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Item 1. Business

2021-02-19 compared with 2020-02-21 · 66 added, 110 removed, 113 unchanged (61% of the section changed)

Genuine Parts Company, a Georgia corporation incorporated on May 7, 1928, is a leading service organization engaged in the distribution of automotive replacement parts, industrial parts, and business products, each described in more detail below.

Genuine Parts Company, a Georgia corporation incorporated on May 7, 1928, is a leading service organization engaged in the distribution of automotive and industrial replacement parts, each described in more detail below.

In 2020, business was conducted from more than 10,000 locations throughout North America, Europe, Australia and New Zealand ("Australasia") via an offering of best in class operating and distribution efficiencies, industry leading coverage of consumable/replacement parts, outstanding just-in-time service and enhanced technology solutions.

At December 31, 2019 , the Company employed approximately 55,000 people worldwide.

As used in this report, the “Company” refers to Genuine Parts Company and its subsidiaries, except as otherwise indicated by the context;

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Please refer to the proxy statement for the information incorporated by reference into Part III of this Form 10-K when it is available.

BUSINESS PRODUCTS GROUP

We previously reported the results of our Business Products Group as a segment.

The Business Products Group was engaged in the wholesale distribution of a broad line of office and other business-related products through a diverse customer base of resellers for use in businesses, schools, offices, and other institutions.

Business products fall into the general categories of office furniture, technology products, general office, school supplies, cleaning, janitorial and break room supplies, safety and security items, healthcare products and disposable food service products.

As further described in the acquisitions, divestitures and discontinued operations footnote in the Notes to Consolidated Financial Statements, effective June 30, 2020, the Company completed the divestiture of its Business Products Group by selling Supply Source Enterprises, Inc.

("SSE") and S.P.

Richards Company ("SPR") in separate transactions.

The results of operations, financial position and cash flows for the Business Products Group are reported as discontinued operations for all periods presented.

The Company maintains an immaterial investment in SPR, which is included within other assets on the consolidated balance sheet.

As a result of the reclassification of the Business Products Group business to discontinued operations, we now have two segments:

the Automotive Parts Group and the Industrial Parts Group.

Our description and discussion within this "Item 1.

Business" reflect the continuing operations, unless otherwise noted.

Our segments are further detailed in the segment data footnote in the Notes to Consolidated Financial Statements.

AUTOMOTIVE PARTS GROUP

The Automotive Parts Group, the largest segment of the Company, distributes automotive parts and accessory items in North America, Europe and Australasia.

The Automotive Parts Group distributes automotive parts and accessory items in North America, Europe and Australasia.

The Automotive Parts Group offers complete inventory, cataloging, marketing, training and other programs to the automotive aftermarket in each of these regions to distinguish itself from the competition.

During 2019 , the Company’s Automotive Parts Group included National Automotive Parts Association ("NAPA") automotive parts distribution centers and automotive parts stores (“auto parts stores” or “NAPA AUTO PARTS stores”) owned and operated in the United States ("U.S.") by the Company;

To complement its competitiveness in the automotive aftermarket, this Group includes select investments in digital/e-commerce businesses across our operations.

During 2020, the Company’s Automotive Parts Group included National Automotive Parts Association ("NAPA") automotive parts distribution centers and automotive parts stores (“auto parts stores” or “NAPA AUTO PARTS stores”) owned and operated in the United States ("U.S.") by the Company and its U.S.

Automotive Group;

NAPA and Traction automotive parts distribution centers and auto parts stores in the U.S.

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automotive parts distribution centers and auto parts stores in Europe, owned and operated by Alliance Automotive Group (“AAG”), a wholly-owned subsidiary of the Company.

an import automotive parts distribution center in the U.S.

owned by the Company and operated by its Altrom America division;

an import automotive parts distribution center and branches in Canada owned and operated by Altrom Canada Corporation (“Altrom Canada”), a wholly-owned subsidiary of the Company;

distribution centers in the U.S.

owned by Balkamp, Inc.

(“Balkamp”), a wholly-owned subsidiary of the Company;

distribution facilities in the U.S.

owned by the Company and operated by its Rayloc division;

and an automotive parts distribution center and auto parts stores in Mexico, owned and operated by Autopartes NAPA Mexico ("NAPA Mexico"), a wholly-owned subsidiary of the Company.

The Company’s automotive parts distribution centers distribute replacement parts (other than body parts) for substantially all motor vehicle makes and models in service in the U.S., including imported vehicles, hybrid and electric vehicles, trucks, SUVs, buses, motorcycles, recreational vehicles and farm vehicles.

