease for our nonautomotive businesses.

Our gross profit for the fourth quarter was 31.0% of sales, which is up 180 basis points from the 29.2% of sales last year. For the 12 months, gross margin of 30% (technical difficulty) 18 million and 3 million, respectively, to cost of sales as purchase accounting adjustments for the write up of inventory to fair value at GPC Asia Pacific. This write up negatively impacted our full-year gross margin by approximately 15 basis points.

So a good amount of activity impacting our gross margin in 2013, especially as it relates to GPC Asia Pacific and their store-own model. Looking ahead, we will continue to seek opportunities for further margin expansion and currently expect gross margins to improve slightly from the 30% achieved in 2013.

As an additional point of interest, we continue to see very little inflation in our businesses. For (technical difficulty) our cumulative pricing was down negative 0.1% for automotive, up 1.1% for our Industrial, up 0.5% for Office Products, and up 1% for Electrical.

Excuse us, we understand the line went out for a few minutes. So I am going to back Carol up to probably the beginning of your session, Carol. They couldn't tell exactly where it went out, but we've got a notification the audio was dead. It may have been just for a few minutes.

Operator, if you can tell us anything more specific, we will try to start at the appropriate spot.

It would probably be best if you started at the beginning of hers.

We apologize for the problems, folks, but here we go.

Okay. We will start off with total revenues for the fourth quarter were $3.5 billion, an increase of 13% from last year. For the 12 months, our total sales of $14.1 billion were up 8% from 2012, another record sales level for Genuine Parts Company. Before the positive impact of our fourth-quarter acquisitions and the GPC Asia Pacific acquisition on April 1, 2013, total revenues were up 4% in the fourth quarter and this was offset by a 1% headwind from currency.

For the year, total sales are up 1% before acquisitions, reflecting a 4% underlying sales increase for our automotive group, offset by a 1% sales decrease for our nonautomotive businesses.

Gross profit for the fourth quarter was 31.0% of sales, up 180 basis points from the 29.2% of sales last year. And for the 12 months gross margin of 30% is up from the 29% for the same period last year or an increase of 100 basis points. Our improvement in gross margin for both the fourth quarter and the full year can be primarily attributed to the favorable impact of higher gross margins in our Australasian business, which owns 100% of its stores.

Excluding the impact of GPC Asia Pacific, our underlying gross margin for the quarter and the year was up slightly, despite the headwind of lower volume incentives in our nonautomotive businesses, primarily Industrial, during the year.

In the second and third quarters of 2013, we recorded expenses of $18 million and $3 million, respectively, to cost of sales as purchase accounting adjustments for the write up of inventory to fair value at GPC Asia Pacific. This write up negatively impacted our full-year gross margin by approximately 15 basis points. So a good amount of activity impacting our gross margins in 2013, especially as it relates to GPC Asia Pacific and their 100%-owned store model.

Looking ahead, we will continue to seek opportunities for further margin expansion and currently expect gross margin to improve slightly from the 30% achieved in the prior year.

As an additional point of interest, we continue to see very little inflation in our businesses. For 2013, cumulative pricing was down 0.1% in automotive, up 1.1% in Industrial, up 0.5% in Office Products, and up 1% in Electrical.

Turning to SG&A, total expenses were $856 million in the fourth quarter, representing 24.3% of sales. For the 12 months in 2013, total SG&A expenses are $3.2 billion, or 22.6% of sales. SG&A, as a percentage of sales, are up 320 and 140 basis points for the quarter and the full year, respectively. Much like the change in gross margin, this primarily reflects the impact of higher SG&A costs at GPC Asia Pacific, again due to their 100%-owned store model.

The decrease in leverage associated with the weak sales levels across our nonautomotive businesses also serve to negatively impact our operating costs in both the quarter and the year. In addition, certain year-end expenses adjustments in areas such as legal and professional services, insurance, and employee benefits were recorded in the fourth quarter which slightly increased our expenses in the period.

It is also important to point out in the fourth quarter of 2012 the Company recorded a one-time non-cash curtailment gain of $23.5 million associated with our December 2012 decision to freeze our pension plan, which was effective January 1, 2014. Our full-year SG&A also includes the positive one-time pretax adjustment of $54 million net of expenses associated with the revaluation of our original 30% investment in GPC Asia Pacific that was acquired on April 1, 2013.

