Investor Presentationgenuineparts.investorroom.com/download/GPC+Investor+Presentati… · Presentation. All Content is Company Confidential and Exclusive Property of Genuine Parts

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Investor

Presentation


Safe Harbor Statement

Some of the comments made today will be forward-looking and are made under the Private Securities Litigation Reform Act of 1995. These statements include projections of revenue, earnings, capital structure, and other financial items; statements on the plans and objectives of the Company and its management; statements of future economic performance and assumptions underlying the statements regarding the Company and its business. The Company's actual results could differ materially from any forward-looking statements due to several important factors, including, among other things, slowing demand for the Company’s products, changes in general economic conditions, including, unemployment, inflation or deflation, high energy costs, uncertain credit markets and other macro-economic conditions, the ability to maintain favorable vendor arrangements and relationships, disruptions in our vendors’ operations, competitive product, service and pricing pressures, the Company’s ability to successfully implement its business initiatives in each of its four business segments, the uncertainties and costs of litigation, as well as other risks and uncertainties described in the Company's latest SEC filings. The Company assumes no obligation to update any forward-looking statements made during this presentation or in these materials except as required by law.

2


Investment Highlights

Leading global distributor in diversified end

markets

Proven track record of steady growth

Strong balance sheet with meaningful free

cash flow generation

Committed to increasing shareholder value

Opportunity for market share growth in large

and fragmented industries

Large customer base built upon

long-standing relationships 3


Company Overview

Founded in 1928

Leading distributor to four

primary end-markets:

- Automotive Parts (APG)

- Industrial Parts (Motion Industries)

- Office Products (S.P. Richards)

- Electrical / Electronic Materials (EIS)

Critical partner to

our customers:

- Best in class operating and

distribution efficiencies

- Industry leading coverage of

consumable/replacement items

- Outstanding just-in-time service

- Technology solutions

% Net Sales by Segment

12-Mos. Ended December 31, 2016

$15.3 Billion

Annual Sales

13%

30%

4%

53%

4


Portfolio Optimization

Global Presence with Significant Brand Strength

Financial Strength with Access to Capital and Low

Cost of Capital

Enhanced Buying Power for Direct and Indirect

Spend

- Global sourcing, common suppliers and providers, volume/scale

Common Distribution Processes

- Shared talent, practices, technology & systems, services,

transportation

We consistently challenge ourselves to support how GPC

is the “optimal” owner/operator of our portfolio businesses5


Track Record of Success

1925 1928 1948 1968 1975 1976 1998 19992010-2014 2013

IPOEstablished Traded On

NYSE: GPC

Founded

Acquired

Acquired

Acquired

Acquired

Record Sales

& Earnings

Acquired

Acquired

Strong history of sales & profit growth

- Sales have increased in 84 of 89 year history

- Profit has increased in 73 of 89 year history

Dividend growth

- 2017 marks GPC’s 61st

consecutive year of dividend increases

6


Ten Year Sales History

7.5

8.5

9.5

10.5

11.5

12.5

13.5

14.5

15.5

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

+9.0%

$ Billions

EPS

+8%EPS

-2%EPS

-14%EPS

+20%EPS

+19%EPS

+16%EPS

+6%*EPS

+10%*EPS

+0.4%

+3.7% +1.6%

-8.7%

+11.4%

+11.2%+4.5%

+8.2%

Record Sales & Earnings Per Share

in 7 of Last 10 Years

7* Comparative Results

-0.4%

EPS

-0.9%

+0.4%


Automotive Parts Group Highlights

Largest auto parts network in North America

2016 Sales at $8.1 billion

- US: 57 DC’s & ~ 6,000 stores (1,100 Co. owned)

- Canada:12 DC’s & ~ 700 stores (200 Co. owned)

