Genuine Parts Investor Presentationgenuineparts.investorroom.com/download/GPC+Investor...GPC...

Genuine Parts Investor PresentationAugust 2020

2GPC INVESTOR PRESENTATION |

Safe Harbor Statement

FORWARD-LOOKING STATEMENTS: Some of the comments made during this conference call and information contained in our presentation constitutes forward-looking statements that are

subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements in the future tense and all statements accompanied by words such as “expect,” “likely,”

“outlook,” “forecast,” “preliminary,” “would,” “could,” “should,”, “position”, “will,” “project,” “intend,” “plan,” “on track,” “anticipate,” “to come,” “may,” “possible,” “assume,” and variations of such

words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, our expected ability to operate and protect

our workforce during the COVID-19 pandemic, our strategy to grow our higher-margin automotive and industrial businesses, the execution and effect of our cost savings initiatives, our efforts

and initiatives to help us emerge from the pandemic well-positioned, our ongoing efforts to maintain compliance and flexibility under our debt covenants, our liquidity position and actions to

maximize cash flow to continue to operate during these highly uncertain times and plans for future cost savings. The Company cautions that its forward-looking statements involve risks and

uncertainties, and while we believe that our expectations for the future are reasonable in view of currently available information, you are cautioned not to place undue reliance on our forward-

looking statements. Actual results or events may differ materially from those indicated as a result of various important factors. Such factors may include, among other things, the extent and

duration of the disruption to our business operations caused by the global health crisis associated with the COVID-19 outbreak, including the effects on the financial health of our business

partners and customers, on supply chains and our suppliers, on vehicle miles driven as well as other metrics that affect our business, and on access to capital and liquidity provided by the

financial and capital markets; the Company’s ability to maintain compliance with its debt covenants; the Company's ability to successfully integrate acquired businesses into the Company and to

realize the anticipated synergies and benefits; the Company's ability to successfully divest businesses; the Company's ability to successfully implement its business initiatives in its two business

segments; slowing demand for the Company's products; the ability to maintain favorable supplier arrangements and relationships; disruptions in our suppliers' operations, including the impact of

COVID-19 on our suppliers as well as our supply chain; changes in national and international legislation or government regulations or policies, including changes to import tariffs, short term

government subsidies, and the unpredictability of such changes and their impact to the Company and its suppliers and customers, data security policies and requirements as well as privacy

legislation; changes in general economic conditions, including unemployment, inflation (including the impact of tariffs) or deflation and the United Kingdom's exit from the European Union,

commonly known as Brexit, and the unpredictability of the impact following such exit from the European Union; changes in tax policies; volatile exchange rates; volatility in oil prices; significant

cost increases, such as rising fuel and freight expenses; the Company's ability to successfully attract and retain employees in the current labor market; uncertain credit markets and other

macroeconomic conditions; competitive product, service and pricing pressures; failure or weakness in our disclosure controls and procedures and internal controls over financial reporting;

including as a result of the work from home environment; the uncertainties and costs of litigation; disruptions caused by a failure or breach of the Company's information systems, as well as

other risks and uncertainties discussed in the Company’s latest SEC filings. The statements are only as of the date they are made, and the Company undertakes no duty to update its forward-

looking statements made during this presentation or in these materials except as required by law. Actual results may vary materially and, as such, you are cautioned not to place undue reliance

on these forward-looking statements.

NON-GAAP MEASURES: This presentation contains adjusted net income from continuing operations, adjusted diluted earnings per share from continuing operations, adjusted tax rate,

adjusted gross profit, adjusted operating and non-operating expenses, net sales excluding divestitures, segment profit excluding divestitures, segment profit margin excluding divestitures, and

free cash flow, which are financial measures that are not derived in accordance with United States generally accepted accounting principles ("GAAP"). The Company considers these non-GAAP

measures useful to investors because they provide greater transparency into management’s view and assessment of the Company’s core operating performance. These measures are widely

used by analysts, investors and competitors in our industry, although our calculation of the measure may not be comparable to similar measures disclosed by other companies, because not all

companies and analysts calculate these measures in the same manner. The Company does not, nor does it suggest investors should, consider non-GAAP financial measures superior to, in

isolation from, or as a substitute for, GAAP financial information. The Company has included reconciliations of this additional information to the most comparable GAAP measure in the appendix

of this presentation.