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The Company's automotive parts network was expanded in 2020 via the acquisition of various store groups and automotive operations in North America, Europe and Australasia.

AAG made a number of acquisitions to further expand their automotive operations in 2019, consisting of several small tuck-in businesses and three larger ones.

Hennig Fahrzeugteile ("Hennig"), acquired on January 1, 2019, is headquartered in Essen, North Rhine-Westphalia, and is one of Germany's leading suppliers of vehicle parts.

Hennig serves more than 9,000 customers, predominantly independent workshops and retailers.

In addition, AAG expanded its footprint into the Netherlands and Belgium via the June 1, 2019 acquisition of PartsPoint Group ("PartsPoint"), headquartered in Ede, Netherlands.

PartsPoint is a leading distributor of automotive and aftermarket parts and accessories in the Benelux.

Finally, AAG reinforced its market share in the heavy duty market in France via the acquisition of Todd Group ("Todd") on October 1, 2019.

Todd, based in Normandy, France, is a leading distributor of truck parts and accessories for the heavy-duty aftermarket.

In total, AAG's acquisitions in 2019 are expected to generate annual revenues of approximately $630 million.

The Company has a 15% interest in Mitchell Repair Information Corporation (“MRIC”), a subsidiary of Snap-on Incorporated.

MRIC is a leading automotive diagnostic and repair information company that links North American subscribers to its services and information databases.

MRIC’s core product, “Mitchell ON-DEMAND,” is a premier electronic repair information source in the automotive aftermarket.

Distribution System .

In 2019 , the Company operated 56 domestic NAPA automotive parts distribution centers located in 39 states and approximately 1,130 domestic company-owned NAPA AUTO PARTS stores located in 44 states.

At December 31, 2019 , the Company had either a noncontrolling, controlling or other interest in 8 corporations, which operated approximately 256 auto parts stores in 15 states.

In 2020, the Company's U.S.

Automotive Group operated 52 domestic NAPA automotive parts distribution centers located in 37 states and approximately 1,190 domestic company-owned NAPA AUTO PARTS stores located in 46 states.

Automotive Group is supported by several operations that are integral to the NAPA supply chain.

In addition, this Group operates two TW Distribution heavy duty parts distribution centers which serve 22 company-owned Traction Heavy Duty parts stores located in eight states.

At December 31, 2020, the Company had either a noncontrolling, controlling (less than 100% owned) or other interest in seven corporations, which operated approximately 268 auto parts stores in 12 states.

The Company’s domestic automotive operations have access to approximately 565,000 different parts and related supply items.

These items are purchased from more than 100 different suppliers, with approximately 49% of 2019 automotive parts inventories purchased from 10 major suppliers.

These items are purchased from hundreds of different suppliers, with approximately 48% of 2020 automotive parts inventories purchased from 10 major suppliers.

Since 1931, the Company's domestic operations have had return privileges with most of its suppliers, which have protected the Company from inventory obsolescence.

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NAPA Canada/UAP, founded in 1926, is a leader in the distribution and marketing of replacement parts and accessories for automobiles and trucks and is also a significant supplier to the mining and forestry industries in Canada.

NAPA Canada/UAP operates a network of nine NAPA automotive parts distribution centers, three heavy duty parts distribution centers and one fabrication/remanufacturing facility supplying 592 NAPA stores and 120 Traction wholesalers.

NAPA Canada/UAP operates a network of eight NAPA automotive parts distribution centers, four heavy duty parts distribution centers, one fabrication/remanufacturing facility and one Altrom distribution center supplying 573 NAPA stores, 122 Traction wholesalers and 24 Altrom branches.

The NAPA stores and Traction wholesalers in Canada include 198 company-owned stores, 13 joint ventures and 21 progressive owners in which NAPA Canada/UAP owns a 50% interest and 463 independently owned stores.

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NAPA Canada/UAP is a licensee of the NAPA ® name in Canada.

Additionally, Altrom Canada operates one import automotive parts distribution center and 23 branches, which distribute OE branded products for import vehicles through the NAPA Canada/UAP network.

In Australia and New Zealand, GPC Asia Pacific, originally established in 1922, is a leading distributor of automotive replacement parts and accessories.

GPC Asia Pacific operates 12 distribution centers, 406 auto parts stores under the Repco banner, 112 auto parts stores under NAPA, Ashdown Ingram and other banners, and 18 locations associated with AMX/McLeod.