Excluding both the 2012 and the 2013 one-time adjustments, SG&A as a percent of sales is 22.9% in 2013 compared to 21.4% in 2012, with the increase due mostly to GPC Asia Pacific but also reflecting a 30 to 40 basis point increase related to the loss of leverage in our nonautomotive businesses, which we intend to improve on in 2014.

Our focus remains on effective cost management in every area of our business. A few notable cost control measures include ongoing investments in technology, which have positively impacted our operating efficiencies and our distribution centers and stores, as well as supply chain initiatives in areas such as freight and logistics. Through these initiatives and in consideration of the GPC Asia Pacific store model, for the full 12 months we expect our SG&A for 2014 to be relatively consistent with the prior year.

Now let's discuss the segment results. Automotive revenue for the fourth quarter was $1.92 billion and represents 54% of sales and is up 25%. Our operating profit of $154 million is up 26% and their margin held even with the prior year at 8.0%. For the full year, automotive sales were $7.5 billion, representing 53% of our revenue and up 18.5%.

Operating profit of $641.5 million is up 19% and so their 8.6% margin is the same as the prior year. Our Industrial sales were $1.09 billion in the fourth quarter and this is 31% of total revenue and up 3% from the prior year. Our operating profit of $73.3 million is down 6% and our operating margin of 6.8% was down from the 7.4% in the prior year.

For the 12 months, Industrial sales were $4.43 billion, which is 31% of total revenue and down 0.5%. Our operating profit of $321 million is down 9% and their margin of 7.2% is down 70 basis points from the 7.9% in 2012. So margin decreases in the Industrial for both the quarter and the year are due to the loss of leverage on weak sales and the decrease in volume incentives with our suppliers. Some improved top-line growth in 2014 will help these margins.

Our Office Products revenues were $386 million in the quarter, which is 11% of our total revenues and down 4.3%. Our operating profit of $31.4 million is down 13.6%, so their margin was down to 8.1% from 9.0% last year. For the year, office sales were $1.64 billion, representing 12% of total revenue and down 2.9%.

Operating profit of $122.5 million is down 8.9% and their margin is 7.5% versus 8.0% last year, or down 50 basis points. This is due primarily to the loss of leverage on their weak sale and also, to a lesser degree, lower vendor allowances.

The Electrical Electronic group had sales in the quarter of $144 million. That's 4% of our revenue and that was up 6.3%, driven by acquisitions. Their operating profit of $12.3 million is down 1.4%, so their margin came down to 8.5% from 9.2%. For the year, Electrical sales were $569 million, representing 4% of revenue and down 2.4%.

Operating profit of $47.6 million is down 6.5% and their margin was down 30 basis points from 8.7% to 8.4%. As with Industrial and office, the decline in margin is primarily a function on the loss of leverage on their lower sales volume in 2013.

The total operating profit was up approximately 9% in the quarter and operating profit margin of 7.7% was down 30 basis points, which is a slight improvement from the 40 basis point year-over-year decrease in the third quarter. For the full year, our total operating profit is up 5% and our margin of 8.0% is down 30 basis points from the 8.3% in 2012. The decline in our operating margins for the quarter and the year reflects the continued impact of our weak sales conditions in our nonautomotive businesses.

That said, the automotive business has held their margin constant for a few periods now and we think we can improve on this by 10 to 20 basis points in the periods ahead. Thus far, the operating margin at GPC Asia Pacific remains comparable to the margin for the total automotive group as we expected. We have room for improvement in each of our four businesses and we remain committed to expanding our operating margin in the periods ahead through improved top-line growth as well as our ongoing initiatives.

We had net interest expense of $6 million in the fourth quarter and for the year our interest expense is $24.3 million, which is up from 2012 due to the increase in our total debt. Based on a recently renewed term note discussed in further details in a few minutes, as well as the possibility of reducing our current debt somewhat in 2014, we expect net interest expense to improve to approximately $20 million for the full year of 2014.

Our total amortization expense was $8.5 million for the fourth quarter and it's $29 million for the full year. This is up from 2012 due primarily to the Quaker City and GPC Asia Pacific acquisitions, as well as the other Industrial and Electrical acquisitions that were completed in the fourth quarter. Currently, we expect amortization expense to be in the $35 million range for 2014.

