UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-5690

__________________________________________

GENUINE PARTS COMPANY

(Exact name of registrant as specified in its charter)

__________________________________________


GA						58-0254510
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2999 WILDWOOD PARKWAY,

30339

ATLANTA,

~~30339~~

(Address of principal executive offices)

(Zip Code)

678-934-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of each exchange on which registered

Common Stock, $1.00 par value per share

GPC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were ~~142,421,748~~141,595,187 shares of common stock outstanding as of ~~October~~April 18, ~~2021.~~2022.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(in thousands, except share and per share data)	(in thousands, except share and per share data)	September 30, 2021		December 31, 2020		(in thousands, except share and per share data)	March 31, 2022		December 31, 2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	919,097	$	990,166	Cash and cash equivalents	$	610,776	$	714,701
Trade accounts receivable, less allowance for doubtful accounts (2021 – $44,807; 2020 – $36,622)		1,888,253		1,556,966
Trade accounts receivable, less allowance for doubtful accounts (2022 – $49,644; 2021 – $44,425)						Trade accounts receivable, less allowance for doubtful accounts (2022 – $49,644; 2021 – $44,425)	2,137,806		1,797,955
Merchandise inventories, net	Merchandise inventories, net	3,748,418		3,506,271		Merchandise inventories, net	4,211,496		3,889,919
Prepaid expenses and other current assets	Prepaid expenses and other current assets	1,226,416		1,060,360		Prepaid expenses and other current assets	1,467,356		1,353,847
Total current assets	Total current assets	7,782,184		7,113,763		Total current assets	8,427,434		7,756,422
Goodwill	Goodwill	1,890,821		1,917,477		Goodwill	2,534,521		1,915,307
Other intangible assets, less accumulated amortization	Other intangible assets, less accumulated amortization	1,409,886		1,498,257		Other intangible assets, less accumulated amortization	1,935,153		1,406,401
Deferred tax assets		43,726		65,658
Property, plant and equipment, less accumulated depreciation (2021 – $1,315,825; 2020 – $1,268,170)		1,107,374		1,162,043
Property, plant and equipment, less accumulated depreciation (2022 – $1,386,714; 2021 – $1,339,706)						Property, plant and equipment, less accumulated depreciation (2022 – $1,386,714; 2021 – $1,339,706)	1,239,046		1,234,399
Operating lease assets	Operating lease assets	1,040,724		1,038,877		Operating lease assets	1,125,803		1,053,689
Other assets	Other assets	700,223		644,140		Other assets	1,011,354		985,884
Total assets	Total assets	$	13,974,938	$	13,440,215	Total assets	$	16,273,311	$	14,352,102

Liabilities and equity	Liabilities and equity					Liabilities and equity
Current liabilities:	Current liabilities:					Current liabilities:
Trade accounts payable	Trade accounts payable	$	4,819,084	$	4,128,084	Trade accounts payable	$	5,214,540	$	4,804,939
Current portion of debt	Current portion of debt	—		160,531		Current portion of debt	120,000		—
Dividends payable	Dividends payable	116,356		114,043		Dividends payable	126,891		115,876
Other current liabilities	Other current liabilities	1,601,883		1,491,426		Other current liabilities	1,788,101		1,660,768
Total current liabilities	Total current liabilities	6,537,323		5,894,084		Total current liabilities	7,249,532		6,581,583
Long-term debt	Long-term debt	2,432,539		2,516,614		Long-term debt	3,387,851		2,409,363
Operating lease liabilities	Operating lease liabilities	781,750		789,294		Operating lease liabilities	847,342		789,175
Pension and other post–retirement benefit liabilities	Pension and other post–retirement benefit liabilities	254,727		265,687		Pension and other post–retirement benefit liabilities	263,257		265,134
Deferred tax liabilities	Deferred tax liabilities	222,467		212,910		Deferred tax liabilities	400,980		280,778
Other long-term liabilities	Other long-term liabilities	549,574		543,623		Other long-term liabilities	516,473		522,779
Equity:	Equity:					Equity:
Preferred stock, par value – $1 per share; authorized – 10,000,000 shares; none issued	Preferred stock, par value – $1 per share; authorized – 10,000,000 shares; none issued	—		—		Preferred stock, par value – $1 per share; authorized – 10,000,000 shares; none issued	—		—
Common stock, par value – $1 per share; authorized – 450,000,000 shares; issued and outstanding – 2021 – 142,503,493 shares; 2020 – 144,354,335 shares		142,503		144,354
Common stock, par value – $1 per share; authorized – 450,000,000 shares; issued and outstanding – 2022 – 141,627,749 shares; 2021 – 142,180,683 shares						Common stock, par value – $1 per share; authorized – 450,000,000 shares; issued and outstanding – 2022 – 141,627,749 shares; 2021 – 142,180,683 shares	141,628		142,181
Additional paid-in capital	Additional paid-in capital	118,223		117,165		Additional paid-in capital	126,064		119,975
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(804,877)		(857,739)
Retained earnings	Retained earnings	3,995,537		3,979,779		Retained earnings	4,132,925		4,086,325
Accumulated other comprehensive loss		(1,073,086)		(1,036,502)
Total parent equity	Total parent equity	3,183,177		3,204,796		Total parent equity	3,595,740		3,490,742
Noncontrolling interests in subsidiaries	Noncontrolling interests in subsidiaries	13,381		13,207		Noncontrolling interests in subsidiaries	12,136		12,548
Total equity	Total equity	3,196,558		3,218,003		Total equity	3,607,876		3,503,290
Total liabilities and equity	Total liabilities and equity	$	13,974,938	$	13,440,215	Total liabilities and equity	$	16,273,311	$	14,352,102

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME ~~(LOSS)~~

(UNAUDITED)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(in thousands, except per share data)	(in thousands, except per share data)	2021		2020		2021		2020		(in thousands, except per share data)	2022		2021
Net sales	Net sales	$	4,818,849	$	4,370,086	$	14,067,301	$	12,285,839	Net sales	$	5,294,635	$	4,464,714
Cost of goods sold	Cost of goods sold	3,108,082		2,842,020		9,126,614		8,079,108		Cost of goods sold	3,468,688		2,923,899
Gross profit	Gross profit	1,710,767		1,528,066		4,940,687		4,206,731		Gross profit	1,825,947		1,540,815
Operating expenses:	Operating expenses:									Operating expenses:
Selling, administrative and other expenses	Selling, administrative and other expenses	1,338,768		1,140,156		3,883,241		3,254,442		Selling, administrative and other expenses	1,403,979		1,195,164
Depreciation and amortization	Depreciation and amortization	72,121		69,097		218,377		203,084		Depreciation and amortization	87,369		72,296
Provision for doubtful accounts	Provision for doubtful accounts	4,284		5,633		14,230		23,452		Provision for doubtful accounts	4,494		4,909
Restructuring costs		—		10,968		—		39,009
Goodwill impairment charge		—		—		—		506,721
Total operating expenses	Total operating expenses	1,415,173		1,225,854		4,115,848		4,026,708		Total operating expenses	1,495,842		1,272,369
Non-operating (income) expenses:
Interest expense		14,958		25,788		50,127		72,218
Non-operating expense (income):										Non-operating expense (income):
Interest expense, net										Interest expense, net	19,850		18,324
Other	Other	(18,338)		(21,241)		(79,728)		(46,017)		Other	(15,461)		(35,737)
Total non-operating (income) expenses		(3,380)		4,547		(29,601)		26,201
Total non-operating expense (income)										Total non-operating expense (income)	4,389		(17,413)
Income before income taxes	Income before income taxes	298,974		297,665		854,440		153,822		Income before income taxes	325,716		285,859
Income taxes	Income taxes	70,389		64,747		211,649		162,059		Income taxes	79,878		68,149
Net income (loss) from continuing operations		228,585		232,918		642,791		(8,237)
Net loss from discontinued operations		—		(5,387)		—		(192,069)
Net income (loss)		$	228,585	$	227,531	$	642,791	$	(200,306)
Net income										Net income	$	245,838	$	217,710
Dividends declared per common share	Dividends declared per common share	$	0.8150	$	0.7900	$	2.4450	$	2.3700	Dividends declared per common share	$	0.8950	$	0.8150
Basic earnings (loss) per share:
Continuing operations		$	1.60	$	1.61	$	4.47	$	(0.06)
Discontinued operations		—		(0.03)		—		(1.33)
Basic earnings (loss) per share		$	1.60	$	1.58	$	4.47	$	(1.39)
Diluted earnings (loss) per share:
Continuing operations		$	1.59	$	1.61	$	4.44	$	(0.06)
Discontinued operations		—		(0.04)		—		(1.33)
Diluted earnings (loss) per share		$	1.59	$	1.57	$	4.44	$	(1.39)
Basic earnings per share										Basic earnings per share	$	1.73	$	1.51
Diluted earnings per share										Diluted earnings per share	$	1.72	$	1.50

Weighted average common shares outstanding	Weighted average common shares outstanding	142,871		144,273		143,826		144,528		Weighted average common shares outstanding	141,916		144,413
Dilutive effect of stock options and non-vested restricted stock awards	Dilutive effect of stock options and non-vested restricted stock awards	718		762		796		—		Dilutive effect of stock options and non-vested restricted stock awards	926		887
Weighted average common shares outstanding – assuming dilution	Weighted average common shares outstanding – assuming dilution	143,589		145,035		144,622		144,528		Weighted average common shares outstanding – assuming dilution	142,842		145,300

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(UNAUDITED)

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2021 2020 2021 2020
Net income (loss) $ 228,585 $ 227,531 $ 642,791 $ (200,306)
Other comprehensive (loss) income, net of income taxes:
Foreign currency translation adjustments, net of income taxes in 2021 — $11,328 and $25,494; 2020 — $22,896 and $19,451, respectively (82,574) 34,063 (75,738) (36,951)
Cash flow hedge adjustments, net of income taxes in 2021 — $1,384 and $4,151; 2020 — $1,313 and $4,731, respectively 3,741 3,550 11,223 (12,792)
Pension and postretirement benefit adjustments, net of income taxes in 2021 — $3,425 and $10,280; 2020 �� $2,998 and $9,023, respectively 9,301 8,187 27,931 24,479
Other comprehensive (loss) income, net of income taxes (69,532) 45,800 (36,584) (25,264)
Comprehensive income (loss) $ 159,053 $ 273,331 $ 606,207 $ (225,570)


	Three Months Ended March 31,
(in thousands)	2022		2021
Net income	$	245,838	$	217,710
Other comprehensive income, net of income taxes:
Foreign currency translation adjustments, net of income taxes in 2022 — $8,411; 2021 — $21,185	42,132		(295)
Cash flow hedge adjustments, net of income taxes in 2022 — $1,384; 2021 — $1,384	3,741		3,741
Pension and postretirement benefit adjustments, net of income taxes in 2022 — $2,580; 2021 — $3,421	6,989		9,296
Other comprehensive income, net of income taxes	52,862		12,742
Comprehensive income	$	298,700	$	230,452

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)


		Three Months Ended September 30, 2021																Three Months Ended March 31, 2022
(in thousands, except share and per share data)	(in thousands, except share and per share data)	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Parent Equity		Non-controlling Interests in Subsidiaries		Total Equity		(in thousands, except share and per share data)	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Parent Equity		Non-controlling Interests in Subsidiaries		Total Equity
July 1, 2021		143,301,673	$	143,302	$	111,972	$	(1,003,554)	$	3,982,159	$	3,233,879	$	11,266	$	3,245,145
January 1, 2022																	January 1, 2022	142,180,683	$	142,181	$	119,975	$	(857,739)	$	4,086,325	$	3,490,742	$	12,548	$	3,503,290
Net income	Net income	—	—		—		—		228,585		228,585		—		228,585		Net income	—	—		—		—		245,838		245,838		—		245,838
Other comprehensive loss, net of tax		—	—		—		(69,532)		—		(69,532)		—		(69,532)
Cash dividend declared, $0.8150 per share		—	—		—		—		(116,486)		(116,486)		—		(116,486)
Share-based awards exercised		2,256	1		(69)		—		—		(68)		—		(68)
Other comprehensive income, net of tax																	Other comprehensive income, net of tax	—	—		—		52,862		—		52,862		—		52,862
Cash dividend declared, $0.8950 per share																	Cash dividend declared, $0.8950 per share	—	—		—		—		(126,891)		(126,891)		—		(126,891)
Share-based awards exercised, including tax benefit of $714																	Share-based awards exercised, including tax benefit of $714	18,670	19		(1,082)		—		—		(1,063)		—		(1,063)
Share-based compensation	Share-based compensation	—	—		6,320		—		—		6,320		—		6,320		Share-based compensation	—	—		7,171		—		—		7,171		—		7,171
Purchase of stock	Purchase of stock	(800,436)	(800)		—		—		(98,721)		(99,521)		—		(99,521)		Purchase of stock	(571,604)	(572)		—		—		(72,347)		(72,919)		—		(72,919)
Noncontrolling interest activities	Noncontrolling interest activities	—	—		—		—		—		—		2,115		2,115		Noncontrolling interest activities	—	—		—		—		—		—		(412)		(412)
September 30, 2021		142,503,493	$	142,503	$	118,223	$	(1,073,086)	$	3,995,537	$	3,183,177	$	13,381	$	3,196,558
March 31, 2022																	March 31, 2022	141,627,749	$	141,628	$	126,064	$	(804,877)	$	4,132,925	$	3,595,740	$	12,136	$	3,607,876

