Good day, and welcome to the Genuine Parts Company Fourth Quarter and Full Year Earnings Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I'd now like to turn the conference over to Sid Jones, Senior Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining us today for the Genuine Parts Company fourth quarter and full year 2021 earnings conference call. With me today are Paul Donahue, our Chairman and Chief Executive Officer; Will Stengel, our President; and Carol Yancey, our Executive Vice President and Chief Financial Officer. As a reminder, today's conference call and webcast includes a slide presentation that can be found on the Genuine Parts Company Investor Relations website. Please be advised this call may include certain non-GAAP financial measures, which may be referred to during today's discussion of our results as reported under generally accepted accounting principles. A reconciliation of these measures is provided in the earnings press release issued this morning, which is also posted in the Investors section of our website. Today's call may also involve forward-looking statements regarding the company and its businesses. The company's actual results could differ materially from any forward-looking statements due to several important factors described in the company's latest SEC filings, including this morning's press release. The company assumes no obligation to update any forward-looking statements made during this call. Now I'll turn the call over to Paul for his remarks.

Thank you, Sid, and good morning. Welcome to our fourth quarter 2021 earnings conference call. The GPC team finished the year with a strong fourth quarter, further building on the positive momentum of the first nine months of 2021. We are proud of our progress through the year and thankful to our 52,000 teammates for their hard work and ongoing commitment to excellence. With a tailwind of strong industry fundamentals, we executed on our key strategic priorities to accelerate sales, improved gross margin and enhanced operational efficiencies, which resulted in double-digit sales and earnings growth for both the quarter and full year. Our earnings growth and continued focus on working capital improvements also helped us to deliver strong cash flow. So just a tremendous effort by our global teams. They were laser-focused throughout the year and successfully navigated the ongoing challenges of the global supply chain, COVID disruptions and inflationary pressures. In early January, we successfully closed on our acquisition of Kaman Distribution Group, an industrial distributor of power transmission, automation and fluid power solutions. We are integrating this highly synergistic acquisition into our Motion business to enhance our scale and further strengthen our market-leading position. We are pleased to welcome the Kaman team to GPC and we look forward to creating significant shareholder value as a premier leader in industrial solutions. Turning to our fourth quarter financial results. Total sales were $4.8 billion, a 13% increase from last year with broad strength across all our businesses. We delivered our 17th consecutive quarter of gross margin expansion and our teams drove cost initiatives to enhance productivity and offset inflationary pressures. These efforts led to an 18% increase in the quarter in adjusted earnings per share. Total sales for the Global Automotive Group were $3.2 billion for the quarter, a 13% increase from 2020. On a comp basis, sales were up 11% from 2020 with our U.S. business posting the strongest year-over-year comps and each of our international operations achieving high single-digit sales comp. In addition, we experienced a steady sales cadence throughout the quarter with double-digit total sales increases in all three months. The ongoing economic recovery has led to strong customer demand. Improving miles driven, delays of new car production and rising used car prices are keeping more cars on the road longer, generating increased repairs and maintenance. Our strategic growth initiatives are proving effective as well. We continue to work closely with global suppliers to manage through product delays and logistical challenges to improve inventory availability. Additionally, our pricing actions have contributed positively to sales and maintain margins throughout the inflationary environment in the latter half of 2021. In the fourth quarter, we also added 130,000 SKUs to our e-catalog with the integration of Auto Accessories Garage. We were also pleased to expand our global store footprint with the addition of several bolt-on acquisitions. In total, we added more than 50 net new stores across our network, with most of these coming in the fourth quarter. Finally, as we look ahead to April, we are excited for the launch of the new AAA-branded premium battery. This battery will be available to all consumers with a focus on the 62 million AAA cardholders and 5,400 approved auto repair centers. Looking next, at our Automotive highlights by region. Total U.S. sales were up 15%, with comp sales up 13% from last year. In Canada, total sales were up 11% with comp sales up 9% from 2020. The growth in Canada was much improved from the third quarter as the easing of lockdowns drove strong demand throughout the end of the year. In the U.S., sales to both commercial and retail customers were up double-digits, with positive ticket and traffic counts for the fourth consecutive quarter. Likewise, sales were strong across a broad range of products with categories such as chassis, exhaust, brakes and ride control all outperforming. Our DIY business remains strong, trending well above historical growth rates for the past several quarters. While initially driven by the increase in DIY demand due to COVID, we have sustained that growth through a number of