Key Messages

Focused on Maximizing Shareholder Value

01 Leading global distributor with scale and brand strength to capture market share

03 Leverage distribution expertise, efficiencies and shared services across portfolio of businesses

02Strong track record of strategic acquisitions to drive growth in large, fragmented addressable

markets

04 Optimizing portfolio and organizational structure for profitable growth

05 Strong balance sheet, cash flow, disciplined capital allocation and history of consistent dividends


Operating Through the Challenges of COVID-19

Working Together As One GPC Team

Focused on prioritizing the safety and well-being of our employees and their families, customers,

suppliers and communities

Remained fully operational to fulfill critical customer needs

Executed with agility through the pandemic, working as one team to quickly and effectively adopt new safety

protocols to ensure a safe work environment

Intensified approach to managing operations enabled us to enhance balance sheet flexibility, achieve

meaningful cost savings and advance operational excellence

Advanced ESG initiatives, including commitment to diversity and inclusion

Sale of S.P. Richards marks a culmination of a multi-year series of acquisitions and divestitures as part of

our strategy to simplify and optimize our portfolio


Genuine Parts Company Snapshot (NYSE: GPC)

Leading Global Distributor in Diversified End Markets

GLOBAL FOOTPRINT

TTM 2020 Revenue by Region1,3

KEY STATISTICS1

Founded 1928

Headquarters Atlanta, GA

Countries Served 14

Locations

• Warehouses

• Distribution Facilities

• Retail (Owned/Independent)

10,575

900

174

9,500

Employees ~50,000

Market Capitalization2 ~$13.1B

TTM 2020 FINANCIAL HIGHLIGHTS1

Revenue3

• Automotive

• Industrial

$16.5B

65%

35%

Segment Profit Margin3 7.7%

Free Cash Flow4 ~$1.3B

Dividend Yield5 3.6%

77%North

America 9%Australasia

14%Europe

1 As of 6/30/20 unless otherwise noted; 2 As of 8/3/20; 3 Estimates, excluding divested and discontinued operations; 4 Refer to Reconciliation of Non-GAAP measures; 5 Calculated based on estimated

annual dividend per share divided by share price as of 6/30/20


Long Track Record of Disciplined Execution to Drive Profitable Growth

$10.1 $11.2

$12.5 $13.0 $14.1

$15.3 $15.3 $15.3 $16.3

$18.7 $19.4

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

$2.50 $3.00

$3.58

$4.14 $4.40

$4.61 $4.63 $4.59 $4.71

$5.68 $5.69

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Strong History of Sales

and Profit Growth

Sales and Profit Have Increased in 87 and

75 Years of 92-Year History, Respectively

Dividend Growth

2020 Marks GPC’s 64th Consecutive Year

of Dividend Increases

1925Established

1928Founded

1948IPO

1968Begin trading on

NYSE: GPC

1975Acquired

1976Acquired

1998Acquired

Revenues ($B)1 Adjusted EPS1

2013Acquired GPC

Asia Pacific

2014Established NAPA

Mexico

2017Acquired

35% Ownership

2018

100% Ownership

2019Sold

Auto Todoand EIS

2020Sold S.P.