The other line, which reflects corporate expense, was a $21 million expense item in the fourth quarter and $35 million expense for the full year. The full-year number includes the $33 million net benefit of the purchase accounting adjustments related to GPC Asia Pacific, which were recorded in the second and third quarters of 2013. Likewise, the $23.5 million pension curtailment gain reported in the fourth quarter of 2012 is also included in this line for the prior year.

With these items in mind, we project the corporate expense line to be in the $60 million to $70 million range again for 2014.

For the quarter, our tax rate was approximately 36.2% compared to 36.4% last year. For the year, our 34.4% rate compares to the 36.4% for the same period last year with the improved tax rate due to the favorable impact of lower Australian tax rates applied to GPC Asia Pacific's pretax earnings, as well as a favorable tax rates on the purchase accounting gain generated by the remeasurement of our 30% investment. We expect our tax rate in 2014 to approximate 36% to 36.5%.

Net income for the quarter was $150.5 million and EPS of $0.97 compared to $1.03 last year or down 6%. After considering the pension retirement gain of $23.5 million in the fourth quarter of 2012, which impacted EPS by $0.10, EPS in the fourth quarter was up 4% on a comparative basis. For the full year, net income of $685 million and EPS of $4.40 are both up 6% from the prior year.

Now we will discuss a few key balance sheet items. Our cash at December 31 was $197 million, which is down from the approximately $400 million at December 31, 2012. Strong cash flows from the increase in our earnings and our ongoing working capital initiatives were offset by the use of cash for acquisitions and other investing activities.

With that said, we are still very satisfied with our current cash position at December 31. Our accounts receivable of $1.7 billion at December 31 increased 12% from 2012 on a 13% sales increase for the quarter, so we are pleased with this level of receivables and we remain focused on our growth -- goal of growing receivables at a rate less than the revenue growth in the periods ahead. We are also very satisfied with the quality of our receivables at this time.

Our inventory at the end of the year was $2.9 billion, which is up 13% from December 2012, primarily due to the GPC Asia Pacific and our other acquisitions in 2013. Excluding the impact of acquisitions, our inventory is up 1% from last year, so our team continues to do a very good job of managing our inventory levels. We remain focused on maintaining this key investment at the appropriate levels as we move forward into 2014.

Our accounts payable balance at December 31 was $2.3 billion, or up 35% from December 31 last year, due to the positive impact of our extended payment terms and other payables initiatives established with our vendors, as well as the impact of GPC Asia Pacific. Our improvement in this area and its positive impact on our working capital and days and payables is quite encouraging. We expect this trend to continue in the periods ahead.

Our working capital of $2.0 billion at December 31 compares to $2.3 billion at December 31, 2012. Effectively managing accounts receivable inventory and accounts payable is a high priority for our company. Our ongoing efforts with these key accounts have resulted in tremendous improvement in our working capital position and cash flow, and our balance sheet remains in excellent condition at December 31, 2013.

Our total debt of $765 million at December 31, 2013, includes two $250 million term notes, as well as another $265 million in borrowings, under our multicurrency syndicated credit facility agreement. This adds to a modest total debt to total capitalization ratio of approximately 18.5% at December 31, 2013. We are comfortable with our capital structure at this time, and although we may choose to pay down some of our current debt under the syndicated credit facility during 2014, it's dependent on other investment opportunities that could arise.

Additionally, since our last call we have renewed our $250 million term note previously due November 30, 2013. This new 10-year note extends to 2023 at a 2.996% interest rate. This provides us more favorable terms and projected annual interest savings of approximately $4 million.

As we stated earlier, we continue to generate solid cash flows and in 2013 our cash from operations was approximately $1.1 billion and free cash flow, which deducts capital expenditures and dividends, was approximately $600 million, both representing new records for us. Looking ahead, we currently expect another strong year for cash flows in 2014 with cash from operations in the $900 million to $1 billion range. And at this level of cash from operations we would expect free cash flow to be in the $500 million range for 2014.

We are pleased with the continued strength of our cash flows and we remain committed to several ongoing priorities for the use of our cash, which we believe serve to maximize shareholder value. Our first priority for the cash is the dividend, which we have paid every year since going public in 1948, and we have now raised for 58 consecutive years, effective with yesterday's Board approval of a $2.30 per share annual dividend for 2014. This represents a 7% increase from the $2.15 per share paid in the prior year and is approximately 52% of our 2013 earnings per share, which is well within our goal of a 50% to 55% payout ratio. Our goal would be to maintain this level of payout ratio going forward.