initiatives, including enhanced in-store merchandising, training and development, and the continued rollout of customer services such as AfterPay, which offers existing and new customers a buy now, pay later option. This program is in 1,200 stores today and currently available for all online purchases. NAPA online B2C sales continue to be our fastest-growing sales channel, up over 40% in Q4 and 53% for the full year, a 3x increase from our 2019 volume. The strength in commercial sales was driven by high-teen growth to our major account partners and sales to our NAPA AutoCare Center customers were up low-teens. The surge in members continued through the fourth quarter, and we ended the year with nearly 18,000 NAPA AutoCare Centers, an increase of over 800 shops from 2020. Rounding out our commercial segments. Fleet, government and other wholesale customers posted low double-digit sales growth for the quarter, so strong results across all our commercial accounts. In Europe, our AAG team continued to perform well with total sales up 14% and comp sales up 7% from last year. Our team delivered solid results across each of our seven markets, with the UK and Benelux each posting growth above 20%. Our teams on the ground continue to expand our market share across all important key account segments as well as accelerating the rollout of NAPA-branded products. In addition, we are pleased to report our 2021 acquisitions of Winparts, an online provider of parts and accessories; and J&S, a multi-store operation based in Ireland, both are performing above expectations. In our Asia Pac business, total sales were up 11% from 2020, with comp sales up 9% from last year and up a strong 25% on a two-year stack. Both commercial and retail sales continue to perform well, with growth for the Repco and NAPA brands driven by an accelerated digital strategy, NAPA store expansion and the Q4 reopening of key metro markets. So now, let's discuss the Global Industrial segment. Total sales for this group were $1.6 billion for the quarter, a 13% increase from last year, with comp sales up 12% from 2020. This is our third consecutive quarter of double-digit comps for this segment, driven by strong growth in both our North American and Australasian industrial businesses. The sales cadence was consistent through the quarter with double-digit sales growth in all three months. The continued improvement in our Industrial sales trends reflects the benefits of our growth initiatives and ongoing strength of the industrial economy. Our Industrial team delivered positive sales growth across virtually all major product categories and industries we serve, including double-digit increases in the majority of our industry groups. These include sectors such as equipment and machinery, iron and steel, automotive and aggregate and cement, among others. Our Industrial team continues to execute several initiatives to drive profitable growth. Our omnichannel build-outs accelerated e-commerce growth and is driving sales with new customers. We are encouraged by the incremental sales for our inside sales center and on motion.com. We have expanded our industrial services and value-added solutions capabilities in areas such as equipment repair, conveyance and automation. And our enhanced strategy to compete in a dynamic pricing environment provides us a competitive advantage while also helping us offset inflationary pressures. Our Motion team made tremendous progress with these initiatives in the quarter and the year, and we expect to make further progress again in 2022. In addition, we continue to look for strategic M&A opportunities to further boost our products and services offerings and expand our footprint. The added scale, presence and capabilities through the KDG acquisition is a great example, checking several boxes with its core power transmission and bearings business, and automation and fluid power industrial services and solutions. KDG's highly complementary growth and productivity strategies, product offering, and value-added services provide tremendous synergies and growth prospects. Our Motion team is actively bringing together the world-class talent and industrial expertise of these two organizations to build an even stronger business. In 2021, we remain focused on the positive impact of sustainable business practices. We updated our 2021 sustainability report, highlighting our progress in promoting diversity, equity and inclusion, and reducing the environmental impact of our operations. Today, we are in process of measuring our global emissions and building a strategy for targeted improvement. We will be sharing additional highlights as we move through 2022. Finally, as most of you are probably aware, we announced last month that Carol will be retiring in May after an exceptional 30-year career. As our CFO for the past nine years, Carol's leadership and countless contributions were integral to the significant growth and strong financial performance of the company. She will be greatly missed by all of us. We were pleased to announce that Bert Nappier will be stepping in as our next CFO. Bert is a strategic financial executive with a diverse background spanning 25 years, including the past 16 years with FedEx serving most recently as EVP Finance and Treasurer. Bert has also served as President of FedEx Express Europe and CEO of TNT Express. We are confident Bert's strong financial background, along with his extensive international experience, will make him a great addition to the GPC team. Carol and Bert will work together over the next few months to ensure an orderly and seamless transition. Carol will be with us for our first quarter earnings call in April, and Bert will join us on the call as well. We look forward to introducing Bert to all of you in the months ahead. Now I'll turn the call over to Will.

