SECURITIES AND EXCHANGE COMMISSION
(Mark One) | ||
[X] | ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Fiscal Year Ended: December 31, 2003
OR
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
GENUINE PARTS COMPANY
Georgia
(State of Incorporation) |
58-0254510
(IRS Employer Identification No.) |
2999 Circle 75 Parkway, Atlanta, Georgia 30339
(Address of Principal Executive Offices) (Zip Code)
Registrants telephone number, including area code: (770) 953-1700.
Securities registered pursuant to Section 12(b) of the Act and the Exchange on which such securities are registered:
Common Stock, Par Value, $1 Per Share
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as described in Exchange Act Rule 12b-2). Yes [X] No [ ]
The aggregate market value of the Registrants Common Stock (based upon the closing sales price reported by the New York Stock Exchange and published in The Wall Street Journal for February 12, 2004) held by non-affiliates as of February 12, 2004 was approximately $5,728,621,671.
The number of shares outstanding of Registrants Common Stock, as of February 12, 2004, was 174,277,466.
Certain portions of the Companys Annual Report to Shareholders for the fiscal year ended December 31, 2003 (the Annual Report) are incorporated by reference into this Form 10-K. Other than those portions of the Annual Report specifically incorporated by reference pursuant to Items 5 through 8 of Part II hereof, no other portions of the Annual Report shall be deemed so incorporated.
Certain portions of the Companys definitive Proxy Statement for the Annual Meeting of Shareholders to be held on April 19, 2004 (the Proxy Statement) filed pursuant to Rule 14a-6 of the Securities Exchange Act of 1934, as amended, are incorporated by reference into this Form 10-K. Other than those portions of the Proxy Statement specifically incorporated by reference pursuant to Items 5 and 10 through 13 of Part III hereof, no other portions of the Proxy Statement shall be deemed so incorporated.
PART I.
ITEM I. BUSINESS.
Genuine Parts Company, a Georgia corporation incorporated on May 7, 1928,
is a service organization engaged in the distribution of automotive replacement
parts, industrial replacement parts, office products and electrical/electronic
materials. In 2003, business was conducted throughout the United States, in
Canada and in Mexico from approximately 1,800 locations. As used in this
report, the Company refers to Genuine Parts Company and its subsidiaries,
except as otherwise indicated by the context; and the terms automotive parts
and industrial parts refer to replacement parts in each respective category.
Segment Data
. For information regarding segment data, refer to the Companys
Audited Financial Statements as set forth on Pages 12 and 33 of the Annual
Report to Shareholders for 2003 attached hereto as Exhibit 13.
Competition - General
. The distribution business, which includes all segments
of the Companys business, is highly competitive with the principal methods of
competition being product quality, sufficiency of inventory, price and the
ability to give the customer prompt and dependable service. The Company
anticipates no decline in competition in any of its business segments in the
foreseeable future.
Employees
. As of December 31, 2003, the Company employed approximately 30,800
persons.
AUTOMOTIVE PARTS GROUP
.
The Automotive Parts Group, the largest division of the Company,
distributes automotive replacement parts and accessory items. The Company is
the largest member of the National Automotive Parts Association (NAPA), a
voluntary trade association formed in 1925 to provide nationwide distribution
of automotive parts. In addition to over 300,000 available part numbers, the
Company, in conjunction with NAPA, offers complete inventory, cataloging,
marketing, training and other programs in the automotive aftermarket.
During 2003, the Companys Automotive Parts Group included NAPA automotive
parts distribution centers and automotive parts stores (auto parts stores or
NAPA AUTO PARTS stores) owned in the United States by the Company; automotive
parts distribution centers and auto parts stores in Canada owned and operated
by UAP, a wholly-owned subsidiary of the Company; auto parts stores in the
United States operated by corporations in which the Company owned either a
minority or majority interest; auto parts stores in Canada operated by
corporations in which UAP owned a 50% interest; distribution centers owned by
Balkamp, Inc., a majority-owned subsidiary of the Company; rebuilding plants
owned by the Company and operated by its Rayloc division; distribution centers
of ACDelco, Motorcraft and other automotive supplies owned and operated by
Johnson Industries, a wholly-owned subsidiary; and automotive parts
distribution centers and automotive parts stores in Mexico, owned and operated
by Grupo Auto Todo, S.A. de C.V. (Auto Todo), a company in which a
wholly-owned subsidiary of the Company owns a controlling interest.
The Company has a 15% interest in Mitchell Repair Information (MRIC), a
subsidiary of Snap-on Incorporated. MRIC is a leading diagnostic and repair
information company with over 35,000 North American subscribers linked to its
services and information databases. MRICs core product, Mitchell ON-DEMAND,
is a premier electronic repair information source in the automotive
aftermarket.
The Companys NAPA automotive parts distribution centers distribute
replacement parts (other than body parts) for substantially all motor vehicle
makes and models in service in the United States, including imported vehicles,
trucks, SUVs, buses, motorcycles, recreational vehicles and farm vehicles. In
addition, the Company distributes replacement parts for small engines, farm
equipment and heavy duty equipment. The Companys inventories also include
accessory items for such vehicles and equipment, and supply items used by a
wide variety of customers in the automotive aftermarket, such as repair shops,
service stations, fleet operators, automobile and truck dealers, leasing
companies, bus and truck lines, mass merchandisers, farms, industrial concerns
and individuals who perform their own maintenance and parts installation.
Although the Companys domestic automotive operations purchase from more than
75 different suppliers, approximately 53% of 2003 automotive parts inventories
were purchased from 10 major suppliers. Since 1931, the Company
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has had return privileges with most of its suppliers, which has protected the
Company from inventory obsolescence.
Distribution System
. In 2003, the Company operated 58 domestic NAPA automotive
parts distribution centers located in 39 states and approximately 900 domestic
company-owned NAPA AUTO PARTS stores located in 43 states. At December 31,
2003, Genuine Parts Company owned either a minority or majority interest in 4
corporations, which operated approximately 24 auto parts stores in 4 states.
UAP, founded in 1926, is a Canadian leader in the distribution, marketing,
and rebuilding of replacement parts and accessories for automobiles and trucks.
UAP employs approximately 4,200 people. UAP operates a network of 14
distribution centers supplying approximately 592 UAP/NAPA auto parts and 62
TRACTION wholesalers, which supply parts to small fleet owners-operators and
are a significant supplier to the mining and forestry industries. These
include approximately 204 company owned stores, 21 joint venture or progressive
owners in which UAP owns a 50% interest, and approximately 429 independently
owned stores. UAP supplies bannered installers and independent installers in
all provinces of Canada, as well as networks of service station and repair
shops operating under the banners of national accounts. UAP is licensed to and
uses the NAPA® name in Canada.
In Mexico, Auto Todo owns and operates 9 distribution centers and 15 auto
parts stores. Auto Todo is licensed to and uses the NAPA® name in Mexico.
The Companys distribution centers serve approximately 5,000 independently
owned NAPA AUTO PARTS stores located throughout the market areas served. NAPA
AUTO PARTS stores, in turn, sell to a wide variety of customers in the
automotive aftermarket. Collectively, these independent automotive parts
stores account for approximately 25% of the Companys total sales with no
automotive parts store or group of automotive parts stores with individual or
common ownership accounting for more than 0.5% of the total sales of the
Company.
Products
. Distribution centers have access to over 300,000 different parts and
related supply items. Each item is cataloged and numbered for identification
and accessibility. Significant inventories are carried to provide for fast and
frequent deliveries to customers. Most orders are filled and shipped the same
day as received. The majority of sales are on terms that require payment
within 30 days of the statement date. The Company does not manufacture any of
the products it distributes. The majority of products are distributed under
the NAPA® name, a mark licensed to the Company by NAPA.
Related Operations
. A majority-owned subsidiary of the Company, Balkamp, Inc.
(Balkamp), distributes a wide variety of replacement parts and accessory
items for passenger cars, heavy duty vehicles, motorcycles and farm equipment.
In addition, Balkamp distributes service items such as testing equipment,
lubricating equipment, gauges, cleaning supplies, chemicals and supply items
used by repair shops, fleets, farms and institutions. Balkamp packages many of
the approximately 27,000 part numbers, which constitute the Balkamp line of
products that are distributed to the members of NAPA. These products are
categorized in 160 different product groups purchased from more than 400
domestic suppliers and 130 foreign manufacturers. BALKAMP®, a federally
registered trademark, is important to the sales and marketing promotions of the
Balkamp organization. Balkamp has four distribution centers located in
Indianapolis and Plainfield, Indiana, Greenwood, Mississippi, and West Jordan,
Utah.
Johnson Industries, Inc. (Johnson), a wholly-owned subsidiary of the
Company, is an independent distributor of ACDelco, Motorcraft and other
automotive supplies. Johnson, founded in 1924, sells primarily to large fleets
and new car dealers from a network of distribution centers throughout the U.S.
The Company, through its Rayloc division, also operates five plants where
certain small automotive parts are rebuilt. These products are distributed to
the members of NAPA under the NAPA brand name. Rayloc® is a mark licensed to
the Company by NAPA.
Segment Data
. In the year ended December 31, 2003, sales from the Automotive
Parts Group approximated 53% of the Companys net sales as compared to 52% in
2002 and 51% in 2001.
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Service to NAPA AUTO PARTS Stores
. The Company believes that the quality and
the range of services provided to its automotive parts customers constitute a
significant advantage for its automotive parts distribution system. Such
services include fast and frequent delivery, obsolescence protection, parts
cataloging (including the use of computerized NAPA AUTO PARTS catalogs) and
stock adjustment through a continuing parts classification system which allows
independent jobbers to return certain merchandise on a scheduled basis. The
Company offers its NAPA AUTO PARTS store customers various management aids,
marketing aids and service on topics such as inventory control, cost analysis,
accounting procedures, group insurance and retirement benefit plans, marketing
conferences and seminars, sales and advertising manuals and training programs.
Point of sale/inventory management is available through TAMS® (Total Automotive
Management Systems), a computer system designed and developed by the Company
for the NAPA AUTO PARTS store.
In association with NAPA, the Company has developed and refined an
inventory classification system to determine optimum distribution center and
auto parts store inventory levels for automotive parts stocking based on
automotive registrations, usage rates, production statistics, technological
advances and other similar factors. This system, which undergoes continuous
analytical review, is an integral part of the Companys inventory control
procedures and comprises an important feature of the inventory management
services, which the Company makes available to its NAPA AUTO PARTS store
customers. Over the last 10 years, losses to the Company from obsolescence
have been insignificant, and the Company attributes this to the successful
operation of its classification system, which involves product return
privileges with most of its suppliers.
Competition
. In the distribution of automotive parts, the Company competes
with automobile manufacturers (some of which sell replacement parts for
vehicles built by other manufacturers as well as those which they build
themselves), automobile dealers, warehouse clubs and large automotive parts
retail chains. In addition, the Company competes with the distributing outlets
of parts manufacturers, oil companies, mass merchandisers, including national
retail chains, and with other parts distributors and jobbers.
NAPA
. The Company is a member of the National Automotive Parts Association, a
voluntary association formed in 1925 to provide nationwide distribution of
automotive replacement parts. NAPA, which neither buys nor sells automotive
parts, functions as a trade association whose members in 2003 operated 64
distribution centers located throughout the United States, 58 of which were
owned and operated by the Company. NAPA develops marketing concepts and
programs that may be used by its members. It is not involved in the chain of
distribution.
In the fourth quarter of 2003, the Company acquired the assets of NAPA
Hawaii, a NAPA member company owned by Schuman Carriage Company, LTD. This
acquisition includes a distribution center that services 37 stores throughout
the Hawaiian Islands as of December 31, 2003.
Among the automotive lines that each NAPA member purchases and distributes
are certain lines designated, cataloged, advertised and promoted as NAPA
lines. The members are not required to purchase any specific quantity of parts
so designated and may, and do, purchase competitive lines from other supply
sources.
The Company and the other NAPA members use the federally registered
trademark NAPA® as part of the trade name of their distribution centers and
parts stores. The Company contributes to NAPAs national advertising program,
which is designed to increase public recognition of the NAPA name and to
promote NAPA product lines.
The Company is a party, together with other members of NAPA and NAPA
itself, to a consent decree entered by the Federal District Court in Detroit,
Michigan, on May 4, 1954. The consent decree enjoins certain practices under
the federal antitrust laws, including the use of exclusive agreements with
manufacturers of automotive parts, allocation or division of territories among
several NAPA members, fixing of prices or terms of sale for such parts among
such members, and agreements to adhere to any uniform policy in selecting parts
customers or determining the number and location of, or arrangements with, auto
parts customers.
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INDUSTRIAL PARTS GROUP
The Industrial Parts Group distributes industrial replacement parts and
related supplies throughout the United States and Canada. This Group
distributes industrial bearings and power transmission equipment replacement
parts, including hydraulic and pneumatic products, material handling
components, agricultural and irrigation equipment and related supplies. The
Group is continuing to enhance their internet-based procurement solutions with
MotionMRO.com.
The Company distributes industrial parts in the United States through
Motion Industries, Inc. (Motion), headquartered in Birmingham, Alabama.
Motion is a wholly-owned subsidiary of the Company. In Canada, industrial
parts are distributed by Motion Industries (Canada), Inc. (Motion Canada), an
operating group in the Companys North American structure. Motion Canadas
service area includes nine provinces of Alberta, British Columbia, Manitoba,
New Brunswick, Newfoundland, Nova Scotia, Ontario, Quebec, and Saskatchewan.
The Company has return privileges with most of its suppliers, which has
protected the Company from inventory obsolescence.
During 2003, the Company sold the Groups interest in a partnership with
Refacciones Industriales de Mexico (RIMSA), which distributed industrial
parts in Mexico.
As of December 31, 2003, the Group served more than 150,000 customers in
all types of industries located throughout the United States and Canada.
Distribution System
. In North America, the Industrial Parts Group operates 422
branches, nine distribution centers, and 32 service centers. The distribution
centers stock and distribute more than 200,000 different items purchased from
more than 250 different suppliers. Approximately 33% of 2003 total industrial
purchases were made from 10 major suppliers. Sales are generated from the
Groups branches located in 48 states and nine provinces in Canada. Each branch
has warehouse facilities that stock significant amounts of inventory
representative of the lines of products used by customers in the respective
market area served.
Motion Canada operates two distribution centers for the 47 Canadian
locations serving industrial and agricultural markets. Motion Canada also
distributes irrigation systems and related supplies.
Products
. The Industrial Parts Group distributes a wide variety of products to
its customers, primarily industrial concerns, to maintain and operate plants,
machinery and equipment. Products include such items as hoses, belts, bearings,
pulleys, pumps, valves, chains, gears, sprockets, speed reducers and electric
motors. The nature of this Groups business demands the maintenance of large
inventories and the ability to provide prompt and demanding delivery
requirements. Virtually all of the products distributed are installed by the
customer. Most orders are filled immediately from existing stock and deliveries
are normally made within 24 hours of receipt of order. The majority of all
sales are on open account.
Related Information
. Non-exclusive distributor agreements are in effect with
most of the Groups suppliers. The terms of these agreements vary; however, it
has been the experience of the Group that the custom of the trade is to treat
such agreements as continuing until breached by one party, or until terminated
by mutual consent.
Integrated Supply
. Motions integrated supply process reduces the costs
associated with MRO (Maintenance, Repair and Operation) inventory management,
but also enables the manufacturing customer to focus on its core competency,
free working capital associated with inventories, improve service levels to
end-users, and allow management to focus on more strategic concerns. Motions
integrated supply process analyzes a customers current operation to develop
integration goals and then provides solutions based on industrys accepted best
practices.
Segment Data
. In the year ended December 31, 2003, sales from the Companys
Industrial Parts Group approximated 27% of the Companys net sales as compared
to 27% in 2002 and 2001.
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Competition
. The Industrial Parts Group competes with other distributors
specializing in the distribution of such items, general line distributors and
others who have developed or joined integrated supply programs. To a lesser
extent, the Group competes with manufacturers that sell directly to the
customer.
OFFICE PRODUCTS GROUP.
The Office Products Group, operated through S. P. Richards Company (S. P.
Richards), a wholly-owned subsidiary of the Company, is headquartered in
Atlanta, Georgia. S. P. Richards is engaged in the wholesale distribution of a
broad line of office and other business related products that are used in the
daily operation of businesses, schools, offices and institutions. Office
products fall into the general categories of computer supplies, imaging
supplies, office furniture, office machines, general office supplies, school
supplies, janitorial supplies, breakroom supplies and healthcare supplies.
HorizonUSA Data Supplies, Inc. (HorizonUSA), a wholly-owned subsidiary
of S. P. Richards, is headquartered in Reno, Nevada. HorizonUSA is a
distributor of computer supplies and accessories.
The Office Products Group is represented in Canada through S. P. Richards
Canada. Headquartered near Vancouver, British Columbia, S. P. Richards Canada
services office product resellers throughout Canada from locations in
Vancouver, Toronto, Calgary and Winnipeg.
The Office Products Group distributes computer supplies including storage
media, printer supplies and computer accessories; office furniture to include
desks, credenzas, chairs, chair mats, partitions, files and computer furniture;
office machines to include telephones, answering machines, calculators, fax
machines, multi-function copiers, printers, digital cameras, laminators and
shredders; general office supplies to include desk accessories, business forms,
accounting supplies, binders, filing supplies, report covers, writing
instruments, envelopes, note pads, copy paper, mailroom supplies, drafting
supplies and audiovisual supplies; school supplies to include bulletin boards,
teaching aids and art supplies; janitorial supplies to include cleaning
supplies, paper towels and trash can liners; and breakroom supplies to include
napkins, utensils, snacks and beverages. S. P. Richards has return privileges
with most of its suppliers, which has protected the Company from inventory
obsolescence.
The Office Products Group distributes more than 30,000 items to over 7,000
business product resellers throughout the United States and Canada from a
network of 44 distribution centers. This network of strategically located
distribution centers provides overnight delivery of the Companys comprehensive
product offering. Approximately 53% of the Companys 2003 total office
products purchases were made from 10 major suppliers.
The Office Products Group sells strictly to resellers of office products.
These resellers include independently owned office product dealers, national
office product superstores, large contract stationers, mail order companies and
college bookstores. Resellers are offered comprehensive marketing programs,
which include full line catalogs and flyers as well as education and training
resources.
While the Company inventories include products from over 350 of the
industrys leading manufacturers, S. P. Richards also markets five proprietary
brands of items. These brands include: SPARCO®, an economical line of office
supply basics; Compucessory, a line of computer accessories; NATURE SAVER®, an
offering of recycled paper products; Elite Image, a line of new and
remanufactured toner cartridges; and Lorell, a line of office furniture.
Segment Data
. In the year ended December 31, 2003, sales from the Companys
Office Products Group approximated 17% of the Companys net sales as compared
to 17% in 2002 and 2001.
Competition
. In the distribution of office supplies to retail dealers, S. P.
Richards competes with many other wholesale distributors as well as with
certain manufacturers of office products.
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ELECTRICAL/ELECTRONIC MATERIALS GROUP.
The Electrical/Electronic Materials Group was formed on July 1, 1998
through the acquisition of EIS, Inc. (EIS). This Group distributes materials
to more than 20,000 electrical and electronic manufacturers in North America.
With branches in 33 locations nationwide and in Mexico, this Group distributes
over 100,000 items, from insulating and conductive materials to assembly tools
and test equipment. This Group also has three manufacturing facilities that
provide custom fabricated parts.
The Electrical/Electronic Materials Group is an important single source to
original equipment manufacturers, repair shops, the electronic assembly market,
and printed circuit board manufacturers. EIS actively utilizes its E-commerce
Internet site to present its products to customers while allowing these on-line
visitors to conveniently purchase from a large product assortment.
In 2003, the Company distributed electrical materials through EIS,
headquartered in Atlanta, Georgia. Electronic materials were distributed
through EISs operating divisions, Electronic Assembly (previously known as
Com-Kyl) and Circuit Supply. Both electrical and electronic products are
distributed from warehouse locations in major user markets throughout the U.S.
The Company has return privileges with some of its suppliers, which has
protected the Company from inventory obsolescence.
Products.
The Electrical/Electronic Materials Group distributes a wide variety
of products to customers from over 350 vendors. Products include such items as
magnet wire, copper clad laminate, conductive materials, insulating and
shielding materials, assembly tools, test equipment, adhesives and chemicals,
pressure sensitive tapes, solder, anti-static products, and thermal management
products. To meet the prompt delivery demands of its customers, this Group
maintains large inventories. The majority of sales are on open account.
Approximately 50% of 2003 total Electrical/Electronic Materials Group purchases
were made from 10 major suppliers.
Integrated Supply.
The Electrical/Electronic Materials Groups integrated
supply programs are a part of the marketing strategy, as a greater number of
customersespecially national accountsare given the opportunity to participate
in this low-cost, high-service capability. The Group developed AIMS (Advanced
Inventory Management System), a totally integrated, highly automated solution
for inventory management. The Groups Integrated Supply offering also includes
SupplyPro, an electronic vending dispenser used to eliminate costly tool crib,
or in-house stores, at customer warehouse facilities.
Segment Data.
In the year ended December 31, 2003 sales from the Companys
Electrical/Electronic Materials Group approximated 3% of the Companys sales,
as compared to 4% in 2002 and 5% in 2001.
Competition.
The Electrical/Electronic Materials Group competes with other
distributors specializing in the distribution of electrical and electronic
products, general line distributors, and, to a lesser extent, manufacturers
that sell directly to customers.
* * * * * * * * * *
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Internet Website.
The Companys internet website can be found at
www.genpt.com. The Company makes available free of charge on or through its
internet website, access to the Companys annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and amendments to those
reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after such material is filed, or furnished, to the
Securities and Exchange Commission (SEC).
Executive Officers of the Company
. The table below sets forth the name and age
of each person deemed to be an executive officer of the Company as of March 1,
2004, the position or office held by each and the period during which each has
served as such. Each executive officer is elected by the Board of Directors
and serves at the pleasure of the Board of Directors until his successor has
been elected and has qualified, or until his earlier death, resignation,
removal, retirement or disqualification.
All executive officers have been employed by and have served as officers
of the Company for at least the last five years.
Forward-Looking Statements
Statements in this report constitute forward-looking statements that are
subject to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The Company cautions that its forward-looking statements
involve risks and uncertainties. The Company undertakes no duty to update its
forward-looking statements, which reflect the Companys beliefs, expectations,
and plans as of the present. Actual results or events may differ materially
from those indicated as a result of various important factors. Such factors
include, but are not limited to, changes in general economic conditions, the
growth rate of the market for the Companys products and services, the ability
to maintain favorable supplier arrangements and relationships, competitive
product and pricing pressures, including internet related initiatives, the
effectiveness of the Companys promotional, marketing and advertising programs,
changes in laws and regulations, including changes in accounting and taxation
guidance, the uncertainties of litigation, as well as the Risk Factors set
forth below and other risks and uncertainties discussed from time to time in
the Companys filings with the SEC. Readers are
cautioned that other factors not listed here could materially impact the
Companys future earnings, financial position and cash flows. You should not
place undue reliance upon forward-looking statements contained herein, and
should carefully read other reports that the Company will, from time to time,
file with the SEC.
Risk Factors
Risks Relating to Our Company
We Depend on Our Relationships with Our Vendors.
As a distributor of automotive replacement parts, industrial parts, office
products and electrical/electronic materials, our business is dependent on
developing and maintaining close and productive relationships with our vendors.
We depend on our vendors to sell us quality products at favorable prices.
Many factors outside our control may harm these relationships. For example,
financial or operational difficulties with a vendor could cause that vendor to
increase the cost of the products we purchase from it. Vendor consolidation
could also limit the number of suppliers from which we may purchase products
and could materially affect the prices we pay for these products. Also,
consolidation among automotive parts or industrial parts and office product
suppliers could disrupt our relationship with some vendors. A disruption of
our vendor relationships or a
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disruption in our vendors operations could have a material adverse effect on
our business and results of operations.
Our Business and Results of Operations Could Be Impacted by Certain Laws.
We are subject to various federal, state, local and foreign laws and
regulations relating to the operation of our business, such as laws and
regulations relating to environmental and employment matters. If we fail to
comply with existing or future laws or regulations, we may be subject to
governmental or judicial fines or sanctions. There can be no assurance that
compliance with these laws and regulations will not have a material adverse
effect on us in the future.
Risks Relating to Our Industry
We Face Substantial Competition in the Industries in Which We Do Business.
The industries in which we do business are highly competitive. The sale of
automotive and industrial parts, office products and electronic materials is
highly competitive in many areas, including name recognition, product
availability, customer service, anticipating changing customer preferences,
store location and price. Increased price competition among distributors of
automotive and industrial parts, office products and electronic materials could
cause a material adverse effect on our results of operations.
In particular, the market for replacement automotive parts is highly
competitive and subjects us to a wide variety of competitors. We compete
primarily with national and regional auto parts chains, independently owned
automotive parts and accessories stores, automobile dealers that supply
manufacturer replacement parts and accessories, mass merchandisers and
wholesale clubs that sell automotive products, and regional and local full
service automotive repair shops. If we are unable to continue to develop
successful competitive strategies, or if our competitors develop more effective
strategies, we could lose customers and our sales and profits may decline.
Our Business May Be Materially Affected If Demand For Our Products Slows.
Our business depends on customer demand for the products that we distribute.