Our other priorities for cash include the ongoing reinvestment in each of our four businesses, strategic acquisitions where appropriate, and share repurchases. Our investment in capital expenditures were $40 million for the fourth quarter, up from $30.4 million in the prior year. Our full-year capital spending totaled $124.1 million, which is an increase from the $102 million in the prior year.

We expect our capital expenditures to further increase in 2014 and to be in the range of $140 million to $160 million, which accounts for a full year with GPC Asia Pacific as well as the anticipated expenditures for our North American businesses. The vast majority of our investments will continue to be weighted towards productivity-enhancing projects primarily in the technology area.

Our depreciation and amortization was $36 million in the quarter, up from $25 million in the fourth quarter of the prior year. For the year, depreciation and amortization is $134 million compared to $98 million for the same period in 2012. The increase on this line reflects the impact of GPC Asia Pacific as well as amortization expense related to Asia-Pacific and Quaker City. We currently anticipate depreciation and amortization to be approximately $145 million to $155 million for the full year in 2014.

Strategic acquisitions continue to be an ongoing and important use of cash for us and are integral to our growth plans for the Company. We continue to seek new acquisitions across our businesses to further enhance our prospects for future growth.

Since we last reported to you, the Company has closed on six acquisitions. In the fourth quarter, Motion added two industrial distribution companies to their operations and EIS added one acquisition, which complements their fabrication capabilities. The combined annual revenues for these three acquisitions are approximately $125 million.

Thus far in 2014 we've added another three acquisitions, including one each in the Industrial, Electrical, and office businesses with the estimated revenues for these three acquisitions totaling approximately $235 million. We are pleased to have added these companies to our operations and we expect them to be accretive to our earnings in 2014. We will remain active in seeking new acquisitions for our businesses in 2014, generally targeting those bolt-on types of acquisitions with annual revenues in the $25 million to $125 million range.

Finally, in 2013 we used our cash to repurchase approximately 1.5 million shares of our common stock under the Company's share repurchase program and we have another 10.7 million shares authorized and available for repurchase today. While we have no set pattern for these repurchases, we would expect to be active in the program again in 2014 as we believe that our stock is an attractive investment and, combined with the dividend, provides the best return to our shareholders.

So that is our financial update. In closing, we want to thank all of our GPC Associates for all that they do each and every day. Through their hard work, we were able to set new records in several areas in 2013 and we are planning for another successful year in 2014. We look forward to updating you on our future progress when we report again.

That concludes the financial review and I will now turn it over to Tom.

Thank you, Carol and Paul, for those updates and thanks also to each of you and your respective teams for the fine job that you continue to do for Genuine Parts Company.

So that concludes our comments on 2013 and looking back it was an interesting year in many ways. And as you have heard, a year in which we had quite a contrast in results with automotive sales being up 18.5% and operating profit being up 19%, but nonautomotive sales being down 1% and operating profit down 9%. Certainly we will be looking for a stronger performance from the nonautomotive operations in 2014 and a bit more consistency in our results.

But in looking back, there were a number of significant achievements by the GPC team in 2013. Sales, net profits, and earnings per share each reached record levels. Cash from operations and free cash flow set new records as well.

We continued to see nice improvement in our working capital and working capital efficiency, as well as in our return on average assets and return on invested capital. And with the action taken yesterday by the GPC Board, dividends have been increased for the 58th consecutive year.

We are proud of the GPC team's achievements in each of these areas and we expect continued improvements in the year ahead. As we turn our attention to 2014, although there is still a degree of uncertainty about the strength of the recovery for a few of our businesses, we do think 2014 will be a solid year for GPC. At this time we feel that reasonable revenue expectations for each of the segments would be for automotive to be up 5% to 7%, Industrial up 5% to 7%, Office Products up 1% to 3%, and Electrical being up 25% to 30%.

For the total GPC that would give us an increase of 5% to 7%. And with revenue growth at this level, our guidance to be for earnings per share to be in the $4.47 to $4.57 range, which will be up 2% to 4% on a reported basis before the one-time purchase accounting gain in 2013, but up 7% to 9% on a comparative basis. And we would point out that our sales and EPS guidance accounts for approximately 1% anticipated headwind from currency.