- Mexico: 12 DC’s & 40 stores

- Balkamp: Parts Re-Packager

- Rayloc: Brake Products Distributor

- Altrom: OE Import Parts

- Heavy Vehicle Parts Group: Class 6,7,8 trucks

11 DC’s & 550 Store footprint in

Australia and New Zealand

Superior NAPA brand name

Highly acclaimed customer service

Positioned to benefit from positive

industry trends

53%

NAPA Established 1925

8


Quarterly Sales History

$-

$0.25

$0.50

$0.75

$1.00

$1.25

$1.50

$1.75

$2.00

$2.25

-0-

-2%

2013 +18.5%2012 +4% 2015 -1%

(+4% ex Fx)

Sales

Billions

+2%

+6%

+4% +2%

+5% +3%

+22%+23% +4%+25%

+22%+5% +4%

9

-0-

2014 +8%

-2%+3%

-1%

+2%

+1%

2016 +1%


Automotive Parts Group Overview

(90%) NAPA branded products

NAPA Know How Differentiators:

- product quality, depth and breadth

- service capabilities

- technology offering

Commercial/DIFM customers

- professional service repair facilities

- approx. 75% of NAPA sales

17,000+ NAPA AutoCare Centers

Major Accounts: AAA, Goodyear,

Firestone, TBC, Midas, CBAdvantage

Retail/DIY customers

- individual consumer customer

- approx. 25% of NAPA sales

Major Competitors

U.S. - AutoZone, Advance Auto Parts & O’Reilly

Canada - Uni-Select & AAP/Carquest

Australasia - Supercheap, Burson & Autobarn

Major Account Customers

10


The Automotive Aftermarket

Market Trends Favoring the Larger DIFM Segment

(U.S. Market Size - Retail Pricing)