Demand for these products depends on many factors. With respect to our
automotive group, the primary factors are: the number of miles vehicles are
driven annually, as higher vehicle mileage increases the need for maintenance
and repair; the quality of the vehicles manufactured by the original vehicle
manufacturers and the length of the warranty or maintenance offered on new
vehicles; the number of vehicles in current service that are six years old and
older, as these vehicles are no longer under the original vehicle
manufacturers warranty and will need more maintenance and repair than newer
vehicles; restrictions on access to diagnostic tools and repair information
imposed by the original vehicle manufacturers or by governmental regulation;
and the economy generally.
Our Business May Be Impacted by General Economic Conditions and Local, National
and Global Events.
Our business and results of operations also may be impacted by general economic
conditions, conditions in local markets or other factors that we cannot
control, including: economic conditions, job growth and unemployment
conditions, industrial output and capacity and capital expenditures, reduction
in manufacturing capacity in our targeted geographic markets due to
consolidation and the transfer of manufacturing capacity to
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foreign countries, weather, terrorist acts, pricing pressures of our
competitors and customers, shortages of fuel or interruptions in transportation
systems, labor strikes, work stoppages, or other interruptions to or
difficulties in the employment of labor in the major markets where we operate,
changes in interest rates, inflation or currency exchange rates, changes in
accounting policies and practices.
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Year First
Name
Age
Position of Office
Assumed Position
Larry L. Prince
65
Chairman of the Board of Directors and
Chief Executive Officer
1990/1989
Thomas C. Gallagher
56
President and Chief Operating Officer
1990
Jerry W. Nix
58
Executive Vice President Finance *
2000
Robert J. Susor
58
Executive Vice President
2003
Edward Van Stedum
54
Senior Vice President-Human Resources
1996
*
Also serves as the Companys Principal Financial and Accounting Officer.
Table of Contents
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ITEM 2. PROPERTIES.
The Companys headquarters and Automotive Parts Group headquarters are located in two adjacent office buildings owned by the Company in Atlanta, Georgia.
The Companys Automotive Parts Group currently operates 58 NAPA Distribution Centers in the United States distributed among four geographic divisions. Approximately 90% of the distribution center properties are owned by the Company. At December 31, 2003, the Company operated approximately 900 NAPA AUTO PARTS stores located in 43 states, and the Company owned either a minority or majority interest in approximately 24 additional auto parts stores located in 4 states. Other than NAPA AUTO PARTS stores located within Company owned distribution centers, most of the automotive parts stores in which the Company has an ownership interest were operated in leased facilities. In addition, UAP operated 14 distribution centers and approximately 225 automotive parts and TRACTION stores in Canada, and Auto Todo operates 9 distribution centers and 15 stores in Mexico. The Companys Automotive Parts Group also operates four Balkamp distribution centers, five Rayloc rebuilding plants, one transfer and shipping facility, and twelve Johnson Industries distribution centers.
The Companys Industrial Parts Group, operating through Motion and Motion Canada, operates 9 distribution centers, 32 service centers and 422 branches. Approximately 90% of these branches are operated in leased facilities.
The Companys Office Products Group operates 40 facilities in the United States and 4 facilities in Canada distributed among the Groups five geographic divisions. Approximately 75% of these facilities are operated in leased buildings.
The Companys Electrical/Electronic Materials Group operates in 31 locations in the United States and 2 cities in Mexico. All of this Groups 33 facilities are operated in leased buildings except one facility, which is owned.
For additional information regarding rental expense on leased properties, see Note 6 of Notes to Consolidated Financial Statements on Page 29 of the Companys Annual Report to Shareholders for the year ended December 31, 2003.
ITEM 3. LEGAL PROCEEDINGS.
The Company is subject to various legal and governmental proceedings, many involving routine litigation incidental to the businesses, including several hundred product liability lawsuits resulting from its national distribution of automotive parts and supplies. Many of these involve claims of personal injury allegedly resulting from the use of automotive parts distributed by the Company. While litigation of any type contains an element of uncertainty, the Company believes that its defense and ultimate resolution of pending and reasonably anticipated claims will continue to occur within the ordinary course of the Companys business, and that resolution of these claims will not have a material adverse effect on the Companys operations or consolidated business and financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II.
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
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Information required by this item is set forth under the heading Market and Dividend Information on Page 11 of the Companys Annual Report to Shareholders for the year ended December 31, 2003, and under the heading Equity Compensation Plan Information on Page 12 of the definitive proxy statement for the Companys Annual Meeting to be held on April 19, 2004, and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
Information required by this item is set forth under the heading Selected Financial Data on Page 11 of the Companys Annual Report to Shareholders for the year ended December 31, 2003, and is incorporated herein by reference.
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Information required by this item is set forth under the heading Managements Discussion and Analysis of Financial Condition and Results of Operations on Pages 13 through 18 of the Companys Annual Report to Shareholders for the year ended December 31, 2003, and is incorporated herein by reference.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information related to this item is set forth under the heading Managements Discussion and Analysis of Financial Condition and Results of Operations on Pages 13 through 18 and under Note 4 Credit Facilities on Page 28 of the Companys Annual Report to Shareholders for the year ended December 31, 2003, and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information required by this item is set forth in the consolidated financial statements on Pages 12 and 20 through 33, in Report of Independent Auditors on Page 19, and under the heading Quarterly Results of Operations on Page 18, of the Companys Annual Report to Shareholders for the year ended December 31, 2003, and is incorporated herein by reference.
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES.
As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Companys management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Companys disclosure controls and procedures. Based on that evaluation, the Companys management, including the CEO and CFO, concluded that the Companys disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the Companys reports under the Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized, and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to the Companys management, including the CEO and CFO, as appropriate, to allow timely decisions regarding disclosure. There have been no significant changes in the Companys internal controls or in other factors that could significantly affect internal controls subsequent to the end of the period covered by this report.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item is set forth under the headings Nominees for Director and Members of the Board of Directors Continuing in Office on Pages 3 through 5, under the heading Corporate Governance Code of Conduct and Ethics on Page 6, under the heading Corporate Governance Board Committees on Pages 6 through 8, and under the heading Section 16(a) Beneficial Ownership Reporting Compliance on Page 27 of the definitive proxy statement for the Companys Annual Meeting to be held on April 19, 2004, and is incorporated herein by reference. Certain information required by this Item is included in and incorporated by reference to Item 1 of Part I of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this item is set forth under the heading Executive Compensation and Other Benefits on Pages 11 through 14, and under the headings Compensation, Nominating and Governance Committee Interlocks and Insider Participation and Change of Control and Employment Termination Arrangements on Pages 16 through 17 of the definitive proxy statement for the Companys Annual Meeting to be held on April 19, 2004, and is incorporated herein by reference. In no event shall the information contained in the definitive proxy statement for the Companys 2004 Annual Meeting on Pages 14 through 16 under the heading Compensation, Nominating and Governance Committee Report on Executive
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Compensation; on Pages 18 and 19 under the heading Performance Graph; or on Pages 22 through 23 under the heading Audit Committee Report be incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this item is set forth under the headings Common Stock Ownership of Certain Beneficial Owners and Common Stock Ownership of Management on Pages 8 through 11, and under the heading Executive Compensation and Other Benefits Equity Compensation Plan Information on Page 12 of the definitive proxy statement for the Companys Annual Meeting to be held on April 19, 2004, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Information required by this item is set forth under the heading Audit Fees on Page 21 of the definitive proxy statement for the Companys Annual Meeting to be held on April 19, 2004, and is incorporated herein by reference.
PART IV.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) | (1) and (2) The response to this portion of Item 15 is submitted as a separate section of this report. | ||
(b) | Reports on Form 8-K: | ||
On October 16, 2003, the Company issued a press release reporting the financial results for the quarter ended September 30, 2003. | |||
On November 17, 2003, the Company issued a press release reporting the dividend payable on January 2, 2004 and the election of a new director. | |||
(c) | Exhibits. The following Exhibits are filed as part of this report in Item 15(c): |
Exhibit 3.1 | Restated Articles of Incorporation of the Company, dated as of April 18, 1988, and as amended April 17, 1989 and amendments to the Restated Articles of Incorporation of the Company, dated as of November 20, 1989 and April 18, 1994. (Incorporated herein by reference from the Companys Annual Report on Form 10-K, dated March 3, 1995.) | |
Exhibit 3.2 | By-laws of the Company, as amended February 19, 2001. (Incorporated herein by reference from the Companys Annual Report on Form 10-K, dated March 12, 2001.) | |
Exhibit 4.1 | Shareholder Protection Rights Agreement, dated as of November 15, 1999, between the Company and SunTrust Bank, Atlanta, as Rights Agent. (Incorporated herein by reference from the Companys Report on Form 8-K, dated November 15, 1999.) | |
Exhibit 4.2 | Specimen Common Stock Certificate. (Incorporated herein by reference from the Companys Registration Statement on Form S-1, Registration No. 33-63874.) |
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Exhibit 4.3
Note Purchase Agreement, dated November 30, 2001.
(Incorporated herein by reference from the Companys Annual
Report on Form 10-K, dated March 7, 2002.)
Instruments with respect to long-term debt where the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis have not been filed. The Registrant agrees to furnish to the Commission a copy of each such instrument upon request. |
Exhibit 10.1 * | Form of Amendment to Deferred Compensation Agreement, adopted February 13, 1989, between the Company and certain executive officers of the Company. (Incorporated herein by reference from the Companys Annual Report on Form 10-K, dated March 15, 1989.) | |
Exhibit 10.2 * | Form of Agreement adopted February 13, 1989, between the Company and certain executive officers of the Company providing for a supplemental employee benefit upon a change in control of the Company. (Incorporated herein by reference from the Companys Annual Report on Form 10-K, dated March 15, 1989.) | |
Exhibit 10.3 * | 1992 Stock Option and Incentive Plan, effective April 20, 1992. (Incorporated herein by reference from the Companys Annual Meeting Proxy Statement, dated March 6, 1992.) | |
Exhibit 10.4 * | Restricted Stock Agreement dated March 31, 1994, between the Company and Larry L. Prince. (Incorporated herein by reference from the Companys Form 10-Q, dated May 6, 1994.) | |
Exhibit 10.5 * | Restricted Stock Agreement dated March 31, 1994, between the Company and Thomas C. Gallagher. (Incorporated herein by reference from the Companys Form 10-Q, dated May 6, 1994.) | |
Exhibit 10.6 * | The Genuine Parts Company Restated Tax-Deferred Savings Plan, effective January 1, 1993. (Incorporated herein by reference from the Companys Annual Report on Form 10-K, dated March 3, 1995.) | |
Exhibit 10.7 * | Genuine Parts Company Death Benefit Plan, effective July 15, 1997. (Incorporated herein by reference from the Companys Annual Report on Form 10-K, dated March 10, 1998.) | |
Exhibit 10.8 * | Genuine Parts Company 1999 Annual Incentive Bonus Plan, effective April 19, 1995. (Incorporated herein by reference from the Companys Annual Report on Form 10-K, dated March 10, 1999.) | |
Exhibit 10.9 * | Restricted Stock Agreement dated February 25, 1999, between the Company and Larry L. Prince. (Incorporated herein by reference from the Companys Form 10-Q, dated May 3, 1999.) | |
Exhibit 10.10 * | Restricted Stock Agreement dated February 25, 1999, between the Company and Thomas C. Gallagher. (Incorporated herein by reference from the Companys Form 10-Q, dated May 3, 1999.) |
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Exhibit 10.11 *
Amendment to the Genuine Parts Company 1992 Stock Option
and Incentive Plan, dated April 19, 1999, effective April
19, 1999. (Incorporated herein by reference from the
Companys Annual Report on Form 10-K, dated March 10,
2000.)
Exhibit 10.12 *
Amendment to the Genuine Parts Company Tax-Deferred
Savings Plan, dated April 19, 1999, effective April 19,
1999. (Incorporated herein by reference from the Companys
Annual Report on Form 10-K, dated March 10, 2000.)
Exhibit 10.13*
The Genuine Parts Company Original Deferred Compensation
Plan, as amended and restated as of August 19, 1996.
Exhibit 10.14 *
Amendment to the Genuine Parts Company Original Deferred
Compensation Plan, dated April 19, 1999, effective April
19, 1999. (Incorporated herein by reference from the
Companys Annual Report on Form 10-K, dated March 10,
2000.)
Exhibit 10.15*
Amendment No. 3 to the Genuine Parts Company Tax-Deferred
Savings Plan, dated November 28, 2001, effective July 1,
2001. (Incorporated herein by reference from the
Companys Annual Report on Form 10-K, dated March 7,
2002.)
Exhibit 10.16*
Trust Agreement Executed in Conjunction with the Genuine
Parts Company Supplemental Retirement Plan, dated July 1,
2001, effective July 1, 2001. (Incorporated herein by
reference from the Companys Annual Report on Form 10-K,
dated March 7, 2002.)
Exhibit 10.17*
Amendment No. 1 to the Trust Agreement Executed in
Conjunction with the Genuine Parts Company Non-Qualified
Deferred Compensation Plans, dated December 5, 2001,
effective July 1, 2001. (Incorporated herein by reference
from the Companys Annual Report on Form 10-K, dated March
7, 2002.)
Exhibit 10.18*
Genuine Parts Company 1999 Long-Term Incentive Plan, as
amended and restated as of November 19, 2001.
(Incorporated herein by reference from the Companys
Annual Report on Form 10-K, dated March 21, 2003.)
Exhibit 10.19*
Amendment to the Genuine Parts Company 1992 Stock Option
and Incentive Plan, dated November 19, 2001, effective
November 19, 2001. (Incorporated herein by reference from
the Companys Annual Report on Form 10-K, dated March 21,
2003.)
Exhibit 10.20*
Genuine Parts Company Supplemental Retirement Plan, as
amended and restated effective January 1, 2003, and
executed October 22, 2003.
Exhibit 10.21*
Amendment No. 1 to the Genuine Parts Company Supplemental
Retirement Plan, dated October 27, 2003, effective January
1, 2003.
Exhibit 10.22*
Amendment No. 4 to the Genuine Parts Company Tax-Deferred
Savings Plan, dated June 5, 2003, effective June 5, 2003.
Exhibit 10.23*
Genuine Parts Company Directors Deferred Compensation
Plan, as amended and restated effective January 1, 2003,
and executed November 11, 2003.
* | Indicates executive compensation plans and arrangements. |
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Exhibit 13 | The following sections and pages of the 2003 Annual Report to Shareholders: | |
- Selected Financial Data on Page 11 | ||
- Market and Dividend Information on Page 11 | ||
- Managements Discussion and Analysis of Financial Condition on Pages 13-18 | ||
- Quarterly Results of Operations on Page 18 | ||
- Segment Data on Page 12 | ||
- Report of Independent Auditors on Page 19 | ||
- Consolidated Financial Statements and Notes to Consolidated Financial Statements on Pages 20-33 | ||
Exhibit 21 | Subsidiaries of the Company | |
Exhibit 23 | Consent of Independent Auditors | |
Exhibit 31.1 | Certification signed by Chief Executive Officer pursuant to SEC Rule 13a-14(a). | |
Exhibit 31.2 | Certification signed by Chief Financial Officer pursuant to SEC Rule 13a-14(a). | |
Exhibit 32.1 | Statement of Chief Executive Officer of Genuine Parts Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002. | |
Exhibit 32.2 | Statement of Chief Financial Officer of Genuine Parts Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002. |
(d) Financial Statement Schedules. The response to this portion of Item 15 is submitted as a separate section of this report.
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SIGNATURES .
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
GENUINE PARTS COMPANY
/s/ Larry L. Prince | 3/8/04 | /s/ Jerry W. Nix | 3/8/04 | |||
|
|
|||||
Larry L. Prince | (Date) | Jerry W. Nix | (Date) | |||
Chairman of the Board | Executive Vice President Finance | |||||
and Chief Executive Officer | (Principal Financial and Accounting Officer) |
Pursuant to the requirements of the Securities and Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ Dr. Mary B. Bullock | 2/16/04 | /s/ Richard W. Courts II | 2/16/04 | |||
|
|
|||||
Dr. Mary B. Bullock | (Date) | Richard W. Courts II | (Date) | |||
Director | Director | |||||
/s/ Jean Douville | 2/16/04 | |||||
|
|
|||||
Jean Douville | (Date) | Robert P. Forrestal | (Date) | |||
Director | Director | |||||
/s/ Thomas C. Gallagher | 2/16/04 | /s/ John D. Johns | 2/16/04 | |||
|
|
|||||
Thomas C. Gallagher | (Date) | John D. Johns | (Date) | |||
Director | Director | |||||
President and Chief Operating Officer | ||||||
/s/ Michael M. E. Johns | 2/16/04 | /s/ J. Hicks Lanier | 2/16/04 | |||
|
|
|||||
Michael M. E. Johns | (Date) | J. Hicks Lanier | (Date) | |||
Director | Director | |||||
/s/ Wendy B. Needham | 2/16/04 | /s/ Larry L. Prince | 2/16/04 | |||
|
|
|||||
Wendy B. Needham | (Date) | Larry L. Prince | (Date) | |||
Director | Director | |||||
Chairman of the Board and Chief Executive Officer | ||||||
/s/ Lawrence G. Steiner | 2/16/04 | /s/ James B. Williams | 2/16/04 | |||
|
|
|||||
Lawrence G. Steiner | (Date) | James B. Williams | (Date) | |||
Director | Director |
Annual Report on Form 10-K
Item 15(a)(1) and (2), (c) and (d)
List of Financial Statements
Certain Exhibits
Year Ended December 31, 2003
Genuine Parts Company
Atlanta, Georgia
Form 10-K - Item 15(a)(1) and (2)
Genuine Parts Company and Subsidiaries
Index of Financial Statements
The following consolidated financial statements of Genuine Parts Company and subsidiaries, included in the annual report of the registrant to its shareholders for the year ended December 31, 2003, are incorporated by reference in Item 8:
Consolidated balance sheets - December 31, 2003 and 2002 | |||
Consolidated statements of income - Years ended December 31, 2003, 2002, and 2001 | |||
Consolidated statements of cash flows - Years ended December 31, 2003, 2002, and 2001 | |||
Notes to consolidated financial statements - December 31, 2003 |
The following consolidated financial statement schedule of Genuine Parts Company and subsidiaries is included in Item 15(d):
Schedule II Valuation and Qualifying Accounts |
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
ANNUAL REPORT ON FORM 10-K
ITEM 15(c)
LIST OF EXHIBITS
The following Exhibits are filed as a part of this Report:
10.13*
The Genuine Parts Company Original Deferred Compensation Plan, as
amended and restated as of August 19, 1996.
10.20*
Genuine Parts Company Supplemental Retirement Plan, as amended and
restated effective January 1, 2003, and executed October 22, 2003.
10.21*
Amendment No. 1 to the Genuine Parts Company Supplemental Retirement
Plan, dated October 27, 2003, effective January 1, 2003.
10.22*
Amendment No. 4 to the Genuine Parts Company Tax-Deferred Savings Plan,
dated June 5, 2003, effective June 5, 2003.
10.23*
Genuine Parts Company Directors Deferred Compensation Plan, as amended
and restated effective January 1, 2003, and executed November 11, 2003.
13
The following Sections and Pages of Annual Report to Shareholders for 2003:
- Selected Financial Data on Page 11
- Market and Dividend Information on Page 11
- Managements Discussion and Analysis of Financial Condition on Pages 13-18
- Quarterly Results of Operations on Page 18
- Segment Data on Page 12
- Report of Independent Auditors on Page 19
- Consolidated Financial Statements and Notes to Consolidated Financial Statements on Pages 20-33
21
Subsidiaries of the Company
23
Consent of Independent Auditors
31.1
Certification signed by the Chief Executive Officer pursuant to SEC Rule 13a-14(a).
31.2
Certification signed by the Chief Financial Officer pursuant to SEC Rule 13a-14(a).
32.1
Statement of Chief Executive Officer of Genuine Parts Company pursuant to
18 U.S.C. Section 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley
Act of 2002.
32.2
Statement of Chief Financial Officer of Genuine Parts Company pursuant to
18 U.S.C. Section 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley
Act of 2002.
The following Exhibits are incorporated by reference as set forth in Item 15 on pages 13-16 of this Form 10-K:
- | 3.1 | Restated Articles of Incorporation of the Company, dated April 18, 1988, and as amended April 17, 1989 and amendments to the Restated Articles of Incorporation of the Company, dated November 20, 1989 and April 18, 1994. | ||||
- | 3.2 | By-laws of the Company, as amended February 19, 2001. | ||||
- | 4.1 | Shareholder Protection Rights Agreement, dated November 15, 1999, between the Company and SunTrust Bank, Atlanta, as Rights Agent. | ||||
- | 4.2 | Specimen Common Stock Certificate. | ||||
- | 4.3 | Note Purchase Agreement dated November 30, 2001. |
Instruments with respect to long-term debt where the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis have not been filed. The Registrant agrees to furnish to the Commission a copy of each such instrument upon request.
- | 10.1* | Form of Amendment to Deferred Compensation Agreement adopted February 13, 1989, between the Company and certain executive officers of the Company. | ||
- | 10.2* | Form of Agreement adopted February 13, 1989, between the Company and certain executive officers of the Company providing for a supplemental employee benefit upon a change in control of the Company. | ||
- | 10.3* | 1992 Stock Option and Incentive Plan, effective April 20, 1992. | ||
- | 10.4* | Restricted Stock Agreement dated March 31, 1994, between the Company and Larry L. Prince. | ||
- | 10.5* | Restricted Stock Agreement dated March 31, 1994, between the Company and Thomas C. Gallagher. | ||
- | 10.6* | The Genuine Parts Company Restated Tax-Deferred Savings Plan, effective January 1, 1993. | ||
- | 10.7* | Genuine Parts Company Death Benefit Plan, effective July 15, 1997. | ||
- | 10.8* | Genuine Parts Company 1999 Annual Incentive Bonus Plan. | ||
- | 10.9* | Restricted Stock Agreement dated February 25, 1999, between the Company and Larry L. Prince. | ||
- | 10.10* | Restricted Stock Agreement dated February 25, 1999, between the Company and Thomas C. Gallagher. | ||
- | 10.11* | Amendment to the Genuine Parts Company 1992 Stock Option and Incentive Plan, dated April 19, 1999, effective April 19, 1999. | ||
- | 10.12* | Amendment to the Genuine Parts Company Tax-Deferred Savings Plan, dated April 19, 1999, effective April 19, 1999. | ||
- | 10.14* | Amendment to the Genuine Parts Company Original Deferred Compensation Plan, dated April 19, 1999, effective April 19, 1999. | ||
- | 10.15* | Amendment No. 3 to the Genuine Parts Company Tax-Deferred Savings Plan, dated November 28, 2001, effective July 1, 2001. | ||
- | 10.16* | Trust Agreement Executed in Conjunction with the Genuine Parts Company Supplemental Retirement Plan, dated July 1, 2001, effective July 1, 2001. | ||
- | 10.17* | Amendment No. 1 to the Trust Agreement Executed in Conjunction with the Genuine Parts Company Non-Qualified Deferred Compensation Plans, dated December 5, 2001, effective July 1, 2001. | ||
- | 10.18* | Genuine Parts Company 1999 Long-Term Incentive Plan, as amended and restated as of November 19, 2001. | ||
- | 10.19* | Amendment to the Genuine Parts Company 1992 Stock Option and Incentive Plan, dated November 19, 2001, effective November 19, 2001. |
* | Indicates executive compensation plans and arrangements. |
Annual Report on Form 10-K
Item 15(d)
Financial Statement Schedule II - Valuation and Qualifying Accounts
Genuine Parts Company and Subsidiaries
Balance at
Charged
Balance at
Beginning
to Costs
End
of Period
and Expenses
Deductions
of Period
$
7,370,434
$
26,515,715
$
(24,621,880)
1
$
9,264,269
$
18,300,000
3
$
(400,000)
2
$
17,900,000
$
9,264,269
$
20,856,135
$
(21,892,433)
1
$
8,227,971
$
17,900,000
$
(9,900,000)
2
$
8,000,000
$
8,227,971
$
23,783,043
$
(23,459,723)
1
$
8,551,291
$
8,000,000
$
(4,700,000)
2
$
3,300,000
1 | Uncollectible accounts written off, net of recoveries. | |
2 | Facility consolidation expenses paid. | |
3 | Facility consolidation expenses accrued |
EXHIBIT 10.13
THE GENUINE PARTS COMPANY
ORIGINAL DEFERRED COMPENSATION PLAN
(Amended and Restated Effective August 19, 1996)
ARTICLE I
ESTABLISHMENT OF PLAN
1.01 Background of Plan. Genuine Parts Company (the "Company") from
time to time has granted deferred compensation benefits for certain key
employees. Such key employees agreed to an annual reduction in their
compensation. In return, Genuine Parts Company promised such key employees a ten
year certain life annuity if such key employee continued employment until age
65. In addition, certain early retirement benefits, death benefits and
disability benefits were provided.
Genuine Parts Company believes it is beneficial to amend and restate such arrangements that are currently in effect for key employees who are actively employed in the form of this document known as the Genuine Parts Company Original Deferred Compensation Plan (the "Plan"). As a condition to receiving benefits provided under this Plan, such key employees will waive their right to benefits previously promised to them under the deferred compensation arrangements.
1.02 Status of Plan. The Plan is intended to be a non-qualified, unfunded plan of deferred compensation under the Internal Revenue Code of 1986, as amended. Also, because the only persons who may participate in this Plan are members of a select group of management or highly compensated employees, this Plan of deferred compensation is not subject to Parts 2, 3 and 4 of Subtitle B of Title I of the Employee Retirement Income Security Act of 1974.