In Mexico, NAPA Mexico owns and operates one distribution center and serves 25 company-owned and 18 independently-owned auto parts stores.

NAPA Mexico is a licensee of the NAPA ® name in Mexico.

AAG, founded in 1989, is a leading European distributor of vehicle parts, tools, and workshop equipment with its primary operations in six countries in Europe.

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In the United Kingdom ("U.K."), AAG operates 34 distribution centers and serves 818 stores, of which 220 are company-owned, under the banners GROUPAUTO UK & Ireland and UAN.

In Germany, AAG operates nine distribution centers and 29 company-owned stores under the banner Alliance Automotive Group Germany as well as 31 company owned stores under the banner Hennig Fahrzeugteile.

In Germany, AAG operates 11 distribution centers and 59 company-owned stores under the banner Alliance Automotive Group Germany.

In Poland, AAG serves 210 affiliated outlets under the banner GROUPAUTO Polska.

In the Netherlands and Belgium, AAG operates through a network of one national distribution center, seven regional warehouses and 195 stores, of which 133 are company owned.

The Company's North American automotive business is supported by several operations that form its Automotive Supply Group.

Balkamp, a wholly-owned subsidiary of the Company, 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 42,000 products, which constitute the “Balkamp” line of products that are distributed through the NAPA system.

These products are categorized into over 238 different product categories purchased from approximately 500 domestic suppliers and over 100 foreign manufacturers.

Balkamp provides the NAPA system with over 1,300

SKUs of oils and chemicals.

BALKAMP ® , a federally registered trademark, is important to the sales and marketing promotions of the Balkamp organization.

The Company's Rayloc division operates four facilities focused on providing cost effective, quality service in engineering, cataloging, global sourcing, and distribution.

Rayloc delivers over 10,000 part numbers, including brake pads, brake drums, chassis, and bearings through a nationwide distribution network.

Products are distributed through the NAPA system under the NAPA ® brand name.

Rayloc ® is a mark licensed to the Company by NAPA.

Additionally, Altrom America distributes OE branded products for import vehicles through the NAPA system.

Finally, the Company operates domestically two TW Distribution heavy duty parts distribution centers which serve 22 company-owned Traction Heavy Duty parts stores located in eight states.

This group distributes heavy vehicle parts through the NAPA system and direct to small and large fleet owners and operators.

In the Netherlands and Belgium, AAG operates under the banner Alliance Automotive Group Benelux through a network of one national distribution center, 6 regional warehouses and 215 stores, of which 153 are company owned.

The Company’s automotive distribution network provides access to hundreds of thousands of different parts and related supply items.

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Traction sales also include products distributed under the HD Plus name, a proprietary line of automotive parts for the heavy duty truck market.

In Australasia and Europe, products are distributed under several brand names, including many of the national brands.

In Australasia and Europe, products are distributed under several brand names, including many of the national brands, as well as the NAPA® name.

Service to NAPA AUTO PARTS Stores .

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The Company competes with automobile manufacturers (some of which sell replacement parts for vehicles built by other manufacturers as well as those that 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 retailers, including online retailers.

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 retailers, including online retailers.

The Automotive Parts Group competes primarily on product offering, service, brand recognition and price.

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(“Motion”), a wholly-owned subsidiary of the Company headquartered in Birmingham, Alabama, operates in North America.

Inenco Group ("Inenco"), also a wholly-owned subsidiary of the Company headquartered in Sydney, Australia, operates across Australasia.

Motion Asia Pacific, which was rebranded from the Inenco Group ("Inenco"), also a wholly-owned subsidiary of the Company headquartered in Sydney, Australia, operates across Australasia.

Motion distributes industrial replacement parts and related supplies such as bearings, mechanical and electrical power transmission products, industrial automation and robotics, hose, hydraulic and pneumatic components, industrial and safety supplies and material handling products to MRO (maintenance, repair and operation) and OEM (original equipment manufacturer) customers throughout the U.S., Canada and Mexico.

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In 2020, Motion served approximately 170,000 customers in all types of industries located throughout North America, including the equipment and machinery, food and beverage, forest products, primary metals, pulp and paper, mining, automotive, oil and gas, petrochemical and pharmaceutical industries;

as well as strategically targeted specialty industries such as power generation, alternative energy, government, transportation, ports, and others.

as well as strategically targeted specialty industries such

as power generation, alternative energy, government, transportation, ports, and others.

Motion services all manufacturing and processing industries with access to a database of 10.4 million parts.

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government agencies access to approximately 20,500 products and replacement parts through a Government Services Administration (“GSA”) schedule.