Richards

1 As Reported

2020Inenco

Rebranding


Automotive Snapshot

Business Highlights

• Largest global auto parts network

• 155 global distribution centers and ~9,500 stores,

~2,500 company owned / ~7,000 independents

• 25,000+ global repair center partnerships

(AutoCare, AutoPro, RAS, GroupAuto), 18,500+

NAPA North American AutoCare Centers

• 90% of NA NAPA Sales are private label products

• Global Sales by segment:

‒ ~80% Commercial / DIFM

‒ ~20% Retail / DIY

Growth Opportunities

• Maximize value of NAPA and other key brands

• Expand global footprint

• Enhance commercial programs

• Upgrade store merchandising and retail services

• Strengthen omni-channel capabilities

2019 Sales by Region

69%

20%

11%

North America

Australasia

Europe

Revenue ($B) Adj. Op Income ($B) & Margin (%)

Program Partnerships & Major Accounts Select Store & Product Banners

North America

Europe

Australasia

$729 $715 $720

$854 $830

9.1% 8.8% 8.4% 8.1% 7.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

$-

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2015 2016 2017 2018 2019

Adj. Operating Income Operating Margin

$7.95 $8.04 $8.58

$10.53 $10.99

-1.0%1.3%

6.2%

2.1%4.8%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

$-

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

2015 2016 2017 2018 2019

Revenue % Change


Industrial Snapshot

Business Highlights

• Leading industrial parts MRO distributor in North

America and Australasia; acquired Inenco in

Australia in July 2019

• 23 distribution centers, 45 Service Centers, 700+

branches across North America and Australasia

• Access to a broad portfolio of 7M+ parts

• Serves a diverse customer base across several

industry sectors

‒ Equipment & Machinery

‒ Food Products

Growth Opportunities

• Expand product categories

• Pursue strategic acquisitions

• Expand into new geographic markets

• Enhance value-added services

2019 Sales by Region

93%

7%

North America

Australasia

Revenue ($B) Adj. Op Income ($B) & Margin (%)

Select Customers 2019 Sales by Product Category

$409 $397 $440

$487 $522

7.6%7.4%

7.6%7.7%

8.1%

7.0%

7.5%

8.0%

8.5%

9.0%

$-

$100

$200

$300

$400

$500

$600

2015 2016 2017 2018 2019

Adj. Operating Income Operating Margin

$5.46 $5.40 $5.81

$6.30 $6.53

-2.0%-0.1%

9.4% 8.6%

3.2%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

$-

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

2015 2016 2017 2018 2019

Revenue % Change

‒ Pulp & Paper

‒ Iron & Steel

9%

3%

7%

9%

9%

13%

17%

34%

Misc. Products & Services

Linear

Electrical & Automation

Seals, Pumps & Hoses

Material Handling

Hydraulics / Pneumatics

Industrial / Safety Supplies

Bearings / Power Transmission


The Power of One GPC

Leveraging Leading Brands, Common Distribution Processes and Logistical Expertise Across Platforms

Leading Brands

Shared Services

Business Practices Systems Facilities

Technology Transport Freight


We Strive to be a World-Class Service Organization

Investment of Choice

Employer of Choice

Supplier of Choice

Valued Customer

Good Corporate Citizen


Our Transformational Journey…

…and We Are Just Getting Started

2013

• Four segments: Automotive,

Industrial, Office Products, Electrical

• North American and Australasian

operations

• Expanded distribution footprint

Today

• Two segments: Automotive and

Industrial

• Expanded operations in Europe in

addition to North America and

Australasia

• Created global transformation office

under new leadership

• Formed Digital Center of Excellence

• Enhanced shared services platform

across businesses

• Increased capabilities in advanced

data analytics

2020+

• Continue portfolio optimization

• Further expand North American,

Australasian and European

operations

• Focus on market leading

automotive and industrial

businesses

• Drive efficient and productive

cost structure


Experienced Leadership Team with Deep Industry Expertise

Driving a Culture of Continuous Improvement, Accountability and Integrity

Paul DonahueChairman, CEO

Joined: 2003

Current Role: 2016

Carol YanceyEVP, CFO

1991

2013

Will StengelEVP, CTO

2019

2019

Greg MillerEVP, CIO

2011

2018

Jim NeillEVP, CHRO

2006

2013

Treg BrownEVP, M&A

1994

1999

Kevin HerronPresident, U.S. Automotive

1983

2019

Alain MassePresident, Canadian Automotive

2011

2015

Frank BaduelCOO, European Automotive

1999

2020

Rob CameronManaging Director, Australasia Automotive

2003

2017

Randy BreauxPresident, North America Industrial

2011

2019

Roger JowettPresident, Australasia Industrial

2014

2019


Supportive Board with Diverse Expertise and Experience

Front Row

Elizabeth Camp (2015)President & CEO,

DF Management, Inc.