Thank you, Paul. Good morning, everyone. As we reflect on 2021 and pivot to 2022, I'd like to reiterate Paul's comments and thank the global GPC teams for an amazing performance in 2021. Passion for our customers, a team approach and relentless hard work translated into impressive results. We're incredibly proud of the entire GPC team. We also want to thank our strategic suppliers who closely partner with us in a challenging environment. As we discussed entering 2021, we wanted to catapult out of 2020 to deliver a great year. We're proud that each of our global business units delivered exceeding initiative and annual financial commitment in 2021. Our strong global performance is a great example of the power of one GPC team. When we focus on key priorities and collectively execute as a team. We enter 2021 with a clear strategy and focused business mix. Across the company, we identified strategic initiatives to further simplify and integrate our operations. We do this to enable a better customer experience and move at a faster, more efficient team pace. Our 2021 plans are part of a strategic vision that extends our leadership positions in attractive, highly fragmented markets. As part of our vision, our foundational priorities remain talent and culture, sales effectiveness, technology, including data and digital, supply chain and emerging technologies. Each business unit and functional teams are executing multiyear plans across these pillars. As Paul highlighted, 2021 offered numerous examples of great progress. Progress to simplify includes our action to optimize facility footprints, realign team structures, offshore field support activities, reduce IT system complexity, streamline back-office processes, leverage shared global vendor relationships and centralized indirect sourcing activities to name a few. In each example, we reduced cost, increased efficiency and better positioned our business to scale growth. Our One GPC team approach enables us to leverage GPC's scale and create value together. As we simplify our customer experience continues to be at the center of our daily action, we continue to listen, understand and act. As an example, the US Automotive team revamped our Voice of Customer Program to create more actionable data-backed customer feedback. We've seen a 40% reduction in customer issue tickets, 50% reduction in time to resolution and a 90% reduction in unresolved issues. Our long-term success starts first with talent and culture, attracting and promoting talent to lead high-performing diverse teams. We made impressive progress in 2021. A few examples include the addition of merchandising and supply chain leadership at US Automotive, technology leadership in North America Automotive, field leadership and sales promotions in North America Industrial and executive leadership promotions in Australia and Europe. Despite the challenging talent environment, we believe our recent progress supports the differentiated and inclusive employee value proposition GPC offers. As an example, in our Atlanta headquarter office, over 60% of our current teammates represent diverse talent and 75% of our new hires in 2021 represented diverse teammates. We are committed to our GPC culture advantage. Our sales effectiveness initiatives delivered exciting wins in 2021 as the teams achieved broad-based profitable growth. We make sure we adjust our resources and strategies to serve our customer segments profitably and efficiently. Examples of our actions include inside sales coverage, corporate account disciplines, digital marketing strategies, strategic promotional activities and feet on the street to name a few. We complement these selling efforts with data-backed pricing and sourcing initiatives to ensure we deliver profitable growth. Technology enables this disciplined approach to sales excellence. Our technology initiatives also delivered returns in 2021. In North America Automotive, we made progress across digital, store systems, supply chain and data platform initiatives. Examples include; enhancements for competitive pricing intelligence, customer relationship management tools, product catalog and site search, and customer-specific system integrations. We accelerated third-party technology partners that offer a faster path to delivering new capabilities and impact. We also made good progress to standardize and simplify our foundational tech infrastructure. These investments support a seamless omnichannel customer experience and are enabling above-average growth across all our digital channels. We also made progress with supply chain initiatives. The challenging global supply chain reinforced our focus on operational productivity investments. Our investments in supply chain talent, inventory, technology, labor and freight productivity, facility automation and network optimization are gaining traction. Our focus on emerging technology accelerated in 2021 with talent, analytics, strategic planning and global teamwork. Examples of progress include commercial partnerships with emerging technology companies such as Arrival and Wallbox, focused partnerships with key strategic suppliers and merchandising strategies for existing EV repair needs, to name just a few. M&A execution was also active in 2021. We completed various U.S. automotive and international bolt-ons that extend leadership positions in key local markets. We closed the year with the announcement of the KDG acquisition, which extends the market-leading position of our North American industrial platform. As Paul mentioned, the integration efforts are well underway and we remain bullish on the outlook for the combined business and the synergy plans. As we pivot to 2022, we have the same level of focus. Our 2022 priorities remain unchanged, as we look to continue the momentum. The global GPC teams have a strong resolve to take on uncontrollable challenges. And we're confident in our ability to continue to remain agile and earn success. Before I turn it over to Carol, I'd like to acknowledge her amazing career at GPC. Carol, on behalf of the extended team, we appreciate all you have done for GPC and for all our GPC stakeholders over the years. With that, I'll turn it over to Carol to detail the financials.