1.03 Trust. The Company has previously established a trust to fund benefits provided under certain non-qualified deferred compensation plans sponsored by the Company ("Trust"). Genuine Parts Company intends to transfer certain assets attributable to the Plan to the Trust. It is intended that such transfer will not generate taxable income (for federal income tax purposes) to the Participants until such assets are actually distributed or otherwise made available to the Participants.
ARTICLE II
DEFINITIONS
Account. See Section 4.01.
Beneficiary. The person or persons designated by a Participant to receive the Participant's death benefits, if any, provided under this Plan. It is expressly intended that the Beneficiary designations previously made by the Participant under the Participant's deferred compensation agreement identified in Appendix A hereto shall remain in effect under this Plan. However, a Participant may execute a new beneficiary designation at any time. If any Participant shall fail to designate a Beneficiary or shall designate a Beneficiary who shall fail to survive the Participant, the Beneficiary shall be the Participant's Beneficiary under the Genuine Partnership Plan or any successor plan to the Genuine Partnership Plan.
Committee. The Executive Committee to the Board of Directors of the Company or its designee that will administer and interpret the terms of the Plan.
Company. Genuine Parts Company, its corporate successors and any of their controlled subsidiaries.
Disability. Disability shall have the same meaning as the term "disability" or "permanent disability" is defined in the Genuine Partnership Plan or any successor plan to the Genuine Partnership Plan.
Normal Retirement Age. Age 65.
Participant. Those individuals identified in Appendix A to the Plan.
Plan. The Genuine Parts Company Original Deferred Compensation Plan as set forth in this document, together with any subsequent amendments hereto.
Termination of Service. A Participant who has ceased to serve as an employee of the Company for any reason.
Trust. See Section 1.03.
Withdrawal Benefits. See Section 4.06.
ARTICLE III
PARTICIPATION
3.01 Participation. The only persons who may participate in this Plan are those Participants who are designated in Appendix A to this Plan.
ARTICLE IV
PLAN BENEFITS
4.01 Account.
(a) Salary Reduction. As a condition of participation in this Plan, each Participant has previously agreed to an annual reduction of his or her salary on a before-tax basis. The salary reduction amount shall be set forth in Appendix A. The Company shall continue to be withhold the salary reduction amount from the Participant's compensation until the earlier of the Participant's Termination of Service or the Participant's Normal Retirement Age.
(b) Account. The Committee shall credit the salary reductions referred to in Section 4.01(a) above to an account ("Account"). The Committee may direct the investment of such Account in any manner it directs including the purchase of insurance policies. Such Account and any assets attributable to such Account shall be the sole property of the Company and no Participant shall have any right to demand a distribution of assets attributable to such Account.
(c) Cessation of Salary Reductions. If a Participant ceases to make the annual salary reduction referred to in Section 4.01(a) above, the Participant shall no longer participate in this Plan and shall be treated as if he or she had a Termination of Service on the date of the Participant's failure to make the annual salary reduction.
4.02 Normal Retirement Benefit.
(a) In General. A Participant who has a Termination of Service on or after attaining Normal Retirement Age is entitled to a normal retirement benefit. The normal retirement benefit shall be paid in the form of a ten year certain life annuity. The ten year certain life annuity shall provide a monthly benefit to the Participant for the remainder of his or her life. If the Participant dies before 120 monthly payments have been paid, the unpaid monthly payments (not to exceed 120 monthly payments, including those monthly payments previously paid to the Participant) shall be paid to the Participant's Beneficiary.
(b) Ten Year Certain Life Annuity. The amount of the ten year certain life annuity shall be computed as follows. The Committee shall select an insurance company of its choosing. The Committee shall request the insurance company to compute the monthly amount that would be paid to the Participant in the form of a ten year certain life annuity based on the asset value held in the Participant's Account as of Participant's Normal Retirement Age (or such later date selected by the Committee in its sole discretion) and based on the insurance company's annuity tables applicable to individuals of similar age and risk categories as the Participant. The monthly amount will then be increased by 100%. Such monthly amount shall then be paid to the Participant in the form of a ten year certain life annuity as described above. The first such payment shall
commence on the first business day of the second calendar year following the calendar year in which the Participant attained age 65.
(c) Guaranteed Normal Retirement Benefit. In no event shall the Participant's monthly normal retirement benefit described above be less than the amount set forth in Appendix A.
4.03 Early Retirement Benefit.
(a) In General. A Participant who has a Termination of
Service on or after attaining age 60 and after completing fifteen or more years
of "credited service" (as defined in the Genuine Parts Company Pension Plan) is
entitled to an early retirement benefit. The early retirement benefit shall be
computed in the same manner as the normal retirement benefit described in
Section 4.02 except that the insurance company shall compute the ten year
certain life annuity based on the asset value held in the Participant's Account
as of the Participant's Termination of Service (or such later date selected by
the Committee in tis sole discretion). Such amount will then be increased by
100%.
(b) Ten Year Certain Life Annuity. The early retirement benefit shall be paid in the form of a ten year certain life annuity (as described in Section 4.02(a). The first such payment shall commence on the first business day of the calendar year following the calendar year in which the Participant has a Termination of Service.
(c) Other Terminations of Service. A Participant who has a Termination of Service prior to attaining age 60 or prior to completing fifteen years of credited service shall not be entitled to an early retirement benefit under this Section 4.03. Instead, such Participant shall be entitled only to the applicable benefit, if any, described in Sections 4.04, 4.05 or 4.06.
4.04 Death Benefits.
(a) Death Before Attaining Normal Retirement Age. If the Participant has a Termination of Service on account of Death before attaining his or her Normal Retirement Age, the Company will pay to the Participant's Beneficiary the monthly amount set forth in Appendix A. Such benefit shall be paid for 120 months beginning with the first business day of the calendar year following the calendar year of the Participant's death.
(b) Death Following Normal Retirement Age. If the Participant has a Termination of Service on or after his Normal Retirement Age but subsequently dies before receiving 120 monthly benefits, the Participant's Beneficiary shall receive the
unpaid monthly benefits, if any, described in Section 4.02(a) (but not to exceed 120 months including those payments previously paid to the Participant).
4.05 Disability Benefits.
(a) In General. If a Participant has a Termination of Service on account of Disability, the Participant shall be entitled to receive the monthly benefit set forth in Appendix A until the Participant attains age 65. Such disability benefits will begin on the first business day of the calendar year following the calendar year in which the Participant incurred the Termination of Service on account of Disability.
(b) Benefit Upon Attaining Age 65. Upon attaining Normal Retirement Age, the Participant's disability benefit shall terminate. In lieu thereof, the Participant shall be entitled to the normal retirement benefit described in Section 4.02, subject to the terms of Section 4.02.
(c) Death Prior to Attainment of Age 65. If a Participant dies before attaining his or her Normal Retirement Age, the Participant's Beneficiary shall be entitled to the benefit described in Section 4.04(a), subject to the terms of Section 4.04(a).
4.06 Withdrawal Benefit. In the event a Participant has a Termination of Service prior to his or her Normal Retirement Age, death or Disability, the Company will pay to the Participant a Withdrawal Benefit ("Withdrawal Benefit") in the amount and for the time set forth in Appendix A. Such annual payment will commence on the first business day of the calendar year following the calendar year in which the Participant has a Termination of Service. If the Participant dies before receiving all of the Withdrawal benefits described in Appendix A, the Participant's Beneficiary shall continue to receive the remaining payments in annual installments.
ARTICLE V
FUNDING OF PLAN
5.01 The benefits provided by this Plan shall be paid from the general assets of the Company or as otherwise directed by the Company. To the extent that any Participant acquires the right to receive payments under the Plan (from whatever source), such right shall be no greater than that of an unsecured general creditor of the Company. Participants and their Beneficiaries shall not have any preference or security interest in the assets of the Company other than as a general unsecured creditor. ARTICLE 6 ADMINISTRATION OF THE PLAN 6.01 The Committee shall have complete control of the administration of the Plan with all powers necessary to enable it to properly carry out the provisions of the Plan. - 5 - |
In addition to all implied powers and responsibilities necessary to carry out the objectives of the Plan, the Committee shall have the following specific powers and responsibilities: (1) To construe the Plan and to determine all questions arising in the administration, interpretation and operation of the Plan; (2) To determine the benefits of the Plan to which any Participant, Beneficiary or other person may be entitled; (3) To keep records of all acts and determinations of the Committee, and to keep all such records, books of accounts, data and other documents as may be necessary for the proper administration of the Plan; (4) To prepare and distribute to all Participants and Beneficiaries information concerning the Plan and their rights under the Plan; (5) To do all things necessary to operate and administer the Plan in accordance with its provisions. ARTICLE 7 AMENDMENT AND TERMINATION 7.01 The Committee reserves the right to modify, alter, amend, or terminate the Plan, at any time and from time to time, without notice, to any extent deemed advisable; provided, however, that no such amendment or termination shall (without the written consent of the Participant, if living, and if not, the Participant's Beneficiary) adversely affect any benefit under the Plan which has accrued with respect to the Participant or Beneficiary as of the date of such amendment or termination regardless of whether such benefit is in pay status. Notwithstanding the foregoing, no amendment, modification, alteration, or termination of this Plan may be given effect with respect to any Participant without the consent of such Participant if such amendment, modification, alteration, or termination is adopted during the six-month period prior to a Change of Control or at any time following a Change of Control. ARTICLE 8 CHANGE IN CONTROL 8.01 Change of Control. (a) Notwithstanding any other provisions in this Plan, in the event there is a Change of Control of the Company as defined in subsection (c) of this Section 8.01, any Participant whose employment is terminated on account of such Change of Control, shall receive an immediate lump sum payment - 6 - |
of the Participant's Account balance computed as if the Participant obtained his or her Normal Retirement Age as of the date of such termination of employment and using the assumptions set forth in Section 8.01(b). For purposes of this Section 8.01(a), a Participant's employment shall be considered to have "terminated on account of such Change of Control" only if the Participant's employment with the Employer is terminated without cause during the 24 month period following the Change of Control. (b) Notwithstanding any other provisions in this Plan, in the event there is a change of control of the Company as defined in subsection (c) of this Section 8.01, any Participant who has commenced receiving monthly distributions from the Company (other than from an annuity contract owned by the Participant or the Trust and purchased from an insurance company) shall immediately receive a lump sum payment determined using the same assumptions as those used by the Genuine Parts Company Pension Plan immediately prior to the Change in Control to determine lump sum benefits. (c) A Change of Control of the Company shall mean a change of control of a nature that would require to be reported in response to item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"). In addition, whether or not required to be reported thereunder, a Change of Control shall be deemed to have occurred at such time as (i) any "person" (as that term is used in Section 13(d)(2) of the Exchange Act) is or becomes the beneficial owner (as defined in rule 13(d)-3 of the Exchange Act) directly or indirectly of securities representing 20% or more of the combined voting power for election of directors of the then outstanding securities of the Company or any successor of the Company (ii) during any period of two consecutive years or less individuals who at the beginning of such period constituted the board of directors of the Company cease, for any reason, to constitute at least a majority of the board of directors, unless the election or nomination for election of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; (iii) the shareholders of the Company approve any merger or consolidation as a result of which the capital stock of the Company shall be changed, converted or exchanged (other than a merger with a wholly-owned subsidiary of the Company) or any liquidation of the Company or any sales or other disposition of 50% or more of the assets or earning power of the Company; or (iv) the shareholders of the Company approve any merger or consolidation to which the Company is a party as a result of which the persons who were shareholders of the Company immediately prior to the effective date of the merger or consolidation shall have beneficial ownership of less than 50% of the combined voting power - 7 - |
for election of directors of the surviving corporation following the effective date of such merger or consolidation. Notwithstanding any provisions in this subparagraph (c), in the event the Company and a Participant agree prior to any event which would otherwise constitute a Change of control, that such event shall not constitute a Change of Control, then for purposes of this Plan there shall be no such Change of Control upon that event. ARTICLE 9 MISCELLANEOUS 9.01 Headings. The headings and sub-headings in this Plan have been inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof. 9.02 Spendthrift Clause. None of the benefits, payments, proceeds or distribution under this Plan shall be subject to the claim of any creditor of any Participant or Beneficiary, or to any legal process by any creditor of such Participant or Beneficiary, and none of them shall have any right to alienate, commute, anticipate or assign any of the benefits, payments, proceeds or distributions under this Plan except to the extent expressly provided herein to the contrary. 9.03 Merger. The Plan shall not be automatically terminated by the Company's acquisition by, merger into, or sale of substantially all of its assets to any other organization, but the Plan shall be continued thereafter by such successor organization. All rights to amend, modify, suspend or terminate the Plan shall be transferred to the successor organization, effective as of the date of the combination or sale. However, See Article 7 for amendment and termination rights following a Change in Control (as defined in Article 8). 9.04 Release. Any payment to Participant or Beneficiary, or to their legal representatives, in accordance with the provisions of this Plan, shall to the extent thereof be in full satisfaction of all claims hereunder against the Committee and the Company, any of whom may require such Participant, Beneficiary, or legal representative, as a condition precedent to such payment, to execute a receipt and release therefor in such form as shall be determined by the Committee, or the Company, as the case may be. 9.05 Governing Law. The Plan shall be governed by the laws of the State of Georgia. 9.06 Costs of Collection; Interest. In the event the Participant collects any part or all of the payments due under this Plan by or through a lawyer or lawyers, the Company will pay all costs of collection, including reasonable legal fees incurred by the Participant. In addition, the Company shall pay to the Participant interest on all or - 8 - |
any part of the payments that are not paid when due at a rate equal to the Prime Rate as announced by Trust Company Bank or its successors from time to time. 9.07 Successors and Assigns. This Plan shall be binding upon the successors and assigns of the parties hereto. 9.08 Noncompetition Agreement. The Participant agrees that the time any payments or benefits may be due or payable under this Plan, the Participant will not engage in any business which is competitive to the Company, directly or indirectly, as principal, partner, stockholder or otherwise. If a Participant violates this provision, the Participant and his or her Beneficiary will forfeit all rights to receive any payment under this Plan other than the benefits described in Section 4.06, if any, that may apply. 9.09 Employment. Under no circumstances shall the Participant's participation in this Plan be deemed to be a contract of employment, nor shall it obligate the Company to continue the Participant's employment for any period nor obligate the Participant to extend similar benefits to any other employee of the Company. 9.10 Nonassignability. No benefits payable under this Plan may be assigned, transferred, encumbered or subject to any legal process for the payment of any claim against the Participant or Beneficiary. 9.11 Prior Agreement. The Participants previously entered into agreements, understandings, etc. ("Prior Agreements") regarding the provision of benefits described in this Plan. The execution of this Plan is intended to supersede and replace the benefits provided under the Prior Agreements. To the extent benefits are paid under the Prior Agreements by error or for any other reason, benefits under the Plan shall be correspondingly decreased. The intent of this Section 9.11 is to prevent a Participant from receiving a double benefit. GENUINE PARTS COMPANY By: /s/ Frank M. Howard ---------------------------------------- Title: Vice President Date: August 19, 1996 |
APPENDIX A
INFORMATION FOR
John E. Aderhold
ANNUAL SALARY GUARANTEED ANNUAL MONTHLY DEATH DATE OF DEFERRED REDUCTION BENEFIT UNDER SECTION BENEFIT UNDER COMPENSATION AGREEMENT SEE SECTION 4.01 4.02(c) SECTION 4.04(a) -------------------------------------------------------------------------------------------- 2/13/68 $5,580 $12,000 $1,000 -------------------------------------------------------------------------------------------- 4/9/70 $1,698 $ 3,000 $ 250 -------------------------------------------------------------------------------------------- 5/16/72 $1,966 $ 3,000 $ 250 -------------------------------------------------------------------------------------------- TOTAL $9,244 $18,000 $ 1,500` -------------------------------------------------------------------------------------------- MONTHLY DISABILITY ANNUAL WITHDRAWAL DATE OF DEFERRED BENEFIT UNDER SECTION BENEFIT COMPENSATION AGREEMENT 4.05 SEE SECTION 4.06 PERIOD OF WITHDRAWAL PAYMENTS ---------------------------------------------------------------------------------------------------------- 2/13/68 $ 1,000 $5,305 The number of full calendar years between 2/13/68 and the Participant's Termination of Service. ---------------------------------------------------------------------------------------------------------- 4/9/70 $ 250 $1,620 The number of full calendar years between 4/9/70 and the Participant's Termination of Service. ---------------------------------------------------------------------------------------------------------- 5/16/72 $ 250 $1,887 The number of full calendar years between 5/16/72 and the Participant's Termination of Service. ---------------------------------------------------------------------------------------------------------- TOTAL $ 1,500 N/A ---------------------------------------------------------------------------------------------------------- |
EXHIBIT 10.20
THE GENUINE PARTS COMPANY
SUPPLEMENTAL RETIREMENT PLAN
(AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 2003)
ARTICLE ONE - INTRODUCTION
1.01 Establishment of Plan. The Board of Directors of Genuine Parts Company ("Genuine Parts") has determined that it is in the best interest of Genuine Parts and its subsidiaries (collectively the "Employer") to establish a nonqualified supplemental retirement plan for certain executives of the Employer. Accordingly, the Board established The Genuine Parts Company Supplemental Retirement Plan effective as of January 1, 1991 (the "Plan"). Effective as of January 1, 2003, the Plan is continued in an amended and restated form as set forth in this document. This Plan is intended to be a plan maintained by the Employer solely for the purpose of providing benefits for certain employees in excess of the limitations on benefits imposed by Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986 (the "Code") and is also intended to be a plan that is unfunded and is maintained by Genuine Parts for the purpose of providing deferred compensation for a select group of management or highly compensated employees (hereinafter "Key Employees"). 1.02 Incorporation of Pension Plan. The terms of the Genuine Parts Company Pension Plan, as amended and restated effective January 1, 2001 (the "Pension Plan") are hereby incorporated in this Plan by reference. Unless otherwise indicated herein, the provisions of any future amendments to the Pension Plan shall also be incorporated in this Plan by reference. Unless indicated otherwise, capitalized terms used in this Plan shall have the meaning given those terms in the Pension Plan. ARTICLE TWO - PARTICIPATION 2.01 Eligibility. Except as provided in Section 2.02, any employee of the Employer ("Key Employee") whose annual, regular Earnings are expected to be equal to or greater than the compensation limits of Code Section 401(a)(17) ($200,000 in 2003) shall participate in this Plan. Upon becoming eligible to participate, a Key Employee must complete and execute a Joinder Agreement in a form satisfactory to the Pension and Benefits Committee of Genuine Parts Company (the "Committee"). Even though a Key Employee may be a Participant in this Plan, he shall not be entitled to any benefit hereunder unless |
and until his benefits under the Pension Plan are reduced due to the application of either Section 401(a)(17) or Section 415 of the Code. 2.02 Additional Rules on Eligibility. (a) The Committee may increase the Earnings limitation (see Section 2.01) that a Key Employee must receive to become eligible to continue or commence his or her participation in the Plan. (b) A Key Employee shall not accrue a benefit for any year in which the Key Employee's annual, regular Earnings is expected to be less than the compensation limits of Code Section 401(a)(17) or, if greater, the Earnings limit established by the Committee pursuant to paragraph (a) above. Nevertheless, the Key Employee shall continue to participate in the Plan and shall again accrue a benefit under this Plan during the calendar year in which the Key Employee's Earnings exceed the Earnings limit established in Section 2.01 or 2.02(a), whichever is greater. (c) The Committee may prohibit any Key Employee from participating in the Plan during a calendar year and subsequent calendar years by notifying such Key Employee during the first calendar year that his or her participation shall cease under the Plan. 2.03 Definition of Earnings. For purposes of this Plan, the term "Earnings" shall (except as modified below) have the same meaning given such term in the Pension Plan. Unlike the Pension Plan, however, Earnings shall include salary, bonus or other compensation that the Company would otherwise have been paid to a Key Employee but for the Key Employee's election to defer the receipt of such salary, bonus or other compensation pursuant to a Company sponsored deferred compensation program ("Deferred Compensation"). A Key Employee's Deferred Compensation shall not be included in Earnings in the year such Deferred Compensation is paid to the Key Employee. ARTICLE THREE - SUPPLEMENTAL RETIREMENT INCOME 3.01 Calculation of Supplement. (a) Each Participant who terminates active employment with the Employer on or after his Normal or Delayed Retirement Date by reason of retirement or voluntary or involuntary termination shall, except as provided in Section 6.05, be entitled to a monthly supplemental retirement income ("Supplemental Retirement Income") equal to (1) minus (2), where |
(1) equals the monthly Normal or Delayed Retirement Income which Participant would be entitled to receive under the Pension Plan beginning on the Benefit Commencement Date (as defined in Section 3.02) if the benefit limitations of Code Sections 401(a)(17) and 415 as reflected in the Pension Plan were not in effect (measured in the form of a single life annuity payable in monthly installments for the Participant's life) and if the definition of Earnings under this Plan were used to compute the Participant's Normal or Delayed Retirement Income under the Pension Plan;
(2) equals the monthly Normal or Delayed Retirement Income which Participant is actually entitled to receive under the Pension Plan beginning on the Benefit Commencement Date measured in the form of a single life annuity payable in monthly installments for the Participant's life.
(b) Each Participant who terminates active employment with the Employer on or after his Early Retirement Date by reason of early retirement or voluntary or involuntary termination shall, except as provided in Section 6.05, be entitled to a monthly Supplemental Retirement Income equal to (1) minus (2), where
(1) equals the monthly Early Retirement Income which Participant would be entitled to receive under the Pension Plan beginning on the Benefit Commencement Date (as defined in Section 3.02) if the benefit limitations of Code Sections 401(a)(17) and 415 as reflected in the Pension Plan were not in effect (measured in the form of a single life annuity payable in monthly installments for the Participant's life) and if the definition of Earnings under this Plan were used to compute the Participant's Early Retirement Income under the Pension Plan;
(2) equals the monthly Early Retirement Income which Participant is actually entitled to receive under the Pension Plan beginning on the Benefit Commencement Date measured in the form of a single life annuity payable in monthly installments for the Participant's life.
(3) The Participant's benefit in (1) and (2) above shall be reduced by the early retirement reduction factors set forth in the Pension Plan (e.g., see Section 4.02) regardless of whether the Participant is entitled to an increased benefit under the Pension Plan by reason of terminating employment pursuant to an early retirement window.
(c) Except as provided in Section 5.01, no payment of any kind shall be made under this Plan to any Participant who terminates active employment with the Employer prior to his Early Retirement Date.
(d) In computing a Key Employee's benefit under this Plan, the Committee shall assume the Participant did not accrue a benefit under the Pension Plan (and did not receive any Earnings) during any calendar year in which the Key Employee did not accrue a benefit under this Plan (see Section 2.02). 3.02 Benefit Commencement Date; Manner of Payment. The Employer shall commence payment of the Supplemental Retirement Income as of the Benefit Commencement Date and such benefit shall continue on a monthly basis for the Participant's lifetime and for any period thereafter provided for under the form of benefit elected by the Participant. The Benefit Commencement Date shall mean the day that Retirement Income is deemed to commence under the Pension Plan with respect to the Participant. The Supplemental Retirement Income shall be paid in the form elected by the Participant in his Joinder Agreement. In the event that the Participant fails to elect a form of payment, then the Supplemental Retirement Income shall be paid in the form of a 50% joint and survivor annuity if the Participant has a Spouse on the Benefit Commencement Date and in the form of a Life Annuity if the Participant does not have a Spouse on the Benefit Commencement Date. If the Supplemental Retirement Income is paid in a form other than a Life Annuity, then the amount of such benefit shall be adjusted so that it is the Actuarial Equivalent of the Life Annuity described in Section 3.01. ARTICLE FOUR - PRE-RETIREMENT DEATH BENEFIT 4.01 Death of Participant Before Supplemental Income Payments Commence. |
(a) Participants Prior to January 1, 1995.
(1) This Section 4.01(a) shall apply only to Key Employees who became Participants in this Plan prior to January 1, 1995.
(2) If a Participant (married or unmarried at the time of his death) dies before Supplemental Retirement Income commences hereunder and while he remains employed by the Employer, then the Participant's Beneficiary shall be entitled to receive a survivor benefit which is the Actuarial Equivalent of the Participant's Supplemental Retirement Income accrued to the date of his death under Section 3.01. For such purpose, the Participant's Beneficiary shall be the same as his or her Beneficiary designated under the Pension Plan.
(b) Participants On or After January 1, 1995.
(1) This Section 4.01(b) shall apply only to Key Employees who became Participants in this Plan on or after January 1, 1995.