Additionally, it would be helpful to point out that our first-quarter sales will be above the full-year guidance, primarily due to the inclusion of three months' worth of sales from GPC Asia Pacific that were not in last year's results. But the 5% to 7% full-year range is a reasonable expectation. We will look forward to updating these numbers as the year progresses.

That will complete our prepared remarks. At this point we would like to turn the call back over to Bridget for your questions.

(Operator Instructions) Matthew Fassler, Goldman Sachs.

Good morning. Congratulations on your quarter. I have two sets of questions.

First of all, obviously the weather is very topical for the automotive business. It has been a couple of years since we have had a cold winter. Can you talk about the way this tends to play out over the course of the year? I know that the impact can have some duration to it.

And then I will ask my second one as a follow-up.

Matt, I will try to answer that. I would say that obviously the extreme temperatures tend to drive incremental growth in certain product categories, like batteries and rotating electrical, I think as Paul referenced. So we get a positive there.

Part of the offset to that in the automotive business is with the number of either our facilities that are closed or even our customers' places of business that are closed. So while we consider it to be a net positive, it's not as pronounced because of some of the loss of business due to the weather conditions.

As far as it plays out going forward, historically when we have seen significant weather situations as we've experienced in January and February of this year, we would tend to think that we will see some improved demands as we get into the warmer months for some of the front-end and chassis type products, which will tend to get a bit damaged. And then if we go a little deeper into the year, if we were to have a very hot summer in parts of the country, we would probably get the benefit from some increased demand on batteries or rotating electrical that were weakened, but didn't fail, in the winter months.

I might also add that the impact on the other GPC businesses, the nonautomotive businesses, is a net negative because not only do we have a number of our facilities that have been closed, but we also have quite a number of our customers' facilities that were closed. So I hope that answers your question.

It does very thoroughly, thank you. Then my second question relates to the fact that you've seen consolidation in office product -- in two of your businesses really. In Office Products from -- involving one of your customers and then auto parts involving one of your competitors. And I know that these were topics on the mind, I think, of a lot of investors.

Any preliminary comments from you on your -- on what you've seen play out to date in those arenas and how you might expect them to play out to date, as far as that consolidation impacts Genuine Parts?

Well, I will try to answer that as well and we would start on the office product side. We did see two of the three megas come together, as you know, and they are in the midst of bringing their two fine companies under one management team. It's much too early to have any feel for what the impact might be, but I know our teams are working very, very carefully and closely with the new entity and looking for whatever the opportunities might be that present themselves.

On the automotive side, again it's very, very early and perhaps a bit premature to offer any indication of what might happen. But we do think that as those two companies come together, we are confident they will do a good job as they work their way through the combination and the integration.

But our past experiences have been that, when you put two organizations together, there's always a degree of spillage that happens despite the best of planning and the talent that is applied to the integration. So our expectation would be that there may be a bit of spillage; we don't know how much. And if there is, our folks are working hard to make sure that we are in a position to benefit from that.

Just as a final follow-up, have you seen any franchisees on the Carquest side begin to drift away at this stage, or is it too early to say?

I think it's too early to say on that.

Thank you so much, guys.

Keith Hughes, SunTrust.

This is more on the Industrial side. As you go into more of the year, things have turned a little bit here to the positive. I guess what you hearing from customers? Is the first-quarter weather going to impact them, or is this one more about just kind of Industrial production we are going to see?

I think, Keith, clearly those areas that had experienced the significant weather situations that we've seen in January and February, they are going to be impacted if their facilities were shut down and they weren't running their equipment and weren't producing product. So we are going to see a bit of headwind from that.

In terms of what we are hearing from customers in a more general sense is still a degree of caution, but a slight bit more optimism because of what we saw in the further strengthening of Industrial production and capacity utilization, and frankly as well as the ISM. If you look at the fourth quarter for each of those indices, the fourth quarter of the year was the strongest for all three.

So generally speaking, people are encouraged a bit by that, but they are also a bit cautious and trying to contain any optimism with a dose of reality.

Second question, I think I heard prepared comments on SG&A, your expected SG&A to be flat year-over-year. Are you referring to as a percentage of sales or dollars, dollars including acquisitions? Any kind of detail there would be helpful.