Thank you Will, and thanks to everyone for joining us today. We're very pleased with our fourth quarter and full year financial performance. As a reminder, our comments this morning primarily focus on quarterly and full-year adjusted results from continuing operations, which excludes the unusual items outlined in our press release. Recapping revenues, total GPC sales were $4.8 billion in the fourth quarter, up 13% from 2020. For the full year, sales were $18.9 billion, up 14%. Our gross margin for the quarter was 35.3%, a 30 basis point improvement compared to the fourth quarter last year. For the year, gross margin improved 70 basis points to 35.2% versus last year. For the quarter and the full year, our improvement in gross margin was primarily driven by the increase in supplier incentives due to strong sales volumes and the ongoing positive impact of strategic category management initiatives. Our total operating and non-operating expenses were $1.36 billion in the fourth quarter, up 14% from 2020 and at 28% of sales. For the year, these expenses are $5.31 billion, up 13% and also at 28% of sales. The increase in expenses for the quarter and the full year primarily reflects the increase in variable costs on our strong sales growth, including the impact of higher incentive compensation. In addition, we experienced inflationary cost pressures in areas such as base wages, freight and health insurance. And finally, our prior year results included benefits of temporary savings related to the pandemic. Our permanent cost savings achieved in 2020 helped to offset rising costs and difficult year-over-year comparisons. And as we've shared today and throughout the year, we continue to execute on our strategic initiatives to further reduce our expenses and to improve our operational efficiencies. This will be important in managing through the continuing inflationary pressures on costs in 2022. Our segment profit in the fourth quarter was $420 million, up 12% and our segment profit margin was 8.7% compared to 8.8% last year. This slight decline was expected and primarily reflects the impact of prior year temporary savings and the year-over-year increase in incentive compensation. Our 8.7% margin reflects a 100 basis point improvement from 2019. For the full year, segment profit was $1.7 billion, up 24% on a 14% sales increase and our segment profit margin was 8.8% compared to 8.2% last year, a 60 basis point increase from 2020 and 100 basis points from 2019. This represents our strongest full year segment profit margin since 2000. So we're very pleased with the improvement in margin and the tremendous work by our teams. Our tax rate for the fourth quarter was 23.6% compared to 25.1% in the fourth quarter of 2020, with the decrease in rate primarily related to a geographic shift in income. For the year, our tax rate was 24.9% compared to 24.5% in the prior year and primarily due to the increase in certain international tax rates throughout the year. Fourth quarter net income from continuing operations on both a reported and adjusted basis was $256 million with diluted earnings per share of $1.79. This compares to $221 million or $1.52 per adjusted diluted share in the prior year or an 18% increase. For the full year, reported net income was $899 million or $6.23 per share, and adjusted net income was $997 million or $6.91 per share, a 31% increase from 2020. So now turning to our fourth quarter results by segment. Total Automotive revenue was $3.2 billion, up 13% from last year. Our segment profit increased 11% to $266 million, with profit margin at 8.3%. While down 20 basis points from 2020 due to higher incentive compensation and the prior year benefit of temporary savings, this represents a 110 basis point margin improvement over 2019 and reflects the strong underlying progress in our operations. For the year, profit margin was 8.6%, up 60 basis points from 2020 and up 100 basis points from 2019. Our Industrial sales were $1.6 billion in the quarter, up 13% from 2020. Our segment profit of $154 million was up 15% from a year ago, and profit margin improved to a strong 9.5%, up 20 basis points from 2020 and up 90 basis points from 2019. For the full year, profit margin for this segment is 9.4%, up 90 basis points from 2020 and up 130 basis points from 2019. So now let's turn our comments to the balance sheet. At December 31, our total accounts receivable were up 15%, primarily due to the increase in sales and we remain pleased with the quality of our receivables. Our inventory was up 11%, a function of the sales increase and our commitment to having the right parts in the right place at the right time. Accounts payable increased 16% from 2020 due to the increase in inventory and extended payment terms with our global suppliers. Our AP-to-inventory ratio improved to 124% from 118% in the prior year. Our total debt at December 31 is $2.4 billion, down 10% from December of 2020. We closed the fourth quarter with available liquidity of $2.2 billion, and our debt to adjusted EBITDA improved to 1.4 times from 1.9 times in 2020. In early January this year, we issued $1 billion in new public debt in connection with the KDG acquisition. This consisted of a three-year $500 million bond at a 1.75% interest rate and 10-year $500 million bonds at a 2.75% rate. This raises our total debt to approximately $3.4 billion and our forecasted debt-to-EBITDA to 1.8 times, which is well within our targeted range and maintains our investment-grade rating. We generated $250 million in cash from operations in the fourth quarter, and our earnings growth and working capital drove $1.3 billion in cash from operations for the full year. Our free cash flow was $992 million. For the year, capital expenditures totaled $266 million for a broad range of investments such as supply chain projects at our distribution centers, including automation and other equipment for added efficiencies, digital initiatives and IT systems and software development. We will continue to reinvest in our business to drive organic growth and to improve the productivity in our operations in 2022. We also invested $284 million of cash for strategic acquisitions to accelerate growth. These investments primarily consisted of various automotive store groups across our geographies as well as online and Internet businesses, which provides us with expanded market coverage and a high return on investment. We continue to generate a robust pipeline of additional strategic and bolt-on acquisitions in both the Automotive and Industrial segments, and we look forward to the benefits of the Kaman Distribution acquisition. The company has paid a cash dividend to shareholders every year since going public in 1948. And in 2021, we paid total cash dividends of approximately $466 million. Earlier this week, our Board approved a $3.58 per share annual dividend for 2022, representing our 66th consecutive annual increase in the dividend. This represents a 10% increase from the $3.26 per share paid in 2021. Additionally, we have an active share buyback program dating back to 1994. In the fourth quarter, we used $50 million to purchase 400,000 shares. And for the year, we used $334 million to purchase 2.6 million shares. As of December 31, we were authorized to repurchase up to 11.9 million shares, and we continue to be active in this program in 2022. So turning to our outlook for 2022. We expect total sales for 2022 to be in the range of plus 9% to plus 11%. These growth rates include an estimated 2% headwind from foreign currency translation and exclude the benefit of any future acquisitions. By business, we are guiding to plus 4% to plus 6% total sales growth for the Automotive segment, including plus 5% to plus 7% comp sales growth which is before the impact of acquisitions and FX. And a total sales increase of plus 20% to plus 22% for the Industrial segment which includes the addition of KDG and a 4% to 6% comp sales increase. On the earnings side, we currently expect diluted earnings per share to be in the range of $7.45 to $7.60 and this represents an 8% to 10% increase compared to our adjusted diluted earnings per share in 2021. So that's my financial update. And throughout the quarter and full year, our teams were focused on driving strong sales, improved margins, exceptional cash flow, and they delivered on every count. We're thankful for all the great work by our teammates. And as we move forward in the new year, there is tremendous momentum in our businesses. We look forward to reporting on our first quarter 2022 performance in April. As Paul mentioned earlier, the April earnings call will be my last as CFO. It was a difficult decision to retire from the company that I love, but the timing was right, and we're in capable hands with a talented team in place to support Bert. He is well qualified and his experience and skills make him the right person to serve as our next CFO. I'm excited to work with Bert over the next few months to ensure a smooth transition. Thank you and I'll now turn it back over to Paul.