(2) If a Participant (married or unmarried at the time of his death) dies before Supplemental Retirement Income commences hereunder and while he remains employed by the Employer, then the Committee may, in its sole discretion, determine that a Participant's Beneficiary shall be entitled to receive a survivor benefit which is the Actuarial Equivalent of the Participant's Supplemental Retirement Income accrued to the date of his death under Section 3.01. For such purpose, the Participant's Beneficiary shall be the same as his or her Beneficiary designated under the Pension Plan. (c) Form of Survivor Benefit. For purposes of paragraphs (a) and (b) above, the survivor benefit shall be a benefit payable for the life of the Beneficiary which commences on the first day of the month following the Participant's death, and ending on the first day of the month coinciding with or immediately following the Beneficiary's death. 4.02 Death of Participant After Supplemental Retirement Income Payments Have Commenced. If a Participant dies after Supplemental Retirement Income Payments have begun hereunder, then the Participant's Contingent Annuitant (as defined in the Joinder Agreement) shall be entitled to only that death benefit, if any, which is in effect at the time of the Participants' death in accordance with the benefit option elected by the Participant. No death benefits shall be paid to the Participant's Beneficiary. ARTICLE FIVE - CHANGE OF CONTROL 5.01 Change of Control. (a) In the event there is a Change of Control of Genuine Parts (as defined in Section 5.01(d)), a Participant described below shall receive an immediate lump sum payment of the Participant's Supplemental Retirement Income in lieu of the Supplemental Retirement Income otherwise provided under this Plan. (i) A Participant who terminates employment on account of the Change of Control (as defined below) must have attained age 55 with at least fifteen (15) years of Credited Service for vesting purposes under the Pension Plan on or prior to the Participant's termination of employment of account of the Change of Control. Such Participant's lump sum benefit shall be computed as described in Section 5.01(b) below. (ii) A Participant (or his or her Beneficiary or Contingent Annuitant if the Participant is not living) who does not satisfy the conditions of - 5 - |
subparagraph (i) above but who terminated employment prior to the Change of Control and who is receiving or entitled to receive benefits under the Plan following the Change in Control shall receive a lump sum benefit computed as described in Section 5.01(c). (iii) For purposes of this Section 5.01(a), a Participant's employment shall be considered to have "terminated on account of such Change of Control" if the Participant's employment with the Employer is terminated for any reason (e.g., resignation, involuntary termination, disability, death, etc.) during the five-year period beginning on the date on which the Change in Control occurred. (b) The lump sum payment for a Participant described in Section 5.01(a)(i) shall be determined by computing the present value of the Participant's monthly Supplemental Retirement Income as of the date of the Participant's termination of employment (calculated pursuant to the formula set forth in Section 3.01(a)). The present value amount shall be determined using the Applicable Interest Rate and Applicable Mortality Table as defined in Section 4.11 of the Pension Plan (i.e., the interest rate used to compute a lump sum payout from the Pension Plan following a change in control). (c) The lump sum payment for a Participant described in Section 5.01(a)(ii) shall be determined by computing the present value of the remaining unpaid monthly Supplemental Retirement Income payments under this Plan using the Applicable Interest Rate and Applicable Mortality Table as defined in Section 4.11 of the Pension Plan (i.e., the interest rate used to compute a lump sum payout from the Pension Plan following a Change of Control) and by assuming such payments begin or continue (as the case may be) immediately following the Change of Control. (d) A Change of Control of Genuine Parts means and includes each of the following: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of 20% or more of the combined voting power of the then outstanding voting securities of Genuine Parts entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by a Person who is on May 1, 1999 the beneficial owner of 20% or more of the Outstanding Company Voting Securities, (ii) any acquisition directly from Genuine Parts, (iii) any acquisition by Genuine Parts, (iv) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Genuine Parts or any corporation controlled by Genuine - 6 - |
Parts, or (v) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this definition; or (2) Individuals who, as of May 1, 1999, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to May 1, 1999 whose election, or nomination for election by Genuine Parts' shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (3) Consummation of a reorganization, merger, consolidation or share exchange or sale or other disposition of all or substantially all of the assets of Genuine Parts (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns Genuine Parts or all or substantially all of Genuine Parts' assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Voting Securities, and (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of Genuine Parts or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (4) Approval by the shareholders of Genuine Parts of a complete liquidation or dissolution of Genuine Parts. |
ARTICLE SIX - MISCELLANEOUS
6.01 Funding. Nothing contained in this Plan and no action taken pursuant to the provisions of this Plan shall create or be construed to create a trust for the purpose of assuring funds for the payment of any amounts provided herein. The amounts provided by this Plan shall be paid from each Employer's general assets or by such other means as the Employer deems advisable. A Participant shall have no title to or beneficial interest in any assets set aside or acquired by an Employer to fund its obligations hereunder prior to its due date and to the extent a Participant acquires the right to receive a payment from the Employer under this Plan, such right shall be no greater than that of an unsecured general creditor of such Employer. 6.02 Nonassignability. No amount payable under this Plan may be assigned, transferred, encumbered or subject to any legal process for the payment of any claim against a Participant. 6.03 Costs of Collection; Interest. In any action taken in good faith relating to the enforcement of benefits under this Plan or any provision herein, the Participant (or the Beneficiary or Contingent Annuitant, as the case may be) shall be entitled to be paid any and all costs and expenses incurred by him or her in enforcing or establishing his or her rights under this Plan, including, without limitation, reasonable attorneys' fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings, but only if Participant (or Beneficiary or Contingent Annuitant) is successful on at least one material issue raised in the enforcement proceeding. In addition, the Employer shall pay to the Participant (or Beneficiary or Contingent Annuitant) interest on all or any part of the payments that are not paid when due at a rate equal to the Prime Rate as announced by Trust Company Bank or its successors from time to time. 6.04 No Right to Continued Employment. Nothing in this Plan shall be deemed to give any Participant the right to be retained in the service of the Employer or to deny the Employer any right it may have to discharge a Participant at any time. 6.05 Noncompetition, Embezzlement, Etc. (a) Notwithstanding other provisions herein to the contrary, if a Participant receiving or eligible to receive Supplemental Retirement Income under this Plan commits a material breach, as determined by the Committee, of his covenant not to compete - 8 - |
as set forth in the Joinder Agreement, then the Participant shall cease to participate in the Plan as of the date of such breach and the Employer shall have no further obligation to make Supplemental Retirement Income payments to the Participant. (b) If the Committee determines that a Participant has committed embezzlement, defalcation or any other criminal activity which is connected with his employment with the Employer, then no payments of any kind shall be made under this Plan to or for the benefit of the Participant or his Beneficiary or Contingent Annuitant. If such determination is made after the Participant (or his Beneficiary or Contingent Annuitant) has begun receiving payments hereunder, then payments shall cease immediately upon a certification by the Committee that an event has occurred which triggers loss of benefits under this section. 6.06 Governing Law. This Plan shall be governed by and construed in accordance with the laws of the State of Georgia to the extent such laws are not preempted by Federal law. 6.07 Successors and Assigns. This Plan shall be binding upon the successors and assigns of the parties hereto. 6.08 Right to Amend and Terminate. The Committee reserves the right to modify, alter, amend, or terminate the Plan, at any time and from time to time, without notice, to any extent deemed advisable; provided, however, that no such amendment or termination shall (without the written consent of the Participant, if living, and if not, the individual to whom survivor benefits are paid (i.e., either the Beneficiary or the Contingent Annuitant as the case may be)) adversely affect any benefit under the Plan which has accrued with respect to the Participant as of the date of such amendment or termination regardless of whether such benefit is vested or in pay status. Notwithstanding the foregoing, no amendment, modification, alteration, or termination of this Plan may be given effect with respect to any Participant, Beneficiary or Contingent Annuitant without the consent of such Participant (if living, and if not, the individual to whom survivor benefits are paid) if such amendment, modification, alteration, or termination is adopted during the six-month period prior to a Change of Control or during the two-year period following a Change of Control. - 9 - |
IN WITNESS WHEREOF, Genuine Parts Company has caused this Plan to be |
signed by its duly authorized officer on the date shown below, but effective as of January 1, 2003.
GENUINE PARTS COMPANY
By: /s/ Frank M. Howard --------------------------- Title: Vice President Date: October 22, 2003 Attest: /s/ Linda Olvey ---------------------------- Date: October 22, 2003 |
JOINDER AGREEMENT TO THE GENUINE PARTS COMPANY
SUPPLEMENTAL RETIREMENT PLAN
THIS AGREEMENT, made and entered into this ____ day of _______________, 20____ by and between Genuine Parts Company ("Genuine Parts"), and __________________________ (the "Executive").
W I T N E S S E T H:
WHEREAS, effective as of January 1, 1991, Genuine Parts Company adopted the Genuine Parts Company Supplement Retirement Plan (the "Plan"); and
WHEREAS, the Pension and Benefits Committee of Genuine Parts Company (the "Committee") has amended the Plan from time to time, and the Plan was most recently amended and restated effective as of January 1, 2003; and
WHEREAS, pursuant to Article Two of the Plan, Executive is eligible to participate in the Plan; and
WHEREAS, the Executive wishes to participate in the Plan pursuant to the terms and conditions of the Plan and this Joinder Agreement;
NOW, THEREFORE, in consideration of the premises contained herein and other good and valuable consideration receipt and sufficiency of which is hereby acknowledged, it is agreed as follows:
1. Incorporation of the Plan. This Agreement shall be construed in a manner consistent with the terms and conditions set forth in the Plan. Any and all terms used in this Agreement shall have the same meaning as defined in the Plan.
2. Payments Contingent on Normal Retirement. Executive acknowledges and agrees that the Supplemental Retirement Income will be paid only if the Executive terminates employment with Genuine Parts on or after the Executive's Normal Retirement Date (age 65). For example, the Supplemental Retirement Income will not be paid if the Executive (absent a change in control) terminates employment prior to his or her Normal Retirement Date even though the Executive is eligible for Early Retirement.
3. Noncompetition. Executive acknowledges and agrees that the receipt of Supplemental Retirement Income under the Plan is subject to and contingent upon his or her refraining from becoming associated with or engaging in or rendering services with any business that is in competition with Genuine Parts or any of its subsidiaries. Executive shall not, without Genuine Parts' prior written consent, directly or indirectly, alone or as a partner, officer, director, manager or shareholder of any company or business organization, engage in any business activity which is directly or indirectly in competition with any of the types of products or services
provided or sold by Genuine Parts or any of its subsidiaries at the date this Plan is executed. The ownership by a Participant of not more than 1% of the shares of stock of any corporation having a class of equity securities actively traded on a national securities exchange or on NASDAQ shall not be deemed to violate the prohibitions of this Section. Executive also acknowledges that he or she shall forfeit all benefits hereunder if he or she commits any act of embezzlement, defalcation, or any other criminal activity which is connected with Executive's employment with Genuine Parts.
4. Election of Form of Benefit. The Committee may, from time to time ask an Executive to complete a new Joinder Agreement. Nevertheless, the Executive must continue to select the same form of payment previously elected on his or her original Joinder Agreement.
I hereby elect that the Supplemental Retirement Income payable to me pursuant to the Plan shall be paid in the form specified below. I understand that this election is irrevocable except that I may make a new election in the event that my designated contingent annuitant does not survive to my Benefit Commencement Date:
[ ] (a) Life Annuity Option is a monthly Retirement Income payable during the Participant's lifetime, with payments ceasing upon the Participant's death.
[ ] (b) Joint and 50% Survivor Annuity is a monthly Retirement Income equal to the reduced Actuarial Equivalent of the Life Annuity Option. The Retirement Income shall be payable to the Participant for the Participant's life, and upon the Participant's death, 50% of such Retirement Income shall be payable to the Participant's Spouse for the Spouse's life. Such Retirement Income shall cease on the later of the death of the Participant or the death of the Participant's Spouse.
[ ] (c) Ten Years Certain and Life Option is a monthly Retirement Income equal to the reduced Actuarial Equivalent of the Life Annuity Option. The Retirement Income shall be payable to the Participant during the Participant's lifetime and, in the event of the Participant's death within a period of ten years after the commencement of benefits, the same monthly amount shall be payable to the Participant's Contingent Annuitant for the remainder of such ten-year period. Solely for purposes of this payment option, my contingent Annuitant is _______________________________.
[ ] (d) Joint and Last Survivor Option is a monthly Retirement Income Equal to the Reduced Actuarial Equivalent of the Life Annuity Option. The Retirement Income shall be payable to the Participant for the Participant's life, and upon the Participant's death, a designated percentage (100%, 75%, or 50%) of the Participant's Retirement Income shall be payable to the Participant's Contingent Annuitant for the Contingent Annuitant's life. Such Retirement Income shall cease on the later of the death of the Participant or the death of the Participant's Contingent Annuitant. My designated percentage is:
[ ] 100% [ ] 75% [ ] 50%
Solely for purposes of this payment option, my Contingent
Annuitant is
_____________________________________________________.
5. Amendment. This Agreement may be amended at any time by mutual consent of the parties, provided that the Executive may not make any change in Paragraph 2 of this Agreement.
6. Miscellaneous. This Agreement may be executed in any number of counterparts, each of which shall be deemed as an original, and such counterparts shall constitute one and the same instrument. The term of this Agreement shall be indefinite, but shall be subject to cancellation at any time by the mutual consent of both parties. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, Genuine Parts and the Executive have caused this Agreement to be executed on the date shown below.
GENUINE PARTS COMPANY
Attest: By: ______________________________ Title: ___________________________ ________________________ Date: ____________________________ EXECUTIVE: __________________________________ Date: ____________________________ |
EXHIBIT 10.21
AMENDMENT ONE TO THE
GENUINE PARTS COMPANY
SUPPLEMENTAL RETIREMENT PLAN
THIS AMENDMENT to The Genuine Parts Company Supplemental Retirement Plan (the "Plan") is adopted by Genuine Parts Company (the "Company"), effective as of the date set forth herein.
W I T N E S S E T H:
WHEREAS, the Company maintains the Plan, and such Plan is currently in effect; and
WHEREAS, the Company desires to amend the Plan.
NOW, THEREFORE, BE IT RESOLVED that the Plan is hereby amended as follows:
1.
Effective as of January 1, 2003, subparagraph (c) of Section 2.02 Additional Rules on Eligibility is revised to read as follows:
"(c) A Key Employee shall be notified in writing by the Committee (or its designee) during the first calendar year of his or her eligibility to participate in the Plan. Unless notified in writing by the Committee (or its designee) as described in the preceding sentence, a Key Employee shall not be eligible to participate in the Plan. Furthermore, the Committee (or its designee) may prohibit any Key Employee from participating in the Plan during any subsequent calendar year(s) following his or her eligibility to participate by notifying such Key Employee in writing that his or her participation shall cease under the Plan."
* * * * * * * * *
Except as amended herein, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, the Pension and Benefits Committee has caused this Amendment to the Plan to be executed on the date shown below, but effective as of the date indicated above.
PENSION AND BENEFITS COMMITTEE
By: /s/ Frank M. Howard --------------------------------- Name: Frank M. Howard Title: Vice President & Treasurer Date: October 27, 2003 Attest: By: /s/ Linda Olvey -------------------------------- Name: Linda Olvey Title: Assistant Date: October 27, 2003 |
EXHIBIT 10.22
AMENDMENT NUMBER FOUR TO THE
GENUINE PARTS COMPANY
TAX-DEFERRED SAVINGS PLAN
This Amendment to the Genuine Parts Company Tax-Deferred Savings Plan is adopted by Genuine Parts Company (the "Company"), effective as of the date set forth herein.
W I T N E S S E T H:
WHEREAS, the Company maintains The Genuine Parts Company Tax-Deferred Savings Plan (the "Plan"), and such Plan is currently in effect;
WHEREAS, the Company desires to amend the Plan; and
WHEREAS, pursuant to Section 7.01 of the Plan, the Company has reserved the right to amend the Plan through action of the Committee;
NOW, THEREFORE, BE IT RESOLVED that the Plan is hereby amended as follows:
1.
Section 4.03(a) is deleted in its entirety and a new Section 4.03(a) is hereby substituted in lieu thereof as follows:
"(a) Payment Election. Payment of Plan benefits shall commence on the date the Participant selects on the Election Form. Any date selected by the Participant must be at least two calendar years following the date the Bonus would ordinarily be paid. In no event, however, shall a Participant's Account commence to be distributed later than February of the calendar year following the calendar year the Participant terminates employment from Genuine Parts Company."
*************** Except as amended herein, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, the Pension and Benefits Committee has caused this Amendment to the Plan to be effective as of the date the Amendment is executed below.
PENSION AND BENEFITS COMMITTEE
By: /s/ Frank M. Howard ------------------------------ Date: June 5, 2003 Attest: /s/ Linda Olvey ------------------------------- |
EXHIBIT 10.23
GENUINE PARTS COMPANY
DIRECTORS' DEFERRED COMPENSATION PLAN
(AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 2003)
ARTICLE 1
ESTABLISHMENT OF PLAN
1.01 Background of Plan. Genuine Parts Company (the "Company") established a deferred compensation plan known as the "Genuine Parts Company Directors' Deferred Compensation Plan", effective as of November 1, 1996. Effective as of January 1, 2003, the Plan is continued in an amended and restated form. The amended and restated Plan, as set forth in this document, will be effective for Fees payable in 2003 or thereafter. 1.02 Status of Plan. The Plan is intended to be a nonqualified, unfunded plan of deferred compensation under the Internal Revenue Code of 1986, as amended. Although the plan is unfunded for tax purposes, the Company may establish a trust under Revenue Procedure 92-64 to provide benefits under the Plan. (See Section 1.03). 1.03 Establishment of Trust. As noted in Section 1.02, the Company may establish a trust to fund benefits provided under the terms of the Plan (the "Trust"). It is intended that a transfer of assets into the Trust will not generate taxable income (for federal income tax purposes) to the Participants until such assets are actually distributed or otherwise made available to the Participants. 1.04 Purpose. The purpose of the Plan is to permit Directors to defer Fees they receive from the Company and, through the Stock Account, give Directors the opportunity to further align their interests with the interests of the Company's shareholders. ARTICLE 2 DEFINITIONS 2.01 Definitions. Certain terms of the Plan have defined meanings set forth in this Article and which shall govern unless the context in which they are used clearly indicates that some other meaning is intended. Accounts. The Variable Rate Account and the Stock Account, as defined below. Beneficiary. Any person or persons designated by a Participant, in accordance with procedures established by the Committee or Plan Administrator, to receive benefits hereunder in the event of the Participant's death. If any Participant shall |
fail to designate a Beneficiary or shall designate a Beneficiary who shall fail to survive the Participant, the Beneficiary shall be the Participant's surviving spouse, or, if none, the Participant's surviving descendants (who shall take per stirpes) and if there are no surviving descendants, the Beneficiary shall be the Participant's estate. Board. The Board of Directors of the Company. Committee. The Executive Committee of the Board or its designee that will administer and interpret the terms of the Plan. Common Stock. The $1.00 par value common stock of the Company. Company. Genuine Parts Company and its corporate successors. Director. A member of the Board. Director Fees. The fees that the Company pays a Director to serve as a member of the Board other than Meeting Fees. Effective Date. The amended and restated Plan will be effective for Fees payable in 2003 or thereafter. Election Form. A form, substantially in the form attached hereto as Exhibit A, pursuant to which a Director elects to defer Fees under the Plan. Election Date. The date established by the Plan as the date by which a Participant must submit a valid Election Form to the Plan Administrator in order to participate in the Plan for a calendar year. For each calendar year, the Election Date is December 31 of the preceding calendar year; provided, however, that the Election Date for a newly eligible Participant shall be the 30th day following the date on which such individual becomes a Director. Fair Market Value. The average highest and lowest quoted selling prices of a share of Common Stock as traded on the New York Stock Exchange on a given date, or if the Common Stock was not traded on such day, then on the next preceding trading date on which the Common Stock was traded. Fees. Director Fees and Meeting Fees. Meeting Fees. The Fees that the Company pays a Director for attendance at meetings of the Board or committees of the Board. |
Participant. Any Director who is participating in the Plan.
Plan. The Genuine Parts Company Directors' Deferred Compensation Plan as set forth in this document together with any subsequent amendments hereto.
Plan Administrator. The Treasurer of the Company or such other individual(s) appointed by the Committee.
Stock Account. The account established by the Company for each Participant for Fees deferred pursuant to the Plan, the performance and value of which shall be measured by reference to the Fair Market Value of the Common Stock from time to time. The maintenance of individual Stock Accounts is for bookkeeping purposes only.
Termination of Service. A Termination of Service occurs when a Participant ceases to serve as a Director for any reason.
Transfer Form. A form, substantially in the form attached hereto as Exhibit B, pursuant to which a Director elects to transfer amounts between his Accounts.
Variable Rate Account. The account established by the Company for each Participant for Fees deferred pursuant to the Plan and which shall be credited with interest on the last day of each month (or such other day as determined by the Plan Administrator) based on the "prime rate" published in the Wall Street Journal on the last business day of such month (or on any other date for which interest is credited to the Variable Rate Account). The maintenance of individual Variable Rate Accounts is for bookkeeping purposes only.