It would be in a percentage of sales. What we really found on the SG&A line, it's primarily due to the loss of leverage with our nonautomotive businesses. So as we see that top line come back, we should be able to see some improvement there. But we talked about really it being more as a percent of sales, but remember we still have one more quarter of comparability with the GPC Asia Pacific and their 100% store model.

So a lot of the impact in SG&A comparability is Asia Pacific, but there is just a loss of leverage. So use the percent of sales as a guide.

Chris Horvers, JP Morgan.

Thanks, good morning. Wanted to follow-up on a couple of those prior questions.

On the Industrial side, can you talk about what the organic, ex-acquisition, growth was in the fourth quarter? And can you talk about what changed in the business because it improved beyond just easy compares? So what was the light switch; which businesses saw the most change at the margin in the fourth quarter?

What we saw ex-acquisition in the quarter was modest growth. Acquisition actually added about 0.7% or just under 1% to the total, the 3%. And what changed, I think you saw what has happened with the GDP, at least the advance indices an indication of a little bit more robust activity, and then the same thing would be true on -- the Industrial production, capacity utilization, and the PMI all showed a little stronger performance. So all three of those had their strongest quarters of the year in the fourth quarter.

So I think we did see a little bit of uptick in activity in the quarter, but we are hoping that that is sustainable as we work our way through the early part of this year.

Would you think that given sort of a negative weather impact in the first week of the quarter, maybe that organic growth can it hold up or does it maybe tick down just because of the weather impact?

Well, it's just a guesstimate on our part at this point. We know that we lost business in January and again in February because of the weather in the Industrial segment. And it's true across all of our nonautomotive businesses.

How much of that we can recover through the remainder of the quarter, we will just have to wait and see. But I would say that our expectation for the year is positive and we think that we have an opportunity to have a better year in the underlying business in Industrial than what we had in 2013.

Then, similarly, as you think about the automotive business and the near-term impact of having major regions shut down, such as your home area there, do you think that the organic growth in the automotive, let's say, company-owned comps, do you think that ticks down in the first quarter as well because of some of this weather noise?

Chris, this is Paul. We could see a slight hit. I will tell you that, and you hit on it, our home turf down here in Georgia, the Southern up through the Atlantic, last week we were -- we had stores shut down for one to two days. So 60 to 75 stores, for sure, were closed down so, yes, that could have an impact.

On the plus side, certainly the cold weather, the road conditions are going to drive business on the product side. So where it all ends up, hard to say. We do believe, though, at the end of the day -- we are happy to see the cold weather for sure. We could do without the ice.

Then on the gross margin SG&A, you will fully anniversary GPC Asia Pacific in the first quarter here. That's going to provide some continued noise in the gross margin and SG&A. You mentioned gross margin up slightly for the year for the total company. Can you -- will gross margin see improvement outside of the first quarter?

Well, I guess it would be hard to say quarter by quarter. What we are saying on gross margin and why we think it could be up for the year and we are giving it just a little bit above the 30% is we did have an impact of lower volume incentives in our nonautomotive businesses. More so in Industrial and a little bit in office.

Then also we had some of the one-time adjustments that were negative this year with the GPC Asia Pacific that we talked about in the second and third quarter. So a combination of those two things we do feel like we should see a bit of improvement, but haven't really put it down on a quarter-by-quarter basis.

Sure, and then one last question. You mentioned auto margins up in 2014. Any comments on the other divisions would be helpful, thanks very much.

I think on the other divisions, again if we can see some of the top-line growth coming back, we may get some of those volume incentives back. Not sure if we would get all of them back. Then certainly we will be able to offset some of the loss of leverage that we've had, so it's really dependent on getting some of that top-line growth back. We would hope to, at least, have more of a maintain perspective on those margins with some growth.

Thank you.

Greg Melich, ISI Group.

Thanks. Just wanted to follow-up on a couple things. The trend in North America, just to make sure I got that right, Paul, in the first quarter so far it sounds like we're actually running a little bit less than we were in the fourth. Is that true or wrong?

That would be accurate, Greg.

Obviously, all the other stuff would kick in later given your historical trends?

Exactly.

The second part was on pricing. Carol, you gave the impacts on pricing. What do you assume for 2014 in terms of inflation in each of the businesses in terms of your guidance? Do we think auto looks like maybe it's flattening a little bit? Could we actually get some pricing power there again?