Nine Months Ended September 30, 2021
(in thousands, except share and per share data) Common Stock Shares Common Stock Amount Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Total Parent Equity Non-controlling Interests in Subsidiaries Total Equity
January 1, 2021 144,354,335 $ 144,354 $ 117,165 $ (1,036,502) $ 3,979,779 $ 3,204,796 $ 13,207 $ 3,218,003
Net income — — — — 642,791 642,791 — 642,791
Other comprehensive loss, net of tax — — — (36,584) — (36,584) — (36,584)
Cash dividend declared, $2.4450 per share — — — — (351,606) (351,606) — (351,606)
Share-based awards exercised 385,419 385 (19,783) — — (19,398) — (19,398)
Share-based compensation — — 20,841 — — 20,841 — 20,841
Purchase of stock (2,236,261) (2,236) — — (281,650) (283,886) — (283,886)
Cumulative effect from adoption of ASU 2019-12 (1) — — — — 6,223 6,223 — 6,223
Noncontrolling interest activities — — — — — — 174 174
September 30, 2021 142,503,493 $ 142,503 $ 118,223 $ (1,073,086) $ 3,995,537 $ 3,183,177 $ 13,381 $ 3,196,558

~~Table of Contents~~

~~GENUINE PARTS COMPANY AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)~~

~~(UNAUDITED)~~

Three Months Ended September 30, 2020
(in thousands, except share and per share data) Common Stock Shares Common Stock Amount Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Total Parent Equity Non-controlling Interests in Subsidiaries Total Equity
July 1, 2020 144,264,189 $ 144,264 $ 107,819 $ (1,212,372) $ 3,809,564 $ 2,849,275 $ 21,613 $ 2,870,888
Net income — — — — 227,531 227,531 — 227,531
Other comprehensive income, net of tax — — — 45,800 — 45,800 — 45,800
Cash dividend declared, $0.7900 per share — — — — (113,982) (113,982) — (113,982)
Share-based awards exercised 25,464 26 (990) — — (964) — (964)
Share-based compensation — — 6,420 — — 6,420 — 6,420
Noncontrolling interest activities — — — — — — (920) (920)
September 30, 2020 144,289,653 $ 144,290 $ 113,249 $ (1,166,572) $ 3,923,113 $ 3,014,080 $ 20,693 $ 3,034,773

Nine Months Ended September 30, 2020
(in thousands, except share and per share data) Common Stock Shares Common Stock Amount Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Total Parent Equity Non-controlling Interests in Subsidiaries Total Equity
January 1, 2020 145,378,158 $ 145,378 $ 98,777 $ (1,141,308) $ 4,571,860 $ 3,674,707 $ 20,793 $ 3,695,500
Net loss — — — — (200,306) (200,306) — (200,306)
Other comprehensive loss, net of tax — — — (25,264) — (25,264) — (25,264)
Cash dividend declared, $2.3700 per share — — — — (342,426) (342,426) — (342,426)
Share-based awards exercised 47,939 48 (1,802) — — (1,754) — (1,754)
Share-based compensation — — 16,274 — — 16,274 — 16,274
Purchase of stock (1,136,444) (1,136) — — (94,583) (95,719) — (95,719)
Cumulative effect from adoption of ASU 2016-13 (2) — — — — (11,432) (11,432) — (11,432)
Noncontrolling interest activities — — — — — — (100) (100)
September 30, 2020 144,289,653 $ 144,290 $ 113,249 $ (1,166,572) $ 3,923,113 $ 3,014,080 $ 20,693 $ 3,034,773


	Three Months Ended March 31, 2021
(in thousands, except share and per share data)	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Parent Equity		Non-controlling Interests in Subsidiaries		Total Equity
January 1, 2021	144,354,335	$	144,354	$	117,165	$	(1,036,502)	$	3,979,779	$	3,204,796	$	13,207	$	3,218,003
Net income	—	—		—		—		217,710		217,710		—		217,710
Other comprehensive income, net of tax	—	—		—		12,742		—		12,742		—		12,742
Cash dividend declared, $0.8150 per share	—	—		—		—		(117,714)		(117,714)		—		(117,714)
Share-based awards exercised, including tax benefit of $1,764	103,722	104		(5,533)		—		—		(5,429)		—		(5,429)
Share-based compensation	—	—		6,235		—		—		6,235		—		6,235
Cumulative effect from adoption of ASU 2019-12 (1)	—	—		—		—		6,223		6,223		—		6,223
Noncontrolling interest activities	—	—		—		—		—		—		(1,661)		(1,661)
March 31, 2021	144,458,057	$	144,458	$	117,867	$	(1,023,760)	$	4,085,998	$	3,324,563	$	11,546	$	3,336,109

(1)~~The Company~~We adopted Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes, during the first quarter of 2021.

~~(2)The Company adopted ASU 2016-13,~~ ~~Measurement of Credit Losses on Financial Instruments,~~ ~~during the first quarter of 2020.~~

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		Nine Months Ended September 30,					Three Months Ended March 31,
(in thousands)	(in thousands)	2021		2020		(in thousands)	2022		2021
Operating activities:	Operating activities:					Operating activities:
Net income (loss)		$	642,791	$	(200,306)
Net loss from discontinued operations		—		(192,069)
Net income (loss) from continuing operations		642,791		(8,237)
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities:
Net income						Net income	$	245,838	$	217,710
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	218,377		203,084		Depreciation and amortization	87,369		72,296
Loss on software disposal		61,063		—
Share-based compensation	Share-based compensation	20,841		16,274		Share-based compensation	7,171		6,235
Excess tax (benefits) deficiencies from share-based compensation		(6,667)		375
Goodwill impairment charge		—		506,721
Realized currency and other divestiture losses		—		11,356
Excess tax benefits from share-based compensation						Excess tax benefits from share-based compensation	(714)		(1,764)
Changes in operating assets and liabilities	Changes in operating assets and liabilities	71,791		697,611		Changes in operating assets and liabilities	59,144		6,465
Net cash provided by operating activities from continuing operations		1,008,196		1,427,184
Net cash provided by operating activities						Net cash provided by operating activities	398,808		300,942
Investing activities:	Investing activities:					Investing activities:
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(138,206)		(105,428)		Purchases of property, plant and equipment	(78,045)		(48,391)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	24,184		11,675		Proceeds from sale of property, plant and equipment	5,895		16,863
Proceeds from divestitures of businesses	Proceeds from divestitures of businesses	16,687		382,737		Proceeds from divestitures of businesses	25,939		10,345
Acquisitions of businesses and other investing activities	Acquisitions of businesses and other investing activities	(142,567)		(59,062)		Acquisitions of businesses and other investing activities	(1,374,734)		(19,489)
Net cash (used in) provided by investing activities from continuing operations		(239,902)		229,922
Net cash used in investing activities						Net cash used in investing activities	(1,420,945)		(40,672)
Financing activities:	Financing activities:					Financing activities:
Proceeds from debt	Proceeds from debt	242,332		1,888,622		Proceeds from debt	2,890,000		31,599
Payments on debt	Payments on debt	(403,126)		(2,466,031)		Payments on debt	(1,784,585)		(26,767)
Share-based awards exercised	Share-based awards exercised	(19,398)		(1,754)		Share-based awards exercised	(1,063)		(5,429)
Dividends paid	Dividends paid	(349,293)		(339,294)		Dividends paid	(115,876)		(114,043)
Purchases of stock	Purchases of stock	(283,886)		(95,719)		Purchases of stock	(72,919)		—
Other financing activities	Other financing activities	(5,353)		(15,032)		Other financing activities	(1,593)		(1,354)
Net cash used in financing activities from continuing operations		(818,724)		(1,029,208)
Cash flows from discontinued operations:
Net cash provided by operating activities from discontinued operations		—		13,323
Net cash used in investing activities from discontinued operations		—		(11,131)
Net cash provided by financing activities from discontinued operations		—		—
Net cash provided by discontinued operations		—		2,192
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	913,964		(115,994)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(20,639)		(6,959)		Effect of exchange rate changes on cash and cash equivalents	4,248		(16,454)
Net (decrease) increase in cash and cash equivalents	Net (decrease) increase in cash and cash equivalents	(71,069)		623,131		Net (decrease) increase in cash and cash equivalents	(103,925)		127,822
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	990,166		276,992		Cash and cash equivalents at beginning of period	714,701		990,166
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	919,097	$	900,123	Cash and cash equivalents at end of period	$	610,776	$	1,117,988

See accompanying notes to condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~(in thousands, except per share data)~~

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes required by accounting principles generally accepted in the U.S. (“U.S. GAAP”) for complete financial statements. On June 30, 2020, the Company completed the divestiture of its Business Products Group. Refer to the acquisitions, divestitures and discontinued operations footnote for more information. The Company's results of operations for the Business Products Group are reported as discontinued operations and all information related to the discontinued operations has been excluded from the notes to the condensed consolidated financial statements for all periods presented. Net income from discontinued operations for each period includes all costs that are directly attributable to these businesses and excludes certain corporate overhead costs that were previously allocated. Additionally, revenue from freight services provided by the Automotive Parts Group are grossed up and recast in continuing operations in each period because those sales are continuing with the discontinued operations after the divestiture. Except as disclosed herein, there have been no material changes in the information disclosed in the notes to the consolidated financial statements included in the Annual Report on Form 10-K of Genuine Parts Company (the “Company,” “we,” “our,” “us,” or “its”) for the year ended December 31, ~~2020.~~2021. Accordingly, the unaudited condensed consolidated financial statements and related disclosures herein should be read in conjunction with ~~the Company’s 2020~~our 2021 Annual Report on Form 10-K.

The preparation of interim financial statements requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements. Specifically, ~~the Company makes~~we make estimates and assumptions in ~~its~~our unaudited condensed consolidated financial statements for inventory adjustments, the accrual of bad debts, credit losses on guaranteed loans, customer sales returns, and volume incentives earned, among others. Inventory adjustments (including adjustments for a majority of inventories that are valued under the last-in, first-out (“LIFO”) method) are accrued on an interim basis and adjusted in the fourth quarter based on the annual book to physical inventory adjustment and LIFO valuation. Reserves for bad debts, credit losses on guaranteed loans and customer sales returns are estimated and accrued on an interim basis based on a consideration of historical experience, current conditions, and reasonable and supportable forecasts. Volume incentives are estimated based upon cumulative and projected purchasing levels.

In the opinion of management, all adjustments necessary for a fair presentation of ~~the Company’s~~our financial results for the interim periods have been made. These adjustments are of a normal recurring nature.

We have reclassified certain prior period amounts to conform to the current period presentation. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 are not necessarily indicative of results for the year ended December 31, 2021. The Company's results of operations continued to improve in 2021 relative to the same period of 2020 as a result of several positive trends caused by the global response to the coronavirus (“COVID-19”) outbreak, which was declared a pandemic in March 2020. In particular, as widespread vaccine distribution continued, we2022. We have seen economic recovery in many of the markets where we operate and a significant uptick in consumer mobility. However, the Company's operations remain vulnerable to the continuing negative economic effects caused by the pandemic. The extent to which the pandemic impacts the Company will depend on numerous factors and future developments that the Company cannot predict, including the severity of the virus; the occurrence of additional waves or spikes in infection rates, including the spread of variant strains; the duration of the outbreak; governmental, business or other actions taken in response to the pandemic and the efficacy of these actions, including partial or complete shut downs, travel restrictions, and shelter-in-place orders among other actions; the effectiveness and distribution of COVID-19 vaccines; the ability of the global population to access such vaccines; impacts on customer demand, impacts on the Company's supply chain including the impact of higher shipping-related charges as a result of port slowdowns or congestion, and its ability to attract talent and keep operating locations open.

~~The Company has~~ evaluated subsequent events through the date the unaudited condensed consolidated financial statements covered by this quarterly report were issued.

2. Recent Accounting Pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASU”) to the FASB Accounting Standards Codification (“ASC”). We consider the applicability and impact of all ASUs and have determined that any recently adopted accounting pronouncements did not have a material impact on our condensed consolidated financial statements and all recent accounting pronouncements not yet adopted are not applicable or are expected to have an immaterial impact on our condensed consolidated financial statements.