ARTICLE 3
PARTICIPATION
3.01 Election to Participate. Each Director is automatically eligible to participate in the Plan. A Director may participate in the Plan by delivering a properly completed and signed Election Form to the Plan Administrator on or before the Election Date. The Director's participation in the Plan will be effective as of the first day of the calendar year beginning after the Plan Administrator receives the Director's Election Form, or, in the case of a newly eligible Participant, on the first day of the calendar month beginning after the Plan Administrator receives such Director's Election Form. A Participant shall not be entitled to any benefit hereunder unless such Participant has properly completed an Election Form and deferred the receipt of his or her Fees pursuant to the Plan. 3.02 Voluntary Termination of Election Form. A Participant may terminate his or her Election Form at any time. Such termination will be effective on the first day of the calendar quarter after the Participant notifies the Plan Administrator of the Participant's termination of the Election Form. If a Participant terminates his or - 3 - |
her Election Form, however, the Participant may not activate a new Election Form to defer his or her Fees for the remainder of the calendar year in which the Participant's former Election Form was terminated. However, effective as of the first day of the following calendar year or the first day of any subsequent calendar year, the Participant may deliver a new Election Form and thereby defer the receipt of any future Fees attributable to the service on the Board. Such new Election Form shall be effective only for Fees applicable to the Participant's service on the Board after the first day of the calendar year following the Plan Administrator's receipt of the Participant's new Election Form. Any Fees deferred prior to the termination of the Election Form shall remain subject to the original Election Form and the Plan. 3.03 Continuation of Election Form. Prior to the commencement of each calendar year, a Participant shall have the right, by executing and delivering to the Plan Administrator a new Election Form, to modify the dollar amount or percentage of his or her Fees which are deferred under the Plan. If the Participant fails to deliver a new Election Form prior to the commencement of the new calendar year, the Participant's Election Form in effect during the previous calendar year shall continue in effect during the new calendar year. 3.04 Automatic Termination of Election Form. A Participant's Election Form will automatically terminate at the earlier of (i) the Participant's Termination of Service, or (ii) the termination of the Plan. 3.05 No Right to Continue as a Director. Nothing contained in the Plan shall be deemed to give any Director the right to be retained as a Director of the Company. ARTICLE 4 PLAN BENEFITS 4.01 Deferred Fees. A Director may elect to defer (i) all of his or her Director Fees, (ii) all of his or her Meeting Fees, or (ii) all of his or her Director Fees and Meeting Fees to his or her Variable Rate Account and/or Stock Account in accordance with the terms of the Plan and the Election Form. A Director cannot defer only a portion of his or her Director Fees or only a portion of his or her Meeting Fees under the Plan. For bookkeeping purposes, the amount of the Fees which the Director elects to defer pursuant to the Plan shall be transferred to and held in individual Accounts. 4.02 Time of Election of Deferral. A Director who wishes to defer Fees for a calendar year must irrevocably elect to do so on or prior to the Election Date for such calendar year, by delivering a valid Election Form to the Plan Administrator. The Election Form shall indicate: (i) the Fees to be deferred; and (ii) the portion of the deferral to be credited to the Participant's Variable Rate Account and Stock - 4 - |
Account, respectively. Amounts to be deferred shall be credited to the Participant's Variable Rate Account and or Stock Account, as applicable, as of the date such Fees are otherwise payable. 4.03 Accounts. (a) Variable Rate Account. Amounts in a Participant's Variable Rate Account will be credited with interest as of the last day of each month (or such other day as determined by the Plan Administrator) based on the "prime rate" published in the Wall Street Journal on the last business day of such month (or any other date for which interest is credited to the Variable Rate Account). (b) Stock Account. Amounts in a Participant's Stock Account are invested in units based on Common Stock. Amounts deferred into a Stock Account are recorded as units of Common Stock, and fractions thereof, with one unit equating to a single share of Common Stock. Thus, the value of one unit shall be the Fair Market Value of a single share of Common Stock. The use of units is merely a bookkeeping convenience; the units are not actual shares of Common Stock. However, the trustee of the Trust may elect to purchase actual shares of Common Stock, which Common Stock, under grantor trust rules, will be treated as owned by the Company. As described below in Section 4.05, a Participant may elect to have some or all of the value of his or her Stock Account distributed in actual shares of Common Stock. The maximum number of Common Stock units that may be allocated by deferral of Fees to Stock Accounts under the Plan is 100,000. (c) Sub-Accounts. To the extent required for bookkeeping purposes, a Participant's Variable Rate Account and Stock Account will be subdivided to reflect deferred Fees on a year-by-year basis. For example, a 2003 Variable Rate Sub-Account, a 2004 Variable Rate Sub-Account, a 2003 Stock Sub-Account, a 2004 Stock Sub-Account, and so on. 4.04 Investment in the Stock Account and Transfers Between Accounts. (a) Election Into the Stock Account. If a Participant elects to defer Fees into his or her Stock Account, his or her Stock Account shall be credited, as of the date described in Section 4.02, with that number of units of Common Stock, and fractions thereof, obtained by dividing the dollar amount to be deferred into the Stock Account by the Fair Market Value of the Common Stock as of such date. (b) Transfers Between Accounts. Except as provided in the remainder of this paragraph (b), a Participant may, by delivering a valid Transfer Form to - 5 - |
the Plan Administrator, direct that all or any portion, designated as a whole dollar amount or as a number of whole units, of the existing balance of one of his or her Accounts be transferred to his or her other Account. However, a Participant may not effect "opposite way" transfers between his or her Accounts more often than once in any six-month period. A transfer shall be effective as of the next day on which the Common Stock is traded on the New York Stock Exchange following the Plan Administrator's receipt of the Transfer Form (the "Transfer Date"). (c) Transfer Into the Stock Account. If a Participant elects pursuant to Section 4.04(b) to transfer an amount from his or her Variable Rate Account to his or her Stock Account, then effective as of the election's Transfer Date, (i) his or her Stock Account shall be credited with that number of units of Common Stock, and fractions thereof, obtained by dividing the dollar amount elected to be transferred by the Fair Market Value of the Common Stock on the business day immediately preceding the election's Transfer Date; and (ii) his or her Variable Rate Account shall be reduced by the amount elected to be transferred. (d) Transfer Out of the Stock Account. If a Participant elects pursuant to Section 4.04(b) to transfer an amount from his or her Stock Account to his or her Variable Rate Account, then effective as of the election's Transfer Date, (i) his or her Variable Rate Account shall be credited with a dollar amount equal to the amount obtained by multiplying the number of units to be transferred by the Fair Market Value of the Common Stock on the business day immediately preceding the election's Transfer Date; and (ii) his or her Stock Account shall be reduced by the number of units elected to be transferred. (e) Dividend Equivalents. Effective as of the payment date for each cash dividend on the Common Stock, the Stock Account of each Participant who had a balance in his or her Stock Account on the record date for such dividend shall be credited with a number of units of Common Stock, and fractions thereof, obtained by dividing (i) the aggregate dollar amount of such cash dividend payable in respect of such Participant's Stock Account (determined by multiplying the dollar value of the dividend paid upon a single share of Common Stock by the number of units of Common Stock held in the Participant's Stock Account on the record date for such dividend); by (ii) the Fair Market Value of the Common Stock on the business day immediately preceding the payment date for such cash dividend. (f) Stock Dividends. Effective as of the payment date for each stock dividend on the Common Stock, additional units of Common Stock shall be - 6 - |
credited to the Stock Account of each Participant who had a balance in his or her Stock Account on the record date for such dividend. The number of units that shall be credited to the Stock Account of such a Participant shall equal the number of shares of Common Stock, and fractions thereof, which the Participant would have received as stock dividends had he or she been the owner on the record date for such stock dividend of the number of shares of Common Stock equal to the number of units credited to his or her Stock Account on such record date. (g) Allocation of Dividends. To the extent required for bookkeeping purposes, the allocation of additional units attributable to cash dividends or stock dividends will be made to the Stock Sub-Account holding existing units to which the cash dividend or stock dividend relates. For example, a Participant's 2003 Stock Sub-Account will be credited with dividends attributable to units held in the 2003 Stock Sub-Account. A Participant's 2004 Stock Sub-Account will be credited with dividends attributable to units held in the 2004 Stock Sub-Account, and so on. (h) Recapitalization. If, as a result of a recapitalization of the Company, the outstanding shares of Common Stock shall be changed into a greater number or smaller number of shares, the number of units credited to a Participant's Stock Account shall be appropriately adjusted on the same basis. (i) Distributions. Amounts in respect of units of Common Stock may only be distributed out of the Stock Account by transfer to the Variable Rate Account or withdrawal from the Stock Account. Withdrawals from the Stock Account shall be made either in cash or shares of Common Stock, as indicated by the Participant at least six months prior to the scheduled distribution. Any fractional units shall be paid in cash. For purposes of transfers to the Variable Rate Account or distributions from the Stock Fund payable in cash, the number of units to be transferred or distributed from a Participant's Stock Account shall be valued by multiplying the number of such units by the Fair Market Value of the Common Stock as of the business day immediately preceding the date such distribution is to occur. (j) Responsibility for Investment Choices. Each Participant is solely responsible for any decision to defer Fees into his or her Stock Account or Variable Rate Account and accepts all investment risks entailed by such decision, including the risk of loss and a decrease in the value of the amounts he or she elects to defer into his or her Stock Account or Variable Rate Account. - 7 - |
4.05 Form of Payment. (a) Payment Election. Payment of Plan benefits shall commence on the date the Participant selects on the Participant's initial Election Form. Any date selected by the Participant must be at least two calendar years following the date of the Director's initial Election Form. In no event, however, shall a Participant's Account commence to be distributed later than the first regular business day of the fourth month following the Participant's death. If the Participant fails to designate a payment commencement date in the Participant's initial Election Form or within six months of such initial Election Form, the Participant's Account shall commence to be distributed no later than the first regular business day of the fourth month following the Participant's Termination of Service. (b) Optional Forms of Payment. Distributions from Participant Accounts (either in cash or in Common Stock) may be paid to the Participant either in a lump sum or in a number of approximately equal annual installments designated by the Participant on the Participant's initial Election Form. Such annual installments may be for 5 years, 10 years or 15 years. The method of payment (e.g., in lump sum or installments) elected on the Participant's initial Election Form will apply to all amounts (including future deferrals) held in both the Variable Rate Sub-Account and Stock Sub-Account. If a Participant elects to receive a distribution of his or her Account in cash installments, the Plan Administrator may purchase an annuity from an insurance company which annuity will pay the Participant the desired annual installments. If the Plan Administrator purchases an annuity contract, the Director will have no further rights to receive payments from the Company or the Plan with respect to the amounts subject to the annuity. If the Plan Administrator does not purchase an annuity contract, the value of the Account remaining unpaid shall continue to receive allocations of return as provided in Section 4.03 and Section 4.04. If the Participant fails to designate a payment method in the Participant's initial Election Form or within six months of such initial Election Form, the Participant's Account shall be distributed in a lump sum. (c) Stock Payment. If a Participant so designates as provided in Section 4.04(i), distributions from the Stock Account may be distributed to the Participant in the form of Common Stock rather than cash. The shares of Common Stock distributable to Directors under the Plan must be previously issued and repurchased shares and may not be original issue shares. Notwithstanding the foregoing, the maximum number of shares of Common Stock that may be distributed under the Plan shall be 1,000,000, and once such limit has been reached, all further distributions from Participants' Stock Accounts shall be made only in cash. |
(d) Irrevocable Elections. A Participant may not elect a different payment commencement date for each year's Fees deferred under the Plan. In addition, a Participant may not elect a different payment form for each year's Fees deferred under the Plan. The payment commencement date and payment form elected or deemed elected on the Participant's initial Election Form shall become irrevocable and may not be modified six months after the execution of such initial Election Form. (e) Acceleration of Payment. If a Participant elects an installment distribution and the value of such annual installment payment elected by the Participant would result in a combined distribution of cash and Common Stock (valued at its Fair Market Value on the initial commencement date) of less than $3,000, the Plan Administrator shall accelerate payment of the Participant's benefits over a lesser number of whole years (but in increments of 5 or 10 years) so that the annual amount distributed is at least $3,000. If payment of the Participant's benefits over a 5-year period will not provide annual distributions of at least $3,000, the Participant's Account shall be paid in a lump sum. (f) Payment to Beneficiary. Upon the Participant's death, all unpaid amounts held in the Participant's Account shall be paid to the Participant's Beneficiary in the same benefit payment form the Participant elected on the Election Form and in accordance with the payment distribution rules set forth in the Plan. Such payment will commence to be paid on the first business day of the fourth month following the Participant's death. 4.06 Financial Hardship. The Plan Administrator may, in its sole discretion, accelerate the making of payment to a Participant of an amount reasonably necessary to handle a severe financial hardship of a sudden and unexpected nature due to causes not within the control of the Participant. Such payment may be made even if the Participant has not incurred a Termination of Service. All financial hardship distributions shall be made in cash in a lump sum. Such payments will be made on a first-in, first-out basis so that the oldest Fees deferred under the Plan shall be deemed distributed first in a financial hardship. 4.07 Payment to Minors and Incapacitated Persons. In the event that any amount is payable to a minor or to any person who, in the judgment of the Plan Administrator, is incapable of making proper disposition thereof, such payment shall be made for the benefit of such minor or such person in any of the following ways as the Plan Administrator, in its sole discretion, shall determine: (a) By payment to the legal representative of such minor or such person; |
(b) By payment directly to such minor or such person;
(c) By payment in discharge of bills incurred by or for the benefit of such minor or such person. The Plan Administrator shall make such payments without the necessary intervention of any guardian or like fiduciary, and without any obligation to require bond or to see to the further application of such payment. Any payment so made shall be in complete discharge of the Plan's obligation to the Participant and his or her Beneficiaries. 4.08 Application for Benefits. The Plan Administrator may require a Participant or Beneficiary to complete and file certain forms as a condition precedent to receiving the payment of benefits. The Plan Administrator may rely upon all such information given to it, including the Participant's current mailing address. It is the responsibility of all persons interested in receiving a distribution pursuant to the Plan to keep the Plan Administrator informed of their current mailing addresses. 4.09 Designation of Beneficiary. Each Participant from time to time may designate any person or persons (who may be designated contingently or successively and who may be an entity other than a natural person) as his or her Beneficiary or Beneficiaries to whom the Participant's Account is to be paid if the Participant dies before receipt of all such benefits. Each Beneficiary designation shall be on the form prescribed by the Plan Administrator and will be effective only when filed with the Plan Administrator during the Participant's lifetime. Each Beneficiary designation filed with the Plan Administrator will cancel all Beneficiary designations previously filed with the Plan Administrator. The revocation of a Beneficiary designation, no matter how effected, shall not require the consent of any designated Beneficiary. ARTICLE 5 FUNDING OF PLAN 5.01 Funding. Plan benefits shall be paid from the general assets of the Company or as otherwise directed by the Company. To the extent that any Participant acquires the right to receive payments under the Plan (from whatever source), such right shall be no greater than that of an unsecured general creditor of the Company. Participants and their Beneficiaries shall not have any preference or security interest in the assets of the Company other than as a general unsecured creditor. ARTICLE 6 ADMINISTRATION OF THE PLAN 6.01 Administration of the Plan. The Committee and the Plan Administrator shall have complete control of the administration of the Plan with all powers necessary to enable it to properly carry out the provisions of the Plan. In addition to all - 10 - |
implied powers and responsibilities necessary to carry out the objectives of the Plan, the Committee and the Plan Administrator shall have the following specific powers and responsibilities: (a) To construe the Plan and to determine all questions arising in the administration, interpretation and operation of the Plan; (b) To determine the benefits of the Plan to which any Participant, Beneficiary or other person may be entitled; (c) To keep records of all acts and determinations of the Committee and Plan Administrator, and to keep all such records, books of accounts, data and other documents as may be necessary for the proper administration of the Plan; (d) To prepare and distribute to all Participants and Beneficiaries information concerning the Plan and their rights under the Plan; and (e) To do all things necessary to operate and administer the Plan in accordance with its provisions. ARTICLE 7 AMENDMENT AND TERMINATION 7.01 Amendment and Termination. The Committee reserves the right to modify, alter, amend, or terminate the Plan, at any time and from time to time, without notice, to any extent deemed advisable; provided, however, that no such amendment or termination shall (without the written consent of the Participant, if living, and if not, the Participant's Beneficiary) adversely affect any benefit under the Plan which has accrued with respect to the Participant or Beneficiary as of the date of such amendment or termination regardless of whether such benefit is in pay status. Notwithstanding the foregoing, no amendment (other than an amendment to increase the number of Common Stock units available under the Plan -- see Section 4.03(b)), modification, alteration, or termination of the Plan may be given effect with respect to any Participant without the consent of such Participant if such amendment, modification, alteration, or termination is adopted during the six-month period prior to a Change of Control or during the two-year period following a Change of Control. |
ARTICLE 8
CHANGE IN CONTROL
8.01 Immediate Payment upon Change of Control. Notwithstanding any other provisions in the Plan, in the event there is a Change of Control of the Company as defined in Section 8.01(c), any Participant whose service is terminated on account of such Change of Control shall receive an immediate lump sum payment of the Participant's Account balances. For purposes of this Section 8.01(a), a Participant's service shall be considered to have "terminated on account of such Change of Control" only if the Participant's service on the Board is terminated without cause during the 24-month period following the Change of Control. 8.02 Acceleration of Installment Distributions. Notwithstanding any other provisions in the Plan, in the event there is a Change of Control as defined in Section 8.01(c), any Participant who has commenced receiving installment distributions from the Company (other than from an annuity contract purchased from an insurance company) shall immediately receive a lump sum payment in an amount equal to the unpaid balance of the Participant's Accounts. 8.03 Definition of Change of Control. Change of Control of the Company means and includes each of the following: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of 20% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by a Person who is on May 1, 1999 the beneficial owner of 20% or more of the Outstanding Company Voting Securities, (ii) any acquisition directly from the Company, (iii) any acquisition by the Company, (iv) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (v) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this definition; or (b) Individuals who, as of May 1, 1999, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to May 1, 1999 whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors - 12 - |
then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger, consolidation or share exchange or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Voting Securities, and (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. |
ARTICLE 9
MISCELLANEOUS
9.01 Heading. The headings and sub-headings in the Plan have been inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof. 9.02 Spendthrift Clause. None of the benefits, payments, proceeds or distribution under the Plan shall be subject to the claim of any creditor of any Participant or Beneficiary, or to any legal process by any creditor of such Participant or Beneficiary, and none of them shall have any right to alienate, commute, anticipate or assign any of the benefits, payments, proceeds or distributions under the Plan except to the extent expressly provided herein to the contrary. 9.03 Merger. The Plan shall not be automatically terminated by the Company's acquisition by, merger into, or sale of substantially all of its assets to any other organization, but the Plan shall be continued thereafter by such successor organization. All rights to amend, modify, suspend or terminate the Plan shall be transferred to the successor organization, effective as of the date of the combination or sale. 9.04 Release. Any payment to Participant or Beneficiary, or to their legal representatives, in accordance with the provisions of the Plan, shall to the extent thereof be in full satisfaction of all claims hereunder against the Committee, the Plan Administrator and the Company, any of whom may require such Participant, Beneficiary, or legal representative, as a condition precedent to such payment, to execute a receipt and release therefor in such form as shall be determined by the Plan Administrator, the Committee, or the Company, as the case may be. 9.05 Governing Law. The Plan shall be governed by the laws of the State of Georgia. 9.06 Costs of Collection; Interest. In the event the Participant collects any part or all of the payments due under the Plan by or through a lawyer or lawyers, the Company will pay all costs of collection, including reasonable legal fees incurred by the Participant. In addition, the Company shall pay to the Participant interest on all or any part of the payments that are not paid when due at a rate equal to the Prime Rate as announced by SunTrust Bank or its successors from time to time. 9.07 Successors and Assigns. The Plan shall be binding upon the successors and assigns of the parties hereto. - 14 - |
IN WITNESS WHEREOF, the Company has caused this Plan to be duly |
executed and its seal to be hereunto affixed on the date indicated below, but effective as of January 1, 2003.
GENUINE PARTS COMPANY
By: /s/ Frank M. Howard -------------------------- Title: Vice President Date: November 11, 2003 ATTEST: |
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EXHIBIT 13
SELECTED FINANCIAL DATA
(in thousands, except per share data) Year ended December 31, 2003 2002 2001 2000 1999 -------------------------------------------------------------------------------------------------------------------------------- Net sales $ 8,449,300 $ 8,258,927 $ 8,220,668 $ 8,369,857 $ 7,950,822 Cost of goods sold 5,826,684 5,704,749 5,699,174*** 5,764,360 5,436,056 Selling, administrative and other expenses 2,050,873 1,948,442 1,951,559*** 1,958,747 1,886,699 Facility consolidation and impairment charges -- -- 73,922*** -- -- Income before taxes and accounting change 571,743 605,736 496,013 646,750 628,067 Income taxes 218,101 238,236 198,866 261,427 250,445 Income before cumulative effect of a change in accounting principle 353,642 367,500 297,147 385,323 377,622 Cumulative effect of a change in accounting principle 19,541* 395,090** -- -- -- Net income (loss) after cumulative effect of a change in accounting principle $ 334,101 $ (27,590) $ 297,147 $ 385,323 $ 377,622 Average common shares outstanding during year - assuming dilution 174,480 175,104 173,633 175,327 179,238 Per common share: Diluted net income, excluding cumulative effect $ 2.03 $ 2.10 $ 1.71*** $ 2.20 $ 2.11 Diluted net income (loss) 1.91 (0.16) 1.71 2.20 2.11 Dividends declared 1.18 1.16 1.14 1.10 1.04 December 31 closing stock price 33.20 30.80 36.70 26.19 24.81 Long-term debt, less current maturities 625,108 674,796 835,580 770,581 702,417 Shareholders' equity 2,312,283 2,130,009 2,345,123 2,260,806 2,177,517 Total assets $ 4,116,497 $ 4,061,055 $ 4,206,646 $ 4,142,114 $ 3,929,672 |
* The cumulative effect of a change in accounting principle in 2003 represents a non-cash charge related to cash consideration received from vendors in conjunction with the Financial Accounting Standards Board's EITF 02-16. Had the Company accounted for vendor consideration in accordance with EITF 02-16 in prior years, there would have been no significant impact on net income (loss) and diluted income (loss) per share for the years ended December 31, 2002, 2001, 2000 and 1999. In addition, in accordance with EITF 02-16, approximately $102 million was reclassified from selling, administrative and other expenses to cost of goods sold for the year ended December 31, 2003. Had the Company accounted for consideration received from vendors in accordance with EITF 02-16 in prior years, approximately $90 million, $111 million, $82 million, and $61 million would have been reclassified from selling, administrative and other expenses to cost of goods sold for the years ended December 31, 2002, 2001, 2000 and 1999, respectively.
** The cumulative effect of a change in accounting principle in 2002 represents a non-cash charge related to the impairment testing for goodwill in conjunction with the Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets". If the Company had applied the non-amortization provisions of Statement 142 for all periods presented, net income and diluted income per common share would have increased by approximately $11.9 million ($.07 per share), $11.4 million ($.06 per share), and $10.7 million ($.06 per share) for the years ended December 31, 2001, 2000 and 1999.
*** Facility Consolidation, Impairment and Other Charges ("2001 Charges") totaled $107.8 million pre-tax in 2001 and $64.4 million after tax. The pre-tax charges include $17.4 million classified in cost of goods sold and $16.4 million classified in selling, administrative and other expenses. Diluted net income per common share before the 2001 Charges was $2.08.
MARKET AND DIVIDEND INFORMATION
High and Low Sales Price and Dividends per Share of Common Shares Traded on the New York Stock Exchange
Sales Price of Common Shares Quarter 2003 2002 ------------------------------------------ HIGH LOW High Low First $31.88 $27.43 $38.08 $33.92 Second 33.66 30.70 37.80 34.17 Third 33.45 30.03 33.63 27.64 Fourth 33.20 30.78 32.00 29.48 |
Dividends Declared Per Share 2003 2002 -------------------------------------- First $0.295 $ 0.29 Second 0.295 0.29 Third 0.295 0.29 Fourth 0.295 0.29 |
Number of Record Holders of Common Stock as of December 31, 2003: 7,719
SEGMENT DATA
(dollars in thousands) Year ended December 31, 2003 2002 2001 2000 1999 --------------------------------------------------------------------------------------------------------------------------- Net sales: Automotive $ 4,477,508 $ 4,335,362 $ 4,252,913 $ 4,163,814 $ 4,084,775 Industrial 2,253,947 2,246,124 2,234,241 2,342,686 2,156,134 Office products 1,457,149 1,396,453 1,379,859 1,336,500 1,218,367 Electrical/electronic materials 297,618 315,826 387,771 557,866 522,411 Other (36,922) (34,838) (34,116) (31,009) (30,865) ------------------------------------------------------------------------ Total net sales $ 8,449,300 $ 8,258,927 $ 8,220,668 $ 8,369,857 $ 7,950,822 ======================================================================== Operating profit: Automotive $ 363,022 $ 381,771 $ 378,162 $ 381,250 $ 383,830 Industrial 151,109 178,027 172,208 206,193 186,203 Office products 143,263 140,912 141,762 134,343 118,345 Electrical/electronic materials 7,112 2,756 3,229 28,010 23,343 ------------------------------------------------------------------------ Total operating profit 664,506 703,466 695,361 749,796 711,721 ======================================================================== Interest expense (51,538) (59,640) (59,416) (63,496) (41,487) Corporate expense (37,121) (33,354) (27,670) (23,277) (22,283) Equity in loss from investees -- -- -- -- (3,675) Goodwill and intangible amortization (1,539) (2,421) (14,333) (13,843) (12,708) Minority interests (2,565) (2,315) (3,077) (2,430) (3,501) Facility consolidation and impairment charges -- -- (94,852) -- -- ------------------------------------------------------------------------ Income before income taxes and accounting change $ 571,743 $ 605,736 $ 496,013 $ 646,750 $ 628,067 ======================================================================== Assets: Automotive $ 2,364,428 $ 2,313,747 $ 2,219,503 $ 2,099,610 $ 2,034,417 Industrial 954,434 982,951 867,716 840,585 758,206 Office products 619,374 581,203 538,468 542,406 503,904 Electrical/electronic materials 96,727 98,225 121,721 190,635 174,258 Corporate 23,506 26,224 17,160 17,443 18,588 Goodwill and intangible assets 58,028 58,705 442,078 451,435 440,299 ------------------------------------------------------------------------ Total assets $ 4,116,497 $ 4,061,055 $ 4,206,646 $ 4,142,114 $ 3,929,672 ======================================================================== Depreciation and amortization: Automotive $ 42,681 $ 43,007 $ 45,094 $ 51,546 $ 51,563 Industrial 10,265 10,789 11,992 11,617 10,926 Office products 10,639 9,856 9,345 9,598 8,814 Electrical/electronic materials 2,729 3,422 4,009 4,391 4,173 Corporate 1,160 656 1,020 1,308 1,783 Goodwill and intangible amortization 1,539 2,421 14,333 13,843 12,708 ------------------------------------------------------------------------ Total depreciation and amortization $ 69,013 $ 70,151 $ 85,793 $ 92,303 $ 89,967 ======================================================================== Capital expenditures: Automotive $ 58,754 $ 38,599 $ 26,766 $ 35,031 $ 57,710 Industrial 6,824 10,868 6,388 20,054 11,275 Office products 7,211 13,376 5,941 9,116 16,085 Electrical/electronic materials 394 224 2,466 3,183 3,113 Corporate 721 1,691 383 3,745 100 ------------------------------------------------------------------------ Total capital expenditures $ 73,904 $ 64,758 $ 41,944 $ 71,129 $ 88,283 ======================================================================== Net sales: United States $ 7,666,389 $ 7,568,926 $ 7,526,631 $ 7,665,498 $ 7,345,707 Canada 731,200 623,686 629,330 633,715 585,504 Mexico 88,633 101,153 98,823 101,653 50,476 Other (36,922) (34,838) (34,116) (31,009) (30,865) ------------------------------------------------------------------------ Total net sales $ 8,449,300 $ 8,258,927 $ 8,220,668 $ 8,369,857 $ 7,950,822 ======================================================================== Net long-lived assets: United States $ 339,020 $ 339,495 $ 579,635 $ 618,818 $ 620,837 Canada 57,906 47,522 182,041 201,895 207,672 Mexico 4,094 4,739 25,534 25,982 25,333 ------------------------------------------------------------------------ Total net long-lived assets $ 401,020 $ 391,756 $ 787,210 $ 846,695 $ 853,842 ======================================================================== |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS December 31, 2003
OVERVIEW
Genuine Parts Company is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The Company has a long tradition of growth dating back to 1928, the year we were founded in Atlanta, Georgia. In 2003, business was conducted throughout the United States, in Canada and in Mexico from approximately 1,800 locations. We recorded consolidated net income, before the cumulative effect of changes in accounting principles, of $354 million compared to $368 million in 2002, a decrease of 4%. After the 2003 and 2002 cumulative effect of changes in accounting principles, net income was $334 million, as compared to the net loss in 2002 of $28 million. The results in all of our industry groups for each of the last three years have been affected by the slow economy with the impact being greatest for Motion Industries and EIS due to the conditions in the manufacturing sectors of the economy. The Company has countered this impact with the introduction of new product lines, sales to new markets and cost savings initiatives, among other things. During 2001, we recorded charges associated with plant closings, exiting certain business lines and determinations of impairment of certain assets. In addition, during 2002 and 2003 we recorded certain charges to earnings as a result of changes in accounting principles relating to goodwill impairment and cash consideration received from vendors. These changes have no impact on our operating results and no cash implications for us. The 2001 charges and changes in accounting principles during the prior three year period are discussed further under "Results of Operations" and "Facility Consolidation, Impairment And Other Charges." Our results are also dependent on the effect of certain accounting assumptions and estimates which are discussed under "Critical Accounting Estimates" below. The major December 31, 2003 balance sheet categories were relatively consistent with the December 31, 2002 balance sheet, and our liquidity and capital resources improved as we reduced our total debt outstanding at December 31, 2003 by approximately $114 million compared to December 31, 2002.
RESULTS OF OPERATIONS
The Company's results of operations are summarized below for the three years ended December 31, 2003, 2002 and 2001.
