Net sales isare disaggregated by geographical region for each of the Company’s reportable segments, as the Company deems this presentation best depicts how the nature, amount, timing and uncertainty of net sales and cash flows are affected by economic factors. DisaggregatedThe following table presents disaggregated geographical net sales from contracts with customers by reportable segment are summarized as follows:segment:

The following tables present the changes in accumulated other comprehensive loss by component for the sixthree months ended June 30:March 31:

The accumulated other comprehensive loss components related to the pension benefits are included in the computation of net periodic benefit income in the employee benefit plans footnote. The nature of the cash flow and net investment hedge ishedges are discussed in the non-derivative financial instrumentderivatives and hedging footnote. Generally, tax effects in accumulated other comprehensive loss are established at the

Net periodic benefit income for the Company's pension plans included the following components for the three months ended June 30:March 31:

Service cost is recorded in selling, administrative and other expenses in the condensed consolidated statements of income and comprehensive income while all other components are recorded within other non-operating expenses (income). Pension benefits also include amounts related to a supplemental retirement plan. During the six months ended June 30, 2018, the Company made a $38,700 contribution to the pension plan.

The Company guarantees the borrowings of certain independently controlled automotive parts stores and businesses (“independents”) and certain other affiliates in which the Company has a noncontrolling equity ownership interest (“affiliates”). Presently, the independents are generally consolidated by unaffiliated enterprises that have controlling financial interests through ownership of a majority voting interest in the independents. The Company has no voting interest or equity conversion rights in any of the independents. The Company does not control the independents or the affiliates, but receives a fee for the guarantees. The Company has concluded that the independents are variable interest entities, but that the Company is not the primary beneficiary. Specifically, the equity holders of the independents have the power to direct the activities that most significantly impact the entities’ economic performance including, but not limited to, decisions about hiring and terminating personnel, local marketing and promotional initiatives, pricing and selling activities, credit decisions, monitoring and maintaining appropriate inventories, and store hours. Separately, the Company concluded that the affiliates are not variable interest entities. The Company’s maximum exposure to loss as a result of its involvement with these independents and affiliates is generally equal to the total borrowings subject to the Company’s guarantees. While such borrowings of the independents and affiliates are outstanding, the Company is required to maintain compliance with certain covenants, including a maximum debt to capitalization ratio and certain limitations on additional borrowings. At June 30, 2018,March 31, 2019, the Company was in compliance with all such covenants.

At June 30, 2018,March 31, 2019, the total borrowings of the independents and affiliates subject to guarantee by the Company were approximately $685,141.$809,784. These loans generally mature over periods from one to six 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 guarantees. When it is deemed probable that the Company will incur a loss in connection with a guarantee, a liability is recorded equal to this estimated loss. To date, the Company has had no significant losses in connection with guarantees of independents’ and affiliates’ borrowings.

The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash equivalents, trade accounts receivable, trade accounts payable, and borrowings under the line of credit and term loan approximate their respective fair values based on the short-term nature of these instruments. As of June 30, 2018,March 31, 2019, the carrying amount, net of debt issuance costs, and the fair value of fixed rate debt were approximately $1,483,356$1,451,281 and $1,433,875,$1,473,599, respectively. The fair value of fixed rate debt is designated as Level 2 in the fair value hierarchy (i.e., significant observable inputs) and is based primarily on the discounted value of future cash flows using current market interest rates offered for debt of similar credit risk and maturity. The carrying amount, net of debt issuance costs, of fixed rate debt of $1,483,356$1,451,281 is included in long-term debt in the accompanying condensed consolidated balance sheet.

As of June 30, 2018,March 31, 2019, the Company also had designated €700,000 of the face value of Euro-denominated debt, a non-derivative financial instrument, as a hedge of the foreign currency exchange rate exposure of an equal amount to the Company's euro-denominatedEuro-denominated net investment in a European subsidiary. As of June 30, 2018,March 31, 2019, the euro-denominatedEuro-denominated debt has a total carrying amount of $817,880,$785,330, which is included in long-term debt in the Company’s condensed consolidated balance sheet. For the three and six months ended June 30, 2018,March 31, 2019, the Company recorded a gain, net of tax, of approximately $32,755 and $16,045 respectively,$11,446 in the cash flow and net investment hedgehedges section of the accumulated other comprehensive loss in the Company’s condensed consolidated balance sheet and statementstatements of income and comprehensive income. No hedge ineffectiveness was recognized in income.