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2.3. Segment Information

The following table presents a summary of ~~the Company's~~our reportable segment financial ~~information from continuing operations:~~information:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020
(in thousands)										(in thousands)	2022		2021
Net sales:	Net sales:									Net sales:
Automotive	Automotive	$	3,204,534	$	2,960,379	$	9,353,998	$	8,038,863	Automotive	$	3,275,621	$	2,953,165
Industrial	Industrial	1,614,315		1,409,707		4,713,303		4,246,976		Industrial	2,019,014		1,511,549
Total net sales	Total net sales	$	4,818,849	$	4,370,086	$	14,067,301	$	12,285,839	Total net sales	$	5,294,635	$	4,464,714
Segment profit:	Segment profit:									Segment profit:
Automotive	Automotive	$	281,150	$	266,124	$	807,586	$	627,608	Automotive	$	264,573	$	235,678
Industrial	Industrial	165,754		125,620		441,459		348,481		Industrial	188,353		125,292
Total segment profit	Total segment profit	446,904		391,744		1,249,045		976,089		Total segment profit	452,926		360,970
Interest expense, net	Interest expense, net	(14,167)		(25,221)		(47,853)		(69,965)		Interest expense, net	(19,850)		(18,324)
Intangible asset amortization	Intangible asset amortization	(25,311)		(24,223)		(78,239)		(70,219)		Intangible asset amortization	(39,694)		(25,544)
Corporate expense	Corporate expense	(47,389)		(33,379)		(130,029)		(117,053)		Corporate expense	(41,751)		(31,243)
Other unallocated costs (1)	Other unallocated costs (1)	(61,063)		(11,256)		(138,484)		(565,030)		Other unallocated costs (1)	(25,915)		—
Income before income taxes from continuing operations		$	298,974	$	297,665	$	854,440	$	153,822
Income before income taxes										Income before income taxes	$	325,716	$	285,859

(1)The following table presents a summary of the other unallocated costs:

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Other unallocated costs:
Loss on software disposal (2) $ (61,063) $ — $ (61,063) $ —
Product liability damages award (3) — — (77,421) —
Goodwill impairment charge (4) — — — (506,721)
Restructuring costs (5) — (10,968) — (39,009)
Realized currency loss (6) — — — (11,356)
Gain on insurance proceeds related to SPR Fire (7) — — — 13,448
Transaction and other costs (8) — (288) — (21,392)
Total other unallocated costs $ (61,063) $ (11,256) $ (138,484) $ (565,030)


	Three Months Ended March 31,
(in thousands)	2022		2021
Other unallocated costs:
Gain on insurance proceeds (2)	$	634	$	—
Transaction and other costs (3)	(26,549)		—
Total other unallocated costs	$	(25,915)	$	—

(2)Adjustment reflects a loss on an internally developed software project that was disposed of due to a change in management strategy related to advances in alternative technologies. Refer to the property, plant and equipment footnote to the condensed consolidated financial statements for more information.

~~(3)~~Adjustment reflects damages reinstated by the Washington Supreme Court order on July 8, 2021 in connection with a 2017 automotive product liability claim. Refer to the commitments and contingencies footnote to the condensed consolidated financial statements for more information.

~~(4)Adjustment reflects the 2020 goodwill impairment charge related to the Company's European reporting unit.~~

~~(5)~~Adjustment reflects restructuring costs related to the execution of certain restructuring actions across the Company's subsidiaries primarily targeted at simplifying the organizational structures and distribution networks implemented by the Company in October 2019 (the “2019 Cost Savings Plan”). The costs are

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~~primarily associated with severance and other employee costs, including a voluntary retirement program, and facility and closure costs related to the consolidation of operations.~~

~~(6)Adjustment reflects realized currency losses related to divestitures.~~

~~(7)~~Adjustment reflects insurance recoveries in excess of losses incurred on inventory, property, plant and equipment and other fire-related ~~costs related to the S.P. Richards Headquarters and Distribution Center.~~costs.

~~(8)~~(3) Adjustment primarily reflects ~~$8,490 of incremental~~ costs associated with ~~COVID-19~~the January 3, 2022 acquisition of Kaman Distribution Group. Refer to the acquisition footnote for more information regarding the nine months ended September 30, 2020 and costs associated with certain divestitures. COVID-19 related costs include incremental costs incurred relating to fees to cancel marketing events and increased cleaning and sanitization materials, among other things.acquisition.

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020
(in thousands)										(in thousands)	2022		2021
North America:	North America:									North America:
Automotive	Automotive	$	2,100,250	$	1,934,503	$	6,039,617	$	5,381,566	Automotive	$	2,130,873	$	1,862,805
Industrial	Industrial	1,493,618		1,295,717		4,362,792		3,937,640		Industrial	1,910,433		1,399,399
Total North America	Total North America	$	3,593,868	$	3,230,220	$	10,402,409	$	9,319,206	Total North America	$	4,041,306	$	3,262,204
Australasia:	Australasia:									Australasia:
Automotive	Automotive	$	374,167	$	355,874	$	1,130,744	$	911,595	Automotive	$	378,909	$	367,869
Industrial	Industrial	120,697		113,990		350,511		309,336		Industrial	108,581		112,150
Total Australasia	Total Australasia	$	494,864	$	469,864	$	1,481,255	$	1,220,931	Total Australasia	$	487,490	$	480,019
Europe – Automotive	Europe – Automotive	$	730,117	$	670,002	$	2,183,637	$	1,745,702	Europe – Automotive	$	765,839	$	722,491
Total net sales	Total net sales	$	4,818,849	$	4,370,086	$	14,067,301	$	12,285,839	Total net sales	$	5,294,635	$	4,464,714

~~3. Accumulated Other Comprehensive Loss~~

~~The following tables present the changes in accumulated other comprehensive loss (“AOCL”) by component for the nine months ended September 30:~~

Changes in Accumulated Other
Comprehensive Loss by Component
Pension and Other Post-Retirement Benefits Cash Flow Hedges Foreign Currency Translation Total
Beginning balance, January 1, 2021 $ (692,868) $ (30,007) $ (313,627) $ (1,036,502)
Other comprehensive loss before reclassifications — — (75,738) (75,738)
Amounts reclassified from accumulated other comprehensive loss 27,931 11,223 — 39,154
Other comprehensive income (loss), net of income taxes 27,931 11,223 (75,738) (36,584)
Ending balance, September 30, 2021 $ (664,937) $ (18,784) $ (389,365) $ (1,073,086)

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Changes in Accumulated Other
Comprehensive Loss by Component
Pension and Other Post-Retirement Benefits Cash Flow Hedges Foreign Currency Translation Total
Beginning balance, January 1, 2020 $ (704,415) $ (20,671) $ (416,222) $ (1,141,308)
Other comprehensive loss before reclassifications — (21,248) (48,307) (69,555)
Amounts reclassified from accumulated other comprehensive loss 24,479 8,456 11,356 44,291
Other comprehensive income (loss), net of income taxes 24,479 (12,792) (36,951) (25,264)
Ending balance, September 30, 2020 $ (679,936) $ (33,463) $ (453,173) $ (1,166,572)

The AOCL 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 hedges are discussed in the derivatives and hedging footnote. Generally, tax effects in AOCL are established at the currently enacted tax rate and reclassified to net income (loss) in the same period that the related pre-tax AOCL reclassifications are recognized.

4. ~~Recent Accounting Pronouncements~~

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASU”) to the FASB Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs and has determined that any recently adopted accounting pronouncements did not have a material impact on the Company's condensed consolidated financial statements and all recent accounting pronouncements not yet adopted are not applicable or are expected to have an immaterial impact on the Company's condensed consolidated financial statements.

~~5. Property, Plant and Equipment~~

During the third quarter of 2021, the Company reconsidered its approach to an internally developed software project due to a change in management strategy related to advances in alternative technologies. The Company decided to dispose of the software project as of September 30, 2021. As a result, the Company recognized $61,063 of selling, administrative and other expense related to the disposal of this software.

~~6. Employee Benefit Plans~~

~~Net periodic benefit income from the Company's pension plans included the following components:~~

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Service cost $ 3,043 $ 3,012 $ 9,185 $ 8,919
Interest cost 17,915 20,942 53,783 62,732
Expected return on plan assets (38,755) (38,550) (116,345) (115,483)
Amortization of prior service cost 172 173 516 519
Amortization of actuarial loss 12,465 11,130 37,430 33,340
Net periodic benefit income $ (5,160) $ (3,293) $ (15,431) $ (9,973)

Service cost is recorded in selling, administrative and other expenses in the condensed consolidated statements of income (loss) while all other components are recorded within other non-operating (income) expenses. Pension benefits also include amounts related to supplemental retirement plans.

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~~7. Guarantees~~

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. At September 30, 2021, the Company was in compliance with all such covenants.

~~As of September 30, 2021, the total borrowings of the independents and affiliates subject to guarantee by the Company were approximately $895,636. These loans generally mature over periods from~~ ~~one~~ to six years. The Company regularly monitors the performance of these loans and the ongoing operating results, financial condition and ratings from credit rating agencies of the independents and affiliates that participate in the guarantee programs. In the event that the Company is required to make payments in connection with these guarantees, the Company would obtain and liquidate certain collateral pledged by the independents or affiliates (e.g., accounts receivable and inventory) to recover all or a substantial portion of the amounts paid under the guarantees. The Company recognizes a liability equal to current expected credit losses over the lives of the loans in the guaranteed loan portfolio, based on a consideration of historical experience, current conditions, the nature and expected value of any collateral, and reasonable and supportable forecasts. To date, the Company has had no significant losses in connection with guarantees of independents’ and affiliates’ borrowings and the current expected credit loss reserve is not material. As of September 30, 2021, there are no material guaranteed loans for which the borrower is experiencing financial difficulty and recovery is expected to be provided substantially through the operation or sale of the collateral.

As of September 30, 2021, the Company has recognized certain assets and liabilities amounting to $80,000 each for the guarantees related to the independents’ and affiliates’ borrowings. These assets and liabilities are included in other assets and other long-term liabilities in the condensed consolidated balance sheets. The liabilities relate to the Company's noncontingent obligation to stand ready to perform under the guarantee programs and they are distinct from the Company's current expected credit loss reserve.

~~8. Debt~~

On September 30, 2021, the Company entered into the first amendment to the Syndicated Facility Agreement (the "Unsecured Revolving Credit Facility"), dated as of October 30, 2020. The interest rates were amended to reduce the applicable rate by 12.5 basis points (resulting in a rate of LIBOR + 112.5 basis points) and the LIBOR floor from 0.5% to 0.0%. The amendment also extended the maturity by one year to September 30, 2026.

9. Accounts Receivable Sales Agreement

~~The Company has an~~Under our accounts receivable sales agreement (the ~~“A/~~"A/R Sales ~~Agreement”~~Agreement") to sell short-term receivables from certain customer trade accounts to an unaffiliated financial institution on a revolving basis. The A/R Sales Agreement has a 3 year term, which the Company intends to renew.

~~As part of the A/R Sales Agreement, the Company~~, we continuously ~~sells~~sell designated pools of receivables as they are originated by itus and certain U.S. subsidiaries to a separate bankruptcy-remote special purpose entity (“SPE”). The ~~assets of the SPE would be first available~~A/R Sales Agreement has a three year term, which we intend to ~~satisfy the creditor claims of the unaffiliated financial institution. The Company controls and therefore consolidates the SPE in its condensed consolidated financial statements.~~renew.

The SPE transferred ownership and control of certain receivables that met certain qualifying conditions to the unaffiliated financial institution in exchange for cash. The Company accounts for transactions with the unaffiliated financial institution as sales of financial assets, with the associated receivables derecognized from the Company's condensed consolidated balance sheet. The remaining receivables held by the SPE were pledged to secure the

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~~collectability of the sold receivables. The amount of receivables pledged as collateral as of September 30, 2021 and December 31, 2020 is approximately $983,000 and $771,000, respectively.~~

~~The Company continues~~We continue to be involved with the receivables transferred by the SPE to the unaffiliated financial institution by providing collection services. As cash is collected on sold receivables, the SPE continuously transfers ownership and control of new qualifying receivables to the unaffiliated financial institution so that the total principal amount outstanding of receivables sold is approximately ~~$800,000~~$1.0 billion at any point in time (which is the maximum amount allowed under the ~~agreement). The future amount of receivables outstanding~~agreement as ~~sold could decrease, based~~amended on ~~the level of activity and other factors.~~ January 3, 2022).

Total principal amount outstanding of receivables sold is approximately ~~$800,000~~$1.0 billion and $800.0 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The amount of receivables pledged as collateral as of March 31, 2022 and December 31, 2021 is approximately $1.1 billion and $973.0 million, respectively.

The following table summarizes the activity and amounts outstanding under the A/R Sales Agreement ~~for the following periods:~~as of:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020
(in thousands)										(in thousands)	2022		2021
Receivables sold to the financial institution and derecognized	Receivables sold to the financial institution and derecognized	$	1,884,023	$	1,279,420	$	5,700,895	$	2,181,746	Receivables sold to the financial institution and derecognized	$	2,236,445	$	1,927,931
Cash collected on sold receivables	Cash collected on sold receivables	$	1,884,028	$	1,279,430	$	5,700,896	$	1,681,732	Cash collected on sold receivables	$	2,036,455	$	1,927,928

~~Upon entry into the A/R Sales Agreement, the Company received an initial benefit from cash from operations of approximately $800,000 in the year ended December 31, 2020.~~ Continuous cash activity related to the A/R Sales Agreement is reflected in net cash ~~from~~provided by operating activities in the condensed consolidated ~~statement~~statements of cash flows. The SPE incurs fees due to the unaffiliated financial institution related to the accounts receivable sales transactions. Those fees, which are immaterial, are recorded within other non-operating expense (income) ~~expense~~ in the condensed consolidated statements of ~~income (loss).~~income. The SPE has a recourse obligation to repurchase from the unaffiliated financial institution any previously sold receivables that are not collected due to the occurrence of certain events, including credit quality deterioration and customer sales returns. The reserve recognized for this recourse obligation as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 is not material. The servicing liability related to ~~the Company's~~our collection services also is not material, given the high quality of the customers underlying the receivables and the anticipated short collection period.