2003 2002 2001 Year ended December 31 (in thousands except for per share data) --------------------------------------------------------------------- Net Sales $ 8,449,300 $ 8,258,927 $ 8,220,668 Gross Profit 2,622,616 2,554,178 2,521,494 Income before Cumulative Effect of a Change in Accounting Principle 353,642 367,500 297,147 Cumulative Effect of a Change in Accounting Principle (19,541) (395,090) -- Net Income (Loss) 334,101 (27,590) 297,147 Diluted Earnings (Loss) per share: Before Change in Accounting Principle 2.03 2.10 1.71 After Change in Accounting Principle 1.91 (.16) 1.71 |
NET SALES
Net sales for the year ended December 31, 2003, totaled $8.45 billion, a 2% increase from 2002. All industry groups were affected to some degree by competitive pressures associated with the difficult economic climate in our markets for most of the year. The impact of these conditions was the greatest for the Industrial and Electrical Groups due to our dependence on the manufacturing sectors of the economy in these segments. Prices were down slightly in the Automotive and Electrical segments in 2003, while pricing in the Industrial and Office segments increased 2% and .6%, respectively, during 2003. Net sales for the year ended December 31, 2002, totaled $8.26 billion, which was a slight increase from 2001. The economy was challenging for us in 2002, so it was significant for the Company to achieve at least some sales growth. In 2002, prices were down slightly in the Automotive and Electrical segments, while pricing in the Industrial and Office segments increased 2% and .7%, respectively.
AUTOMOTIVE GROUP
Sales for the Automotive Group ("Automotive") were $4.5 billion in 2003, an increase of 3% over 2002. Automotive sales were $4.3 billion in 2002, an increase of 2% over 2001. Automotive revenues have been relatively consistent in the past three years, up 2% in 2001 and with comparative quarterly increases each quarter in 2002 and 2003. In the 4th quarter of 2003, Automotive sales were stronger than the previous quarters in 2003, up 6%.
INDUSTRIAL GROUP
Sales for Motion Industries, our Industrial Group ("Industrial"), were $2.3 billion in 2003, a slight increase over the previous year. Industrial sales were $2.2 billion in 2002, a slight increase over 2001. As noted above, the weak conditions in the markets served by Industrial have affected our sales growth in this segment over the last three years. Fortunately, industrial production and factory utilization numbers used to measure these markets are beginning to show some improving trends.
OFFICE GROUP
Sales for S.P. Richards, our Office Products Group ("Office"), were $1.5 billion, up 4% over 2002. Our Office sales were $1.4 billion in 2002, up 1% over 2001. Office has continued to expand their product offerings to generate sales growth. In addition, strong sales of computer supplies and accessories supported their growth in 2003.
ELECTRICAL GROUP
Sales for EIS, our Electrical and Electronic Group ("Electrical"), were down 6% to $298 million in 2003. Our Electrical sales were down 19% to $316 million in 2002. As noted above, the decrease in sales in the Electrical Group can be generally attributed to the Group's dependence on the manufacturing sector of the economy. In addition, conditions in the telecommunications industry have resulted in weaker sales in recent years. The sales trends in 2003 reflected an improving trend for Electrical, and sales in the 4th quarter were slightly greater than in 2002.
COST OF GOODS SOLD/EXPENSES
Cost of goods sold in 2003 was 69.0% of net sales compared to 69.1% in 2002. Selling, administrative, and other expenses of
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
$2.1 billion were 24.3% of sales compared to 23.6% last year. The decrease in cost of goods sold and the increase in expenses reflect our reclassification of certain vendor consideration associated with the adoption of EITF 02-16, as defined below. Before the reclassification, cost of goods sold in 2003 was 70.2% of sales and SG&A expenses were 23.1% of sales. The comparable increase in cost of goods sold was due to lower levels of vendor discounts and volume incentives related to purchases, overall competitive pricing pressures and product and customer mix. The comparable decrease in SG&A expenses reflect our on-going cost savings initiatives, such as tight operating expense controls and facility consolidations.
Effective January 1, 2003, the Company was required to adopt the Financial Accounting Standards Board Emerging Issues Task Force's Issue No. 02-16, related to the accounting treatment of cash consideration received from vendors ("EITF 02-16"). This encompasses certain advertising and promotional allowances, catalog support and other cash support arrangements that normally exist among retailers and distributors with their vendors. The Company historically classified certain vendor monies received, primarily advertising related, as a component of selling, administrative, and other expenses. Under the new EITF 02-16, these vendor monies generally must be classified as cost of goods sold and a portion of the amounts must be capitalized into ending inventory. In connection with the adoption of EITF 02-16, the Company recorded a cumulative effect adjustment of approximately $19.5 million. In addition, as a result of the January 1, 2003 adoption of EITF 02-16, approximately $102.2 million was reclassified from selling, administrative and other expenses to cost of goods sold in the consolidated statement of income for the year ended December 31, 2003. Under EITF 02-16, prior periods were not reclassified.
Cost of goods sold was 69.1% of net sales in 2002 as compared to 69.3% in 2001. The decrease can be attributed to more efficient supply chain costs and inventory mix. Selling, administrative, and other expenses of $1.9 billion were flat as compared to 2001, and slightly down from the previous year as a percentage of sales.
OPERATING PROFIT
Operating profit as a percentage of sales was 7.9% for 2003 compared to 8.5% in 2002. These results reflect our decrease in gross margins before the reclassification of vendor consideration as discussed above, rising pension and healthcare costs, and the overall economic conditions in certain markets, which have constrained our sales opportunities. Operating profit as a percentage of sales was 8.5% for 2002, which was flat with 2001. These results reflect overall economic conditions, as well as the fixed costs inherent in distribution, which have continued to impact operating margins.
AUTOMOTIVE GROUP
Automotive operating margins decreased from 8.8% in 2002 to 8.1% in 2003, primarily due to pricing pressures combined with increases in salaries, insurance, and other expenses associated with the addition of new Company owned stores. Automotive operating margins decreased slightly from 8.9% in 2001 to 8.8% in 2002. Costs associated with new store openings were only partially offset by cost reductions associated with distribution center closings and other headcount reductions.
INDUSTRIAL GROUP
Industrial operating margins decreased from 7.9% in 2002 to 6.7% in 2003, as lower levels of vendor discounts and volume incentives affected this segment the greatest. Industrial operating margins increased from 7.7% in 2001 to 7.9% in 2002, reflecting cost and headcount reductions resulting from branch closings.
OFFICE GROUP
Operating margins in our Office Group decreased slightly from 10.1% in 2002 to 9.8% in 2003, primarily attributable to customer and product mix. Office Group margins decreased slightly from 10.3% in 2001 to 10.1% in 2002.
ELECTRICAL GROUP
Operating margins in our Electrical Group increased from .9%in 2002 to 2.4% in 2003, as this Group continued to reduce costs through headcount reductions, branch closings and operating expense controls. Our Electrical segment increased their margins slightly from .8% in 2001 to .9% in 2002.
INCOME TAXES
The effective income tax rate decreased from 39.3% to 38.2% for the year primarily due to the utilization of foreign tax credits in 2003. The effective income tax rate decreased from 40.1% in 2001 to 39.3% in 2002, primarily as a result of the decrease in non-deductible goodwill amortization due to the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142).
NET INCOME
Net income, before the cumulative effect of changes in accounting principles, was $354 million compared to $368 million in 2002, a decrease of 4%. On a per share diluted basis, net income for the period, before the cumulative effect of changes in accounting principles, equaled $2.03 compared to $2.10 reported in 2002. After the 2003 and 2002 cumulative effect of changes in accounting principles, net income was $334 million, or $1.91 diluted earnings per share for 2003, as compared to the net loss in 2002 of $28 million, or $.16 diluted loss per share. Net income, before the cumulative effect of changes in accounting principles in 2003 and 2002, was 4.2% of net sales compared to 4.5% in 2002.
In the first quarter of 2002, the Company completed impairment testing for goodwill in conjunction with the new provisions introduced in SFAS 142 resulting in a non-cash charge of $395.1 million. This was recorded as of January 1, 2002 as a cumulative effect of a change in accounting principle. Net income, before the cumulative effect of a change in accounting principle, was 4.5% of net sales as compared to 3.6% in 2001. Net income for 2002, before the cumulative effect of a change in accounting principle, was $368 million, an increase of 2%, compared to $362 million, before the Facility Consolidation, Impairment and Other Charges ("2001 Charges") as discussed
below, for the same period in 2001. On a per share diluted basis, net income for 2002, before the 2002 cumulative effect of a change in accounting principle and the 2001 Charges, equaled $2.10, as compared to $2.08 reported in 2001. After the 2002 cumulative effect of a change in accounting principle and the 2001 Charges, the net loss was $28 million, or $.16 diluted loss per share for 2002, as compared to net income in 2001 of $297 million, or $1.71 diluted earnings per share.
FACILITY CONSOLIDATION, IMPAIRMENT AND OTHER CHARGES
In the fourth quarter of 2001, the Company's management approved a plan to close and consolidate certain Company-operated facilities, terminate certain employees, and exit certain other activities. The Company also determined that certain assets were impaired. Following is a summary of the charges ($107.8 million pre-tax; $64.4 million, net of tax) and accruals related to continuing liabilities associated with the plan (in thousands):
Paid in Paid in Paid in Liability at Total Non-cash 2001 2002 2003 Dec. 31, 2003 -------------------------------------------------------------------------------------------------------------- Impairment charges $ 49,400 $ (49,400) $ -- $ -- $ -- $ -- Facility consolidation expenses 17,900 (6,900) (300) (4,800) (2,600) 3,300 Severance expenses 6,700 -- (100) (4,800) (1,800) -- Inventory-related exit costs - cost of goods sold 17,400 (17,400) -- -- -- -- Other - selling, administrative and other expenses 16,400 (15,800) -- (300) (300) -- -------------------------------------------------------------------------------------------------------------- $ 107,800 $ (89,500) $ (400) $ (9,900) $ (4,700) $ 3,300 -------------------------------------------------------------------------------------------------------------- |
Impairment charges are primarily comprised of two separate technology projects:
(1) an abandoned software system implementation in the Office Group totaling
approximately $30 million, and (2) an impaired technology-related venture in the
Automotive Group totaling approximately $15 million for which the Company
projects the undiscounted cash flows to be less than the carrying amount of the
related investment. Facility consolidation expenses relate to facility
consolidations in each of the Company's business segments. In 2001, the Company
identified certain distribution, branch and retail facilities that were to be
closed prior to December 31, 2002. The Company appropriately accrued the
estimated lease obligation from the planned exit date through the end of the
contractual lease term, net of estimated sublease income. The facility
consolidations did not result in any material decline in net sales, as all such
closed facilities have been served by other Company-operated facilities.
Severance expenses include charges for employees who have been involuntarily terminated in connection with the Company's facility consolidations. All terminations occurred prior to December 31, 2002. Inventory-related exit costs relate to inventory considered by the Company to be impaired as a result of the facility consolidations described above and related inventory rationalization and optimization programs. All inventory-related exit costs have been classified as cost of goods sold in the accompanying consolidated statement of income. Other charges have been classified as a component of selling, administrative, and other expenses.
FINANCIAL CONDITION
The major balance sheet categories were relatively consistent with the December 31, 2002 balance sheet. The Company's cash balance at December 31, 2003 was $15 million compared to $20 million at December 31, 2002, as we continue to improve our utilization of cash. Our accounts receivable balance at December 31, 2003 increased 4% compared to last year, primarily due to our December sales increase. Inventory was slightly down compared to December 31, 2002. Accounts payable at December 31, 2003 was down $29 million from last year, as our Industrial purchases in the final quarter of 2003 were well below those in 2002. The change in debt is discussed below.
LIQUIDITY AND CAPITAL RESOURCES
The Company reduced its total debt outstanding at December 31, 2003 by approximately $114 million compared to December 31, 2002. The decline in borrowings is primarily attributable to cash generated from operating activities of $402 million. In addition, the Company's dividends, stock repurchases, capital expenditures and other investing activities in 2003 were comparable to 2002.
The ratio of current assets to current liabilities is 3.4 to 1 at December 31, 2003, and the Company's cash position is good. The Company believes existing credit facilities and cash generated from operations will be sufficient to fund future operations, and to meet its short-term and long-term cash requirements.
NOTES AND OTHER BORROWINGS
On November 21, 2003, the Company completed a $125,000,000 financing with a consortium of financial institutions and insurance companies (the "Notes"). The proceeds of the Notes were primarily used to repay certain variable rate borrowings. The Notes bear interest at LIBOR plus .50% (1.73% at December 31, 2003), reset every six months. Further, on October 31, 2003, the Company obtained a $350,000,000 unsecured revolving line of credit with a consortium of financial institutions which matures in October 2008 and bears interest at LIBOR plus .40% (1.47% at December 31, 2003).
At December 31, 2003, the Company had unsecured Senior Notes outstanding under a $500 million financing arrangement as follows: $250 million, Series A, 5.86% fixed, due 2008; and $250 million, Series B, 6.23% fixed, due 2011. In addition, at December 31, 2003, the Company had $50 million outstanding on a $350 million unsecured revolving line of credit, LIBOR plus .40%, due 2008, and an unsecured private placement term note in the amount of $125 million, LIBOR plus .50%, due 2010; and $3 million in other borrowings. Certain borrowings contain covenants related to a maximum debt-to-equity ratio, a minimum fixed-charge coverage ratio, and certain limitations on additional borrowings. At December 31, 2003, the Company
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
was in compliance with all such covenants. The weighted average interest rate on the Company's outstanding borrowings was approximately 4.9% and 4.8% at December 31, 2003 and 2002, respectively. Total interest expense for all borrowings was $51.5 million and $59.6 million in 2003 and 2002, respectively.
CONSTRUCTION AND LEASE FACILITY
The Company also has an $85 million construction and lease facility. Properties acquired by the lessor are constructed and then leased to the Company under operating lease agreements. The total amount advanced and outstanding under this facility at December 31, 2003 was approximately $80 million. Since the resulting leases are operating leases, no debt obligation is recorded on the Company's balance sheet. This construction and lease facility expires in 2008. Lease payments fluctuate based upon current interest rates and are generally based upon LIBOR plus .55%. The lease facility contains residual value guarantee provisions and guarantees under events of default. Although management believes the likelihood of funding to be remote, the maximum guarantee obligation under the construction and lease facility is approximately $80 million at December 31, 2003.
CONTRACTUAL AND OTHER OBLIGATIONS
The following table shows the Company's approximate obligations and commitments to make future payments under contractual obligations as of December 31, 2003 (in thousands):
PAYMENT DUE BY PERIOD Period less Period 1-3 Period 4-5 Period over Total than 1 year years years 5 years -------------------------------------------------------------------------------------------- Credit facilities $ 677,633 $ 52,525 $ 108 $ 250,000 $ 375,000 Operating leases 383,335 104,862 136,934 69,721 71,818 ------------------------------------------------------------------------ Total Contractual Cash Obligations $ 1,060,968 $ 157,387 $ 137,042 $ 319,721 $ 446,818 ------------------------------------------------------------------------ |
The Company has certain commercial commitments related to affiliate borrowing guarantees and residual values under operating leases. The Company believes the likelihood of any significant amounts being funded in connection with these commitments to be remote. The following table shows the Company's approximate commercial commitments as of December 31, 2003 (in thousands):
PAYMENT DUE BY PERIOD Total Period Period Period Period Amounts less than 1-3 4-5 over Committed 1 year years years 5 years ------------------------------------------------------------------------------------------------ Guaranteed borrowings of affiliates $ 163,006 $ 22,778 $ 7,442 $ 4,961 $ 127,825 Residual value guarantee under operating leases 69,330 -- -- 69,330 -- Total Commercial ------------------------------------------------------------------------ Commitments $ 232,336 $ 22,778 $ 7,442 $ 74,291 $ 127,825 ------------------------------------------------------------------------ |
In addition, the Company sponsors a defined benefit pension plan that may obligate us to make contributions to the plan from time to time. We expect to make a cash contribution to our qualified defined benefit plan in 2004, and contributions required for 2005 and future years will depend on a number of unpredictable factors including the market performance of the plan's assets and future changes in interest rates that affect the actuarial measurement of the plan's obligations.
INTEREST RATE SWAPS
The Company manages its exposure to changes in short-term interest rates, particularly to reduce the impact on its floating-rate term notes, by entering into interest rate swap agreements. The Company has interest rate swaps with fair value of approximately $11.6 million and $15.6 million outstanding as of December 31, 2003 and December 31, 2002, respectively. The decrease in fair values since December 31, 2002 is primarily due to normal settlement of monthly payments due on swaps during the year ended December 31, 2003, offset by increases in the fair value of the liability on outstanding swaps during the period.
The following table shows the activity of the Company's liability for interest rate swap agreements for the period from December 31, 2002 to December 31, 2003 (in thousands):
Fair value of contracts outstanding at December 31, 2002 $ 15,643 Contracts realized or otherwise settled during the period (cash paid) (5,494) Other changes in fair values 1,437 -------- Fair value of contracts outstanding at December 31, 2003 $ 11,586 -------- |
This interest rate swap liability is included in Other Accrued Expenses in the Company's consolidated balance sheet. Other than interest rate swaps, the Company does not have any other significant derivative instruments. The Company does not enter into derivatives for speculative or trading purposes.
During 2003, the Company's exposure to future declines in interest rates associated with fixed rate interest rate swap agreements was consistent with 2002. At December 31, 2003, the Company had fixed interest rate payment swap agreements outstanding in the amount of $100 million, comprised of two $50 million notional swaps with maturity dates of 2005 and 2008. In addition, at December 31, 2003, approximately $500 million of the Company's total borrowings, which mature in approximately five and eight years, are at fixed rates of interest. A 1% adverse change in interest rates would not have a material adverse impact on future earnings and cash flows of the Company.
SHARE REPURCHASES
On April 19, 1999, the Board authorized the repurchase of 15 million shares. Through December 31, 2003, approximately 8.4 million shares have been repurchased under this authorization.
CRITICAL ACCOUNTING ESTIMATES
General
Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes the following critical accounting policies reflect its more significant estimates and assumptions used in the preparation of the Consolidated Financial Statements. For further information on the critical accounting policies, see Note 1 of our Notes to Consolidated Financial Statements.
INVENTORIES-- PROVISIONS FOR SLOW MOVING AND OBSOLESCENCE
The Company identifies slow moving or obsolete inventories and estimates appropriate loss provisions related thereto. Historically, these loss provisions have not been significant as the vast majority of the Company's inventories are not highly susceptible to obsolescence and are eligible for return under various vendor return programs. While the Company has no reason to believe its inventory return privileges will be discontinued in the future, its risk of loss associated with obsolete or slow moving inventories would increase if such were to occur.
ALLOWANCE FOR DOUBTFUL ACCOUNTS -- METHODOLOGY
The Company evaluates the collectibility of accounts receivable based on a combination of factors. Initially, the Company estimates an allowance for doubtful accounts as a percentage of net sales based on historical bad debt experience. This initial estimate is periodically adjusted when the Company becomes aware of a specific customer's inability to meet its financial obligations (e.g., bankruptcy filing) or as a result of changes in the overall aging of accounts receivable. While the Company has a large customer base that is geographically dispersed, a general economic downturn in any of the industry segments in which the Company operates could result in higher than expected defaults, and, therefore, the need to revise estimates for bad debts. For the years ended December 31, 2003, 2002 and 2001, the Company recorded provisions for bad debts of $23.8 million, $20.9 million and $26.5 million, respectively.
CONSIDERATION RECEIVED FROM VENDORS
The Company enters into agreements at the beginning of each year with many of its vendors providing for inventory purchase incentives and advertising allowances. Generally, the Company earns inventory purchase incentives upon achieving specified volume purchasing levels and advertising allowances upon fulfilling its obligations related to cooperative advertising programs. The Company accrues for the receipt of inventory purchase incentives as part of its inventory cost based on cumulative purchases of inventory to date and projected inventory purchases through the end of the year, and, in the case of advertising allowances, upon completion of the Company's obligations related thereto. While management believes the Company will continue to receive such amounts in 2003 and beyond, there can be no assurance that vendors will continue to provide comparable amounts of incentives and allowances in the future.
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT AND GOODWILL AND OTHER INTANGIBLE ASSETS
At least annually, the Company evaluates property, plant and equipment and goodwill and other intangible assets for potential impairment indicators. The Company's judgments regarding the existence of impairment indicators are based on legal factors, market conditions and operational performance. Future events could cause the Company to conclude that impairment indicators exist and that assets associated with a particular operation are impaired. Evaluating the impairment also requires the Company to estimate future operating results and cash flows which require judgment by management. Any resulting impairment loss could have a material adverse impact on the Company's financial condition and results of operations.
EMPLOYEE BENEFIT PLANS
The Company's benefit plan committee establishes investment policies and strategies and regularly monitors the performance of the funds. The pension plan strategy implemented by the Company's management is to achieve long-term objectives and invest the pension assets in accordance with ERISA and fiduciary standards. The long-term primary objectives for the pension plan are to provide for a reasonable amount of long-term growth of capital, without undue exposure to risk, protect the assets from erosion of purchasing power, and provide investment results that meet or exceed the pension plan's actuarially assumed long-term rate of return.
Based on the investment policy for the pension plan, as well as an asset study that was performed based on the Company's asset allocations and future expectations, the expected rate of return on plan assets for measuring pension expense or income was chosen to be 8.75% for the year ending December 31, 2004. The asset study forecasted expected rates of return for the approximate duration of the Company's benefit obligations, using capital market data and historical relationships.
The discount rate is chosen as the rate at which pension obligations might be settled and is based on capital market conditions as of the measurement date. It is based on returns available on high-quality fixed income obligations, such as those included in the Moody's Aa bond index. The discount rate used at December 31, 2003 was reduced from 6.75% to 6.25%. This is consistent with the 51 basis point decline in Moody's Aa from December 31, 2002 to December 31, 2003.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
QUARTERLY RESULTS OF OPERATIONS
The preparation of interim consolidated financial statements requires management to make estimates and assumptions for the amounts reported in the condensed consolidated financial statements. Specifically, the Company makes certain estimates in its interim consolidated financial statements for the accrual of bad debts, inventory adjustments, and discounts and volume incentives earned. Bad debts are accrued based on a percentage of sales and volume incentives are estimated based upon cumulative and projected purchasing levels. Inventory adjustments are accrued on an interim basis and adjusted in the fourth quarter based on the annual October 31 book-to-physical inventory adjustment. The methodology and practices used in deriving estimates for interim reporting typically result in adjustments upon accurate determination at year-end. The effect of these adjustments in 2003 and 2002 was not significant.
The cumulative effect of a change in accounting principle related to cash consideration from vendors in 2003 and goodwill impairment in 2002, as discussed above, resulted in a decrease in net income in the first quarter of 2003 and 2002 of $.12 and $2.26 per share, respectively. Without the cumulative effect adjustment, diluted income per share would have been $.51 and $.50 in the quarter ended March 31, 2003 and 2002, respectively.
The following is a summary of the quarterly results of operations for the years ended December 31, 2003 and 2002.
Three Months Ended March 31, June 30, Sept. 30, Dec. 31, (in thousands except for per share data) ---------------------------------------------------------------------------------- 2003 Net Sales $ 2,021,858 $ 2,152,794 $ 2,189,388 $ 2,085,260 Gross Profit 638,340 651,383 651,949 680,944 Income before Cumulative Effect of a Change in Accounting Principle 88,424 90,148 88,333 86,737 Cumulative Effect of a Change in Accounting Principle (19,541) -- -- -- Net Income 68,883 90,148 88,333 86,737 Diluted Earnings per share: Before Change in Accounting Principle .51 .52 .51 .50 After Change in Accounting Principle .39 .52 .51 .50 2002 Net Sales $ 1,977,743 $ 2,130,924 $ 2,156,759 $ 1,993,501 Gross Profit 603,969 644,232 649,793 656,184 Income before Cumulative Effect of a Change in Accounting Principle 87,027 96,047 94,027 90,399 Cumulative Effect of a Change in Accounting Principle (395,090) -- -- -- Net (Loss)/Income (308,063) 96,047 94,027 90,399 Diluted Earnings/ (Loss) per share: Before Change in Accounting Principle .50 .55 .54 .52 After Change in Accounting Principle (1.76) .55 .54 .52 |
FORWARD-LOOKING STATEMENTS
Statements in this report constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company cautions that its forward-looking statements involve risks and uncertainties. The Company undertakes no duty to update its forward-looking statements, which reflect the Company's beliefs, expectations, and plans as of the present. Actual results or events may differ materially from those indicated as a result of various important factors. Such factors include, but are not limited to, changes in general economic conditions, the growth rate of the market for the Company's products and services, the ability to maintain favorable supplier arrangements and relationships, competitive product and pricing pressures, including internet related initiatives, the effectiveness of the Company's promotional, marketing and advertising programs, changes in laws and regulations, including changes in accounting and taxation guidance, the uncertainties of litigation, as well as other risks and uncertainties discussed from time to time in the Company's filings with the Securities and Exchange Commission. Readers are cautioned that other factors not listed here could materially impact the Company's future earnings, financial position and cash flows. You should not place undue reliance upon forward-looking statements contained herein, and should carefully read other reports that the Company will, from time to time, file with the Securities and Exchange Commission.
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Genuine Parts Company
We have audited the accompanying consolidated balance sheets of Genuine Parts Company and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Genuine Parts Company and subsidiaries at December 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States.
As discussed in Note 1, effective January 1, 2003, the Company adopted Emerging Issues Task Force Issue No. 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor. In addition, as discussed in Note 2, effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.