$0

$15

$30

$45

$60

$75

2011 2012 2013 2014 2015 2016 2017* 2018* 2019* 2020*

DIFM

DIY

Source: Frost & Sullivan/ACA11

* Forecasted

billions

$75B*

$32B*$30B

+3%

5-Yr

CAGR

+1%

5-Yr

CAGR

$67B


Vehicle Fleet Trends

$0

$200

$400

$600

$800

$1,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15+

$403$484

$573$644 $671

$741 $776 $829 $868 $861 $873$857

$776 $802 $812

An

nu

al

Sp

en

d p

er

Veh

icle

Vehicle Age

Consumers Are Maintaining Older Vehicles

12

Prime Years for Aftermarket Repair

Start in Year 6

Vehicles 6+

Years of Age

>75% of Fleet

Avg. Repair

Cost/Year

1-5 Yr = $555

6-12 Yr = $829

> 12 Yr = $797

Source: IMR, Inc. Automotive Research, BB&T


Fundamentally Strong Aftermarket

Total vehicle fleet growing+1 to 2%

thru 2020

11.6 Years

$2.25/GL in 2016Down 10% from 2015

+2.8% in 2016

Average age of fleet increasing

Historical low gas prices

Miles driven reaching new peaks

13


Automotive Parts Group - Growth Opportunities

Key Areas of Focus NAPA Initiatives

New Distribution

• Plans for New NAPA AUTOPARTS Stores in U.S. – Merle’s,

Standard and Olympic Store Groups

• Expansion in Canada, Mexico, Australia and New Zealand

NAPA AutoCare• 17,000+ Independent AutoCare Members

• $1.3+ Billion in 2016

Major Accounts • $2.1+ Billion in 2016

Outside Sales • Adding Outside Sales Representatives at Stores

Connectivity • Adding Installer Connectivity and Enhanced Capabilities

Special Markets

• Heavy Duty Parts, Import Parts, Paint, Tools & Equipment

• Acquired Olympus & Auto Camping Imports & Global Heavy

Duty in 2016

Store Resets & Upgrades• Retail Impact Store Initiative

• Ongoing Program to Consistently Refresh and Upgrade Stores 14


NAPA AutoCare Center

15

The Aftermarket’s Preeminent Commercial Program

for the Independent Repair Center

Before

NAPA_Brand Short Video.m4v

NAPA_Brand Short Video.m4v


NAPA Retail Store

16

Before


NAPA Retail Store – New Store Concept

17

After


Australasian & Mexico Expansion

GPC Asia Pacific

Market Share Leader in

Australia and New Zealand

- 550+ Company owned stores

- Added 50+ stores in 2016

NAPA Mexico

Growth Plan for Company

Owned and Independent

NAPA AUTOPARTS Stores

- 33 stores today.. and growing

18


Motion Industries – Industrial Parts Group

Industrial Parts Group Highlights Leading industrial parts MRO

distributor in North America


- 13 DC’s and 525+ branches and service

centers in the U.S., Canada and Mexico

Proven track record with over 70

years in the industry

Access to over 6.9 million products

- Global manufacturing base

Very large and fragmented industry

Efficient supply chain and

vendor partnerships

High customer service levels

and technical sales support

Industry leading E-Business capabilities

30%

Founded 1946

Acquired 1976

19



$400

$500

$600

$700

$800

$900

$1,000

$1,100

$1,200-4%

-8%-2.5%

Sales

Millions

2013 -0-% 2014 +8% 2015 -3%

+12% +8% +4.5%

+2%

-2%-1%

-2.5%+3%

+4%

+7%+10%

+3%

20

+10% -2%

+2%

2012 +7%

+4%-1%

+7%

2016 -0-

-2%


Suppliers: SKF, Baldor, Gates, Rexnord, Timken and Eaton

Customers represent all industry groups, including Equipment & Machinery, Food Products, Iron & Steel, Pulp & Paper and Mining & Aggregate

Industrial Parts Group Overview

Sales by Product Category

Bearings & Power

Transmission

37%

Industrial & Safety

17%

Other

4%Seals, Pumps

& Hose

8%

Hydraulics & Pneumatic

14%

Electrical & Automation

11%

Major Competitors

Applied Industrial Technologies

Kaman (Industrial Technologies Div.)

DXP Enterprises

21

Material Handling

9%


Top Industries

Growing Sectors

Equipment and Machinery

Food Products & Processing

Iron and Steel

Fabricated Metal Products

Aggregate & Cement

Chemical Products

Equipment Rentals/Leasing

Oil & Gas Extraction

Lagging Sectors

Pulp and Paper

Automotive

Lumber & Wood Products

Rubber & Plastic Products

22Data for 3-mos 2017

YTD 2017 Update


Industry Demand Drivers

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2010 2011 2012 2013 2014 2015 2016 Q117

Mfg. Industrial ProductionYOY Growth Rate

Recently Improved Economic Environment- Declines thru 2016 Driven by Pressure in Exports and Oil/Gas -

23

%


Industrial Parts Group

Growth Opportunities

Product Category Expansion

- Automation, Process Pumps and Safety

Acquisitions

- Added 5 New Businesses in 2016

- 35% Investment in Inenco (Australia) April 2017

Expansion in New Markets

Repair, Fabrication and Assembly

E-Commerce

Vending, VMI and Store Room Mgmt

Share Gains with Major Accounts

Only 7% share of market –

estimated at $70+ billion

24


Office Products Group Highlights

S.P Richards is the nation’s second largest distributor of business products, office furniture, computer supplies and facilities, breakroom and safety supplies


- 56 DC’s in U.S. and Canada

Long history of serving the independent reseller and national accounts

Access to over 69,000 products

- 800+ leading manufacturers

- Global sourcing includes nine proprietary product brands

Superior fill rates, accurate and timely shipments and competitive pricing

Database management, logistical support, e-commerce

Comprehensive array of sales, marketing and training programs

13%

Founded 1848

Acquired 1975

25



$300

$325

$350

$375

$400

$425

$450

$475

$500

-1%

-3%

-3%

-4%

-2%

+5%

Sales

Millions

-1%

-1%

+3%

2013 -3%2012 -0-% 2014 +10%

-0-

+15%

2015 +7.5%

+4%

+22%

+17%

+14%

26

+3%

-2%

-3%+1%

+4%

+9%

2016 +2%


Office Products Group Overview

Suppliers: Hewlett Packard, 3M, Hon, Newell, Kimberly Clark, Georgia Pacific..