Thank you, Carol. With the fourth quarter now behind us, we can safely say that 2021 was an exceptional year for GPC. Throughout the year, our team focused on advancing the strategic priorities for our global Automotive and industrial businesses. With the backdrop of our multiyear portfolio optimization strategy, the economic recovery and strong industry fundamentals, we generated double-digit sales and earnings growth and significantly improved our profit margin. We are proud of our strong financial performance and the many accomplishments of the GPC team. Our results drove strong cash flow, which further supported our balance sheet strength. Our capital allocation priorities continue to be investing for enhanced productivity and growth through capital expenditures, strategic acquisitions, dividends and share repurchases. In total, we were pleased to effectively deploy $1.35 billion for these key priorities in 2021. So now turning to 2022, we are confident in our plans for accelerated growth and profitability as we build on the underlying momentum in both our Automotive and Industrial operations and realize the benefits from our acquisition of KDG. We are well positioned with the financial strength and flexibility to support our growth plans and provide for disciplined, value-creating capital allocation, and we look forward to sharing our progress with you. We thank you for your interest in and support of GPC, and we thank each of our GPC teammates for taking great care of our customers and delivering a terrific year for GPC. So with that, I'll turn it back to the operator for your questions.

Thank you. We’ll now begin the question-and-answer session. Our first question comes from Scot Ciccarelli from Truist Securities. Please go ahead, sir.

Hi, everyone. Scot Ciccarelli here. Paul, my question is about the varying levels of openness we've observed in different states and regions. Have you noticed significant differences in sales patterns throughout your business? Additionally, does the Industrial segment also show regional differences, or are sales fluctuations primarily influenced by overall market activity? Thank you.

Hey, thanks, Scot. And hey, Scot, welcome back. Glad to have you back on the call. What I would tell you about US Automotive, Scot, when I go through region-by-region, first off, every region in Q4 was up double digit, which I don't recall that in a number of years. Both coasts were the strongest. When I look at the East Coast, up and down the East Coast, from Atlantic, Northeast, Southeast, all strong, West, really strong. But even that, it's hard to single out one of our regions, all were up double digits. So really, really terrific performance up and down. On the Industrial side, again, double-digit increases every month in Q4. And we really don't see much regionality on the Industrial side, either. It was, again, every region performed extremely well. And I will tell you, Scot, I couldn't be more proud of our team. In a pretty challenging environment, the increases they delivered were just outstanding.

And then Paul, when you assess the growth that you're also seeing in a bunch of your international markets, are there any nuances about the US market that might be a little bit different than international, whether it's rate of increase of used vehicle prices, et cetera, that is continuing to boost the US a little bit higher than what we're seeing here nationally right now?