As more fully discussedThe Company acquired several businesses for approximately $153,200, net of cash acquired, during the three months ended March 31, 2019. These included Hennig Fahrzeugteile Group and several bolt-on acquisitions in Note 11the Automotive Parts Group and Axis New England and Axis New York in the Industrial Parts Group.

Certain prior period amounts have been reclassified to conform to the current year presentations. Within the condensed consolidated statements of income and comprehensive income, the Company adopted ASU 2017-07 and adjusted the prior period to include the components of net periodic benefit income other than the service cost component within other non-operating expenses (income). See the employee benefit plans footnote for additional information.

As more fully discussed in the segment informationshare-based compensation footnote of the Company’s notes to the consolidated financial statements in its 2018 Annual Report on Form 10-K, the Company adjusted priormaintains various long-term incentive plans, which provide for the granting of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance awards, dividend equivalents and other share-based awards. Options to purchase approximately 3 shares of common stock were outstanding but excluded from the computations of diluted earnings per share for the three month period ended March 31, 2019 as compared to approximately 1,334 for the three month period ended March 31, 2018. These options were excluded from the computations of diluted net sales to allocate discounts, incentives, and freight billed to customers to their respective segments and also combinedincome per common share because the industrial and electrical/electronic materials segments.options’ exercise prices were greater than the average market price of the common stock.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes contained herein and with the audited consolidated financial statements, accompanying notes, related information and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2017.2018.

Some statements in this report, as well as in other materials we file with the Securities and Exchange Commission ("SEC") or otherwise release to the public and in materials that we make available on our website, constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Senior officers may also make verbal statements to analysts, investors, the media and others that are forward-looking. Forward-looking statements may relate, for example, to the proposed business combination transaction between the Company and Essendant in which the Company will spin-off its Business Products Group and combine this business with Essendant or the acquisition of AAG and the anticipated strategic benefits, synergies and other attributes of these transactions,resulting from acquisitions, as well as future operations, prospects, strategies, financial condition, economic performance (including growth and earnings), industry conditions and demand for our products and services.

The Company cautions that its forward-looking statements involve risks and uncertainties, and while we believe that our expectations for the future are reasonable in view of currently available information, you are cautioned not to place undue reliance on our forward-looking statements. Actual results or events may differ materially from those indicated as a result of various important factors. Such factors may include, among other things, the Company’s ability to successfully integrate AAGacquired companies into the Company, including the challenges associated with the integration of processes to ensure the adequacy of our internal controls in regard to the Alliance Automotive Group business, and to realize the anticipated synergies and benefits; changes in the European aftermarket; the Company's ability to complete the transaction to spin-off its Business Products Group and combine it with Essendant, particularly in light of Staples, Inc.'s announced offer to acquire Essendant; the Company’s ability to successfully implement its business initiatives in each of its three business segments; slowing demand for the Company’s products; changes in national and international legislation or government regulations or policies, including potentialnew import tariffs and data security policies and requirements; changes in general economic conditions, including unemployment, inflation (including the impact of potential tariffs) or deflation;deflation and the United Kingdom’s referendum to exit from the European Union, commonly known as Brexit; changes in tax policies; volatile exchange rates; volatility in oil prices; significant cost increases, such as rising fuel and freight expenses; labor shortages; uncertain credit markets and other macroeconomic conditions; competitive product, service and pricing pressures; the ability to maintain favorable vendor arrangements and relationships; disruptions in our vendors’ operations, including the impact of potential tariffs and trade considerations on their operations and output, as required to meet product demand; the Company’s ability to successfully integrate its other acquired businesses;failure or weakness in our disclosure controls and procedures and internal controls over financial reporting; the uncertainties and costs of litigation; disruptions caused by a failure or breach of the

Forward-looking statements are only as of the date they are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. You are advised, however, to review any further disclosures we make on related subjects in our subsequent Forms 10-K, 10-Q, 8-K and other reports to the SEC.

Genuine Parts Company is a service organization engaged in the distribution of automotive replacement parts, industrial parts and business products. We have a long tradition of growth dating back to 1928, the year we were founded in Atlanta, Georgia. During the sixthree months ended June 30, 2018,March 31, 2019, business was conducted throughout the U.S., Canada,North America, Australia, New Zealand, Mexico, the U.K., France, Germany, Poland, and Puerto Rico from approximately 3,100 locations.