Customers: Serves > 9,300 business product resellers and superstores

Primary Sales Channels

Independent

Resellers

59%

Internet Reseller

6%

Nat’l Accounts

22%

Major Competitors

Essendant

(formerly United)

27

Alternate Channel

13%


PRODUCT MIX

22%

37%

26%

15%

2016

Office Supplies FBS Furniture Tech

32%

47%

8% 13%

2010

17%

27%41%

15%

2020

(Est)

Drive for Diversification

Initiatives to Diversify Product Offering are Significantly

Increasing Facility, Breakroom & Safety Supply Sales28


Demand Drivers Relatively Stable, but Also Mixed..

0

100

200

300

400

500

600

700

Q4'12 Q2'13 Q4'13 Q2'14 Q4'14 Q2'15 Q4'15 Q2'16 Q4'16

Service-Providing Employment

Source: BLS.gov

-4.5M in 2008/09

1M+ in 2010

2M+ in 2011 - 2016

Steady and Consistent New

Job Growth for last 5 Years

U.S. GDP and Employment Levels

2.0M

New Jobs

in 2016

29

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Q4'12 Q2'13 Q4'13 Q2'14 Q4'14 Q2'15 Q4'15 Q2'16 Q4'16

U.S. GDP (% Change)

Source: BEA.gov

-3.1% in 09+2.2% in 12+2.5% in 10+1.6% in 11

Tepid GDP Growth

in 2016 at 1.6%

+1.6%

in 2016

+1.5% in 13+2.4% in 14 & 15

December 2016

Unemployment

Rate at 4.7%


Office Products Group


Market Share Initiatives

Product Line Expansion

New Products

Private Brand Expansion

Enhanced Dealer Services/ Marketing & Electronic Content

FBS and Alternate Channel Growth

- JAL, Dinesol & Malt Acquisitions in 2015

- Safety Zone and RMC in 2016

Low percentage share of market

– estimated at $100+ billion

(Retail)

30


Electrical Markets Group Highlights

EIS is a leading distributor of electrical, industrial and specialty products via three business groups:

- Electrical/Electronic

- Fabrication & Coating

- Specialty Wire & Cable

2016 Sales at $716 million

- 45 locations in U.S., Mexico, Canada, Puerto Rico and Dominican Republic

Highly developed supply chain

Long-standing partnerships

Sophisticated information technology and e-business capabilities

Knowledgeable employees with product, technical and service solutions

4%

Founded 1950

Acquired 1998

31


$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

+5% +5%

2012 +5% 2013 -2% 2014 +30% 2015 +2%

Sales

Millions

-3%

+9%

-2%-4%-5% -5% +6%

+30%+32%

+23%

+35%


32

+1%

+4% +2%

-0- -0--5% -9%

2016 -5%

+5


Electrical Markets Group – Overview

Access to over 100,000 products:

• Electrical Insulating Materials

• Magnet Wire

• Wire & Cable

• Bonding & Adhesive Materials

More than 20,000 customers in the

Electrical/Electronic, Fabrication &

Coating and Specialty Wire & Cable

markets, such as:

• First Solar

• General Electric

• Baldor

• Emerson

• Eaton

Major Competitors

Essex/Brownell (a Division of Superior Essex)

Anixter

Houston Wire & Cable

Suppliers

33


Evolving Sales Composition

75%

20%

5%

2010

Electrical/Electronic Fabrication Wire & Cable

Initiatives Focused on Growth Opportunities

in Wire & Cable Markets

38%

26%

36%

2017 (Est)

33%

22%

45%

2020 (Est)