/s/ ERNST & YOUNG LLP February 3, 2004 Atlanta, Georgia |
CONSOLIDATED BALANCE SHEETS
(dollars in thousands) December 31, 2003 2002 ------------------------------------------------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $ 15,393 $ 19,995 Trade accounts receivable 1,084,874 1,039,843 Merchandise inventories 2,140,811 2,144,787 Prepaid expenses and other assets 176,548 172,362 --------------------------- Total Current Assets 3,417,626 3,376,987 Goodwill and Intangible Assets, less accumulated amortization 58,028 58,705 Other Assets 297,851 292,312 Property, Plant and Equipment: Land 36,428 36,562 Buildings, less allowance for depreciation (2003 - $111,646; 2002 - $105,348) 124,600 124,546 Machinery and equipment, less allowance for depreciation (2003 - $378,869; 2002 - $360,732) 181,964 171,943 --------------------------- Net Property, Plant and Equipment 342,992 333,051 --------------------------- $ 4,116,497 $ 4,061,055 =========================== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Trade accounts payable $ 706,609 $ 735,183 Current portion of long-term debt and other borrowings 52,525 116,905 Accrued compensation 72,086 63,825 Other accrued expenses 115,805 123,094 Dividends payable 51,331 50,557 Income taxes payable 18,575 21,366 --------------------------- Total Current Liabilities 1,016,931 1,110,930 Long-Term Debt 625,108 674,796 Deferred Income Taxes 114,533 97,912 Minority Interests in Subsidiaries 47,642 47,408 Shareholders' Equity: Preferred Stock, par value $1 per share--authorized 10,000,000 shares; none issued -- -- Common stock, par value $1 per share - authorized 450,000,000 shares; issued 174,045,263 shares in 2003 and 174,380,634 shares in 2002 174,045 174,381 Additional paid-in capital 32,853 44,371 Accumulated other comprehensive income (loss) 4,835 (60,522) Retained earnings 2,100,550 1,971,779 --------------------------- Total Shareholders' Equity 2,312,283 2,130,009 --------------------------- $ 4,116,497 $ 4,061,055 =========================== |
See accompanying notes.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data) Year ended December 31, 2003 2002 2001 ---------------------------------------------------------------------------------------------------------------- Net sales $ 8,449,300 $ 8,258,927 $ 8,220,668 Cost of goods sold 5,826,684 5,704,749 5,699,174 ------------------------------------------ 2,622,616 2,554,178 2,521,494 Selling, administrative and other expenses 2,050,873 1,948,442 1,951,559 Facility consolidation and impairment charges -- -- 73,922 ------------------------------------------ Income before income taxes and cumulative effect of a change in accounting principle 571,743 605,736 496,013 Income taxes 218,101 238,236 198,866 ------------------------------------------ Income before cumulative effect of a change in accounting principle 353,642 367,500 297,147 Cumulative effect of a change in accounting principle (19,541) (395,090) -- ------------------------------------------ Net income (loss) $ 334,101 $ (27,590) $ 297,147 ========================================== Basic net income (loss) per common share: Before cumulative effect of a change in accounting principle $ 2.03 $ 2.11 $ 1.72 Cumulative effect of a change in accounting principle (.11) (2.27) -- ------------------------------------------ Basic net income (loss) $ 1.92 $ (0.16) $ 1.72 ========================================== Diluted net income (loss) per common share: Before cumulative effect of a change in accounting principle $ 2.03 $ 2.10 $ 1.71 Cumulative effect of a change in accounting principle (.12) (2.26) -- ------------------------------------------ Diluted net income (loss) $ 1.91 $ (0.16) $ 1.71 ========================================== Weighted average common shares outstanding 173,995 174,369 172,765 Dilutive effect of stock options and non-vested restricted stock awards 485 735 868 ------------------------------------------ Weighted average common shares outstanding-- assuming dilution 174,480 175,104 173,633 ========================================== |
See accompanying notes.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated Additional Other Total Common Stock Paid-In Comprehensive Retained Shareholders' (dollars in thousands, except per share amounts) Shares Amount Capital Income (Loss) Earnings Equity --------------------------------------------------------------------------------------------------------------------------------- Balance at January 1, 2001 172,389,688 $ 172,390 $ -- $ (13,041) $2,101,457 $ 2,260,806 Net income -- -- -- -- 297,147 297,147 Foreign currency translation adjustment -- -- -- (12,252) -- (12,252) Changes in fair value of derivative instruments, net of income taxes of $13,867 -- -- -- (20,801) -- (20,801) ----------- Comprehensive income 264,094 ----------- Cash dividends declared, $1.14 per share -- -- -- -- (196,941) (196,941) Stock options exercised, including tax benefit 936,978 937 13,464 -- -- 14,401 Purchase of stock (496,025) (496) (12,162) -- -- (12,658) Stock issued in connection with acquisitions 643,303 643 14,778 -- -- 15,421 ------------------------------------------------------------------------------ Balance at December 31, 2001 173,473,944 173,474 16,080 (46,094) 2,201,663 2,345,123 Net loss -- -- -- -- (27,590) (27,590) Foreign currency translation adjustment -- -- -- (17,960) -- (17,960) Changes in fair value of derivative instruments, net of income taxes of $2,686 -- -- -- 3,532 -- 3,532 ----------- Comprehensive loss (42,018) ----------- Cash dividends declared, $1.16 per share -- -- -- -- (202,294) (202,294) Stock options exercised, including tax benefit 1,286,697 1,287 39,190 -- -- 40,477 Purchase of stock (389,434) (389) (11,226) -- -- (11,615) Stock issued in connection with acquisitions 9,427 9 327 -- -- 336 ------------------------------------------------------------------------------ Balance at December 31, 2002 174,380,634 174,381 44,371 (60,522) 1,971,779 2,130,009 Net income -- -- -- -- 334,101 334,101 Foreign currency translation adjustment -- -- -- 54,864 -- 54,864 Changes in fair value of derivative instruments, net of income taxes of $6,990 -- -- -- 10,493 -- 10,493 ----------- Comprehensive income 399,458 ----------- Cash dividends declared, $1.18 per share -- -- -- -- (205,330) (205,330) Stock options exercised, including tax benefit 280,821 280 5,575 -- -- 5,855 Purchase of stock (616,192) (616) (17,093) -- -- (17,709) ------------------------------------------------------------------------------ Balance at December 31, 2003 174,045,263 $ 174,045 $ 32,853 $ 4,835 $2,100,550 $ 2,312,283 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands) Year ended December 31, 2003 2002 2001 --------------------------------------------------------------------- ------------ ------------ ----------- OPERATING ACTIVITIES Net income (loss) $ 334,101 $ (27,590) $ 297,147 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 69,013 70,151 85,793 Gain on sale of property, plant and equipment (5,210) (25) (1,626) Deferred income taxes 27,354 43,995 (21,704) Cumulative effect of a change in accounting principle 19,541 395,090 -- Non-cash portion of facility consolidation and impairment charges -- -- 89,500 Income applicable to minority interests 2,565 2,315 3,077 Income tax benefit of stock options exercised 1,254 4,468 2,488 Changes in operating assets and liabilities: Trade accounts receivable (21,735) (27,380) 6,974 Merchandise inventories 20,232 (243,005) (45,063) Trade accounts payable (43,230) 88,215 7,354 Other, net (1,700) (33,826) (88,300) ------------ ------------ ----------- 68,084 299,998 38,493 ------------ ------------ ----------- Net cash provided by operating activities 402,185 272,408 335,640 INVESTING ACTIVITIES Purchases of property, plant and equipment (73,904) (64,758) (41,944) Proceeds from sale of property, plant and equipment 13,619 10,137 5,261 Acquisition of businesses and other investments, net of cash acquired (14,990) (6,042) (16,358) ------------ ------------ ----------- Net cash used in investing activities (75,275) (60,663) (53,041) FINANCING ACTIVITIES Proceeds from credit facilities 935,000 1,021,168 3,223,466 Payments on credit facilities (1,047,976) (1,122,237) (3,251,769) Stock options exercised 4,601 36,009 11,913 Dividends paid (204,556) (201,150) (195,022) Purchase of stock (17,709) (11,615) (12,658) ------------ ------------ ----------- Net cash used in financing activities (330,640) (277,825) (224,070) Effect of exchange rate changes on cash (872) 305 (497) ------------ ------------ ----------- Net (decrease) increase in cash and cash equivalents (4,602) (65,775) 58,032 Cash and cash equivalents at beginning of year 19,995 85,770 27,738 ------------ ------------ ----------- Cash and cash equivalents at end of year $ 15,393 $ 19,995 $ 85,770 ============ ============ =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Income taxes $ 205,451 $ 173,595 $ 257,280 ============ ============ =========== Interest $ 49,807 $ 60,807 $ 60,461 ============ ============ =========== |
See accompanying notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Genuine Parts Company and all of its majority-owned subsidiaries ("the Company") is a distributor of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The Company serves a diverse customer base through more than 1,800 locations in North America and, therefore, has limited exposure from credit losses to any particular customer or industry segment. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral.
Principles of Consolidation
The consolidated financial statements include all of the accounts of the Company. Income applicable to minority interests is included in other expenses. Significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates and the differences could be material.
Revenue Recognition
The Company recognizes revenues from product sales upon shipment to its customers.
Foreign Currency Translation
The consolidated balance sheets and statements of income of the Company's foreign subsidiaries have been translated into U.S. dollars at the current and average exchange rates, respectively. The foreign currency translation adjustment is included as a component of accumulated other comprehensive income (loss).
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash and cash equivalents.
Trade Accounts Receivable and the Allowance for Doubtful Accounts
The Company evaluates the collectibility of trade accounts receivable based on a combination of factors. Initially, the Company estimates an allowance for doubtful accounts as a percentage of net sales based on historical bad debt experience. This initial estimate is periodically adjusted when the Company becomes aware of a specific customer's inability to meet its financial obligations (e.g. bankruptcy filing) or as a result of changes in the overall aging of accounts receivable. While the Company has a large customer base that is geographically dispersed, a general economic downturn in any of the industry segments in which the Company operates could result in higher than expected defaults, and, therefore, the need to revise estimates for bad debts. For the years ended December 31, 2003, 2002, and 2001, the Company recorded provisions for bad debts of approximately $23,800,000, $20,900,000, and $26,500,000, respectively.
Merchandise Inventories, including Consideration Received from Vendors
Merchandise inventories are valued at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for a majority of automotive parts, electrical/electronic materials, and industrial parts, and by the first-in, first-out (FIFO) method for office products and certain other inventories. If the FIFO method had been used for all inventories, cost would have been approximately $187,444,000 and $181,220,000 higher than reported at December 31, 2003 and 2002, respectively.
The Company identifies slow moving or obsolete inventories and estimates appropriate provisions related thereto. Historically, these losses have not been significant as the vast majority of the Company's inventories are not highly susceptible to obsolescence and are eligible for return under various vendor return programs. While the Company has no reason to believe its inventory return privileges will be discontinued in the future, its risk of loss associated with obsolete or slow moving inventories would increase if such were to occur.
The Company enters into agreements at the beginning of each year with many of its vendors providing for inventory purchase rebates and advertising allowances. Generally, the Company earns inventory purchase rebates upon achieving specified volume purchasing levels and advertising allowances upon fulfilling its obligations related to cooperative advertising programs. The Company accrues for the receipt of inventory purchase rebates as part of its inventory cost based on cumulative purchases of inventory to date and projected inventory purchases through the end of the year, and, in the case of advertising allowances, upon completion of the Company's obligations related thereto. While management believes the Company will continue to receive consideration from vendors in 2004 and beyond, there can be no assurance that vendors will continue to provide comparable amounts of rebates and allowances in the future.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist primarily of prepaid expenses and amounts due from vendors.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets primarily represents the excess of the purchase price paid over the fair value of the net assets acquired in connection with business acquisitions. Effective January 1, 2002, the Company adopted
Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"). SFAS No. 142 requires that entities assess the fair value of the net assets underlying all acquisition-related goodwill on a reporting unit basis effective beginning in 2002. When the fair value is less than the related carrying value, entities are required to reduce the amount of goodwill (see Note 2). The approach to evaluating the recoverability of goodwill as outlined in SFAS No. 142 requires the use of valuation techniques utilizing estimates and assumptions about projected future operating results and other variables. The impairment only approach required by SFAS No. 142 may have the effect of increasing the volatility of the Company's earnings if additional goodwill impairment occurs at a future date.
SFAS No. 142 also requires that entities discontinue amortization of all purchased goodwill, including amortization of goodwill recorded in past business combinations. Accordingly, the Company no longer amortized goodwill beginning in 2002. Goodwill amortization expense was $11,912,000 in 2001.
Other Assets
Other assets consist primarily of a prepaid pension asset, an investment accounted for under the cost method and in 2002, also included certain costs of internal-use information systems under development.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is primarily determined on a straight-line basis over the following estimated useful life of each asset: buildings and improvements, 10 to 40 years; machinery and equipment, 5 to 15 years.
Long-Lived Assets Other Than Goodwill
The Company assesses its long-lived assets other than goodwill for impairment whenever facts and circumstances indicate that the carrying amount may not be fully recoverable. To analyze recoverability, the Company projects undiscounted net future cash flows over the remaining life of such assets. If these projected cash flows are less than the carrying amount, an impairment would be recognized, resulting in a write-down of assets with a corresponding charge to earnings. Impairment losses, if any, are measured based upon the difference between the carrying amount and the fair value of the assets.
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) is comprised of the following:
(Dollars in Thousands) December 31 2003 2002 ---------------------------------- ---- ---- Foreign currency translation $ 11,611 $ (43,253) Net unrealized loss on derivative instruments, net of taxes (6,776) (17,269) -------- --------- Total accumulated other comprehensive income (loss) $ 4,835 $ (60,522) |
Fair Value of Financial Instruments
The carrying amount reflected in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate their respective fair values based on the short-term nature of these instruments. The fair value of interest rate swap agreements, included in other accrued expenses in the consolidated balance sheets, was approximately $11,586,000 and $15,643,000 at December 31, 2003 and 2002, respectively. The fair value of derivative financial instruments has been determined based on quoted market prices. At December 31, 2003 and 2002, the carrying amount for variable rate long-term debt approximates fair market value since the interest rates on these instruments are reset periodically to current market rates. At December 31, 2003 and 2002, the fair market value of fixed rate long-term debt was approximately $543,000,000 and $537,000,000, respectively, based primarily on quoted prices for these or similar instruments. The fair value of fixed rate long-term debt was estimated by calculating the present value of anticipated cash flows. The discount rate used was an estimated borrowing rate for similar debt instruments with like maturities.
Derivative Instruments and Hedging Activities
From time to time, the Company uses interest rate swap agreements to synthetically manage the interest rate characteristics of a portion of its outstanding debt and to limit the Company's exposure to rising interest rates. The Company designates at inception that interest rate swap agreements hedge risks associated with future variable interest payments and monitors each swap agreement to determine if it remains an effective hedge. The effectiveness of the derivative as a hedge is based on a high correlation between changes in the value of the underlying hedged item. Ineffectiveness related to the Company's derivative transactions is not material. The Company records amounts to be received or paid as a result of interest rate swap agreements as an adjustment to interest expense. All of the Company's interest rate swaps are designated as cash flow hedges. Gains or losses on terminations or redesignation of interest rate swap agreements are deferred and amortized as an adjustment to interest expense of the related debt instrument over the remaining term of the original contract life of the agreements. The Company does not enter into derivatives for speculative or trading purposes.
Shipping and Handling Costs
Shipping and handling costs are classified as selling, administrative and other expenses in the accompanying consolidated statements of income and totaled approximately $202,000,000, $200,000,000 and $198,000,000 in the years ended December 31, 2003, 2002, and 2001, respectively.
Stock Compensation
Effective January 1, 2003, the Company prospectively adopted the fair value method of accounting for stock compensation. The adoption of SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), had no
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
significant impact on the Company's consolidated financial statements for the year ended December 31, 2003.
Until January 1, 2003, the Company had elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), and related Interpretations in accounting for stock compensation. Under APB 25, no compensation expense is recognized if the exercise price of stock options equals the market price of the underlying stock on the date of grant. Note 7 contains a tabular presentation as if the Company had applied the alternative fair value accounting provided for under SFAS 123, to all stock options.
Net Income (Loss) Per Common Share
Basic net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during the
year. The computation of diluted net income (loss) per common share includes the
dilutive effect of stock options and non-vested restricted stock awards. Options
to purchase 5,219,100, 679,000 and 3,485,000, shares of common stock at prices
ranging from $32 to $38 per share were outstanding at December 31, 2003, 2002
and 2001, respectively, but were not included in the computation of diluted net
income (loss) per common share because the options' exercise price was greater
than the average market price of the common shares. At December 31, 2003, 2002
and 2001, the dilutive effect of options to purchase approximately 39,000,
56,000, and 199,000 shares of common stock at an average exercise price of
approximately $18 per share issued in connection with a 1998 acquisition have
been included in the computation of diluted net income (loss) per common share
since the date of the acquisition.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform to current year presentation.
Recently Issued Accounting Pronouncements
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"), Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51. FIN 46, as revised in December 2003, requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied no later than December 31, 2003 for entities meeting the definition of special-purpose entities, and no later than fiscal periods ending after March 15, 2004 for all other entities under consideration.
In connection with the adoption of FIN 46, in June 2003, the Company's construction and lease facility was amended. Subject to the amendment, FIN 46 did not change the Company's accounting for the construction and lease facility. In addition to the construction and lease facility, the Company has relationships with entities which are required to be considered for consolidation under FIN 46. Specifically, the Company guarantees the borrowings of certain independently controlled automotive parts stores ("independents") and certain other affiliates in which the Company has a minority equity ownership interest ("affiliates"). Presently, the independents are generally consolidated by an enterprise that has a controlling financial interest through ownership of a majority voting interest in the entity. The Company has no voting interest or other equity conversion rights in any of the independents. At December 31, 2003, the total borrowings subject to guarantee by the Company were approximately $163,006,000. The Company does not control the independents or the affiliates, but receives a fee for the guarantee. The Company has preliminarily concluded that it is not the primary beneficiary with respect to any of the independents and, in substantially all cases, has concluded that the affiliates are not variable interest entities or, if so, the Company is not the primary beneficiary.
In January 2003, the Emerging Issues Task Force ("EITF") of the FASB issued EITF Issue No. 02-16, Accounting by a Customer (Including Reseller) for Certain Consideration Received from a Vendor ("EITF 02-16"). EITF 02-16 addresses accounting and reporting issues related to how a reseller should account for certain consideration received from vendors. Generally, certain consideration received from vendors is presumed to be a reduction of prices of the vendor's products or services and should, therefore, be characterized as a reduction of cost of sales when recognized in the customer's income statement. However, under certain circumstances, this presumption may be overcome and recognition as revenue or as a reduction of other costs in the income statement may be appropriate. The Company, in certain circumstances, previously included funds of this type in selling, administrative, and other expenses. Under the new method, vendor allowances for advertising and catalog related programs are generally considered a reduction of cost of goods sold. On January 1, 2003, the Company adopted EITF 02-16 and recorded a non-cash charge of $19.5 million, net of a $13.6 million tax benefit, ($.11 and $.12 per basic and diluted share, respectively) related to the capitalization of certain vendor consideration as part of inventory cost. Had the Company accounted for vendor considerations in accordance with EITF 02-16 in prior years, the capitalization of these vendor considerations would not have a significant impact on the consolidated statements of income for the years ended December 31, 2002 and 2001. In addition, as a result of the January 1, 2003 adoption of EITF 02-16, approximately $102 million was reclassified from selling, administrative and other expenses to cost of goods sold in the consolidated statement of income for the year ended December 31, 2003. In accordance with EITF 02-16, the income statement presentations for periods prior to January 1, 2003 have not been reclassified. Had the Company accounted for consideration received from
vendors in accordance with EITF 02-16 in prior years, approximately $90 million and $111 million would have been reclassified from selling, administrative and other expenses to cost of goods sold in the consolidated statements of income for the years ended December 31, 2002 and 2001, respectively.
2. GOODWILL AND OTHER INTANGIBLE ASSETS
Effective January 1, 2002, the Company adopted SFAS No. 141 and SFAS No. 142. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations. SFAS No. 142 requires that entities assess the fair value of the net assets underlying all acquisition-related goodwill on a reporting unit basis. When the fair value is less than the related carrying value, entities are required to reduce the amount of goodwill.
Within the Company's four reportable segments, the Company identified reporting units as defined in SFAS No. 142. The reporting units' goodwill was tested for impairment during the first quarter of 2002 as required by SFAS No. 142 based on the expected present value of future cash flows approach. As a result of this valuation process as well as the application of the remaining provisions of SFAS No. 142, the Company recorded a transitional impairment loss of approximately $395.1 million ($2.27 basic loss per share and $2.26 diluted loss per share) as of January 1, 2002. This write-off was reported as a cumulative effect of a change in accounting principle in the Company's consolidated statement of income as of January 1, 2002. No tax benefits were recorded in connection with this goodwill impairment. For the year ended December 31, 2002, additions to goodwill of approximately $14.7 million relate to a balance sheet reclassification and additional consideration for earnouts on prior acquisitions.
The Company performed an annual goodwill impairment test during the fourth quarter of 2003. Similar to 2002, the present value of future cash flows approach was utilized in determining potential goodwill impairment. The Company determined that goodwill was not impaired and, therefore, no impairment was recognized during 2003. The Company also assessed finite-lived, identifiable intangible assets for impairment under an undiscounted cash flows approach and concluded there was no impairment for the years ended December 31, 2003 and 2002.
The changes in the carrying amount of goodwill during the years ended December 31, 2003 and 2002 by reportable segment, as well as other identifiable intangible assets, are summarized as follows:
Goodwill ------------------------------------------------------- Electrical/ Identifiable Office Electronic Intangible (In Thousands) Automotive Industrial Products Materials Assets Total ---------------------------------------------------------------------------------------------------------------------------- Balance as of January 1, 2002 $ 221,752 $ 50,304 $ 8,297 $ 155,611 $ 6,114 $ 442,078 Goodwill and intangible assets acquired during the year 13,266 31 400 -- 956 14,653 Amortization during the year -- -- -- -- (2,421) (2,421) Other impairment charges -- (515) -- -- -- (515) Transitional impairment losses (213,401) (19,512) (6,566) (155,611) -- (395,090) --------- --------- --------- --------- --------- --------- Balance as of December 31, 2002 21,617 30,308 2,131 -- 4,649 58,705 Goodwill acquired during the year -- 862 -- -- -- 862 Amortization during the year -- -- -- -- (1,539) (1,539) --------- --------- --------- --------- --------- --------- Balance as of December 31, 2003 $ 21,617 $ 31,170 $ 2,131 $ -- $ 3,110 $ 58,028 --------- --------- --------- --------- --------- --------- |
Prior to the adoption of SFAS No. 142, the Company amortized goodwill over estimated useful lives ranging from 10 years to 40 years. Had the Company accounted for goodwill consistent with the provisions of SFAS No. 142 in the year ended December 31, 2001, the Company's income would have been affected as follows, in thousands, except per share data:
Year ended December 31, 2001 --------------------------------------------------- Reported income $297,147 Add back: Goodwill amortization 11,912 -------- Adjusted income $309,059 ======== Basic net income per common share: As reported $ 1.72 Add back: Goodwill amortization 0.07 -------- As adjusted $ 1.79 ======== Diluted net income per common share: As reported $ 1.71 Add back: Goodwill amortization 0.07 -------- As adjusted $ 1.78 ======== |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. FACILITY CONSOLIDATION, IMPAIRMENT AND OTHER CHARGES
Prior to December 31, 2001, the Company's management approved a plan to close and consolidate certain facilities, terminate certain employees, and exit certain other activities. The Company also determined certain assets were impaired. Following is a summary of the charges recorded in the year ended December 31, 2001, and subsequent activity related to accruals for continuing liabilities associated with the plan (in thousands):
Liability at Paid in Paid in Paid in December 31, Total Non-cash 2001 2002 2003 2003 -------------------------------------------------------------------------------------------------------------------------- Impairment charges $ 49,400 $ (49,400) $ -- $ -- $ -- $ -- Facility consolidation expenses 17,900 (6,900) (300) (4,800) (2,600) 3,300 Severance expenses 6,700 -- (100) (4,800) (1,800) -- Inventory-related exit costs 17,400 (17,400) -- -- -- -- Other 16,400 (15,800) -- (300) (300) -- --------- --------- --------- --------- --------- --------- $ 107,800 $ (89,500) $ (400) $ (9,900) $ (4,700) $ 3,300 ========= ========= ========= ========= ========= ========= |
Impairment charges are primarily comprised of two separate technology projects:
(1) an abandoned software system implementation of the Company's office products
segment totaling approximately $30,000,000, and (2) an impaired
technology-related venture of the Company's automotive segment totaling
approximately $15,000,000 for which the Company projected the undiscounted cash
flows to be less than the carrying amount of the related investment. Facility
consolidation expenses relate to facility consolidations in each of the
Company's business segments. In 2001, the Company identified certain
distribution, branch and retail facilities that were to be closed prior to
December 31, 2002. The Company appropriately accrued the estimated lease
obligation from the planned exit date through the end of the contractual lease
term, net of estimated sublease income. The facility consolidations did not
result in any material decline in net sales, as all such closed facilities have
been served by other Company-operated facilities.