If we compare the US to Europe, it's clear that Europe has a much stronger market for Do-It-For-Me services, with 90% to 95% of our business there falling into that category, leaving very little for Do-It-Yourself. During the COVID period, we saw a significant surge in DIY due to the substantial financial support provided to consumers. However, I should mention that we're experiencing more supply chain challenges in the US automotive sector compared to Australia or Europe. Despite this, I'm pleased to report that the US automotive group has performed well, and we've also seen strong results in both Europe and Asia Pacific.

Excellent. Thanks a lot, guys.

The next question comes from Christopher Horvers from JPMorgan. Please go ahead.

Thanks and good morning and congratulations, Carol, on your retirement. It's been a pleasure working with you all of these years.

Thank you, Chris.

My first question is a bit of a follow-up to Scot. As you think about 2022, how do you think about the relative comp potential in the different geographies in the NAPA business? And then specifically in the US, how are you thinking about your DIY business relative to the commercial business? Do you think DIY could be up? Obviously, you're very heavily weighted towards the commercial side.

Yes. So let me just clarify, Chris. When you talk about the different geographies, are you talking different geographies in the US or US compared to Europe and Asia Pac?

Yes, the global regions.

Yes. As we look at our outlook for 2022, we expect to see solid growth across all our markets. It is early in the year, but we are observing trends from 2021 continuing into 2022. Overall, we anticipate coming in for the year across all our markets in the five to seven range, which aligns with our historical targets. However, growth in the U.S. could be somewhat stronger. Regarding your question about DIY and DIFM, our strength lies in DIFM, and we had an excellent year in that sector in 2021, with our NAPA AutoCare Center business, major accounts, and fleet business all showing double-digit growth. Our DIY business also performed very well, but we recognize that we are starting from a small base. The efforts our team has made over the last few years, particularly in enhancing store assortments, training, and hours, have significantly boosted our retail business, and we expect that momentum to continue strongly.

As a follow-up, did you notice any impact from the consumer stimulus in January? Did the DIY business experience pressure during that time, or did it decline?

Not at all, not at all which gives me a lot of confidence as we move throughout the year.

Got it. My last question is, did you discuss the inflation rates in NAPA and Motion in the fourth quarter? Also, how are you approaching 2022?

Sure. I'm glad to address that. Looking at the fourth quarter, it followed the pattern we mentioned when we exited the third quarter. It was somewhat stronger during this period, particularly in U.S. Automotive, while Global Automotive showed mid-single-digit growth, leading to around 3% growth for the full year. Global Industrial remained in the low-single digits, which was consistent throughout the year. Moving forward, we anticipate a planned impact from the third and fourth quarters into 2022. We expect the first half of 2022 to resemble the second half of 2021, followed by a moderation in the latter half. We expect stronger performance in U.S. Automotive while International Automotive and Industrial will return to more typical levels, potentially resulting in growth around 3% or slightly higher in the U.S. as reflected in our 2022 projections.

Got it. Thank you very much.

Thanks, Chris.

Thank you.

Our next question comes from Bret Jordan from Jefferies. Please go ahead.

Hey. Good morning. This is Ethan Huntley on for Bret. Thanks for taking my questions here. Just one here, surrounding market share within the Automotive Segment, I know one of your peers mentioned sort of taking price in an effort to gain share. Can you just sort of comment on sort of general industry dynamics you're seeing there and what you expect to see from a market share standpoint?

Sure, I'm happy to help, Evan. Historically, we've had a fairly stable environment in the U.S. automotive aftermarket, and we do not anticipate any significant changes in that regard. However, our teams continuously monitor pricing and market dynamics at a detailed level. At this moment, our focus is on our actions to ensure we take good care of our customers. We will keep competing in the marketplace by emphasizing the quality of our NAPA products, their availability, and the excellent service provided by our team in stores, as we strive to deliver outstanding customer service to all our valued customers.

Great. That's helpful. And then just lastly here, on the European NAPA private label business, can you just sort of touch on how that's going? Are you sort of continuing to see strong traction there and then maybe how inventory is faring related to the private label business?

Yes. Maybe Will and I tag team that. I would just give you from a high-level view, and we were over in Europe with the team a couple of weeks ago, the NAPA rollout continues very strong. As you may know, we kicked it off in the UK a couple of years ago. And we've now rolled out a number of product categories. We continue to expand into new product categories. So we're in chassis, brakes. We're looking at launching oil, have launched oil, steering calipers, toolboxes. So we continue to expand the offering, but we're also expanding into new markets. So we've gone beyond the UK into France. We've launched now Germany, Netherlands, and it continues to perform very, very well. So I don't know, Will, is there anything you would add?

No. I would just say from an inventory perspective, we continue to feel good about having access to product in all of the markets that we're rolling now. So, continued success and exciting outlook for the future.

Great. Thank you very much for taking the questions.

You’re welcome.

The next question comes from Greg Melich from Evercore ISI. Please go ahead.