The Company's Industrial Parts Group network expanded in 2019 via the acquisition of various tuck-in acquisitions and industrial operations in North America and Australasia.

In North America, the Company expanded its industrial operations with two tuck-in acquisitions, which in total are expected to generate annual revenues of approximately $78 million.

In Australasia, the Company purchased the remaining 65% stake in Inenco, a leading distributor of industrial replacement parts and accessories in Australasia.

In total, Inenco is expected to generate annual revenues of approximately $400 million.

The Industrial Parts Group provides customers with supply chain efficiencies achieved through the Company’s On-Site Solutions offering.

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Most branches have warehouse facilities that stock significant amounts of inventory representative of the products used by customers in the respective market areas served.

The Industrial Parts Group distributes a wide variety of parts and products to its customers, which are primarily industrial concerns.

The Industrial Parts Group distributes a wide variety of parts and products to its customers, which are primarily industrial companies.

Products include such items as hoses, belts, bearings, pulleys, pumps, valves, chains, gears, sprockets, speed reducers, electric motors, industrial supplies, assembly tools, test equipment, adhesives and chemicals.

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The Industrial Parts Group competes with other distributors specializing in the distribution of such items, general line distributors and others who provide similar services.

To a lesser extent, the Industrial Parts Group competes with manufacturers that sell directly to the customer.

To a lesser extent, the Industrial Parts Group competes with manufacturers that sell directly to the customer and with various industrial eCommerce sites.

The Industrial Parts Group competes primarily on the breadth of product offerings, service and price.

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Risk Factors — We face substantial competition in the industries in which we do business.”

BUSINESS PRODUCTS GROUP

The Business Products Group, operated through S.P.

Richards Company (“S.P.

Richards” or "SPR"), is a wholly-owned subsidiary of the Company headquartered in Atlanta, Georgia.

Richards is engaged in the wholesale distribution of a broad line of office and other business-related products through a diverse customer base of resellers.

These products are used in businesses, schools, offices, and other institutions.

Business products fall into the general categories of office furniture, technology products, general office, school supplies, cleaning, janitorial and breakroom supplies, safety and security items, healthcare products and disposable food service products.

In 2019, the Business Products Group operated primarily in the U.S.

but was also represented in Canada through S.P.

Richards Canada, a wholly-owned subsidiary of the Company headquartered near Toronto, Ontario.

On December 6, 2019, the Company entered into a definitive agreement to sell all of its equity in SPR Canada, and the transaction closed on January 1, 2020.

Distribution System .

The Business Products Group distributes more than 98,000 items to almost 9,000 resellers and distributors throughout the U.S.

In addition, the group has an electronic, non-stock ordering system that can seamlessly deliver thousands of additional SKUs to customers in a timely fashion.

This group’s network of strategically located distribution centers provides overnight delivery of the Company’s comprehensive product offering.

Approximately 41% of the Company’s total office products purchases in 2019 were made from 10 major suppliers.

The Business Products Group sells to a wide variety of resellers.

These resellers include independently owned office product dealers, national office product superstores and mass merchants, large contract stationers, online resellers, military base stores, office furniture dealers, value-add technology resellers, business machine dealers, janitorial and sanitation supply distributors, safety product resellers and food service distributors.

Resellers are offered comprehensive marketing programs, which include print and electronic catalogs, flyers, digital content and email campaigns for reseller websites, as well as an array of education and training resources.

In addition, world-class market analytics programs are made available to qualified resellers.

The Business Products Group distributes technology products and consumer electronics including storage media, printer supplies, tablets and computer accessories, calculators, shredders, laminators, copiers, and printers;

office furniture including desks, credenzas, chairs, adjustable height desks, chair mats, office suites, panel systems, file, mobile and storage cabinets and computer workstations;

office supplies including desk accessories, accounting supplies, binders, filing supplies, report covers, writing instruments, envelopes, note pads, business forms, copy paper, mailroom and shipping supplies, drafting and audiovisual supplies;

school and educational products including bulletin boards, teaching aids and art supplies;

healthcare products including first aid supplies, gloves, exam room supplies and furnishings, cleaners and waste containers;

janitorial and cleaning supplies;

safety supplies;

disposable food service products;

and breakroom supplies including napkins, utensils, snacks and beverages.

Richards has return privileges with most of its suppliers, which have protected the Company from inventory obsolescence.

While the Company’s inventory includes products from over 700 of the industry’s leading manufacturers worldwide, S.P.