Robert Loudermilk, Jr (2010)President & CEO,

The Loudermilk Companies

Donna Hyland (2015)President & CEO,

Children's Healthcare of Atlanta

Paul Donahue (2012)Chairman & CEO,

Genuine Parts Company

Gary Fayard (2014)Retired CFO,

The Coca-Cola Company

Wendy Needham (2013)Retired MD, Global Auto Research,

Credit Suisse First Boston

Back Row

Jean-Jacques Lafont (2020)Co-Founder & Executive Chairman,

Alliance Automotive

P. Russell Hardin (2017)President,

Robert W. Woodruff Foundation

Richard Cox, Jr. (2020)Chief Information Officer,

Cox Enterprises

John Johns (2002)Retired Chairman & CEO,

Protective Life Corporation

John Holder (2011)Chairman & CEO,

Holder Properties

E. Jenner Wood (2014)Retired Executive Vice President,

SunTrust Banks, Inc

Recent Updates and Composition

✓ Added Jean-Jacques Lafont of Alliance Automotive Group

✓ 83% Independent Directors

✓ 25% Women; 42% Minorities

✓ 6.8 Year Average Tenure

Expertise and Experience

CEO / Leadership Position 92%

Finance and Accounting 50%

Government / Regulatory 50%

Automotive 33%

Distribution / Supply Chain 25%

Legal 25%

International 25%


Engrained ESG Best Practices Throughout Organization

An ESG Focused Organization Benefiting All Stakeholders

Environmental

• Completed 752 lighting retrofits offsetting

52M lbs of CO2 (2015-2018)

• Our fleet management program recycled

more than 20 tons of tires, 3,500 gal of oil

and more than 7,800 lbs of cardboard and

scrap material (2018)

• Recycled 6,445 tons of waste in 2018

through comprehensive waste recycling

program

• Vendors meet strict supply chain

sustainability standards

Social Governance

• Donated time, resources and $5M+ in

2018 to:

‒ United Way

‒ Intrepid Fallen Heroes

‒ City of Hope

‒ American Cancer Society

‒ Starlight Children’s Foundation

• Provided health and wellness benefits to

employees, including biometric screenings,

fitness challenges, eLearning modules and

counseling/recovery assistance programs

• Increased spend with diverse suppliers

by 8% in 2018 from 5,200 diversity supplier

partners

• Diversity & Inclusion Committee to advance

initiatives supportive of an environment built on

respect, dignity & fairness

• Formalizing our sustainability governance,

including ongoing shareholder engagement

and routine updates to the Board of Directors

• Ambassadors will serve on cross company

corporate sustainability committee to drive

positive change

• Safety Council serves as an internal advisory

group approving policy, actions and

communications

• Enhancing existing corporate values to

explicitly mention sustainability, responsibility,

stewardship, ethics and community values


Our Sustainability Commitment

Significant Progress on Our Journey to Become a More Sustainable Organization

ENERGY FLEET COMMUNITY WATER WASTE

✓ LED lighting conversion

✓ Alternative sources

(solar, battery, wind)

✓ 500+ active projects

✓ 15M BTU

reduction (25%)

✓ Rail vs truck conversion

(18 mpg)

✓ Improved fuel economy/

vehicle selection criteria

(10%)

✓ Route optimizations

✓ Reduction of millions of

miles

✓ Sustainability

ambassadors

✓ Awareness at local level

✓ Volunteer support

programs

✓ Structured give back

campaigns

✓ Executive non-profit

board service

✓ Low-flow devices

✓ Natural water retention

treatment vs runoff

policy

✓ Usage reduction

programs

✓ Closed loop systems

✓ Diversion for waste

streams

✓ Recycle programs

at source

✓ Packaging conversion/

reduction

✓ Fiber recycle


Favorable Long-Term Macro Trends Across Our Businesses

Well-Positioned to Benefit from Economic Recovery

Automotive Industrial

Industry Drivers

• Total vehicle fleet growth

• Increasing average age of fleet

• Affordable gas prices

• Positive long-term growth outlook for miles driven

• Industrial production

• Capacity utilization rates

• Capital expenditure budget expansion

• Manufacturing employment growth in U.S.