~~10. Fair Value of Financial Instruments~~

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. Additionally, ASC 820, ~~Fair Value Measurements, defines levels within a hierarchy based upon observable and non-observable inputs.~~

•~~Level 1. Observable inputs such as quoted prices in active markets;~~

•~~Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and~~

•~~Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions~~

As of September 30, 2021 the fair value of the Company's senior unsecured notes was approximately $2,524,914, which are designated as Level 2 in the fair value hierarchy. Our valuation technique is based primarily on prices and other relevant information generated by observable transactions involving identical or comparable assets or liabilities.

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~~Derivative instruments are recognized in~~5. Debt

1.750% and 2.750% Senior Notes Offering

On January 6, 2022, we issued $500.0 million of unsecured 1.750% Senior Notes due 2025. Simultaneously, we issued $500.0 million of unsecured 2.750% Senior Notes due 2032. For both offerings, interest is payable semi-annually on February 1 and August 1 of each year, beginning August 1, 2022.

We utilized the ~~consolidated balance sheets at fair value and are designated as Level 2 in~~proceeds from these offerings to repay the ~~fair value hierarchy. They are valued using inputs other than quoted prices, such as foreign exchange rates and yield curves. Refer to the derivatives and hedging footnote for further information.~~

Fair value measurements of non-financial assets and non-financial liabilities are primarily used in the impairment analyses of goodwill, other intangible assets, and long-lived assets. These involve fair value measurements on a nonrecurring basis using Level 3 inputs as defined in the fair value hierarchy. The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash equivalents, trade accounts receivable, trade accounts payable, and borrowings under our Revolving Credit Facility, which were incurred to finance a significant portion of the ~~line of credit approximate their respective fair values based on the short-term nature of these instruments.~~Kaman Distribution Group ("KDG") acquisition.

~~11.~~6. Derivatives and Hedging

~~The Company is~~We are exposed to various risks arising from business operations and market conditions, including fluctuations in interest rates and certain foreign currencies. When deemed appropriate, ~~the Company uses~~we use derivative and non-derivative instruments as risk management tools to mitigate the potential impact of interest rate and foreign exchange rate risks. The objective of using these tools is to reduce fluctuations in ~~the Company’s~~our earnings and cash flows associated with changes in these rates. Derivative financial instruments are not used for trading or other speculative purposes. ~~The Company has~~We have not historically incurred, and ~~does~~do not expect to incur in the future, any losses as a result of counterparty default related to derivative instruments.

~~The Company~~We formally ~~documents~~document our relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. ~~The Company~~This process includes linking cash flow hedges to specific forecasted transactions or variability of cash flows to be paid. We also formally ~~assesses,~~assess, both at the hedge’s inception and on an ongoing basis, whether the designated derivative and non-derivative instruments that are used in hedging transactions are highly effective in offsetting changes in the cash flows of the hedged items. When a designated instrument is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable, hedge accounting is discontinued prospectively.

~~Cash Flow Hedges~~

In 2020, the Company terminated its interest rate swaps and settled the outstanding balances through cash payments totaling $41,000. The remaining amount in AOCL is being amortized to interest expense on a straight-line basis over the remaining life of the previously hedged instrument.

Net Investment Hedges

~~The Company has~~We have designated certain derivative instruments and a portion of ~~its~~our foreign currency denominated debt, a non-derivative financial instrument, as hedges of the foreign currency exchange rate exposure of ~~the Company's~~our Euro-denominated net investment in a European subsidiary. ~~The Company applies~~We apply the spot method to assess the hedge effectiveness of the derivative instruments and this assessment for each instrument excludes the initial value related to the difference at contract inception between the foreign exchange spot rate and the forward rate (i.e., the forward points). The initial value of this excluded component is recognized as a reduction to interest expense in a systematic and rational manner over the term of the derivative instrument. All other changes in value for the net investment hedges are included in ~~AOCL~~accumulated other comprehensive loss (“AOCL”) within foreign currency translation and would only be reclassified to earnings if the European subsidiary were liquidated, or otherwise disposed.

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The following table summarizes the location and carrying amounts of the derivative instruments and the foreign currency denominated debt, a non-derivative financial instrument, that are designated and qualify as part of hedging ~~relationships:~~relationships (in thousands):


			September 30, 2021				December 31, 2020						March 31, 2022				December 31, 2021
Instrument	Instrument	Balance Sheet Location	Notional		Balance		Notional		Balance		Instrument	Balance Sheet Location	Notional		Balance		Notional		Balance
Net investment hedges:	Net investment hedges:										Net investment hedges:
Forward contracts	Forward contracts	Prepaid expenses and other current assets	$	925,810	$	59,397	$	800,000	$	7,668	Forward contracts	Prepaid expenses and other current assets	$	1,406,950	$	97,842	$	925,810	$	73,819
Forward contracts	Forward contracts	Other current liabilities	$	235,180	$	6,306	$	360,990	$	19,442	Forward contracts	Other current liabilities	$	—	$	—	$	235,180	$	2,935
Foreign currency debt	Foreign currency debt	Long-term debt	€	700,000	$	811,790	€	700,000	$	861,070	Foreign currency debt	Long-term debt	€	700,000	$	781,060	€	700,000	$	792,820

The tables below presents gains ~~and losses~~ related to designated ~~cash flow hedges and~~ net investment hedges:


	Gain Recognized in AOCL before Reclassifications				Gain Recognized in Interest Expense for Excluded Components
(in thousands)	2022		2021		2022		2021
Three Months Ended March 31,
Net investment hedges:
Forward contracts	$	19,393	$	37,515	$	7,565	$	6,574
Foreign currency debt	11,760		40,950		—		—
Total	$	31,153	$	78,465	$	7,565	$	6,574

7. Fair Value of Financial Instruments

As of March 31, 2022 the fair value of our senior unsecured notes was approximately $3.3 billion, which are designated as Level 2 in the fair value hierarchy. Our valuation technique is based primarily on prices and other relevant information generated by observable transactions involving identical or comparable assets or liabilities.

8. Employee Benefit Plans

Net periodic benefit income from our pension plans included the following components for the three months ended March 31:


	Pension Benefits
(in thousands)	2022		2021
Service cost	$	2,616	$	3,041
Interest cost	18,867		17,906
Expected return on plan assets	(37,672)		(38,732)
Amortization of prior service cost	172		172
Amortization of actuarial loss	9,279		12,456
Net periodic benefit income	$	(6,738)	$	(5,157)

Service cost is recorded in selling, administrative and other expenses in the condensed consolidated statements of income while all other components are recorded within other non-operating expense (income). Pension benefits also include amounts related to supplemental retirement plans.

9. Acquisitions

We acquired several businesses for approximately $1.4 billion and $20.3 million, net of cash acquired, during the three months ended March 31, 2022 and March 31, 2021, respectively.

For each acquisition, we allocate the purchase price to the assets acquired and the liabilities assumed based on their fair values as of their respective acquisition dates. The results of operations for acquired businesses are included in our condensed consolidated statements of income beginning on their respective acquisition dates.

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Gain (Loss) Recognized in AOCL Before Reclassifications Gain Recognized in Interest Expense For Excluded Components
2021 2020 2021 2020
Three Months Ended September 30,
Cash flow hedges:
Interest rate contracts $ — $ (277) $ — $ —
Net investment hedges:
Forward contracts 20,958 (49,660) 6,574 6,574
Foreign currency debt 21,000 (35,140) — —
Total $ 41,958 $ (85,077) $ 6,574 $ 6,574
KDG Acquisition

Gain (Loss) Recognized in AOCL Before Reclassifications Gain Recognized in Interest Expense For Excluded Components
2021 2020 2021 2020
Nine Months Ended September 30,
Cash flow hedges:
Interest rate contracts $ — $ (29,107) $ — $ —
Net investment hedges:
Forward contracts 45,143 (33,959) 19,722 20,572
Foreign currency debt 49,280 (38,080) — —
Total $ 94,423 $ (101,146) $ 19,722 $ 20,572
On January 3, 2022, we, through our wholly-owned subsidiary, Motion Industries, Inc., acquired all of the equity interests in KDG for a purchase price of approximately $1.3 billion in cash. KDG, which is headquartered in Bloomfield, Connecticut, is a power transmission, automation and fluid power industrial distributor and solutions provider with operations throughout the United States, providing electro-mechanical products, bearings, power transmission, motion control and electrical and fluid power components to MRO and OEM customers. KDG has approximately 1,700 employees with approximately 220 locations across the United States and Puerto Rico. As of January 3, 2022, KDG had estimated annual revenues of approximately $1.1 billion.

The net cash consideration transferred of approximately $1.3 billion is net of the estimated cash acquired of approximately $30.0 million.

The KDG acquisition was financed using a combination of borrowings under the existing unsecured revolving credit facility, proceeds of $200.0 million from the selling of additional receivables under our amended A/R Sales Agreement and $109.0 million of cash.

The following table summarizes the preliminary, estimated fair values of the assets acquired and liabilities assumed at the acquisition date. The fair value of the acquired identifiable intangible assets is provisional pending completion of the final valuations for these assets. We are in the process of analyzing the estimated values of all assets acquired and liabilities assumed as of the acquisition date, including, among other things, obtaining valuations of certain tangible and intangible assets, as well as the fair value of certain contracts and the determination of certain tax balances. Additional adjustments may be made to the acquisition accounting during the measurement period primarily related to intangible asset revaluations, tax accounting and leases.


(in thousands)	As of January 3, 2022
Trade accounts receivable	$	156,000
Merchandise inventories	166,000
Prepaid expenses and other current assets	39,000
Property, plant and equipment	26,000
Operating lease assets	49,000
Other assets	1,000
Total identifiable assets acquired (excluding other intangible assets and goodwill)	437,000
Trade accounts payable	85,000
Other current liabilities	32,000
Operating lease liabilities	17,000
Deferred tax liabilities	121,000
Other long-term liabilities	39,000
Total liabilities assumed	294,000
Net identifiable assets acquired (excluding other intangible assets and goodwill)	143,000
Other intangible assets and goodwill	1,166,000
Net assets acquired	$	1,309,000

The goodwill was assigned to the Industrial segment and is attributable primarily to expected synergies and the assembled workforce. Approximately $261 million of the estimated goodwill recognized as part of the KDG acquisition is expected to be tax deductible.

For the three months ended March 31, 2022, approximately $5.0 million of inventory amortization step-up costs related to this acquisition were included in cost of goods sold and approximately $21.5 million of transaction and other costs were included in selling, administrative and other expenses in the condensed consolidated statement of income.

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10. Accumulated Other Comprehensive Loss

The following tables present the changes in AOCL by component for the three months ended March 31:


	Changes in Accumulated Other Comprehensive Loss by Component
(in thousands)	Pension and Other Post-Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation		Total
Beginning balance, January 1, 2022	$	(463,227)	$	(15,042)	$	(379,470)	$	(857,739)
Other comprehensive income before reclassifications	—		—		42,132		42,132
Amounts reclassified from accumulated other comprehensive loss	6,989		3,741		—		10,730
Other comprehensive income, net of income taxes	6,989		3,741		42,132		52,862
Ending balance, March 31, 2022	$	(456,238)	$	(11,301)	$	(337,338)	$	(804,877)


	Changes in Accumulated Other Comprehensive Loss by Component
(in thousands)	Pension and Other Post-Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation		Total
Beginning balance, January 1, 2021	$	(692,868)	$	(30,007)	$	(313,627)	$	(1,036,502)
Other comprehensive loss before reclassifications	—		—		(295)		(295)
Amounts reclassified from accumulated other comprehensive loss	9,296		3,741		—		13,037
Other comprehensive income (loss), net of income taxes	9,296		3,741		(295)		12,742
Ending balance, March 31, 2021	$	(683,572)	$	(26,266)	$	(313,922)	$	(1,023,760)

The AOCL components related to the pension benefits are included in the computation of net periodic benefit income in the employee benefit plans footnote. Generally, tax effects in AOCL are established at the currently enacted tax rate and reclassified to net income in the same period that the related pre-tax AOCL reclassifications are recognized.

11. Guarantees

We guarantee the borrowings of certain independently controlled automotive parts stores and businesses (“independents”) and certain other affiliates in which we have a noncontrolling equity ownership interest (“affiliates”). While such borrowings of the independents and affiliates are outstanding, we are required to maintain compliance with certain covenants. At March 31, 2022, we were in compliance with all such covenants.

As of March 31, 2022, the total borrowings of the independents and affiliates subject to guarantee by us were approximately $949.7 million. These loans generally mature over periods from one to six years. We regularly monitor the performance of these loans and the ongoing operating results, financial condition and ratings from credit rating agencies of the independents and affiliates that participate in the guarantee programs. In the event that we are required to make payments in connection with these guarantees, we would obtain and liquidate certain collateral pledged by the independents or affiliates (e.g., accounts receivable and inventory) to recover all or a substantial portion of the amounts paid under the guarantees. We recognize a liability equal to current expected credit losses over the lives of the loans in the guaranteed loan portfolio, based on a consideration of historical experience, current conditions, the nature and expected value of any collateral, and reasonable and supportable forecasts. To date, we have not had significant losses in connection with guarantees of independents’ and affiliates’ borrowings and the current expected credit loss reserve is not material. As of March 31, 2022, there are no material guaranteed loans for which the borrower is experiencing financial difficulty and recovery is expected to be provided substantially through the operation or sale of the collateral.

