The operator introduces the Genuine Parts Company's first quarter 2024 earnings conference call and announces the participation of senior executives. The call will be recorded and a replay will be available, and a supplemental slide presentation can be found on the company's website. The call may include non-GAAP financial measures and forward-looking statements, and the company's actual results may differ from these statements due to various factors.

The company will not update any forward-looking statements made during the call. Paul Donahue, the CEO, is pleased with the first quarter results and highlights the value of their business mix and geographic diversity. The company saw a slight increase in sales and improved profitability. They also raised their outlook for adjusted earnings per share in 2024. The macroeconomic environment presents challenges and opportunities, but the company's businesses are supported by positive industry fundamentals.

The Global Automotive business is seeing an increase in miles driven and aging fleets, as well as high new and used car prices. The industrial side of the business is also seeing positive movement. The Motion business has a diverse portfolio and is expanding into new opportunities. Sales were slightly down in the first quarter, but profit conversion was exceptional. Supply chain initiatives and data analytics are driving inventory productivity and customer service. Motion's business is expected to accelerate in the second half of the year. James Howe, with nearly three decades of service, has been promoted to President of Motion North America and is supported by a strong team.

The paragraph discusses the recent visit to the Motion team's headquarters and their new learning development center, as well as the performance of the Automotive teams in Europe, Australasia, and the U.S. The company is confident in its strategic plans and ability to pursue growth opportunities while also returning capital to shareholders. The first quarter results reflect progress on investment pillars and the team's focus on customers. The speaker thanks the global GPC teams for their dedication and the company is pleased with their solid start to the year.

In the first quarter, global industrial sales decreased by 2%, in line with expectations. The company's focus on key priorities such as talent, sales, technology, and acquisitions drives efficiency and growth. Motion saw mixed results in different end markets, with strength in iron and steel and chemicals, but softer sales in equipment and machinery and lumber and building products. Customer feedback is cautious, but renewal rates for corporate accounts are high. The company is also seeing growth in physically locating team members at customer facilities.

Motion's sales expertise and solution-based selling have helped to maintain strong relationships with customers and keep their operations running smoothly. Despite a 16-month period of contraction in the manufacturing industry, Motion has outperformed due to its diversification and strategic initiatives. The manufacturing PMI showed signs of expansion in March 2024, giving hope for the rest of the year and the future. The Industrial segment, which represents 50% of GPC's total profit, saw a 3% increase in segment profit and a 70 basis point increase in margin despite lower sales. The Global Automotive segment saw a 2% increase in sales, with positive growth in international markets and flat sales in the US. Sales inflation moderated to less than 1% and segment profit increased by 3% and 10 basis points.

The Global Automotive segment saw strong results in the first quarter, with improvements in the U.S. Automotive business. In Europe, sales and market share grew thanks to key account wins and the expansion of NAPA products. The opening of a new distribution center in France is expected to increase efficiency and customer service. In Asia-Pacific, sales and margins increased despite a challenging market. In Canada, there was a slight decrease in sales and comparable sales.

The Canadian team is focused on achieving sales growth despite a cautious consumer and mild winter. Automotive sales met expectations, while heavy vehicle sales were slightly below. In the U.S., Automotive sales were flat but showed improvement from the previous quarter. Independent owners showed positive buying behaviors. Commercial sales were slightly down, while DIY sales were flat. In-flight actions are expected to have a positive impact throughout the year. Inventory fill rates and in-store service levels improved, and field teams were realigned to focus on key activities, customer service, and sales growth.

The company's focus on improving store and field operations has led to a decrease in employee turnover and improved efficiency in their supply chain. They have also made progress on strategic initiatives, such as expanding their distribution center and partnering with Google to enhance the customer experience. Additionally, they are working on evolving their operating model and owning more stores in selected markets while still partnering with independent owners. These initiatives aim to improve growth and operations for both company-owned and independently-owned locations.

In the first quarter, the company made strategic acquisitions and is focusing on key initiatives to improve productivity and reduce costs. The company exceeded expectations and is cautiously optimistic about a recovery in the North American industrial market. The company remains committed to long-term growth and thanks their global team for their hard work. Profit growth was achieved despite low sales growth.

The company is pleased with their strong start to the year, which exceeded their expectations despite the challenges. They focus on adjusted results, which exclude non-recurring costs from their restructuring program. Total sales increased slightly, with contributions from acquisitions and growth in Europe and Australasia, but offset by declines in Industrial and Canada. Gross margin improved due to strategic sourcing and pricing initiatives. Adjusted operating and non-operating expenses also increased.

In the first quarter, the company's operating expenses were higher due to planned investments in IT, rent expenses, and salaries and wages. However, these were partially offset by discipline in other categories and the company expects to benefit from its global restructuring program. The segment profit margin improved by 30 basis points, driven by margin expansion in the Industrial business and benefits from actions taken to improve the U.S. Automotive business. Adjusted net income increased by 3.7% and the company generated $318 million in cash from operations and $203 million in free cash flow.

In the first quarter, the company had $2.5 billion in available liquidity and a debt-to-EBITDA ratio of 1.8 times. They invested $116 million in capital expenditures and $135 million in strategic acquisitions. They also returned $170 million to shareholders in dividends and share repurchases. The company implemented a global restructuring effort, with expected costs of $100 million to $200 million and potential benefits of $20 million to $40 million in 2024. The first quarter saw $83 million in restructuring expenses, with the majority being related to a voluntary retirement program. The remaining costs were for facility closures and start-up costs for new facilities.