Hi, thanks. So Carol thanks for all the help, and I'm going to ask you for a little more help.

Okay. Thanks.

On SG&A, I mean if the dollars grew a lot, and I know you mentioned wage pressure, new bases there, incentive comp, et cetera. How should we think about SG&A leverage this year or not, other initiatives to sort of help offset that inflation as you look at your guidance?

Yes, looking at Q4, we anticipated facing several challenges. The temporary cost savings from last year, which were around $40 million, impacted our SG&A by nearly 90 basis points this quarter. Additionally, the rise in incentive compensation was significant, similar to the temporary cost savings, making it a notable factor. We also dealt with ongoing inflationary pressures that we highlighted in Q3, particularly regarding wages and freight. Freight, in particular, posed a considerable challenge. Furthermore, we have made investments in projects and technology within our supply chain. On the positive side, our strong growth allowed us to leverage our resources more effectively than in the past, and our ongoing initiatives have continued to yield benefits. Despite the various ups and downs, our SG&A performance this year was better than we initially expected, thanks to our teams who have done an excellent job in a challenging labor market while managing resources efficiently. As we look ahead to 2022, we are anticipating improvements in operating margins and expect to maintain our gross margin rate despite the inflationary environment, with initiatives that may enhance it further. Additionally, we foresee some improvement in SG&A as we proceed into 2022, driven by our initiatives.

That's a great summary. I would like to follow up regarding your comments on the supply chain being more challenging in the US compared to the rest of the world. Could you provide more insight on why that is the case and whether you expect this situation to continue?

It's primarily due to the logistics of global freight. The port congestion on the West Coast is the most significant area affected, which is why we see it as more impacted than Europe. The volume of products coming into the US and North America is considerable. We're feeling cautiously optimistic about the global supply chain situation. The good news is that this is backed by strong underlying growth and demand. Factories around the world appear to be managing the increased volume more effectively. While port congestion remains a challenge that is gradually being addressed, progress is being made. Additionally, transportation costs are still higher than historical averages, and we will continue to navigate this situation. So, we remain cautiously optimistic as we look ahead to 2022.

And hey, Greg, I would just add to that, that we haven't seen the degradation in supply chain on the industrial side. Our industrial fill rates have, throughout this past 18 months or so, have remained pretty good, certainly better than what we've seen on the US Automotive side. So our challenge has largely relegated to US Automotive. But as Will said, we are beginning to see an uptick in our fill rates across most of our major suppliers. And look, we know our supplier partners, they have got challenges as it relates to COVID and labor and material shortages. So they're doing all they can for us. And we do believe with our size and scale, that if anybody is going to get product in this environment, it will be Genuine Parts Company.

That’s great. Good luck guys.

Thanks.

Thanks, Greg.

Thank you.

Our next question comes from Seth Basham from Wedbush Securities. Please go ahead.

Thanks a lot. Good morning and congrats on your retirement, Carol.

Thank you very much.

I have a follow-up question to the comment you just made, Paul. Just thinking about the supply dynamics for a lot of the smaller regional competitors in the US auto aftermarket business, how do you think the competitive environment can change as supply chain challenges ease, those players get more products? Do you think that it becomes more price competitive?

No, I don't think so, Seth. If you look back, I've been in the automotive aftermarket for a long time, and price has never been the main driver in this sector. As I mentioned earlier, we concentrate on providing a great quality product, ensuring it is available when our customers need it, delivering quickly, and having excellent people on the ground. Yes, we need to maintain competitive pricing, but price has never been the primary motivator in the automotive aftermarket.

Understood. Okay. Thank you. And then I have a separate follow-up question around KDG. Can you just give us a sense of what the contribution you're anticipating is in terms of sales and EPS from the acquisition in 2022?

Yes. I'll walk through that. I mean, again, as we talked about on our December conference call with KDG, I mean, the sales of roughly $1.1 billion, our guidance of 21% to 22% and the core growth of 5% to 6%, the balance of that is KDG. So we've kind of given you the 5% to 6% with KDG being the difference there. And again, similar to what we gave you in December with the EBITDA margin, again, you're talking about in the 8% to 9% range. What you have to think about, and again, I've implied that and we've got segment operating profit improvement going into next year, both with and without Kaman, when you roll it all the way down to net profit and EPS, as we've talked about earlier, you have to take into account the incremental interest expense as well as the intangible amortizations. And again, it's early in the process, obviously, the pace of synergies is the significant driver here based on where we are now and what we know, that's all sort of rolling up to roughly a $0.10 impact for this year. But again, we're only six weeks in on the synergies, really highly encouraged by what the teams are going to do. But again, we do have the implied operating margin improvement in those numbers.