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As of March 31, 2022, we have recognized certain assets and liabilities amounting to $80.0 million each for the guarantees related to the independents’ and affiliates’ borrowings. These assets and liabilities are included in other assets and other long-term liabilities in the condensed consolidated balance sheets. The liabilities relate to our noncontingent obligation to stand ready to perform under the guarantee programs and they are distinct from our current expected credit loss reserve.

12. Commitments and Contingencies

Legal Matters

~~As more fully discussed~~From time to time, we are involved in various claims and legal actions that arise in the ~~Company's notes~~ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we do not believe that the ultimate resolution of these actions will have a material adverse effect on our financial position, results of operations, liquidity and capital resources. There have been no significant developments to the ~~consolidated financial statements~~information presented in ~~its 2020~~our 2021 Annual Report on Form 10-K a jury awarded damages in 2017 against the Company in a litigated automotive product liability dispute. On February 19, 2020, the Washington Court of Appeals issued an order entirely reversing the jury’s finding on damageswith respect to litigation or commitments and ordering a new trial on damages. The plaintiffs subsequently appealed this order to the Washington Supreme Court. On July 7, 2020, the Washington Supreme Court indicated that it would consider a further appeal on this matter, and oral arguments occurred on November 10, 2020. On July 8, 2021, the Washington Supreme Court overturned the order of the Washington Court of Appeals and reinstated the trial court's damage award of $77,100 against the Company. The Company recorded an adjustment to increase selling, general and other expenses by approximately $77,421, inclusive of statutory interest and insurance coverage, in the condensed consolidated statements of income (loss) for the nine months ended September 30, 2021. The damage award and statutory interest was fully paid as of September 30, 2021.contingencies.

Environmental Liabilities

Item 103 of SEC Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that ~~the Company~~we reasonably ~~believes~~believe will exceed an applied threshold not to exceed ~~$1,000.~~$1.0 million. Applying this threshold, there are no environmental matters to disclose for this period.

13. ~~Acquisitions, Divestitures and Discontinued Operations~~

~~Acquisitions~~

The Company acquired several businesses for approximately $142,669 and $77,393, net of cash acquired, during the nine months ended September 30, 2021 and September 30, 2020, respectively. The measurement period is still open for certain businesses acquired in prior periods, but there have been no significant measurement period adjustments during the three and nine months ended September 30, 2021.

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~~Divestitures~~

~~The Company received cash proceeds from divestitures of businesses totaling $16,687 and $382,737 for the nine months ended September 30, 2021 and September 30, 2020, respectively.~~

~~Discontinued Operations~~

~~Business Products Group~~

During 2020, the Company completed the divestiture of its Business Products Group as part of its long-term strategic initiative to streamline its operations and optimize its portfolio so that it can drive shareholder value by focusing on its global Automotive and Industrial Parts Groups. This divestiture represented a single plan to exit the Business Products Group segment and was considered a strategic shift that had a major effect on the Company’s operations and financial results. Therefore, the results of operations, financial position and cash flows for the Business Products Group are reported as discontinued operations for all prior periods presented.

The Company retains an investment in S.P. Richard's (“SPR”), a business that previously belonged to the Business Products Group, with a carrying value of $69,700, which is included within other assets on the condensed consolidated balance sheets, as of September 30, 2021. The Company maintains an allowance equal to the current expected credit loss based on a consideration of historical experience, current market conditions and reasonable and supportable forecasts related to this investment and other related assets of $17,000.

The Company also remains involved with SPR for a limited period of time through various lease, sublease, freight distribution and transition service agreements. The Company has concluded that SPR is a variable interest entity, but the Company is not the primary beneficiary and therefore the entity is not consolidated. Among other things, the Company does not have any voting rights and does not have the power to direct the activities that most significantly affect SPR's economic performance. For a limited period of time as SPR completes its transition away from the Company’s shared services platform, the Company continues to pay certain payables on SPR’s behalf and at SPR’s direction with full reimbursement from SPR under the terms of a transition services agreement.

~~The Company’s results of operations for discontinued operations were:~~

Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
Net sales $ — $ 846,944
Cost of goods sold — 632,007
Gross profit — 214,937
Operating expenses — 179,461
Loss on disposal 3,165 223,483
Loss before income taxes (3,165) (188,007)
Income tax expense 2,222 4,062
Net loss from discontinued operations $ (5,387) $ (192,069)

~~14. Income Taxes~~

The Company's effective income tax rate was 23.5% for the three months ended September 30, 2021, compared to 21.8% for the same three month period in 2020. The effective income tax rate was 24.8% for the nine months ended September 30, 2021, compared to 105.4% for the same period in 2020.

For the three months ended September 30, 2021, the rate increase is primarily due to income mix shifts and statute related adjustments. For the nine months ended September 30, 2021, the rate decrease is primarily due to the non-deductible goodwill impairment charge that occurred in 2020. In addition, during the second quarter of 2021, the United Kingdom enacted legislation raising its corporate tax rate from 19% to 25% effective April 2023. Accordingly, the Company remeasured its deferred tax assets and liabilities as of June 30, 2021.

~~15.~~ Earnings Per Share

As more fully discussed in the share-based compensation footnote of ~~the Company’s~~our notes to the consolidated financial statements in ~~its 2020~~our 2021 Annual Report on Form 10-K, ~~the Company maintains~~we maintain various long-term incentive plans, which provide for the granting of stock options, stock appreciation rights (“SARs”), restricted stock, restricted

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stock units (“RSUs”), performance awards, dividend equivalents and other share-based awards. Certain outstanding options ~~to purchase shares of common stock~~ are not included in the diluted earnings per share ~~calculation. These options are excluded~~calculation because their inclusion would have been anti-dilutive.

The following table summarizes anti-dilutive shares outstanding:

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Anti-dilutive shares outstanding — 473 158 2,214


	Three Months Ended March 31,
	2022	2021
Anti-dilutive shares outstanding	1,341	—

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, ~~2020.~~2021. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 are not necessarily indicative of results for the year ended December 31, ~~2021.~~2022.

Forward-Looking Statements

Some statements in this report, as well as in other materials we file with the Securities and Exchange Commission (“SEC”), release to the public, or 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. All statements in the future tense and all statements accompanied by words such as “expect,” “likely,” “outlook,” “forecast,” “preliminary,” “would,” “could,” “should,” “position,” “will,” “project,” “intend,” “plan,” “on track,” “anticipate,” “to come,” “may,” “possible,” “assume,” or similar expressions are intended to identify such forward-looking statements. These forward-looking statements include our ~~expected~~view of business and economic trends for the remainder of the year and our expectations regarding our ability to ~~operate~~capitalize on these business and ~~protect our workforce during the COVID-19 pandemic, our strategies for growing our automotive~~economic trends and ~~industrial businesses, the execution and effect of our cost savings initiatives, our efforts and initiatives to help us emerge from the pandemic well-positioned~~ to execute our strategy, our ongoing efforts to maintain compliance and flexibility under our debt covenants, our liquidity position and actions to maximize cash flow to continue to operate during these highly uncertain times and plans for future cost savings.strategic

priorities. Senior officers may also make verbal statements to analysts, investors, the media and others that are forward-looking.

We caution you that all 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 extent and duration of the disruption to our business operations caused by the global health crisis associated with the COVID-19 pandemic, including the effects on the financial health of our business partners and customers, on supply chains and our suppliers, on vehicle miles driven as well as other metrics that affect our business, and on access to capital and liquidity provided by the financial and capital markets; our ability to maintain compliance with our debt covenants; our ability to successfully integrate acquired businesses into our operations and to realize the anticipated synergies and benefits; our ability to successfully implement our business initiatives in our two business segments; slowing demand for our products; the ability to maintain favorable supplier arrangements and relationships; disruptions in global supply chains and in our suppliers' operations, including as a result of the impact of COVID-19 on our suppliers and our supply chain; changes in national and international legislation or government regulations or policies, including changes to import tariffs, environmental and social policy, infrastructure programs and privacy legislation, and their impact to us and our suppliers and customers; changes in general economic conditions, including unemployment, inflation (including the impact of tariffs) or deflation and geopolitical conflicts, such as the ~~United Kingdom's (“U.K.”) exit from the European Union~~conflict between Russia and ~~the unpredictability of the impact following such exit;~~Ukraine; changes in tax policies; volatile exchange rates; volatility in oil prices; significant cost increases, such as rising fuel and freight expenses; our ability to successfully attract and retain employees in the current labor market; uncertain credit markets and other macroeconomic conditions; competitive product, service and pricing pressures; failure or weakness in our disclosure controls and procedures and internal controls over financial reporting, including as a result of the work from home environment; the uncertainties and costs of litigation; disruptions caused by a failure or breach of our information systems, as well as other risks and uncertainties discussed in our ~~2020~~2021 Annual Report on Form 10-K and Item 1A, Risk Factors, in this report on Form 10-Q (all of which ~~risks~~ may be amplified by the COVID-19 ~~pandemic)~~pandemic and geopolitical conflicts, such as the current conflict between Russia and Ukraine) and from time to time in our subsequent filings with the SEC.

Forward-looking statements speak only as of the date they are made, and we undertake no duty to update any 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 filed with the SEC.

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Overview

Genuine Parts Company is a service organization engaged in the global distribution of automotive and industrial replacement parts. We have a long tradition of growth dating back to 1928, the year we were founded in Atlanta, Georgia. We conduct business in North America, Europe and Australasia from a network of more than ~~10,000~~10,300 locations.

~~The Company's~~Our Automotive Parts Group operated in the U.S., Canada, Mexico, France, the U.K., Ireland, Germany, Poland, the Netherlands, Belgium, Australia and New Zealand as of ~~September 30, 2021,~~March 31, 2022, and accounted for ~~66%~~62% of total ~~revenue~~revenues for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Our Industrial Parts Group operated in the U.S., Canada, Mexico,

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Australia, New Zealand, Indonesia and Singapore. The Industrial Parts Group accounted for ~~34%~~38% of the ~~Company's~~our total ~~revenue~~revenues for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

At Genuine Parts Company, our mission is to be a world-class service organization and the employer of choice, supplier of choice, valued customer ~~good corporate citizen~~of choice and investment of ~~choice.~~choice - we keep the world moving! This is our purpose and the foundation of how we do business. Additionally, we strive to be a respected business community member and a good corporate citizen. Our strategic financial objectives are intended to align with our mission and drive value for all our stakeholders. Our strategic financial objectives include: (1) top line revenue growth in excess of market growth; (2) improved operating margin; (3) a strong balance sheet and cash flows; and (4) effective capital allocation.

~~COVID-19 Pandemic~~

During the nine months ended September 30, 2021, our business and results of operations continued to improve relative to the same period of 2020. In particular, as widespread vaccine distribution continued, we have seen economic recovery in many of the markets where we operate and a significant uptick in consumer mobility. However, all regions in which we operate continue to experience periodic surges in infection rates. As a result, our business segments continue to face many uncertainties and our operations remain vulnerable to continuing negative effects caused by the pandemic. However, we are encouraged to see the impact of the pandemic subsiding as evidenced by the improving industrial economy, increase in miles driven and overall consumer activity.

As of September 30, 2021, all our operations are open for business. Our supply chain partners have been very supportive and accommodating, despite strains on the supply chain caused by labor shortages, inventory shortages, delays in order fulfillment and increased backlogs. This has allowed us to continue to provide quality customer service. We remain in constant communication with our employees regarding changing conditions and protocol. Based on the length and severity of the pandemic, we may experience continued volatility in customer demand and supply chain disruption. We will continue to evaluate the nature and extent of these potential impacts to our business, consolidated results of operations, segment results, liquidity and capital resources.

For further information regarding the impact of COVID-19 on our business, please see “Results of Operations,” and Item 1A, “Risk Factors,” in this report, which are incorporated herein by reference.

Key Business Metrics

We consider comparable sales to be a key business metric because management has evaluated its results of operations using this metric and we believe that this key indicator provides additional perspective and insights when analyzing the operating performance of our business from period to period and trends in its historical operating results. This metric should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in this report.

Comparable Sales

Comparable sales refer to period-over-period comparisons of our net sales excluding the impact of acquisitions, foreign currency and other. We consider this metric useful to investors because it provides greater transparency into management’s view and assessment of our core ongoing operations. This is a metric that is widely used by analysts, investors and competitors in our industry, although our calculation of the metric may not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate this metric in the same manner.