The company completed their first quarter restructuring activities and expects to see benefits in the second quarter. They are confident in their team's ability to drive results and have raised their adjusted diluted earnings per share guidance for 2024. They expect total sales growth of 3% to 5% for the year, with a stronger second-half. Gross margin is expected to expand by 30 basis points to 50 basis points, and SG&A is expected to deleverage by 20 basis points to 30 basis points. The company expects diluted earnings per share to be in the range of $9.05 to $9.20, and adjusted diluted earnings per share to be in the range of $9.80 to $9.95, an increase of 5% to 6.6% from 2023. For the Automotive segment, they expect 2% to 4% total sales growth and 20 basis points to 40 basis points of expansion in Global Automotive segment margin.

In the Industrial segment, the company expects sales growth of 3% to 5% with comparable sales growth in the 2% to 4% range. They anticipate an increase in global industrial segment margin and are targeting corporate expenses to be 1.5% to 2% of sales. The company is confident in their cash flows and expects cash from operations to be between $1.3 billion and $1.5 billion with free cash flow of $800 million to $1 billion. They plan to allocate capital to four priorities: capital expenditures, M&A, dividends, and share repurchases. They will continue to pursue opportunities for growth and remain disciplined in their approach. The company is pleased with their first quarter results and is confident in their teams and actions being taken to align the business. They will provide an update on their progress in July.

Scot Ciccarelli asks for clarification on the reported and comp numbers for U.S. Auto sales. Will Stengel explains that the reported numbers include all sales, while the comp numbers only include sales out. Bert Nappier adds that the reported numbers also include a 130 basis point adjustment for a new rebate program that is managed by the company and has no impact on gross profit.

The speaker discusses the results of the company's new incentive program in the first quarter, which negatively impacted sales growth by 130 basis points. They explain that this is a more comparable way to present the data and that the program was not in place in the prior year. They anticipate an acceleration in sales growth in the Motion sector due to improved macro indicators and the team's efforts, with expectations of positive or flat sales growth in the second quarter.

The company's first quarter results were impacted by weather and the Easter holiday, resulting in a 160 basis points decrease in the top line. However, they expect to see improvement in the second half of the year due to a recovery in the market and their restructuring activities. The company has raised their outlook for the year and expects U.S. Automotive and Motion to accelerate sequentially. They also anticipate an improvement in industrial production and interest rates, although they cannot be certain of the correlation between the two.

The company is optimistic about the second half of the year and expects an improvement in industrial activity. They do not anticipate any changes in the vendor rebate program and expect it to remain constant. The restructuring program will have a two-year payback and the majority of the benefits will come from people and facility actions. The company is currently in the process of implementing the program and expects to see a 70% benefit from people and 15% from facilities.

In the first quarter, 65% of the $83 million cost incurred by the company came from people, with the rest being spent on facility optimization. The voluntary retirement program is complete, with most retirees leaving on March 31. The company expects to see benefits from this program in the second quarter and has given a range of $100 million to $200 million for the total cost of the program. The company is also estimating the impact of inflation, which is now slightly positive and expected to remain flat for both the Industrial and Auto sectors. They will continue to provide updates on this as the year progresses.

Bert Nappier, the speaker, reports that the inflation impact for the quarter was less than 1% for all GPC, with both segments performing similarly. He also mentions that the outlook for the rest of the year is for it to stay at that level. Greg Melich then asks for more details on the outperformance of Auto Care and underperformance of major accounts, to which Will Stengel responds by explaining the intentional efforts made to service the Auto Care segment and the diverse strategies in place for major accounts, which are currently facing sluggishness due to a cautious consumer.

The Auto Care Advisory Council is energized and the Auto Care base is growing. The quality of NAPA's auto cares is improving and they are focused on capturing more of their customers' spending. NAPA has bought in over 100 drivers and is continuing to acquire more stores from independent owners. They are refining their approach and shifting the mix to own more stores in target priority markets, which they believe will be beneficial for the business.

In response to a question about Genuine Parts Company's acquisition of independent stores, Paul Donahue and Bert Nappier mention that this is not a new development and has been happening for years. They expect this trend to continue throughout the year and attribute it to the company's initiatives and strong partnership with independent owners. They also credit the company's operations team for improving availability and supply chain.

In response to a question about regional performance for the U.S. automotive business, the company's executive discussed the quarterly progression and regional breakdown, noting that March was a strong month and certain regions outperformed while others were soft. They also mentioned a national program aimed at improving sales effectiveness by focusing on the right customers.

The company is focused on optimizing sales coverage and improving efficiency in distribution. They have not made any significant changes to sales incentives and do not expect a pull-forward of sales. Inflation is slowing, including wage inflation, which has become less competitive compared to a year ago.

The speaker discusses how labor costs have returned to historical averages and the company is no longer facing the same challenges as last year. They also mention the success of their NAPA brand expansion in Europe, with plans to continue expanding in Spain.

Carolina Jolly from Gabelli asked about the cadence of the industrial end-markets. Paul Donahue responded that there was a mixed story, with some end-markets improving and others declining due to weather and Good Friday. Will Stengel added that iron and steel, automotive, chemicals, and mining were strong, giving them optimism for the remaining quarters.

The speaker is thanking someone for their question and stating that everything is good. The operator then ends the conference call.

This summary was generated with AI and may contain some inaccuracies.