34


Electrical Markets Group

Index Supportive of Industry Growth- Mfg. Contraction in Q4 2015 Followed by Ongoing Expansion -

Institute for Supply Management - Purchasing Managers Index

50

35


Electrical Markets Group


Market Share Initiatives

- Product Line Expansion

- New Products

- Enhanced Services

Market Expansion/Share Gains

- Fabrication & Coating

- Cable & Connectivity

Acquisitions

- CPS in 2016

- Empire in April 2017

7% share of market –

estimated at $10.0+ billion

36

Both for

Wire & Cable


Drivers and Opportunities

Demand Drivers Opportunities and Initiatives

Automotive

• Total vehicles > 6 years old

• Complexity of vehicles/ # Trucks & SUV’s

• Average age of cars & light trucks

• Gas Prices/Miles driven on roads each

year

• 8-9% share of market – est. at $100+ billion (Retail)

• Approx. 500,000+ Products & Tens of Thousands

of Customers

• New Distribution, NAPA AutoCare, Major A/C’s, O/S Sales,

Connectivity, Niche Markets – Heavy Duty, Imports, Paints

and Tools & Equipment, Store Resets and Retail initiatives

Industrial

• Manufacturing industrial production

• Capacity utilization rates

• Capital expenditure budgets/expansion

• Manufacturing employment in U.S.

• 7% share of market – estimated at $70+ billion

• Approx. 6.9 million Products & > 300,000 Customers

• Growth via product line expansion, acquisitions and

targeted industries – e.g. Waste Water Treatment, Power

Generation, Municipalities and Transportation & Ports

Office Products

• U.S. gross domestic product (GDP)

• White collar employment numbers

• Office occupancy rates in U.S.

• Low percentage share of market – est. $100+ billion (Retail)

• More than 69,000 Products & Approx. 9,300 Customers

• Growth via market share initiatives, product line expansion

(including proprietary brands), new products, enhanced

marketing/electronic content and new or alternate channels

via FBS diversification

Electrical Markets

• Manufacturing expansion (ISM’s PMI)

• Capacity utilization rates

• 7% share of market – estimated at $10+ billion

• Over 100,000 Products & > 20,000 Customers

• Growth via new products, new markets & acquisitions

(including fabrication & coating and cable & connectivity

market expansion opportunities)37


Financial Focus

Recent Financial Highlights

Q1 2017 2016

2017 v. '16 2016 v. '15

Net Sales (billions) $3.91 +5% $15.34 +0.4%

Net Income (millions) $160 +1% $687 (3%)

Diluted EPS $1.08 +3% $4.59 (1%)

38


7.0

7.3

7.5

7.8

8.0

8.3

8.5

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Mixed Operating Margin Trend

Targeting Further

Expansion to 8.5-9.0%

Operating Margin

8.0%8.1%

39


Strong cash position

- Approx. $178 million at March 31, 2017

Prudent working capital management

- Improving working capital efficiency and cash conversion cycle

Solid after-tax return on invested capital (ROIC)

- 16% ROIC for 12-Mos ending December 31, 2016

High after-tax return on assets (ROAA)

- Consistently > 8%

Comfortable with capital structure

- Consistently low debt to total capitalization

Financial Focus

Balance Sheet Highlights

40


Financial Focus – Capital Structure

41

$0

$200

$400

$600

$800

$1,000

De

bt

Tre

nd

(I

n m

illio

ns)

Total Debt to

Total Capitalization24%

Historically Low Debt Levels


0.0

5.0

10.0

15.0

20.0

25.0

30.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Improving W/C Efficiency Trends

25.2%

13.0%

W/C Eff.Steady and consistent improvement and

positioned to further improve with effective asset

management and sales and earnings growth

42


Improvement in Working Capital

43

DIO - 127

DIO - 104

DPO - 39

DPO - 101

DSO - 45DSO - 46

20

40

60

80

100

120

140

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

DSO DIO DPO


…..Compressed CCC

44

CCC - 133

CCC - 49

40

50

60

70

80

90

100

110

120

130

140

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

CCC


6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

14.0

15.0

16.0

17.0

18.0

Return On Invested Capital

Continue to target

investments with

> 15% ROIC

16.0%

14.6%

45

ROIC

WACCApprox.