Before the impact of theserealized currency losses and transaction and other costs, the Company's adjusted net income was $233.6 million, or $1.59 on an adjusted per share diluted basis, for the three month period ended June 30, 2018, and both amounts increased 23% over the same period in the prior year. Adjusted net income was $420.0$187.2 million, an increase of 20%, or $2.85 on an0.4% as compared to adjusted net income of $186.5 million in the same three month period of the prior

year. On a per share diluted basis, adjusted net income was $1.28 for the three months ended March 31, 2019, an increase of 21%,0.8% as compared to $1.27 for the sixsame three month period ended June 30,of 2018.

The Company remains committed to its key growth initiatives, which include: driving greater share of spend with existing customers; employing an aggressive but disciplined acquisition strategy focused on both geographical in-fill and product line adjacencies; expanding the Company's digital capabilities; and the further expansion of our U.S. and international store footprint.

We continue to execute on these sales initiatives, as welland also focus on our plans and initiatives to enhance our gross margins, reduce costs and build a highly productive, sustainable and cost-effective structure. We expect our focus in these key areas to improve the Company's operating performance over the long-term.

Sales for the three months ended June 30, 2018March 31, 2019 were $4.82$4.7 billion, a 17.6%3.3% increase as compared to $4.10$4.6 billion in the same period of the prior year. Approximately 3%3.3% of the revenue increase for the three months ended June 30, 2018March 31, 2019 came from organic sales, 14%while 2% came from acquisitions, and 0.5% fromacquisitions. These items were partially offset by a positive2% negative currency impact. For the six months ended June 30, 2018 sales were $9.41 billion, a 17.5% increase as compared to $8.01 billion in the same period of the prior year. This reflects an approximate 2% increase in organic sales, a 14% contribution from acquisitions and a 1% favorable currency impact, as compared to the same six month period in 2017.

Sales for the Automotive Parts Group increased 27.7% in2.3% for the second quarter of 2018,three months ended March 31, 2019, as compared to the same period in the prior year. This group’s revenue increase for the three months ended June 30, 2018March 31, 2019 consisted of an approximate 2%3.1% increase in organic sales and a 25%2.9% benefit from acquisitionsacquisitions. These items were partially offset by an unfavorable foreign currency impact of approximately 3.4% and a 1% favorable currency impact. This group's 28.6% sales increase for the six month period ended June 30, 2018 reflects a 1% increase from organic sales growth, an approximate 26% contribution from acquisitions, and a 1%0.3% negative impact from currency from our businesses throughout Europe, Australasia, Canada, and Mexico.the sale of Grupo Auto Todo. We anticipate the Company’s initiatives to drive both organic and acquisitive growth will positively benefit the Automotive Parts Group in the quarters ahead.

Cost of goods sold for the three months ended June 30, 2018March 31, 2019 was $3.30$3.23 billion, a 15.4%2.5% increase from $2.86$3.15 billion for the same period in 2017.2018. As a percentage of net sales, cost of goods sold was 68.4%68.2% for the three month periodmonths ended June 30, 2018,March 31, 2019, as compared to 69.8%68.7% in the same three month period of 2017. Cost of goods sold for the six months ended June 30, 2018 was $6.45 billion, a 15.0% increase from $5.61 billion for the same period in the prior year. As a percent of net sales, cost of goods sold was 68.6% as compared to 70.1% in the same six month period of 2017.2018. The increase in cost of goods sold for the three and six month periodsmonths ended June 30, 2018March 31, 2019 primarily relates to the sales increasesincrease for these periodsthis period as compared to the same three and six month periodsperiod of the prior year. The increasesincrease for these periods werethis period was partially offset by the favorable impact of the lower cost of goods sold model at AAG as well as at certain other acquisitions. In addition, cost of goods sold has been favorably impacted by the improvement in the industrial business.Automotive Parts Group and Industrial Parts Group due to favorable global supplier negotiations, more flexible and sophisticated pricing strategies, a shift in product mix to products that carry a higher gross margin and higher supplier incentives due to improved volumes for these segments. The Company’s cost of goods sold includes the total cost of merchandise sold, including freight expenses associated with moving merchandise from our vendors to our distribution centers, retail stores and branches, as well as vendor volume incentives and inventory adjustments. Gross profit as a percentage of net sales may fluctuate based on (i) changes in merchandise costs and related vendor volume incentives or pricing, (ii) variations in product and customer mix, (iii) price changes in response to competitive pressures, (iv) physical inventory and LIFO adjustments, and (v) changes in foreign currency exchange rates.