North America

• 2019 U.S. comp sales up 3.3% and solid growth in operating profit

• 2019 Canada comp sales flat but expect share gains driven by

commercial programs, specifically major account customer

segments

• 12M+ Retail NAPA Rewards members, representing 16% of retail

sales

• Slowing trend in industrial economy persisted throughout 2019

• 3 of 14 product categories posted positive YoY sales in 2019

Australasia• Mid-single digit comp growth and solid growth in operating profit in

2019

• Inenco acquisition performing inline within expectations in first 6

months of ownership

Europe

• 2019 comp sales flat, sequential improvement from mid-to-high

single digit declines mid-year

• U.K. stabilizing on Brexit agreement


Addressable Market of $430B+

Proven Ability to Consolidate and Grow within Large and Fragmented Markets

Automotive

$230B+ Global Market

Industrial

$200B+ Global Market

Regions Market Share Industry Growth

United States 7% +2-3%

Europe 5% +1-2%

Canada 14% +2-3%

Australasia 20% +2-3%

Mexico 1% +5-6%

Total 8% +2-3%

Regions Market Share Industry Growth

North America 3% +2-3%

Australasia 4% +2-3%

Total 3% +2-3%

$125 $82

$9 $7 $6

United States

Europe

Canada

Australasia

Mexico

$190

$10

North America

Australasia


Sustainable Competitive Advantages

Well Positioned as a Leading Global Distributor


Global Presence

and Brand Strength

Best-in-Class Operating

and Distribution Efficiencies

Enhanced

Technology Solutions

• Enduring Company history

• Largest global automotive aftermarket

and industrial businesses

• Expanding the NAPA and Mi brands

globally

• Shared services and technologies

• Purchasing scale with shared

suppliers across automotive and

industrial

• Strategically collocated facilities

• Acquisition and integration expertise

• Digital Center of Excellence

established five years ago

• Agile development of digital

technologies to innovate our supply

chains

• Utilizing the power of data analytics to

make better decisions about how we

price for our customers


Strategic Growth Framework

A Consistent Framework to Coordinate Growth Plans Supported by Operational Excellence

030201

Acquire new customers and

increase existing wallet share

Introduce new

products and services

Strategic expansion

into new geographies

• Maximize the value of global

branding opportunities

• Enhancement of omnichannel

capabilities

• Retail store remodel and

enhancements

• Leverage NAPA Rewards Program

• Introduction of new omnichannel

offerings

• Develop commercial programs and

technology solutions for customers

• Innovate digital tools to better serve

customers

• Expand NAPA brand into Europe and

Australasia

• Make strategic acquisitions to

complement existing operations and

expand footprint

• Rebranding of Mi Asia Pacific


History of Strong Cash Flow Supporting Growth and Capital Allocation

Driving Strong Cash Flows

$845

$679 $625

$906

$1,057

$790

$1,159

$946 $815

$1,145

$892

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Working Capital

Cash from Operations ($M)

Working Capital Initiatives

• Sale of accounts receivables

• Sophisticated inventory management

• Extended terms and programs with vendors

Cost Savings Initiatives

• Reinvestment in core businesses to enhance

efficiencies and productivity

• Significant opportunities to improve cost structure

Cash Flows

• Steady strength in annual cash generation

• Resilient cash flows in economic downturns

• Expect continued strong cash flows

105

8579 78

6961

5547 48

41 38

26%22% 22%

18%14% 13% 11% 11% 11% 9% 8%

0%

10%

20%

30%

40%

50%

60%

$-

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Cash Conversion Cycle (Days) Working Capital (% of Sales)