Results of Operations

Overview

~~As a result of the COVID-19 vaccine distribution~~Our Automotive Parts Group and ~~its positive impact on consumer mobility~~Industrial Parts Group both experienced continued recovery and ~~demand, we are encouraged by the increase~~expansion in ~~consumer activity~~their operations, reporting strong sales and segment profit margin growth during the three ~~and nine~~ months ended ~~September 30, 2021 as~~

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our key markets continue to reopen. In addition, we continue to realize the benefits of our cost savings initiatives to more effectively leverage our cost structure in both our Automotive and Industrial Parts Groups. Both our segments reported improved sales during the three and nine months ended September 30, 2021March 31, 2022 when compared to the same prior year ~~periods. The Automotive Parts Group benefited from the broad economic recovery, an increase in customer mobility and miles driven, as well as favorable weather trends. The~~period. Our Industrial Parts Group benefited from the ~~strengthening~~January 2022 acquisition of Kaman Distribution Group. We expect this strategic and highly synergistic combination to significantly enhance our scale and to strengthen our market leading position, creating a premier leader in industrial ~~economy, as evidenced by economic indicators such as the Manufacturing Industrial Production~~solutions. Additionally both businesses were resilient in managing through ongoing supply chain challenges and the Purchasing Managers Index, among others. Additionally, the Industrial Parts Group executed on key operational initiatives, including improved omni-channel capabilities and the expansion of our services and solutions business.inflationary pressures.

Sales

Sales for the three months ended ~~September 30, 2021~~March 31, 2022 were ~~$4.8~~$5.3 billion, ~~a 10.3%~~an 18.6% increase as compared to ~~$4.4~~$4.5 billion infor the same period of the prior year. The increase in sales is attributable to a ~~7.6%~~12.3% increase in comparable sales ~~a 1.8%~~and an 8.1% benefit from acquisitions, ~~and~~slightly offset by a net ~~favorable~~unfavorable impact of foreign currency and other of ~~0.9%~~1.8%. ~~Sales for the nine months ended September 30, 2021 were $14.1 billion, a 14.5%~~The 12.3% increase as compared to $12.3 billion in the same period of the prior year. The increase in sales is due to a 10.0% comparable sales increase, a 3.2% net favorable impact of foreign currency and other and a 1.3% benefit from acquisitions. The increases in comparable sales iswas primarily driven ~~primarily~~ by the ~~increased~~continued increase in consumer activity ~~as our key markets continue~~and pricing increases to ~~reopen when compared to the three~~offset product cost and ~~nine months ended September 30, 2020. Sales were positively impacted by price inflation of approximately 3% and 2% for the three and nine months ended September 30, 2021, respectively.~~other inflationary pressures.

Sales for the Automotive Parts Group increased ~~8.2%~~10.9% for the three months ended ~~September 30, 2021, as~~March 31, 2022 compared to the same period in the prior year. This group's revenue increase for the three months ended ~~September 30, 2021~~March 31, 2022 consisted of an approximate ~~4.8%~~10.3% increase in comparable sales driven by strong demand in all geographical regions and pricing increases to offset product costs and other inflationary pressures. The overall sales increase also included a ~~2.4%~~3.1% benefit from acquisitions and was slightly offset by a ~~1.0%~~2.5% net ~~favorable~~unfavorable impact of foreign currency and other. This group's 16.4% revenue increase for the nine months ended September 30, 2021 consisted of an approximate 10.7% increase in comparable sales, a 3.9% net favorable impact from foreign currency and other and a 1.8% benefit from acquisitions.

Sales for the Industrial Parts Group increased ~~14.5%~~33.6% for the three months ended ~~September 30, 2021,~~March 31, 2022 compared to the same period in 2021. The increase reflects a 17.9% benefit from the acquisition of Kaman Distribution Group and a 16.1% increase in comparable sales, slightly offset by a 0.4% unfavorable impact of foreign currency as compared to the same period in ~~2020. The increase in this group's revenue reflects an approximate 13.4% increase in comparable sales, a 0.8% favorable foreign currency impact and a 0.3%~~2021. Our Industrial Parts Group continues to benefit from ~~acquisitions. This group's 11.0% sales increase for~~continued expansion in the ~~nine months ended September 30, 2021 reflects an 8.9% increase~~industrial economy, which is evident in ~~comparable sales, a 1.5% favorable impact from foreign currency~~indicators such as the Purchasing Managers Index and ~~a 0.6% benefit from acquisitions.~~Industrial Production Index.

Cost of Goods Sold and Operating Expenses

Cost of goods sold for the three months ended ~~September 30, 2021~~March 31, 2022 was ~~$3.1~~$3.5 billion, ~~a 9.4%~~an 18.6% increase from ~~$2.8~~$2.9 billion for the same period in ~~2020.~~2021. As a percentage of net sales, cost of goods sold was ~~64.5%~~65.5% for the three months ended September 30, 2021, as compared to 65.0% in the same three month period of 2020. Cost of goods sold for the nine months ended September 30, 2021 was $9.1 billion, a 13.0% increase from $8.1 billion for the same period in 2020. As a percentage of net sales, cost of goods sold was 64.9% for the nine months ended September 30, 2021, as compared to 65.8% in the same period of 2020. The increase in cost of goods sold for the three and nine months ended September 30, 2021 primarily relates to the overall increase in sales volume due to the increased consumer activity as compared to the same three and nine month periods of the prior year.

Gross profit as a percentage of net sales may fluctuate based on, among other things, (i) changes in merchandise costs and related supplier 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, (v) changes in foreign currency exchange rates, (vi) changes in inflation or deflation, and (vii) the impact of tariffs. Gross margin improved to 35.5% for the three months ended September 30, 2021 compared to 35.0% in the same period of 2020. Gross margin for the nine months ended September 30, 2021 improved to 35.1% from 34.2% for the same nine month period of 2020. The gross margin improvements primarily reflect the impact of higher levels of supplier incentives on stronger sales and strategic category management initiatives including pricing and global sourcing strategies. We have reported improved year over year gross margin for 16 consecutive quarters.

Total operating expenses increased to $1.4 billion for the three months ended September 30, 2021 as compared to $1.2 billion for the same three month period in 2020. As a percentage of net sales, operating expenses increased to 29.4% as compared to 28.1% in the respective periods. This increase as a percentage of net sales is primarily due to the benefit of temporary COVID-19 related savings initiatives in 2020 and a $61.1 million loss on a software disposal in 2021. For the nine months ended September 30, 2021, operating expenses totaled $4.1 billion as

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ended March 31, 2022 and 2021. Cost of goods sold includes the total cost of merchandise sold, including freight expenses associated with moving merchandise from our suppliers to our distribution centers, retail stores and branches, as well as supplier volume incentives and inventory adjustments. The increase in costs of goods sold for the three months ended March 31, 2022 was primarily driven by inflation and increased demand.

Total operating expenses increased 17.6% to $1.5 billion for the three months ended March 31, 2022 compared to ~~$4.0~~$1.3 billion for the same ~~nine~~three month period in ~~2020.~~2021. As a percentage of net sales, operating expenses ~~improved~~decreased to ~~29.3% as~~28.3% compared to ~~32.8%~~28.5% in the three months ended March 31, 2022 and 2021, respectively. The decrease in operating expenses as a percentage of net sales for the ~~respective periods~~period is primarily ~~driven by the non-cash goodwill impairment charge that occurred in 2020.~~related to improved leverage on stronger sales and cost control initiatives.

Our operating expenses are substantially comprised of compensation and benefit-related costs for personnel. Other major expense categories include facility occupancy costs for headquarters, distribution centers and retail store/branch operations, transportation and delivery ~~costs driven by higher sales, facility occupancy~~ costs, technology and digital costs, ~~insurance costs,~~accounting, legal and professional services, insurance costs, and travel and advertising.

Segment Profit

The Automotive Parts ~~Group’s~~Group's segment profit increased ~~5.6%~~12.3% in the three months ended ~~September 30, 2021 as~~March 31, 2022 compared to the same period of ~~2020,~~2021, and its segment profit margin ~~was 8.8% as~~increased to 8.1% compared to ~~9.0% in~~8.0% for the same period of the previous year. Segment profit margin declined primarily due to the benefit of temporary COVID-related savings initiatives in 2020. These items were partially offset by improved leverage from stronger sales, gross margin expansion and incremental cost control initiatives in 2021. For the nine months ended September 30, 2021, the Automotive Parts Group's segment profit increased approximately 28.7% and the segment profit margin improved to 8.6% as compared to 7.8% in the same nine month period of 2020. This slight improvement in segment profit margin, isdespite inflationary headwinds, reflects the strong operating results in all geographical regions, driven primarily ~~due to~~by strong sales ~~gains as a result of the increased consumer activity as our key markets continue to reopen, gross margin improvements,~~demand and the ~~leveraging~~execution of ~~expenses on higher sales~~our growth and ~~ongoing cost control~~operating initiatives.

The Industrial Parts Group's segment profit increased ~~31.9%~~50.3% in the three months ended ~~September 30, 2021 as~~March 31, 2022 compared to the same three month period of ~~2020, and~~2021 primarily driven by the acquisition of Kaman Distribution Group. This groups segment profit margin ~~for this group improved~~increased to ~~10.3%~~9.3% compared to 8.9% for the same period of the previous year. Segment profit for the Industrial Parts Group improved 26.7% in the nine months ended September 30, 2021 as compared to the same nine month period of 2020, and the segment profit margin for this group improved to 9.4% compared to 8.2%8.3% for the same period of the previous year. The improved segment profit ~~margins for both periods reflect~~margin is primarily due to the ~~positive impact~~benefit of ~~higher~~strong sales ~~volumes, gross margin gains~~growth and ~~efficiencies~~strategic initiatives in ~~the operating structure of the Industrial Parts Group. Additionally, the Industrial Parts Group benefited from the strengthening industrial economy, which is evident in indicators~~areas such as ~~the Purchasing Managers Index~~category management and ~~Industrial Production Index.~~pricing.

Income Taxes

~~The Company's~~Our effective income tax rate was ~~23.5%~~24.5% and 23.8% for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~compared~~respectively. The increase in the rate is primarily related to ~~21.8% for~~prior year gains on the ~~same three month period in 2020. The effective~~sale of real estate and geographic income ~~tax rate was 24.8% for the nine months ended September 30, 2021, compared to 105.4% for the same period in 2020.~~mix shifts.

Net Income

For the three months ended September 30, 2021, the rate increase is primarily due to income mix shifts and statute related adjustments. For the nine months ended September 30, 2021, the rate decrease is primarily due to the non-deductible goodwill impairment charge that occurred in 2020, as described below. In addition, during the second quarter of 2021, the United Kingdom enacted legislation raising its corporate tax rate from 19% to 25% effective April 2023. Accordingly, the Company remeasured its deferred tax assets and liabilities as of June 30, 2021.

~~Net Income (Loss) from Continuing Operations~~

~~For the three months ended September 30, 2021, the Company recorded~~March 31, 2022, net income ~~from continuing operations~~was $245.8 million, an increase of ~~$228.6 million, a decrease of 1.9% as~~12.9% compared to net income ~~from continuing operations~~ of ~~$232.9~~$217.7 million infor the same three month period of the prior year. On a per share diluted basis, net income was ~~$1.59, a decrease~~$1.72, an increase of ~~1.2% as~~14.7% compared to ~~net income per diluted share of $1.61~~$1.50 for the same three month period of ~~2020. This decrease is primarily related to a loss on a software disposal of $61.1 million during the three months ended September 30,~~ 2021.

For the nine months ended September 30, 2021, the Company recorded net income from continuing operations of $642.8 million as compared to net loss from continuing operations of $8.2 million in the same nine month period of the prior year. On a per share diluted basis, net income from continuing operations was $4.44 as compared to net loss per diluted share of $0.06 in the same nine month period of 2020. The increase in income for the nine month period was primarily driven by the goodwill impairment charge of $506.7 million that occurred during the second quarter of 2020. Additionally, we saw higher sales volume as a result of increased consumer activity as our key markets continue to reopen during the nine months ended September 30, 2021 .

Further impacting net income from continuing operations during the three and nine months ended September 30, 2021, the Company incurred $61.1 million and $138.5 million of adjustments, respectively. These adjustments include the aforementioned loss related to a software disposal of $61.1 million and $77.4 million related to damages

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reinstated by the Washington Supreme Court order on July 8, 2021 in connection with a 2017 automotive product liability claim. Refer to the property, plant and equipment and commitments and contingencies footnotes to the condensed consolidated financial statements for more information regarding these adjustments. The Company believes these represent costs that do not arise in the ordinary course of the Company's business and therefore impact comparability with prior periods.

During the three and nine months ended September 30, 2020, the Company incurred $11.3 million and $565.0 million of adjustments, respectively. These adjustments include a goodwill impairment charge of $506.7 million related to our European reporting unit and also represents restructuring costs, realized currency losses, insurance proceeds related to the SPR Fire and transaction and other costs and income. Transaction and other costs primarily include incremental costs associated with certain divestitures and COVID-19.

For the three months ended ~~September 30, 2021, the Company's adjusted~~March 31, 2022, net income ~~from continuing operations~~on an adjusted basis was ~~$270.5~~$265.7 million, an increase of ~~14.2% as~~22.0% compared to adjusted net income ~~from continuing operations~~ of ~~$236.8~~$217.7 million infor the same three month period of the prior year. On a per share basis, ~~adjusted~~ net income ~~from continuing operations~~on an adjusted basis was ~~$1.88~~$1.86 for the three months ended ~~September 30, 2021,~~March 31, 2022, an increase of ~~15.3% as~~24.0% compared to ~~$1.63~~$1.50 for the same three month period of ~~2020.~~2021. For ~~the nine months ended September 30,~~ 2021, adjusted net income from continuing operations was $740.8 million, an increase of 36.2% as compared to $544.1 million for the same period of 2020. On a per share diluted basis, adjusted net income from continuing operations was $5.12 for the nine months ended September 30, 2021, an increase of 36.2% as compared to $3.76 for the same period of the prior year. The increased adjusted net income from continuing operations for the three and nine months ended September 30, 2021 reflects the benefits of improved sales volume related to increased consumer activity as our key markets continue to reopen, gross margin improvements, improved expense leverage on sales growth and our ongoing cost control initiatives. Both adjusted net income from continuing operations and adjusted diluted net income ~~from continuing operations~~ per common share are both non-GAAP measures (see table below for reconciliations to the most directly comparable GAAP measures).