Hey, Seth, I would just add to that. We are very, very encouraged what we're seeing in the early days. As Carol mentioned, we're six weeks in, but the team is out of the blocks strong. We've met with the majority of our key customers, our key suppliers in this first six weeks. The team has put an incredible amount of effort. They got a great plan in place, and we're excited with having the Kaman team as a part of GPC and we know they're going to deliver great things for us in the next few years.

Got it. Thank you very much and good luck.

Thanks.

Thank you.

The next question comes from Daniel Imbro from Stephens. Please go ahead.

Hey. Good morning, guys. Thanks for taking my question. Hopped on late, but I hope that I didn't address this already. But I wanted to ask just on the status, obviously, your fill rates seem to be getting better, and you guys have improved that supply chain through the back half of the year. What do you guys do with the biggest risks from here to your supply chain? And related to that, one of your peers has talked more about direct sourcing straight from the Far East, kind of end rounding some of the suppliers. Would love to hear your thoughts around that strategy and potential. Would that be something GPC looks to do that expands margins or how you weigh the pros and cons of that strategy? Thanks.

Hey, Daniel, I'll hit the first piece of your question in terms of biggest risk, and Paul will maybe come on behind my comments. But I think the biggest risk is talent, and it's more a internal risk just having the talent into buildings to handle the increased product flow as we recover. We've talked a lot about the labor market and having access to people in the buildings, drivers, et cetera. So from our perspective, making sure that we continue to build on all the great momentum and progress we're making around all things people and making sure that we're staffed up on our end to handle the improving volume.

Yes. And Daniel, I'll just mention that, look, we've been on the ground with a full team in place in Shenzhen, China now for the better part of a decade. And we're sourcing product today, direct sourcing product for all of our automotive businesses around the world. We go to the same factories. We consolidate our purchases between Europe, Asia Pac and the US. So we've been there for the better part of a decade, and it's worked extremely well for us.

Great. And so the relationships with the suppliers, you still have polisher reads, those are value-added and where you direct source where you could direct stores you already do?

That's correct.

Perfect. That's helpful. And then again, I apologize if you addressed this and not to get too near-term focused, but just think about Europe, the two-year stack did slow a bit on the auto side. Obviously, Europe had some pretty strict shutdowns with COVID through the fourth quarter. Just curious what you're seeing in that market and whether some countries are maybe outperforming as they reopen or any competitive changes? We've heard anecdotes of smaller competitors closing over there. So just curious how you're thinking about that market into 2022 and 2023?

Yes. So Daniel, we're in seven different markets across Europe, including the UK. The UK and Benelux countries were our strongest performers in 2021. And really continue to deliver. The UK was also our initial launch point for our NAPA-branded product. So they've got a bit of a head start on the rest of Europe. All seven countries are positive, and we certainly expect that trend to continue into 2022. We've got a great team on the ground in Europe, and we're very bullish on the outlook for our business there.

Got it. Thanks so much for the color and best of luck.

You bet. Thank you.

And we have time for one more question by Liz Suzuki from Bank of America. Please go ahead.

Great. Thanks for letting me on and I'll add my congratulations to you, Carol. It's been great working with you over the last decade.

Thank you, Liz.

So you guys have done some meaningful M&A recently and then your more standard tuck-in acquisitions. And would you categorize the M&A environment broadly as more attractive now than it has been for the last two years? Just with a lot of disruption in the market from inflation and supply chain constraints without the support of PPP loans that I think may have helped some of your smaller competitors during the height of COVID.

Yes, Liz, I think we would agree with that statement. The M&A pipeline continues to be very active. I think GPC and both on the Automotive and Industrial side of the business continues to be viewed as an acquirer of choice. And I think scale matters and especially in times where there's kind of an uncertain environment, joining the market-leading businesses and becoming part of the family is a pretty exciting proposition. So we expect that to continue and continue the good amount of activity that we've seen over the last 12 to 24 months.

Great. I would like to ask about the partnership with Wallbox. Will this be an exclusive relationship where NAPA becomes the destination for the PULSAR plus? Additionally, is the target audience for these chargers mainly DIY customers, or will there also be opportunities to sell to dealerships and other large accounts?

Yes, it's an exciting opportunity for us. It’s not an exclusive relationship, but it does have implications for both DIY and DIFM. I think it's a great example of the opportunity that NAPA has to extend its business model. We discussed Arrival and Wallbox, and whether it's charging stations or the service of the future, we're excited about it. Additionally, it's generating a lot of buzz and momentum with other strategic partnerships. The discussions are active, and the pipeline for more of these is quite strong. We are looking forward to what this could bring to the business, even though it’s still early days.

Great. Thanks very much.

Thank you, Liz.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

We'd like to thank you for your interest and participation in our fourth quarter and year-end earnings. We appreciate your support of Genuine Parts Company, and we look forward to reporting out our first quarter results in April. Thank you, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.