Richards also markets products under a number of proprietary brand names.

These brands include:

Business Source ® , a line of value priced, high volume office products;

Compucessory ® , a line of computer accessories;

Lorell ® , a line of office furniture;

NatureSaver ® , an offering of recycled products;

Elite Image ® , a line of remanufactured toner cartridges, premium papers and labels;

Integra ™ , a line of writing instruments;

Genuine Joe ® , a line of cleaning and breakroom products;

Sparco™, a targeted line to add depth to key office supply categories.

Through the Company’s FurnitureAdvantage ™ program, S.P.

Richards provides resellers with an additional 16,000 furniture items made available to consumers in seven to ten business days.

The Company’s Impact Products and The Safety Zone businesses also offer an additional series of proprietary brands including Eclipse™, Mopster ® , ProGuard ® , ProLite ® , PolyLite ® , ProMax ® , and The Safety Zone ® brands of products that are janitorial and sanitation based, as well as solution-specific.

Competition .

The business products distribution business is highly competitive.

In the distribution of its product offering to resellers, S.P.

Richards competes with many other wholesale distributors, as well as with certain manufacturers of office products.

Richards competes primarily on product offerings, service, marketing programs, brand recognition and price.

Further information regarding competition in the industry is set forth in “Item 1A.

Risk Factors — We face substantial competition in the industries in which we do business.”

HUMAN CAPITAL MANAGEMENT

The Company’s key human capital management objectives are to attract, retain and develop the highest quality talent.

To support these objectives, the Company’s human resources programs are designed to CONNECT prospective and current talent to opportunities at the Company, ENGAGE current employees through an inclusive and diverse culture with an emphasis internally and throughout the community, and help employees to GROW for future opportunities within the organization.

Employee Retention and Professional Development

As of December 31, 2020, the Company employed approximately 50,000 people worldwide and operated within 14 countries.

We take pride in our employees and are committed to helping our employees improve their physical, emotional and financial well-being.

Our well-being programs include an online platform that offers an interactive way to accomplish personal and financial goals and a rewards platform for completing Company sponsored competitions and well-being activities.

The Company periodically conducts a global Engagement Survey ("the Engagement Survey") as a means of measuring employee engagement and satisfaction, as well as a tool for improving our human capital strategies.

Our management reviews the results and based on the responses we have built action plans to focus on areas of improvement.

We are pleased to report

that the 2020 Engagement Survey results were overall favorable and have shown that our employees are proud to work for the Company.

The results of the 2020 Engagement Survey and future surveys help us to continuously improve our human capital strategies and find ways to foster engagement and growth for our employees.

In addition, to empower employees to continually enhance their skills and reach their maximum potential, we provide a range of development programs, resources, and opportunities to help them be successful.

Many are facilitated locally by each business with core leadership development at the Corporate level.

One of our more significant programs is focused on high potential employees from all businesses globally.

This program is a combination of in-person and virtual coursework and training with the intent to become fully immersed in the operations of our business and developing strategies and improvements cross-functionally.

The Company also offers various internship and rotational programs.

Our internship and rotational programs allow employees to see different operations of our business while also building strong relationships throughout the Company.

Additionally, we offer various on-demand and live training courses to help our employees achieve their professional and personal goals.

We believe these programs demonstrate the Company’s ongoing commitment of developing our future leaders.

Diversity and Inclusion

Our culture is strengthened by our core values, which includes a steadfast commitment to diversity and inclusion.

As part of our investment in our people, we make diversity and inclusion a priority.

Our goal is to create a culture where we value, respect, and provide fair treatment and equal opportunities for all employees.

In addition, the Company has created a Diversity and Inclusion Committee, led by senior leadership and representatives from each business unit to ensure accountabilities exist to advance new initiatives and causes directed at leveling the playing field for all concerned.

Our commitment includes supporting organizations that advance the interests of impacted individuals as well as supporting our communities in need.

In the year ended December 31, 2020, our senior leaders also participated in training and discussions around the creation of an inclusive workplace.

Employees at all levels across the organization are also participating in trainings to gain a better understanding of unconscious bias and its impact on the business.

Our efforts are also directed internally where we encourage the exchange of ideas, actively listen to employee dialogue, provide appropriate training, and ensure that the interests of all our employees are supported and advanced.

Overall, the Company seeks to create an environment where there is a sense of belonging and all voices are valued.

Please refer to the Company's 2020 Sustainability Report and Human Rights Policy, which can be found on the Company's investor relations website, for further information on human capital management.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business