Durable Balance Sheet and Ample Liquidity

• Fixed and variable-rate debt maturing 2021-2034

• In compliance with debt covenants as of June 30, 2020; negotiated more favorable covenants, effective May 1, 2020

• Liquidity strengthened in Q2; ~$2.6 billion available liquidity entering July

• $500 million A/R Sales Program; $500 million additional international debt; $400 million SPR proceeds

DEBT MATURITY SCHEDULE2,3BALANCE SHEET HIGHLIGHTS1 LIQUIDITY PROFILE1

Cash / Cash Equivalents $1.0

Accounts Receivable $1.8

Inventory $3.4

Total Assets $13.3

Accounts Payable $3.7

Total Debt $3.2

Total Liabilities $10.4

Working Capital4 $1.3

$110

$188

$715

$250

$360 $358$400

$196

$336

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030+

Ample Liquidity to Withstand Challenging Economic Environment

2.85% 2Q20 Average Interest Rate

($B)

1 As of 6/30/2020; 2 Excludes revolver; 3 As of 12/31/2019; 4 Working capital is defined as current assets less current liabilities; 5 Total credit capacity represents total committed capacity under the

revolving credit facility plus the amount of all other debt outstanding; 6 As defined in our credit agreements

Total Credit Capacity5 $4.8

Less Total Debt: ($3.2)

Unused Credit Capacity $1.6

Cash $1.0

Total Available Liquidity $2.6

Total Debt to EBITDA63.2x

($B) ($M)


Disciplined Capital Allocation

Taking Necessary Steps to Conserve Cash

47%

29%

16%

8%

M&A Dividend Reinvestment Share Repurchases

2017-2019 Capital Deployment

~$4.3B1

22

Current Priorities

Dividend

• $0.79 per share, representing a 4% increase from 2019

• Dividend yield2 of 3.6%

Reinvestment

• 2020 CapEx of $150M - $200M (35-50% reduction from original plan)

M&A

• Limited to small, bolt-ons, for balance of 2020

Share Repurchases

• Temporarily suspended share repurchases

1 Includes proceeds from divestitures; 2 As of 6/30/20


Strategic Approach to M&A

Core Competency with a Proven History of Successful Acquisitive Growth

Strategic Filters

Key Product Category Extension

Market Leadership

Geographic / Market Expansion

Capability Enhancements

Operating and Cost Synergies

Talent Acquisition / Retention

Financial Criteria

Accretive Sales Growth Rates

Accretive to EPS within First Year

ROIC at 15% within 3 Years

Post-Synergy Purchase Price

Multiple Below Our Trading Multiple


64 Consecutive Years of Dividend Growth

Strong Track Record of Paying Consistent Dividends

'80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 20E

Dividend History

• 2020E annual dividend of $3.16/share, a 4%

increase

• Consistent 3%+ dividend yield

• Targeted payout range of 50% to 55%

• Among “2019 Dividend Kings” - 26 companies

with 50+ years of increasing dividends

$3.16

$0.21


Compelling Investment Thesis

Leading global Automotive and Industrial distributor with scale to grow market leading positions in large fragmented

markets with favorable long-term trends01

Leveraging sustainable competitive advantages including global presence, brand strength, best in class operating and

distribution efficiencies and enhanced technology solutions02

Streamlined portfolio to focus on key Automotive and Industrial markets with well defined M&A criteria for expansion04

Strong balance sheet, ample liquidity and significant free cash flow combined with disciplined capital allocation

maximizes shareholder value creation05

Solid track record of consistent sales and earnings growth with strategic framework to enhance profitability through

increased productivity and margin expansion 03


Appendix


Reconciliation Tables

Free Cash FlowTrailing Twelve Months

(in thousands) June 30, 2020

Net cash provided by operating activities $ 1,564,765

Less: Purchases of property, plant and equipment (270,047)

Free Cash Flow 1,294,718$

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