Severance expenses include charges for employees who have been involuntarily terminated in connection with the Company's facility consolidation. All terminations occurred prior to December 31, 2002. Inventory-related exit costs relate to inventory considered by the Company to be impaired as a result of the facility consolidations described above and related inventory rationalization and optimization programs. All inventory-related exit costs have been classified as cost of goods sold in the accompanying consolidated statement of income. Other charges have been classified as a component of selling, administrative and other expenses.
4. CREDIT FACILITIES
The principal amount of the Company's borrowings subject to variable rates before interest rate swap agreements totaled approximately $177,268,000 and $287,666,000 at December 31, 2003 and 2002, respectively. The weighted average interest rate on the Company's outstanding borrowings was approximately 4.92% and 4.76% at December 31, 2003 and 2002, respectively.
On November 21, 2003, the Company completed a $125,000,000 financing with a consortium of financial institutions and insurance companies (the "Notes") that matures in February 2010 and bears interest at Libor plus .50% (1.73% at December 31, 2003), reset every six months. The proceeds of the Notes were primarily used to repay certain variable rate borrowings.
On October 31, 2003, the Company obtained a $350,000,000 unsecured revolving line of credit with a consortium of financial institutions that matures in October 2008 and bears interest at Libor plus .40% (1.47% at December 31, 2003). At December 31, 2003, $50,050,000 was outstanding under the line of credit.
Certain borrowings contain covenants related to a maximum debt-to-equity ratio, a minimum fixed-charge coverage ratio, and certain limitations on additional borrowings. At December 31, 2003, the Company was in compliance with all such covenants. Total interest expense for all borrowings was $51,538,000 in 2003, $59,640,000 in 2002 and $59,416,000 in 2001.
Amounts outstanding under the Company's credit facilities consist of the following:
(In Thousands) December 31 2003 2002 --------------------------------------------------------------- Unsecured revolving line of credit, $350,000,000, Libor plus .40%, due October 2008 $ 50,050 $108,964 Unsecured term notes: November 30, 2001, Series A Senior Notes, $250,000,000, 5.86% fixed, due November 30, 2008 250,000 250,000 November 30, 2001, Series B Senior Notes, $250,000,000, 6.23% fixed, due November 30, 2011 250,000 250,000 November 21, 2003, Libor plus .50%, due February 2010 125,000 171,367 Other borrowings 2,583 11,370 -------- -------- 677,633 791,701 Current portion of long-term debt and other borrowings 52,525 116,905 -------- -------- $625,108 $674,796 ======== ======== |
Approximate maturities under the Company's credit facilities are as follows (in thousands):
2004 $ 52,525 2005 108 2006 -- 2007 -- 2008 250,000 Subsequent to 2008 375,000 -------- $677,633 ======== |
5. SHAREHOLDERS' EQUITY
The Company has a Shareholder Protection Rights Agreement which includes the distribution of rights to common shareholders under certain defined circumstances. The rights entitle the holder, upon occurrence of certain events, to purchase additional stock of the Company. The rights will be exercisable only if a person, group or company acquires 20% or more of the Company's common stock or commences a tender offer that would result in ownership of 20% or more of the common stock. The Company is entitled to redeem each right for one cent.
6. LEASED PROPERTIES
The Company leases land, buildings and equipment. Certain land and building leases have renewal options generally for periods ranging from two to ten years. In addition, certain properties occupied under operating leases contain normal purchase options. The Company also has an $85,000,000 construction and lease facility. Properties acquired by the lessor are constructed and/or then leased to the Company under operating lease agreements. The total amount advanced and outstanding under this facility at December 31, 2003 was approximately $80,057,000. Since the resulting leases are accounted for as operating leases, no debt obligation is recorded on the Company's balance sheet. Future minimum payments, by year and in the aggregate, under the noncancelable operating leases with initial or remaining terms of one year or more consisted of the following at December 31, 2003 (in thousands):
2004 $ 104,862 2005 80,027 2006 56,907 2007 41,801 2008 27,920 Subsequent to 2008 71,818 --------- $ 383,335 ========= |
Rental expense for operating leases was approximately $119,595,000 in 2003, $114,352,000 in 2002 and $112,470,000 in 2001.
7. STOCK OPTIONS AND RESTRICTED STOCK AWARDS
In 1999, the Company authorized the grant of options of up to 9,000,000 shares of common stock. In accordance with stock option plans approved by shareholders, options are granted to key personnel for the purchase of the Company's stock at prices not less than the fair market value of the shares on the dates of grant. Most options may be exercised not earlier than twelve months nor later than ten years from the date of grant.
Pro forma information regarding net income and earnings per share is required by SFAS 123, as amended, determined as if the Company had accounted for its employee stock options granted subsequent to December 31, 1994 under the fair value method of SFAS 123. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 2003, 2002 and 2001, respectively: risk-free interest rates of 4.0%, 4.1%, and 5.0%; dividend yield of 3.6%; 4.0%, and 3.8%; annual volatility factor of the expected market price of the Company's common stock of 0.25, 0.22, and 0.26, and an expected life of the options of 8 years, 8 years, and 5 years.
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures under SFAS 123 as amended by SFAS No. 148, the estimated fair value of the options is amortized to expense over the options' vesting period. The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to all outstanding and unvested awards in each period (in thousands, except per share amounts):
Year ended December 31, 2003 2002 2001 --------------------------------------------------------------------------- Net income (loss), as reported $334,101 $(27,590) $297,147 Add: Stock-based employee compensation expense related to option grants in 2003 included in reported net income, net of related tax effects 13 -- -- Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (5,688) (3,376) (3,394) -------- -------- -------- Pro forma net income (loss) $328,426 $(30,966) $293,753 ======== ======== ======== Income (loss) per share: Basic -- as reported $ 1.92 $ (0.16) $ 1.72 ======== ======== ======== Basic -- pro forma $ 1.89 $ (0.18) $ 1.70 ======== ======== ======== Diluted -- as reported $ 1.91 $ (0.16) $ 1.71 ======== ======== ======== Diluted -- pro forma $ 1.88 $ (0.18) $ 1.69 ======== ======== ======== |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
A summary of the Company's stock option activity and related information are as follows:
2003 2002 2001 --------------------- -------------------- ------------------- WEIGHTED Weighted Weighted AVERAGE Average Average SHARES EXERCISE Shares Exercise Shares Exercise (000'S) PRICE (000's) Price (000's) Price ------------------------------------------------------------------------- Outstanding at beginning of year 7,574 $ 29 6,156 $ 28 7,513 $ 26 Granted 20 32 3,131 32 30 33 Exercised (500) 23 (1,412) 29 (1,049) 14 Forfeited (129) 31 (301) 34 (338) 32 ------- ------- ------- Outstanding at end of year 6,965 $ 30 7,574 $ 29 6,156 $ 28 ======= ======= ======= Exercisable at end of year 4,171 $ 29 3,337 $ 28 4,477 $ 29 ======= ======= ======= Weighted-average fair value of options granted during the year $ 6.92 $ 5.72 $ 6.91 ======= ======= ======= Shares available for future grants 4,037 4,080 6,910 |
Exercise prices for options outstanding as of December 31, 2003 ranged from approximately $21 to $35, except for 39,000 options granted in connection with a 1998 acquisition for which the exercise price is approximately $18. The weighted-average remaining contractual life of those options is approximately 4 years.
In 1999, the Company entered into restricted stock agreements with two officers which provide for the award of up to 150,000 and 75,000 shares, respectively, during the period 1999 through 2003 based on the Company achieving certain increases in net income per common share and stock price levels. Through December 31, 2003, the two officers have earned 15,000 and 7,500 shares, respectively. The Company recognizes compensation expense equal to the fair market value of the stock on the award date over the remaining vesting period which expires in 2009.
8. INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:
(In Thousands) 2003 2002 --------------------------------------------------------------------------- Deferred tax assets related to: Expenses not yet deducted for tax purposes $ 101,129 $ 87,256 Deferred tax liabilities related to: Employee and retiree benefits 112,164 104,833 Inventory 73,446 52,000 Property and equipment 23,731 18,722 Other 24,896 10,333 ---------- ----------- 234,237 185,888 Net deferred tax liability 133,108 98,632 Current portion of deferred tax liability 18,575 720 ---------- ----------- Non-current deferred tax liability $ 114,533 $ 97,912 |
The components of income tax expense are as follows:
(In Thousands) 2003 2002 2001 -------------------------------------------------------------- Current: Federal $ 163,878 $ 165,289 $ 188,040 State 26,869 28,952 32,530 Deferred 27,354 43,995 (21,704) --------- --------- --------- $ 218,101 $ 238,236 $ 198,866 |
The reasons for the difference between total tax expense and the amount computed by applying the statutory Federal income tax rate to income before income taxes and the cumulative effect of accounting changes are as follows:
(In Thousands) 2003 2002 2001 -------------------------------------------------------------------------- Statutory rate applied to income before the cumulative effect of an accounting change $ 200,110 $212,008 $ 173,605 Plus state income taxes, net of Federal tax benefit 19,969 23,081 19,064 Other (1,978) 3,147 6,197 ---------- -------- --------- $ 218,101 $238,236 $ 198,866 |
9. EMPLOYEE BENEFIT PLANS
The Company's noncontributory defined benefit pension plan covers substantially all of its employees in the United States. The benefits are based on an average of the employees' compensation during the five highest of their last ten years of credited service. The Company's funding policy is to contribute amounts deductible for income tax purposes. Contributions are intended to provide not only for benefits attributed for service to date but also for those expected to be earned in the future. Pension benefits also include amounts related to a supplemental retirement plan. The Company uses a measurement date of December 31 for its pension and other benefit plans.
Pension Benefits Other Postretirement Benefits (In Thousands) 2003 2002 2003 2002 -------------------------------------------------------------------------------------------------------------------- CHANGES IN BENEFIT OBLIGATION Net benefit obligation at beginning of year $ 769,643 $ 662,532 $ 10,018 $ 10,769 Service cost 31,031 25,622 90 235 Interest cost 53,338 49,810 481 877 Plan participants' contributions -- -- 3,209 2,993 Plan amendments -- (2,727) (2,104) -- Actuarial loss 36,661 55,556 17,689 677 Gross benefits paid (26,084) (21,150) (4,975) (5,533) ----------------------------- ---------------------------- Net benefit obligation at end of year $ 864,589 $ 769,643 $ 24,408 $ 10,018 |
The accumulated benefit obligation was approximately $657,703,000 and $551,543,000 at December 31, 2003 and 2002, respectively.
The assumptions used in accounting for the defined benefit plans and other postretirement plan obligations are as follows:
Pension Benefits Other Postretirement Benefits 2003 2002 2003 2002 ----------------------------------------------------------------------------------------------------------------------- Weighted-average discount rate 6.25% 6.75% 6.25% 6.75% Rate of increase in future compensation levels 3.25% 4.15% -- -- Health care cost trend on covered charges -- -- 10.00% 10.00% |
A 10% annual rate of increase in the per capita cost of covered health care benefits is assumed for 2004. The rate was assumed to decrease gradually, reaching 5% in 2009 and thereafter.
Pension Benefits Other Postretirement Benefits (In Thousands) 2003 2002 2003 2002 ------------------------------------------------------------------------------------------------------------------------ CHANGES IN PLAN ASSETS Fair value of plan assets at beginning of year $ 655,010 $ 707,158 $ -- $ -- Actual return (loss) on plan assets 99,858 (43,083) -- -- Employer contributions 28,900 12,085 1,766 2,540 Plan participants' contribution -- -- 3,209 2,993 Gross benefits paid (26,084) (21,150) (4,975) (5,533) ----------------------------- ---------------------------- Fair value of plan assets at end of year $757,684 $ 655,010 $ -- $ -- |
The asset allocation for the Company's pension plan at December 31, 2003 and 2002, and the target allocation for 2004, by asset category follows:
Target Percentage of Plan Allocation Assets at December 31 Asset Category 2004 2003 2002 ---------------------------------------------------------------- Equity securities 60% 62% 53% Debt securities 40% 35% 43% Real estate and other -- 3% 4% --- -------------- 100% 100% 100% |
At December 31, 2003 and 2002, the Company-sponsored pension plan held 1,619,480 shares of common stock of the Company with a market value of approximately $53,767,000 and $49,880,000, respectively. Dividend payments received by the plan on Company stock totaled approximately $1,903,000 and $1,867,000 in 2003 and 2002, respectively. Fees paid during the year for services rendered by parties-in-interest were based on customary and reasonable rates for such services.
The Company's benefit plan committee establishes investment policies and strategies and regularly monitors the performance of the funds. The pension plan strategy implemented by
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
the Company's management is to achieve long-term objectives and invest the pension assets in accordance with ERISA and fiduciary standards. The long-term primary objectives for the pension plan are to provide for a reasonable amount of long-term growth of capital, without undue exposure to risk, protect the assets from erosion of purchasing power, and provide investment results that meet or exceed the pension plan's actuarially assumed long term rate of return.
Based on the investment policy for the pension plan, as well as an asset study that was performed based on the Company's asset allocations and future expectations, the expected rate of return on plan assets for measuring pension expense or income was chosen to be 8.75% for the year ending December 31, 2004. The asset study forecasted expected rates of return for the approximate duration of the Company's benefit obligations, using capital market data and historical relationships.
The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets at December 31:
Pension Benefits Other Postretirement Benefits (In Thousands) 2003 2002 2003 2002 ------------------------------------------------------------------------------------------------------ Funded status at end of year $(106,905) $(114,633) $ (24,408) $ (10,018) Unrecognized net actuarial loss 319,407 318,699 20,788 3,249 Unrecognized prior service (income) cost (3,202) (6,460) 3,017 5,492 --------- --------- --------- --------- Net amount recognized at end of year $ 209,300 $ 197,606 $ (603) $ (1,277) ========= ========= ========= ========= |
Information about the expected cash flows for the U.S. pension plan and other post retirement benefit plans follows:
(In Thousands) Pension Benefits Other Postretirement Benefits ------------------------------------------------------------------------------------ EMPLOYER CONTRIBUTION 2004 (expected) $ 29,736 $ -- EXPECTED BENEFIT PAYMENTS 2004 26,414 2,936 2005 28,252 2,953 2006 30,419 3,025 2007 33,303 3,153 2008 36,091 3,189 2009 through 2013 242,617 13,845 |
For the pension benefits, the above table reflects the total benefits expected to be paid from the plan's or the Company's assets. For other postretirement benefits, the above table reflects only the Company's share of the benefit cost. Of the benefits expected to be paid in 2004, pension benefits of $2,088,000 are expected to be paid from employer assets. Expected contributions reflect amounts expected to be contributed to funded plans.
Net periodic pension cost (income) included the following components:
Pension Benefits Other Postretirement Benefits (In Thousands) 2003 2002 2001 2003 2002 2001 ----------------------------------------------------------------------------------------------------------------------------------- Service cost $ 31,031 $ 25,622 $ 19,935 $ 90 $ 235 $ 177 Interest cost 53,338 49,810 44,525 482 877 816 Expected return on plan assets (72,432) (72,887) (72,167) -- -- -- Amortization of unrecognized transition obligation -- -- 260 -- -- -- Amortization of prior service (cost) income (3,258) (2,968) (2,871) 371 487 588 Amortization of actuarial loss 8,526 954 531 150 268 74 -------- -------- -------- -------- -------- -------- Net periodic pension cost (income) $ 17,205 $ 531 $ (9,787) $ 1,093 $ 1,867 $ 1,655 ======== ======== ======== ======== ======== ======== |
The assumptions used in accounting for the net periodic benefit costs are as follows:
Pension Benefits Other Postretirement Benefits (In Thousands) 2003 2002 2001 2003 2002 2001 -------------------------------------------------------------------------------------------------------------------------- Weighted average discount rate 6.75% 7.35% 7.63% 6.75% 7.35% 7.63% Rate of increase in future compensation levels 4.15% 4.15% 4.15% -- -- -- Expected long-term rate of return on assets 8.95% 9.45% 9.85% -- -- -- Health care cost trend covered charges -- -- -- 10.00% 6.50% 7.00% |
The effect of a one-percentage point change in the 2003 assumed health care cost trend is as follows:
(In Thousands) Decrease Increase ------------------------------------------------------------------- Total service and interest cost components on net periodic postretirement health care benefit cost $ (97) $ 145 Accumulated postretirement benefit obligation for health care benefits (1,002) 1,429 |
The Medicare Prescriptions Drug Improvement and Modernization Act of 2003 (the "Act") was signed December 8, 2003 to make additional voluntary benefits available through Medicare. As permitted by FASB Financial Statement Position No. 106-1, the Company has elected not to recognize the effects of the Act in the 2003 financial statements and accompanying notes. The Company will be evaluating the implications of the Act during 2004 and recognize expected financial effects as prescribed by accounting standards in effect for subsequent reporting periods. Specific authoritative guidance on the accounting for the federal subsidy is pending and that guidance, when issued, could require the Company to change previously reported information.
The Company has a defined contribution plan, which covers substantially all of its domestic employees. The Company's contributions are determined based on 20% of the first 6% of the covered employee's salary. Total plan expense was approximately $5,674,000 in 2003, $6,112,000 in 2002 and $5,901,000 in 2001.
10. GUARANTEES
Certain operating leases expiring in 2008 contain residual value guarantee provisions and other guarantees which would become due in the event of a default under the operating lease agreement, or at the expiration of the operating lease agreement if the fair value of the leased properties is less than the guaranteed residual value. The maximum amount of the Company's potential guarantee obligation at December 31, 2003 is approximately $80,057,000. The Company believes the likelihood of funding the guarantee obligation under any provision of the operating lease agreements is remote.
As discussed in Note 1, the Company also guarantees borrowings of certain independents and affiliates. The total borrowings of the independents and affiliates subject to guarantee by the Company at December 31, 2003 were approximately $163,006,000. These loans generally mature over periods from one to ten years. In the event that the Company is required to make payments in connection with guaranteed obligations of the independents or the affiliates, the Company would obtain and liquidate certain collateral (e.g. accounts receivable and inventory) to recover all or a portion of the amounts paid under the guarantee. To date, the Company has had no significant losses in connection with guarantees of independents' and affiliates' borrowings.
11. SEGMENT DATA
The segment data for the past five years presented on page 12 is an integral part of these financial statements.
The Company's automotive segment distributes replacement parts (other than body parts) for substantially all makes and models of automobiles, trucks and buses.
The Company's industrial segment distributes a wide variety of industrial bearings, mechanical and fluid power transmission equipment, including hydraulic and pneumatic products, material handling components, and related parts and supplies.
The Company's office products segment distributes a wide variety of office products, computer supplies, office furniture and business electronics.
The Company's electrical/electronic materials segment distributes a wide variety of electrical/electronic materials, including insulating and conductive materials for use in electronic and electrical apparatus.
Inter-segment sales are not significant. Operating profit for each industry segment is calculated as net sales less operating expenses excluding general corporate expenses, interest expense, equity in income from investees, goodwill and other amortization and minority interests. Net property, plant and equipment by country relate directly to the Company's operations in the respective country. Corporate assets are principally cash and cash equivalents and headquarters' facilities and equipment.
For the year ended December 31, 2001, Facility Consolidation and Impairment Charges discussed in Note 3 totaling approximately $12,900,000 have been classified as a reduction to operating profit of the office products segment for management reporting purposes. Additionally, for management purposes, net sales by segment excludes the effect of certain discounts, incentives and freight billed to customers. The line item "other" represents the net effect of the discounts, incentives and freight billed to customers which are reported as a component of net sales in the Company's consolidated statements of income.
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.
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EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
JURISDICTION OF NAME % OWNED INCORPORATION ----------------------------------------------------------------------------------------------------------- BALKAMP 89.6% INDIANA EIS, INC. 100.0% GEORGIA GENUINE PARTS FINANCE COMPANY 100.0% DELAWARE GPC PROCUREMENT COMPANY 100.0% GEORGIA MOTION INDUSTRIES 100.0% DELAWARE HUB SUPPLY COMPANY 100.0% KANSAS NATIONAL AUTOMOTIVE PARTS ASSOCIATION 100.0% MICHIGAN S.P. RICHARDS 100.0% GEORGIA HORIZON USA DATA SUPPLY, INC. 100.0% NEVADA JOHNSON INDUSTRIES, INC. 100.0% GEORGIA MANCO TRUCKING 100.0% ILLINOIS 1ST CHOICE AUTO PARTS, INC. 51.0% GEORGIA AUTO PARTS OF JUPITER, INC. 51.0% GEORGIA PARTS OF HILLSVILLE, INC. 70.0% GEORGIA CAROLINA PIEDMONT CORPORATION 51.0% GEORGIA PUEBLO AUTOMOTIVE, INC. 51.0% GEORGIA CLINTON COUNTY AUTO SUPPLY, INC. 51.0% GEORGIA WHITE COUNTY AUTO SUPPLY, INC. 51.0% GEORGIA MIDLAND AUTO AND TRUCK SUPPLY, INC. 70.0% GEORGIA WEST MARION COUNTY AUTO PARTS AND ACCESSORIES, INC. 70.0% GEORGIA SERVICE FIRST AUTO, INC. 51.0% GEORGIA THE FLOWERS COMPANY 49.0% NORTH CAROLINA GPC MEXICO, S.A. de C.V. 100.0% PUEBLA, MEXICO EIS MEXICO 100.0% GUADALAJARA, JALISCO, MEXICO GENUINE PARTS HOLDINGS, LTD. 100.0% ALBERTA, CANADA MOTION INDUSTRIES (CANADA), INC. 100.0% OTTAWA, ONTARIO S. P. RICHARDS CO. CANADA, INC. 100.0% BRITISH COLUMBIA, CANADA UAP INC. 100.0% QUEBEC, CANADA GARANAT INC. 100.0% FEDERAL, CANADA UAPRO INC. 100.0% FEDERAL, CANADA UNITED AUTO PARTS (Eastern) LTD. 100.0% ONTARIO, CANADA SERVICES FINANCIERS UAP INC. 100.0% QUEBEC, CANADA AUTOMOTEUR TERREBONNE LTEE 100.0% QUEBEC, CANADA CENTRE DI CULASSES DU QUEBEC INC. 100.0% QUEBEC, CANADA LES ENTREPRISES G. GAUDREAU (1986) INC. 100.0% FEDERAL, CANADA MTC SUSPENSION INC. 100.0% QUEBEC, CANADA REUSINAGE KNIGHT INC. 100.0% FEDERAL, CANADA |
EXHIBIT 23
EXHIBIT 23 - CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K) of Genuine Parts Company of our report dated February 3, 2004, included in the 2003 Annual Report to Shareholders of Genuine Parts Company.
Our audits also included the financial statement schedule of Genuine Parts Company listed in Item 15(d). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements of Genuine Parts Company listed below of our report dated February 3, 2004, with respect to the consolidated financial statements and schedule of Genuine Parts Company incorporated by reference or included in the Annual Report (Form 10-K) for the year ended December 31, 2003.
- Registration Statement No. 33-62512 on Form S-8 pertaining to the 1992 Stock Option and Incentive Plan
- Registration Statement No. 333-21969 on Form S-8 pertaining to the Directors' Deferred Compensation Plan
- Registration Statement No. 333-61611 on Form S-8 pertaining to the Assumed Stock Options Under the Electrical Insulation Suppliers, Inc. 1993 Incentive Plan
- Registration Statement No. 333-76639 on Form S-8 pertaining to the Genuine Parts Company 1999 Long-Term Incentive Plan
/s/ Ernst and Young LLP Atlanta, Georgia March 5, 2004 |
EXHIBIT 31.1
CERTIFICATIONS
I, Larry L. Prince, certify that:
1. I have reviewed this annual report on Form 10-K of Genuine Parts Company;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and
c) Disclosed in this annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's fourth fiscal quarter of 2003 that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls.
Date: March 8, 2004 /s/ Larry L. Prince ------------------- Larry L. Prince Chairman of the Board and Chief Executive Officer |
A signed original of this written statement required by Section 302 of the Sarbanes-Oxley Act of 2002 has been provided to Genuine Parts Company and will be retained by Genuine Parts Company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 31.2
CERTIFICATIONS
I, Jerry W. Nix, certify that:
1. I have reviewed this annual report on Form 10-K of Genuine Parts Company;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and
c) Disclosed in this annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's fourth fiscal quarter of 2003 that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls.
Date: March 8, 2004 /s/ Jerry W. Nix ------------------- Jerry W. Nix Executive Vice President-Finance and Chief Financial Officer |
A signed original of this written statement required by Section 302 of the Sarbanes-Oxley Act of 2002 has been provided to Genuine Parts Company and will be retained by Genuine Parts Company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.1
STATEMENT OF CHIEF EXECUTIVE OFFICER OF
GENUINE PARTS COMPANY
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Genuine Parts Company (the "Company") on Form 10-K for the year ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Larry L. Prince, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Genuine Parts Company and will be retained by Genuine Parts Company and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Larry L. Prince ------------------------------- Larry L. Prince Chairman of the Board and Chief Executive Officer March 8, 2004 |
EXHIBIT 32.2
STATEMENT OF CHIEF EXECUTIVE OFFICER OF
GENUINE PARTS COMPANY
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Genuine Parts Company (the "Company") on Form 10-K for the year ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Larry L. Prince, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Genuine Parts Company and will be retained by Genuine Parts Company and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Jerry W. Nix ------------------------------- Jerry W. Nix Executive Vice President - Finance and Chief Financial Officer March 8, 2004 |