The following table sets forth a reconciliation of net income ~~(loss) from continuing operations~~ and diluted net income ~~(loss) from continuing operations~~ per common share to adjusted net income ~~from continuing operations~~ and adjusted diluted net income ~~from continuing operations~~ per common share to account for the impact of these adjustments. ~~The Company believes~~We believe that the presentation of adjusted net income ~~from continuing operations~~ and adjusted diluted net income ~~from continuing operations~~ per common share, ~~which are not calculated in accordance with GAAP,~~ when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provide meaningful supplemental information to both management and investors that is indicative of ~~the Company's~~our core operations. ~~The Company considers~~We consider these metrics useful to investors because they provide greater transparency into management’s view and assessment of ~~the Company’s~~our ongoing operating performance by removing items management believes are not representative of our ~~continuing~~ operations and may distort our longer-term operating trends. We believe these measures are useful and enhance the comparability of our results from period to period and with our competitors, as well as show ongoing results from operations distinct from items that are infrequent or not associated with ~~the Company’s~~our core operations. ~~The Company does~~We do not, nor ~~does it~~do we suggest that investors should, consider such non-GAAP financial measures, as superior to, in isolation from, or as a substitute for, GAAP financial information.

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Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2021 2020 2021 2020
GAAP net income (loss) from continuing operations $ 228,585 $ 232,918 $ 642,791 $ (8,237)
Adjustments:
Loss on software disposal (1) 61,063 — 61,063 —
Product liability damages award (2) — — 77,421 —
Goodwill impairment charge (3) — — — 506,721
Restructuring costs (4) — 10,968 — 39,009
Realized currency loss (5) — — — 11,356
Gain on insurance proceeds related to SPR Fire (6) — — — (13,448)
Transaction and other costs (7) — 288 — 21,392
Total adjustments 61,063 11,256 138,484 565,030
Tax impact of adjustments (19,167) (7,423) (40,489) (12,733)
Adjusted net income from continuing operations $ 270,481 $ 236,751 $ 740,786 $ 544,060

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	Three Months Ended March 31,
(in thousands)	2022		2021
GAAP net income	$	245,838	$	217,710

Adjustments:
Gain on insurance proceeds (1)	(634)		—
Transaction and other costs (2)	26,549		—
Total adjustments	25,915		—
Tax impact of adjustments	(6,103)		—
Adjusted net income	$	265,650	$	217,710

The table below ~~represents~~represent amounts per common share assuming dilution:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except per share data) 2021 2020 2021 2020
GAAP net income (loss) from continuing operations $ 1.59 $ 1.61 $ 4.44 $ (0.06)
Adjustments:
Loss on software disposal (1) 0.42 — 0.42 —
Product liability damages award (2) — — 0.54 —
Goodwill impairment charge (3) — — — 3.51
Restructuring costs (4) — 0.07 — 0.26
Realized currency loss (5) — — — 0.08
Gain on insurance proceeds related to SPR Fire (6) — — — (0.09)
Transaction and other costs (7) — — — 0.15
Total adjustments 0.42 0.07 0.96 3.91
Tax impact of adjustments (0.13) (0.05) (0.28) (0.09)
Adjusted diluted net income from continuing operations per common share $ 1.88 $ 1.63 $ 5.12 $ 3.76
Weighted average common shares outstanding – assuming dilution 143,589 145,035 144,622 144,528


	Three Months Ended March 31,
(in thousands, except per share data)	2022		2021
GAAP net income	$	1.72	$	1.50

Adjustments:
Gain on insurance proceeds (1)	(0.01)		—
Transaction and other costs (2)	0.19		—
Total adjustments	0.18		—
Tax impact of adjustments	(0.04)		—
Adjusted diluted net income per common share	$	1.86	$	1.50
Weighted average common shares outstanding – assuming dilution	142,842		145,300

The table below clarifies where the ~~items that have been~~ adjusted ~~above to improve comparability of the financial information from period to period~~items are presented in the condensed consolidated statements of ~~income (loss).~~income.


	Three Months Ended March 31,
(in thousands)	2022		2021
Line item:
Cost of goods sold	$	5,000	$	—
Selling, administrative and other expenses	21,549		—
Non-operating expense (income): Other	(634)		—
Total adjustments	$	25,915	$	—

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2021 2020 2021 2020
Line item:
Cost of goods sold $ — $ 604 $ — $ 13,495
Selling, administrative and other expenses 61,063 — 138,484 8,213
Goodwill impairment charge — — — 506,721
Restructuring costs — 10,968 — 39,009
Non-operating (income) expenses: Other — (316) — (2,408)
Total adjustments $ 61,063 $ 11,256 $ 138,484 $ 565,030

(1)Adjustment reflects a loss on an internally developed software project that was disposed of due to a change in management strategy related to advances in alternative technologies. Refer to the property, plant and equipment footnote to the condensed consolidated financial statements for more information.

~~(2)~~Adjustment reflects damages reinstated by the Washington Supreme Court order on July 8, 2021 in connection with a 2017 automotive product liability claim. Refer to the commitments and contingencies footnote to the condensed consolidated financial statements for more information.

~~(3)Adjustment reflects the 2020 goodwill impairment charge related to the Company's European reporting unit.~~

~~(4)~~Adjustment reflects restructuring costs related to the execution of the 2019 Cost Savings Plan. The costs are primarily associated with severance and other employee costs, including a voluntary retirement program, and facility and closure costs related to the consolidation of operations.

~~(5)Adjustment reflects realized currency losses related to divestitures.~~

~~(6)~~Adjustment reflects insurance recoveries in excess of losses incurred on inventory, property, plant and equipment and other fire-related costs.

(2) Adjustment primarily reflects costs associated with the January 3, 2022 acquisition of Kaman Distribution Group. Refer to the acquisition footnote for more information regarding the acquisition.

Financial Condition

Our cash balance of $610.8 million at March 31, 2022 decreased $103.9 million, or 14.5%, from December 31, 2021. For the three months ended March 31, 2022, we had net cash provided by operating activities of $398.8 million, net cash used in investing activities of $1.4 billion and net cash provided by financing activities of $914.0 million.

The cash provided by operating activities was driven by higher net income for the three months ended March 31, 2022 and the effective management of our working capital. In addition, cash from operations included a $200 million benefit related to our A/R Sales Agreement during the ~~S.P. Richards Headquarters and~~quarter. We used $1.4 billion cash for investing activities primarily in connection with the acquisition of Kaman Distribution ~~Center.~~Group, in addition to $78.0 million for capital

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~~(7)~~Adjustment reflects $8.5 million of incremental costs associated with COVID-19 for the nine months ended September 30, 2020 and costs associated with certain divestitures. COVID-19 related costs include incremental costs incurred relating to fees to cancel marketing events and increased cleaning and sanitization materials, among other things.

~~Financial Condition~~

The Company’s cash balance of $919.1 million at September 30, 2021 decreased $71.1 million, or 7.2%, from December 31, 2020. For the nine months ended September 30, 2021, the Company had net cash provided by operating activities of $1,008.2 million, net cash used in investing activities of $239.9 million and net cash used in financing activities of $818.7 million. The cash provided by operating activities of $1,008.2 million reflects strong earnings and effective working capital management. This amount decreased $419.0 million from $1,427.2 million for the nine months ended September 30, 2020 primarily driven by the $500 million benefit to operating cash flow in 2020 as a result of the Company entering into the A/R Sales Agreement to sell receivables. The investing activities consisted primarily of $142.6 million in acquisitions and other investing activities and $138.2 million in capital expenditures, slightly offset by $40.9 million in proceeds from divestitures and the sale of property, plant and equipment.expenditures. The financing activities consisted primarily of ~~$349.3~~$1.1 billion of net proceeds from debt primarily from the Senior Notes offering (as discussed below). This was partially offset by $115.9 million for dividends paid to our shareholders and $72.9 million of stock repurchases.

Each of our working capital line items were impacted by the ~~Company’s shareholders, $283.9 million paid~~acquisition of Kaman Distribution Group (refer to our acquisitions footnote in the notes to condensed consolidated financial statements for ~~share repurchases and $160.8 million net payments on debt.~~

further information). Accounts receivable increased ~~$331.3~~$339.9 million, or ~~21.3%~~18.9%, from December 31, ~~2020 primarily due to higher sales volumes.~~2021. Inventory increased ~~$242.1~~$321.6 million, or ~~6.9%, due to increased economic activity~~8.3%. Accounts receivable and inventory were both impacted by first quarter increase in revenues and related product demand. Accounts payable increased ~~$691.0~~$409.6 million, or ~~16.7%~~8.5% from December 31, 2021, in line with the increase in inventory. Total debt of $3.5 billion at March 31, 2022 increased $1.1 billion, or 45.6%, from December 31, ~~2020 due to increased purchasing related to sales volume and extended payment terms with certain suppliers. Total debt of $2.4 billion at September 30,~~ 2021 ~~decreased $0.2 billion, or 9.1%, from December 31, 2020.~~driven primarily by the Senior Notes offering (as discussed below).

We continue to negotiate extended payment ~~terms~~dates with our suppliers. Our current payment terms with the majority of our suppliers range from 30 to 360 days. Several global financial institutions offer voluntary supply chain finance (“SCF”) programs which enable our suppliers, at their sole discretion, to sell their receivables from ~~the Company~~us to these financial institutions on a non-recourse basis at a rate that takes advantage of our credit rating and may be beneficial to them. The SCF program is primarily available to suppliers of goods and services included in cost of goods sold in our condensed consolidated statements of ~~income (loss). The Company~~income. Our suppliers and ~~our suppliers~~us agree on commercial terms for the goods and services we procure, including prices, quantities and payment terms, regardless of whether the supplier elects to participate in the SCF program. The suppliers sell goods or services, as applicable, to ~~the Company~~us and they issue the associated invoices to ~~the Company~~us based on the agreed-upon contractual terms. Then, if they are participating in the SCF program, our suppliers, at their sole discretion, determine which invoices, if any, they want to sell to the financial institutions. In turn, we direct payment to the financial institutions, rather than the suppliers, for the invoices sold to the financial institutions. No guarantees are provided by ~~the Company~~us or any of our subsidiaries on third-party performance under the SCF program; however, ~~the Company guarantees~~we guarantee the payment by our subsidiaries to the financial institutions participating in the SCF program for the applicable invoices. We have no economic interest in a supplier’s decision to participate in the SCF program, and we have no direct financial relationship with the financial institutions, as it relates to the SCF program. Accordingly, amounts due to our suppliers that elected to participate in the SCF program are included in the line item accounts payable in our condensed consolidated balance sheets. All activity related to amounts due to suppliers that elected to participate in the SCF program is reflected in cash flows from operating activities in our condensed consolidated statements of cash flows. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the outstanding payment obligations to the financial institutions are ~~$2.6~~$2.7 billion and ~~$1.8~~$2.7 billion, respectively. The amount settled through the SCF program was ~~$2.3 billion~~$855 million and ~~$1.9 billion~~$577 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and March 31, 2021, ~~and September 30, 2020,~~ respectively.

Liquidity and Capital Resources

We ended the quarter with ~~$2.4~~$2.0 billion of total liquidity (comprising ~~$1.5~~$1.4 billion availability on the ~~Unsecured Revolving Credit Facility, defined below,~~revolving credit facility and $~~0.9 billion~~610.8 million of cash and cash equivalents). From time to time, we may enter into other credit facilities or financing arrangements to provide additional liquidity and to manage against foreign currency risk. We currently believe that the existing lines of credit and cash generated from operations will be sufficient to fund anticipated operations for the foreseeable future.

On September 30, 2021, we entered into the first amendment to the Syndicated Facility Agreement (the "Unsecured Revolving Credit Facility"), dated as of October 30, 2020. The interest rates were amended to reduce the applicable rate by 12.5 basis points (resulting in a rate of LIBOR + 112.5 basis points) and the LIBOR floor from 0.5% to 0.0%. The amendment also extended the maturity by one year to September 30, 2026.

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We have a strong cash position and solid financial strength to pursue strategic growth opportunities through disciplined, strategic capital deployment. Our key priorities include the reinvestment in our businesses through capital expenditures, mergers and acquisitions, the dividend and share repurchases. We have plans for additional investments in our businesses to drive growth, improve efficiencies and productivity, and drive shareholder value.

On ~~February 16, 2021,~~January 3, 2022, we ~~announced a 3%~~amended our A/R Sales Agreement to increase the facility limit by an additional $200 million bringing the total to $1.0 billion. The terms of the A/R Sales Agreement limit the balance of receivables sold to approximately $1.0 billion at any point in time. Refer to the A/R Sales Agreement footnote in the ~~regular quarterly cash dividend~~notes to condensed consolidated financial statements for ~~2021. The Board~~more information.