10% Spread

8.0%

6.6%

Consistently Exceeding WACC


Steady and Strong Cash Flows

0

150

300

450

600

750

900

1,050

1,200

2012 2013 2014 2015 2016 2017 e

Free Cash Flow

Capital Expenditures

Dividend Payout $950 Mil

$400M

$155M

$395M

46


Commitment to Shareholders

Priorities for Cash

Reinvestment in

Businesses

Acquisitions

Dividends

Share Repurchases

47


Recent Acquisitions

20155

4 Store Groups

AEA

4Miller, Oil & Gas

Lake Erie, Moss

1Connect-Air

3JAL, Dinesol

Malt

2016

11Olympus, Covs,

Global, AMX,

Auto-Camping, ASL,

5 Store Groups

5Epperson,

MO Power,

Colmar, OBBCO,

Braas

1CPS

2Safety Zone,

RMC Jan/San

20173

Merles,

Olympic, Standard

(+26 new stores)

135% investment

in Inenco

(Australia)

1

Empire

Will remain active in seeking additional acquisitions 48

$180M

$600M

$140M



0

0.5

1

1.5

2

2.5

3

2017

Dividend Record

2017 Annual Dividend $2.70

3% Yield and +3% from 2016

61 Consecutive Years of

Increased Dividends

49



Share Repurchases History

3.2 Million Shares Remaining to be Repurchased at March 31, 2017

Consistent History Of Returning Cash To Shareholders50

(in millions) # Shares Cash Paid

1994 – 2004 24.0 $649.9

2005 – 2009 18.2 782.3

2010 – 2014 8.2 495.3

2015 3.3 292.2

2016 2.0 181.4

YTD – Q1 2017 1.1 98.9

TOTAL 56.8 $2,500.0



5-Year Returns to Shareholders

2012 2013 2014 2015 2016

Dividends $301.0 $326.2 $347.3 $368.3 $386.9

Share

Repurchases81.8 120.6 95.9 292.3 181.4

Total 382.8 446.8 443.2 660.6 568.3

Approx. $2.5 Billion Returned to

Shareholders Over 5 Years

51


GPC Outlook & Objectives

• Sales Growth +3-4%

• Operating Margin Flattish

• Earnings per Share +4-6%

• Strong Cash Flow in

$900M-$1B Targeted Range

• Improved W/C Efficiency

2017 Outlook

• Improve Sales by 6-8%

• Increase Operating Margin

• Grow EPS by 7-10%

• Generate Solid Cash Flows

• Maintain Strong Bal. Sheet

Key Long Term

Annual Objectives

52


Periods Ending December 31, 2016

1 YEAR 3 YEAR 5 YEAR 7 YEAR 10 YEAR

14.3% 7.6% 12.4% 17.6% 10.8%

12.0% 8.9% 14.7% 12.8% 7.0%

16.5% 8.7% 12.9% 12.4% 7.5%

8.9% 10.1% 17.1% 14.5% 9.5%

Total Return to Shareholders

53


0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

3.00

3.25

3.50

3.75

4.00

4.25

4.50

4.75

5.00

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

110.00

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 11 12 14 16

P/E

Stock Price

EPS

Dividend

P/E, Stock Price, EPS & Dividend Trends

54

Market Capitalization

$14.2 Billion @ Dec 31, 2016



Thank You!Contact Information:

Carol Yancey - EVP & CFO: 678-934-5044

[email protected]

Sid Jones - SVP IR: 678-934-5628

[email protected]

mailto:[email protected]

mailto:[email protected]

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