Total operating expenses increased to $1.21$1.3 billion for the three month periodmonths ended June 30, 2018March 31, 2019 as compared to $948.7 million$1.2 billion for the same three month period in 2017.2018. As a percentage of net sales, operating expenses increased to 25.1%26.7% as compared to 23.1%26.1% in the same three month period of the previous year. For the six months ended June 30, 2018, these expenses totaled $2.41 billion, or 25.6% as a percentage of net sales, compared to $1.87 billion, or 23.3% as a percentage of net sales for the same six month period in the prior year. The increase in operating expenses as a percentage of net sales for the three and six month periodsmonths ended June 30, 2018March 31, 2019 reflects the Company’s deleveragingeffect of expenses on lower comparable sales in the U.S. Automotive and

The Company’s operating expenses are substantially comprised of compensation and benefit relatedbenefit-related costs for personnel. Other major expense categories include facility occupancy costs for headquarters, distribution centers and retail store/branch operations, insurance costs, accounting, legal and professional services, technology and digital costs, transportation and delivery costs, travel and advertising. Management’s ongoing cost control measures in these areas have served to improve the Company’s overall cost

structure. The Company's recent acquisitions have lower costs of goods sold and higher levels of operating costs as compared to the Company's other businesses, however, the operating profit margins remain consistent.

The Automotive Parts Group’s operating profit increased 17.5%decreased 3.0% in the three month periodmonths ended June 30, 2018March 31, 2019 as compared to the same period of 2017,2018, and its operating profit margin was 8.9%6.8% as compared to 9.7%7.2% in the same period. For the six months ended June 30, 2018, the Automotive Parts Group's operating profit increased approximately 19.3% and the operating profit margin was 8.1% as compared to 8.7% in the same six month period of 2017.the previous year. The decrease in operating profit marginas a percent of sales for the three and six month periodsmonths ended June 30, 2018March 31, 2019 is primarily due to the slow organic sales environmentimpact of rising costs and the deleveraging of expenses in our U.S. Automotive businesses and its impact on expense leveragethe European automotive business. These increases were partially offset by the improvement in gross margin for the first quarter of 2019 as well as higher costs in areas such as payroll, IT, digital, legal, professional and insurance, freight and delivery and acquisition related costs.

The Industrial Parts Group’s operating profit increased 11.9%7.9% in the three month periodmonths ended June 30, 2018March 31, 2019 as compared to the same three month period of 2017,2018, and the operating profit margin for this group was 7.8%7.4% compared to 7.6%7.2% for the same period of the previous year. OperatingThe improved operating profit forreflects the Industrial Parts Group increased by 10.0% forpositive impact of strong sales growth, improved gross margins and the six month periodleveraging of expenses in the three months ended June 30, 2018,March 31, 2019 as compared to the same period in 2017,2018, driven by a healthy industrial economy and the operating profit margin was 7.5% compared to 7.4% for the same six month period in 2017. The increase in operating profit margin for the three and six month periods ended June 30, 2018 is primarily due to the Industrial Group's 6.5% and 5.5%, respectively, increase in organic sales volume and its positive impact on expense leverage, as well as improved core gross margin.effective execution of Industrial's growth initiatives.

The effective income tax rate was 24.4%24.2% for the three months ended June 30, 2018,March 31, 2019, compared to 36.1%23.0% for the same three month period in 2017. The effective2018, primarily due to differences in income tax rate was 23.8% for the six month period ended June 30, 2018, compared to 35.3% for the same period in 2017. The rate decrease in the threerates associated with transaction and six month periods ended June 30, 2018 reflects the positive impact of the Tax Cuts and Jobs Act enacted in December 2017other costs as well as a favorable mix of U.S. and foreign earnings, including AAG acquiredstatute adjustments recorded in November 2017, as compared to the same three and six month periods in 2017.periods.

The Company’s cash balance of $355.1$356.9 million at June 30, 2018March 31, 2019 increased $40.2$23.4 million, or 12.8%7.0%, from December 31, 2017.2018. For the sixthree months ended June 30, 2018,March 31, 2019, the Company used $82.5$138.4 million for acquisitions and other investing activities, $204.6$105.4 million for dividends paid to the Company’s shareholders, and $65.1$45.6 million for investments in the Company via capital expenditures. These items were partially offset by the Company’s earnings and net cash provided by operating activities.