Napa Auto Parts 2006 Annual Report Download - page 6

We are pleased to report that Genuine Parts Company achieved
another record level of sales and earnings in 2006.
Total sales for 2006 rose to $10.5 billion, an increase of 7% com-
pared to 2005, and our first year to surpass the $10 billion revenue
milestone. is is a significant achievement for the GPC team!
Our progress in 2006 follows 8% increases in revenues in both 2004
and 2005 and we remain encouraged by the positive trend in total
sales growth for the Company. Net earnings for the year were $475
million, an increase of 9% compared to 2005, and earnings per share
were $2.76, up 10%. 2006 represents our third consecutive year of
double-digit growth in earnings per share.
With another record year behind us, we have now increased sales in 56
of the last 57 years and increased profits in 44 of the last 46 years. We
are proud of this record and we feel that it reflects our unending com-
mitment to steady and consistent growth at Genuine Parts Company.
Financial Strength
Ongoing asset management initiatives and the continued generation
of consistent and strong cash flows helped to further strengthen our
financial condition in 2006. Our year-end ratio of current assets to
current liabilities was 3.2 to 1 and working capital as a percentage of
sales improved for the third consecutive year to 25%. Cash flow from
operations was consistent with last year at $434 million and, after
deducting dividends and capital expenditures, we generated positive
free cash flow of $79 million. At December 31, 2006, our total debt
was $500 million, which was unchanged from the prior year.
During 2006, we used our cash to repurchase 2.9 million shares of
our Company stock. We continue to view this as a good use of cash
and, at our August 2006 Board meeting, our Directors authorized
an additional 15 million shares for repurchase. As of December 31,
2006, we have 15.3 million shares available for repurchase under
our current program. We will continue to make opportunistic share
repurchases in 2007. We also invested $126 million in capital expen-
ditures in our businesses and we returned $228 million to shareholders
through dividends paid in 2006.
Dividends
e Company has paid a cash dividend to shareholders every year
since going public in 1948, and in 2006 we improved our dividend
by 8% to $1.35 per share, representing our 50th consecutive year
of increases. e Board of Directors, at its meeting on February 19,
2007, raised the cash dividend payable April 2, 2007 by 8% to an
annual rate of $1.46 per share, or 53% of our 2006 earnings. 2007
will be our 51st consecutive year of increased dividends paid to our
shareholders.
Progress In Operations
Again in 2006, each of our four business segments contributed to
our overall progress for the year. Motion Industries, our Industrial
Distribution company, reported very strong results, with its sales
increasing 11% for the third consecutive year. Looking ahead to
2007, the outlook for the industrial markets served by Motion is
promising. e manufacturing sector of the economy, as measured
by the Industrial Production and Manufacturer Capacity Utilization
indices, remains healthy and customer demand is likely to provide
us further growth opportunities. EIS, our Electrical/Electronic
segment, also benefited from the strength in the manufacturing
sector and, in 2006, reported a 20% increase in sales for the year.
We expect 2007 to be another good year for EIS.
S.P. Richards, our Office Products company, improved sales by 7%
for the year, and this follows an 8% increase in sales in 2005. e
Office Products Group generates consistent and steady results and we
are encouraged by its performance in 2006. is year’s solid progress
reflects our product and customer expansion efforts and the continued
development of effective marketing programs and dealer services. In
2007, we expect these initiatives, combined with the ongoing growth
in Gross Domestic Product (GDP) and white-collar employment, to
drive additional progress for the Office Products Group.
e Automotive Parts Group, our largest business group, increased
sales by 3% in 2006, following 6% increases in 2004 and 2005. Core
NAPA operations, which excludes our Johnson Industries subsidiary,
improved revenues by 5%, so the progress made in our ongoing
Automotive operations was somewhat offset by our decision in 2005
to downsize the operations at Johnson Industries. We continue to
believe this was the right decision for the Company. Looking ahead,
we expect our Automotive growth initiatives to position the group for
solid progress in 2007 and beyond. In addition, market factors such
as total vehicles on the road, the age and mix of the vehicles and miles
driven, remain positive for the industry and they create excellent
growth opportunities for the Automotive Parts Group.
GPC Directors
e GPC Board, at its meeting in November 2006, elected George C.
“Jack” Guynn as a new Director. Mr. Guynn is the retired President
and Chief Executive Officer of the Federal Reserve Bank of Atlanta.
Jack is an experienced and successful executive and we are pleased to
have him joining our Board. We look forward to his contributions in
the years ahead. We are asking the shareholders to elect Jack, along
with all other Directors, at the April 23, 2007 Shareholders’ Meeting.
Management
During 2006, there were a number of management changes and
promotions that we would like to share with you. G. omas Braswell,
our Senior Vice President – Information Technology, retired from the
Company in February 2007. Tom’s impressive career at Genuine Parts
Company spans over 40 years and the Company has benefited greatly
To our
Shareholders
Date amount oneShareBecame
march1959 100% 2ShareS
april1962 200% 6ShareS
DecemBer1967 50% 9ShareS
may1970 50% 13.5ShareS
may1972 100% 27ShareS
april1979 50% 40.5ShareS
april1984 50% 60.75ShareS
may1987 50% 91.125ShareS
april1992 50% 136.69ShareS
april1997 50% 205.04ShareS
Summary of Stock Dividends
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