On January 6, 2022, we issued $500.0 million of ~~Directors increased~~unsecured 1.750% Senior Notes due 2025. Simultaneously, we issued $500.0 million of unsecured 2.750% Senior Notes due 2032. For both offerings, interest is payable semi-annually on February 1 and August 1 of each year, beginning August 1, 2022. We utilized the ~~cash dividend payable~~proceeds from these offerings to ~~an annual rate~~repay the borrowings under the Revolving Credit Facility which were incurred to finance a significant portion of ~~$3.26 per share compared with~~ the ~~previous dividend of $3.16 per share. GPC has paid a cash dividend every year since going public in 1948, and 2021 marks the 65th consecutive year of increased dividends paid to shareholders.~~KDG Acquisition.

We expect to be able to continue to borrow funds at reasonable rates over the long term. At ~~September 30, 2021, the Company's~~March 31, 2022, our total average cost of debt was ~~2.34%~~2.31%, and ~~the Company remained~~we remain in compliance with all covenants connected with ~~its~~our borrowings. ~~Such covenants include, among others, a financial covenant to maintain a certain leverage ratio~~

Table of ~~consolidated debt to consolidated adjusted EBITDA under our credit facility.~~Contents

Any failure to comply with our debt covenants or restrictions could result in a default under our financing arrangements or could require us to obtain waivers from our lenders for failure to comply with these restrictions. The occurrence of a default that remains uncured or the inability to secure a necessary consent or waiver could create cross defaults under other debt arrangements and have a material adverse effect on our business, financial condition, results of operations and cash flows.

On February 14, 2022, we announced a 10% increase in the regular quarterly cash dividend for 2022. Our Board of Directors increased the cash dividend payable to an annual rate of $3.58 per share compared with the previous dividend of $3.26 per share. We have paid a cash dividend every year since going public in 1948, and 2022 marks the 66th consecutive year of increased dividends paid to shareholders.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

For quantitative and qualitative disclosures about market risk, refer to “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of Part II of our ~~2020~~2021 Annual Report on Form 10-K. Our exposure to market risk has not changed materially since December 31, ~~2020.~~2021.

Item 4. Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of ~~the Company’s~~our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of ~~the Company’s~~our disclosure controls and procedures. Based on that evaluation, ~~the Company’s~~our CEO and CFO concluded that ~~the Company’s~~our disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed by ~~the Company~~us in the reports that ~~it files~~we file or furnishes under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to ~~the Company’s~~our management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

On January 3, 2022, we completed the KDG Acquisition. We are in the process of integrating KDG into our system of internal control over financial ~~reporting~~reporting.

~~There~~Excluding the KDG acquisition, there have been no changes in ~~the Company’s~~our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 of the SEC that occurred during ~~the Company’s~~our last quarter ended ~~September 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in various claims and legal actions that arise in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we do not believe that the ultimate resolution of these actions will have a material adverse effect on our financial position, results of operations, liquidity and capital resources. Except as set forth herein, there have been no significant developments to the information presented in our ~~2020~~2021 Annual Report on Form 10-K with respect to litigation or commitments and contingencies. ~~Refer~~See the Commitments and Contingencies footnote in the notes to ~~the commitments and contingencies footnote to the~~ condensed consolidated financial statements for more information, which information is incorporated by reference herein.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our ~~2020~~2021 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Geopolitical conflicts, including the conflict between Russia and Ukraine, may adversely affect our business and results of operations.

We have operations or activities in numerous countries and regions outside the United States, including throughout Europe and Australasia. As a result, our global operations are affected by economic, political and other conditions in the foreign countries in which we do business as well as U.S. laws regulating international trade. Specifically, the current conflict between Russia and Ukraine is creating substantial uncertainty about the future impact on the global economy. Countries across the globe are instituting sanctions and other penalties against Russia. The retaliatory measures that have been taken, and could be taken in the future, by the U.S., NATO, and other countries have created global security concerns that could result in broader European military and political conflicts and otherwise have a substantial impact on regional and global economies, any or all of which could adversely affect our business, particularly our European operations.

While the broader consequences are uncertain at this time, the continuation and/or escalation of the Russian and Ukraine conflict, along with any expansion of the conflict to surrounding areas, create a number of risks that could adversely impact our business, including:

•increased inflation and significant volatility in commodity prices;

•disruptions to our global technology infrastructure, including through cyberattacks, ransom attacks or cyber-intrusion;

•adverse changes in international trade policies and relations;

•our ability to maintain or increase our prices, including freight in response to rising fuel costs;

•disruptions in global supply chains;

•increased exposure to foreign currency fluctuations;

•constraints, volatility or disruption in the credit and capital markets; and

•exacerbating the other risks disclosed in our Annual Report.

All of these risks could materially and adversely affect our business and results of operations. We are continuing to monitor the situation in the Ukraine and globally and assess its potential impact on our business.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about the ~~Company’s~~ purchases of shares of ~~the Company’s~~our common stock during the three months ended ~~September 30, 2021:~~March 31, 2022:

ISSUER PURCHASES OF EQUITY SECURITIES
Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
July 1, 2021 through July 31, 2021 213,064 $128.09 209,275 12,834,436
August 1, 2021 through August 31, 2021 355,503 $124.53 352,904 12,481,532
September 1, 2021 through September 30, 2021 240,124 $120.78 238,257 12,243,275
Totals 808,691 $124.35 800,436 12,243,275


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
January 1, 2022 through January 31, 2022	165,944	$135.98	144,939	11,720,278
February 1, 2022 through February 28, 2022	225,445	$125.76	216,971	11,503,307
March 1, 2022 through March 31, 2022	230,290	$124.27	209,694	11,293,613
Totals	621,679	$127.94	571,604	11,293,613

(1)Includes shares surrendered by employees ~~to the Company~~ to satisfy tax withholding obligations in connection with the vesting of shares of restricted stock, the exercise of stock options and/or tax withholding obligations.

(2)On August 21, 2017, the Board of Directors announced that it had authorized the repurchase of 15.0 million shares. ~~Under this program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.~~ The authorization for the repurchase continues until all such shares have been repurchased or the repurchase ~~program~~plan is terminated by action of the Board of Directors. ~~The program may be suspended at any time and does not have an expiration date.~~ Approximately ~~12.2~~11.3 million shares authorized remain available to be ~~repurchased by the Company.~~repurchased. There were no other repurchase ~~programs~~plans announced as of ~~September 30, 2021.~~March 31, 2022.

2822

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Item 6. Exhibits

(a) The following exhibits are filed or furnished as part of this report:


Exhibit 3.1						Amended and Restated Articles of Incorporation of the Company, dated April 23, 2007 (incorporated herein by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K dated April 23, 2007)

Exhibit 3.2						By-Laws of the Company, as amended and restated November 19, 2018 (incorporated herein by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K dated November 19, 2018)

Exhibit 4.1						Officer’s Certificate, dated January 10, 2022, pursuant to Sections 3.01 and 3.03 of the Indenture, dated October 29, 2020, setting forth the terms of the 1.750% Senior Notes due 2025 and 2.750% Senior Notes due 2032 (incorporated herein by reference from Exhibit 4.2 to the Company’s Current Report on Form 8-K dated January 10, 2022)

Exhibit 4.2						Form of 1.750% Senior Notes due 2025 (included in Exhibit 4.1)

Exhibit 4.3						Form of 2.750% Senior Notes due 2032 (included in Exhibit 4.1)

Exhibit 10.1						Offer Letter, dated January 21, 2022 (incorporated herein by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 25, 2022)

Exhibit 31.1						Certification pursuant to SEC Rule 13a-14(a) signed by the Chief Executive Officer – filed herewith

Exhibit 31.2						Certification pursuant to SEC Rule 13a-14(a) signed by the Chief Financial Officer – filed herewith

Exhibit 32						Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer and Chief Financial Officer – furnished herewith
~~Exhibit 10.1~~						~~First Amendment, dated as of September 30, 2021, to Genuine Parts Company~~ Syndicated Facility Agreement dated October 30, 2020 among Genuine Parts Company, UAP, Inc., and Certain Designated Subsidiaries as Borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, Domestic Swing Line Lender and L/C Issuer, JPMorgan Chase Bank, N.A., acting through its Toronto Branch, as Canadian Swing Line Lender and the other Lenders and L/C Issuers party thereto.
Exhibit 101.INS						XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

Exhibit 101.SCH						XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

Exhibit 101.LAB						XBRL Taxonomy Extension Labels Linkbase Document

Exhibit 101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit 104						The cover page from this Quarterly Report on Form 10-Q for the period ended ~~September 30, 2021~~March 31, 2022 formatted in Inline XBRL

* Indicates management contracts and compensatory plans and arrangements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						Genuine Parts Company (Registrant)

Date: ~~October~~April 21, ~~2021~~2022						/s/ Carol B. Yancey
						Carol B. Yancey
						Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial ~~Officer)~~

~~Date: October 21, 2021~~						~~/s/ Napoleon B. Rutledge Jr.~~
						~~Napoleon B. Rutledge Jr.~~
						~~Senior Vice President~~ and ~~Chief Accounting Officer~~ ~~(Duly Authorized Officer and Principal~~ Accounting Officer)

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PART I		Page

Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Income ~~(Loss)~~	3
	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~	4
	Condensed Consolidated Statements of Equity	5
	Condensed Consolidated Statements of Cash Flows	76
	Notes to Condensed Consolidated Financial Statements	87
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1815
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2620
Item 4.	Controls and Procedures	2620

PART II

Item 1.	Legal Proceedings	2721
Item 1A.	Risk Factors	2721
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2722
Item 6.	Exhibits	2923
	Signatures	3024


	Nine Months Ended September 30, 2021
(in thousands, except share and per share data)	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Parent Equity		Non-controlling Interests in Subsidiaries		Total Equity
January 1, 2021	144,354,335	$	144,354	$	117,165	$	(1,036,502)	$	3,979,779	$	3,204,796	$	13,207	$	3,218,003
Net income	—	—		—		—		642,791		642,791		—		642,791
Other comprehensive loss, net of tax	—	—		—		(36,584)		—		(36,584)		—		(36,584)
Cash dividend declared, $2.4450 per share	—	—		—		—		(351,606)		(351,606)		—		(351,606)
Share-based awards exercised	385,419	385		(19,783)		—		—		(19,398)		—		(19,398)
Share-based compensation	—	—		20,841		—		—		20,841		—		20,841
Purchase of stock	(2,236,261)	(2,236)		—		—		(281,650)		(283,886)		—		(283,886)
Cumulative effect from adoption of ASU 2019-12 (1)	—	—		—		—		6,223		6,223		—		6,223
Noncontrolling interest activities	—	—		—		—		—		—		174		174
September 30, 2021	142,503,493	$	142,503	$	118,223	$	(1,073,086)	$	3,995,537	$	3,183,177	$	13,381	$	3,196,558


	Three Months Ended September 30, 2020
(in thousands, except share and per share data)	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Parent Equity		Non-controlling Interests in Subsidiaries		Total Equity
July 1, 2020	144,264,189	$	144,264	$	107,819	$	(1,212,372)	$	3,809,564	$	2,849,275	$	21,613	$	2,870,888
Net income	—	—		—		—		227,531		227,531		—		227,531
Other comprehensive income, net of tax	—	—		—		45,800		—		45,800		—		45,800
Cash dividend declared, $0.7900 per share	—	—		—		—		(113,982)		(113,982)		—		(113,982)
Share-based awards exercised	25,464	26		(990)		—		—		(964)		—		(964)
Share-based compensation	—	—		6,420		—		—		6,420		—		6,420
Noncontrolling interest activities	—	—		—		—		—		—		(920)		(920)
September 30, 2020	144,289,653	$	144,290	$	113,249	$	(1,166,572)	$	3,923,113	$	3,014,080	$	20,693	$	3,034,773


	Nine Months Ended September 30, 2020
(in thousands, except share and per share data)	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Parent Equity		Non-controlling Interests in Subsidiaries		Total Equity
January 1, 2020	145,378,158	$	145,378	$	98,777	$	(1,141,308)	$	4,571,860	$	3,674,707	$	20,793	$	3,695,500
Net loss	—	—		—		—		(200,306)		(200,306)		—		(200,306)
Other comprehensive loss, net of tax	—	—		—		(25,264)		—		(25,264)		—		(25,264)
Cash dividend declared, $2.3700 per share	—	—		—		—		(342,426)		(342,426)		—		(342,426)
Share-based awards exercised	47,939	48		(1,802)		—		—		(1,754)		—		(1,754)
Share-based compensation	—	—		16,274		—		—		16,274		—		16,274
Purchase of stock	(1,136,444)	(1,136)		—		—		(94,583)		(95,719)		—		(95,719)
Cumulative effect from adoption of ASU 2016-13 (2)	—	—		—		—		(11,432)		(11,432)		—		(11,432)
Noncontrolling interest activities	—	—		—		—		—		—		(100)		(100)
September 30, 2020	144,289,653	$	144,290	$	113,249	$	(1,166,572)	$	3,923,113	$	3,014,080	$	20,693	$	3,034,773