We are on our second year of deflation in automotive and really had -- we are seeing less-than-normal levels of inflation in all of our businesses for 2014. We've talked to a couple of our business units and I would say it would be very little and it may be another year like we've had this year, but we are certain not seeing much in the way of pricing. We would like to see it, but we're just not anticipating it for 2014.

Okay, great. Then lastly, on pensions; was there anything with pension in the quarter? I know you called out last year's hit in the fourth quarter. Was there anything this year and in your guidance for this year do you expect any pension costs or benefits?

We did not have any -- our pension costs for 2014 were very similar, with the exclusion of the 2012 one-time gain that we talked about, so there was really nothing unusual in the 2013 numbers. I would tell you that our guidance for 2014 takes into account a lower pension expense, given that we do have the freeze taking effect for 2014. But what we've got offsetting that is some increased costs in our 401(k) as well as some increased healthcare costs with the Affordable Care Act, so we have factored all of that into our guidance.

Okay, so basically the lower pension expense offset by the other increased costs. Do you care to quantify that just roughly?

We don't at this time.

Thanks a lot, good luck.

Bret Jordan, BB&T Capital.

Good morning. Question on the AP to inventory and what you've picked up so far in extended terms benefits. If you looked at that automotive where it's sort of the tradition versus some of your other nonautomotive businesses, is there a big dispersion in your leverage of accounts payable?

I guess as we look at Exego in the Australian market is that something where it's a meaningful difference in extended terms adoption down there and is there a fair amount of running room you can pick up?

Bret, I will try to answer that. I think the majority of the progress that you see is attributable to the automotive segment and primarily the North American component. We do think that there's some possible improvement yet with GPC Asia Pacific. We have seen some progress and there's a bit more there.

Then we continue to think about the possibilities, perhaps, in the nonautomotive businesses. So I think there's upside yet. I don't think we would suggest the magnitude of the improvement that we have seen to this point, but we do feel there is still some upside.

If you were to quantify it I guess, is it something that you this -- are we three-quarters of the way there or are we halfway to what we can get from an AP'd inventory?

I think we are closer to the former rather than the latter, but that's about as far as we would go.

Okay. Then one last question. I guess it's quite a comp for the fourth quarter. If you looked at it -- is it either a benefit of the geography of your stores or do you see some benefit from a market share gain standpoint in that comp? How do you feel you did at that 7% growth relative to your physical markets?

I will take the first stab at that and Paul may want to chime in, but I would say that certainly the stores, as Paul mentioned, basically from the planes all the way to the Northeast saw some benefit from the weather. Conversely, the stores basically from Atlanta on up to Washington did not get any benefit from the weather and actually had a little bit of impediment.

But if we look at the results across the country, we were pleased with the progress we made in all of the areas and I think it's more attributable to the strength of the initiatives. Paul pointed out the strong results we had in the quarter with both major accounts and NAPA AutoCare, and that was fairly consistent across the entire country. And I think our teams are doing a good job continuing to develop those initiatives.

Bret, I would just also add to that that, as I commented, we had a good quarter on the retail side. But there's -- and Tom kind of hit on it, there is certainly nothing magical. Many of the initiatives that our team has been working very, very hard on really started to take hold, so basic blocking and tackling is what I would attribute it to.

Great, thank you.

Aram Rubinson, Wolfe Research.

Good morning and thanks for taking the question. Two things, one your office EBIT margins, even though they've struggled a little bit lately, still about 8%. I think they are higher than any other listed player by around 250 basis points.

I'm wondering if you could just remind us why they are so much different than the peers and why that is going to stay that way, would appreciate it.

I don't know that I could address that question categorically. I would just say that, in our case, we always have been a pretty efficient company in the way we operate and our team continues to do a good job in operating efficiently despite the headwinds that they have faced on the revenue side.

As Carol mentioned earlier, we continue to invest in all of our businesses and largely in technology initiatives, either intended to give us better information to run the business or intended to help us be more efficient in handling the business. And certainly that is true for Office Products as well as the other businesses.

Historically, your operating margins of your segments have clustered pretty tight to one another. If one of the were to deviate meaningfully from that bunch, would that be kind of something you would take seriously and kind of think about more structural activity, divestiture, or anything like that?

We look for an 8% to 8.5% operating margin for all of our businesses and for the Company in total. And that's really a long-term outlook, so there's times that will be outside of that, but I think on balance we are looking for the 8% to 8.5% for the whole company.

Thanks. And if I could just follow up, one more thing. You mentioned in your remarks that technology has kind of benefited you, I think, in your warehouses and some other areas.

Can you talk to us about both the advantages and maybe some of the risks that technology is bringing? Just wanted to get a little bit more detail on that topic if you don't mind.

I think we would rather not get into the specifics of the individual initiatives that we have underway. I think we would rather just leave it as I said earlier, and that is that we are looking for ways that we can have better information to manage the business or ways that we can have better capabilities in handling the business. And we continue to -- our team continues to work hard on this and they continue to find ways that we can move a bit further.

The only other thing I would add to do is that we are not a company that will go out and look for a big bang type result, so we are not about to embark upon some technology initiative that we think could be beneficial but also could have significant downside risk. We go at things incrementally and we test them rather thoroughly. We prove the concept and then we move somewhat deliberately in how we roll them out in their respective businesses in order to avoid any significant downside risk.

Thank you for the clarity and good luck in 2014.

Seth Basham, Wedbush.

Good morning or good afternoon now. Couple of quick questions for you on the auto business. Just I wanted to better understand if you had any major customers that you won in the quarter to help drive success in that business.

Seth, this is Paul. No, there was no major account activity that swung that number to the positive. Again, it was our team just really putting some of the initiatives that we've been working on for many quarters now into place and all came together for a good quarter.

Got you. Now on the retail side of the business you guys had a very much improved comp this quarter versus Q3. Was there anything besides the weather that drove that from your perspective?

Again, Seth, I would just say that there's a number of initiatives that we have been working on testing in some markets and I would like to think that some of those initiatives are beginning to take hold. Our team has been working very, very hard to get our stores looking good, to get our folks trained to sell at the retail level, and it's good to finally see that coming together in Q4. The real question is can we maintain that going forward, which we certainly hope to.

Are you adding incremental services to the customers that walk through the door or is it just a matter of better selling processes?

No, I would lean towards the latter there, Seth. Just really working on our training and our sales techniques, but no real change in our approach at the store level.

Then lastly, on your store count, how did that change year over year and what are your expectations for 2014?

We came on the low end of our guidance, which is to say that we will grow our store count 1% to 2% per year. And we were at the bottom end of that range for the year. Going forward we would offer the same guidance and that's 1% to 2% growth.

Thank you.

Brent Rakers, Wunderlich Securities.

This is actually Anjali Voria in for Brent this morning. My first question is on the Industrial side.

Did you talk about the difference in OEM and MRO growth differential? And have you now reached the anniversary of the underperformance in some of the oil and gas and mining segments?

I will take the second part of that question first. We have not reached the final stage there yet, but the headwind diminishes as we work our way through the early part of this year. So we should get -- from a comparative standpoint we should get a little bit of benefit as we get into Q2 and on through the remainder of the year.

In terms of the demand patterns, it was more MRO demand than it was on the original equipment demand.

Okay. Was there any new business or maybe sales pushed out from Q3 into Q4 for the Industrial segments or --?

No. No, there wasn't.

And then, I apologize if you've already addressed this, but on the auto segment margin side were there any LIFO benefits or any other unusual benefits in that number?

No, there really wasn't. As I mentioned, we had really deflation and it was only 10 basis points and there really wasn't any impact in our automotive margins. We were glad to hold those flat and there really wasn't any one-time adjustments in there.

Is it fair to say that the acquisition at Exego Australasia did that help by something like 30 or 40 basis points because of the seasonality on the margin side?

No. No, no, it was pretty consistent.

Their margins are consistent with our margins.

Okay. But isn't this a seasonally stronger period for them or --?

Well, they are into their summer months. But if we look at margin contribution across the businesses, it was fairly consistent with what we did in our automotive business.

Okay, thank you very much.

Now I would like to turn the call back over to management for closing comments.

We want to thank you for joining us and participating in our call. Again, we apologize for the technical difficulties that we had and especially if you had -- if you missed anything or you had to listen to it twice. So we apologize for that.

Thank you for your interest in and support of Genuine Parts Company. We will talk to you after our first-quarter release.

Thank you. This does conclude today's conference call. You may now disconnect your line.