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, ~~2022~~2023


☐			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,

(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 ~~141,161,349~~140,196,631 shares of common stock outstanding as of October ~~17, 2022.~~16, 2023.

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) September 30, 2022 December 31, 2021
Assets
Current assets:
Cash and cash equivalents $ 629,198 $ 714,701
Trade accounts receivable, less allowance for doubtful accounts (2022 – $47,262; 2021 – $44,425) 2,215,032 1,797,955
Merchandise inventories, net 4,300,709 3,889,919
Prepaid expenses and other current assets 1,678,259 1,353,847
Total current assets 8,823,198 7,756,422
Goodwill 2,460,911 1,915,307
Other intangible assets, less accumulated amortization 1,748,274 1,406,401
Property, plant and equipment, less accumulated depreciation (2022 – $1,369,770; 2021 – $1,339,706) 1,241,567 1,234,399
Operating lease assets 1,073,858 1,053,689
Other assets 1,029,272 985,884
Total assets $ 16,377,080 $ 14,352,102
Liabilities and equity
Current liabilities:
Trade accounts payable $ 5,531,253 $ 4,804,939
Current portion of debt 1,629 —
Dividends payable 126,434 115,876
Other current liabilities 1,835,803 1,660,768
Total current liabilities 7,495,119 6,581,583
Long-term debt 3,231,668 2,409,363
Operating lease liabilities 809,495 789,175
Pension and other post–retirement benefit liabilities 262,820 265,134
Deferred tax liabilities 398,797 280,778
Other long-term liabilities 500,989 522,779
Equity:
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 – 2022 – 140,962,009 shares; 2021 – 142,180,683 shares 140,962 142,181
Additional paid-in capital 132,240 119,975
Accumulated other comprehensive loss (1,074,316) (857,739)
Retained earnings 4,465,565 4,086,325
Total parent equity 3,664,451 3,490,742
Noncontrolling interests in subsidiaries 13,741 12,548
Total equity 3,678,192 3,503,290
Total liabilities and equity $ 16,377,080 $ 14,352,102


(in thousands, except share and per share data)	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	654,637	$	653,463
Trade accounts receivable, less allowance for doubtful accounts (2023 – $61,499; 2022 – $53,872)	2,394,787		2,188,868
Merchandise inventories, net	4,482,773		4,441,649
Prepaid expenses and other current assets	1,497,677		1,532,759
Total current assets	9,029,874		8,816,739
Goodwill	2,637,150		2,588,113
Other intangible assets, less accumulated amortization	1,754,977		1,812,510
Property, plant and equipment, less accumulated depreciation (2023 – $1,532,480; 2022 – $1,435,677)	1,513,822		1,326,014
Operating lease assets	1,197,244		1,104,678
Other assets	888,831		847,325
Total assets	$	17,021,898	$	16,495,379

Liabilities and equity
Current liabilities:
Trade accounts payable	$	5,486,379	$	5,456,550
Current portion of debt	354,017		252,029
Dividends payable	133,254		126,191
Other current liabilities	1,826,709		1,851,340
Total current liabilities	7,800,359		7,686,110
Long-term debt	2,963,448		3,076,794
Operating lease liabilities	919,470		836,019
Pension and other post–retirement benefit liabilities	198,180		197,879
Deferred tax liabilities	411,350		391,163
Other long-term liabilities	527,816		502,967
Equity:
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 – 2023 – 140,234,786 shares; 2022 – 140,941,649 shares	140,235		140,941
Additional paid-in capital	163,602		140,324
Accumulated other comprehensive loss	(1,087,262)		(1,032,542)
Retained earnings	4,969,538		4,541,640
Total parent equity	4,186,113		3,790,363
Noncontrolling interests in subsidiaries	15,162		14,084
Total equity	4,201,275		3,804,447
Total liabilities and equity	$	17,021,898	$	16,495,379

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	(in thousands, except per share data)	2022		2021		2022		2021		(in thousands, except per share data)	2023		2022		2023		2022
Net sales	Net sales	$	5,675,274	$	4,818,849	$	16,572,323	$	14,067,301	Net sales	$	5,824,602	$	5,675,274	$	17,504,726	$	16,572,323
Cost of goods sold	Cost of goods sold	3,695,607		3,108,082		10,805,910		9,126,614		Cost of goods sold	3,715,361		3,695,607		11,247,341		10,805,910
Gross profit	Gross profit	1,979,667		1,710,767		5,766,413		4,940,687		Gross profit	2,109,241		1,979,667		6,257,385		5,766,413
Operating expenses:	Operating expenses:									Operating expenses:
Selling, administrative and other expenses	Selling, administrative and other expenses	1,458,418		1,338,768		4,226,412		3,883,241		Selling, administrative and other expenses	1,551,799		1,458,418		4,644,696		4,226,412
Depreciation and amortization	Depreciation and amortization	86,563		72,121		259,822		218,377		Depreciation and amortization	83,860		86,563		261,948		259,822
Provision for doubtful accounts	Provision for doubtful accounts	6,146		4,284		13,539		14,230		Provision for doubtful accounts	8,417		6,146		22,378		13,539
Total operating expenses	Total operating expenses	1,551,127		1,415,173		4,499,773		4,115,848		Total operating expenses	1,644,076		1,551,127		4,929,022		4,499,773
Non-operating expense (income):	Non-operating expense (income):									Non-operating expense (income):
Interest expense, net	Interest expense, net	18,220		14,167		58,318		47,853		Interest expense, net	15,827		18,220		49,146		58,318
Other	Other	(7,616)		(17,547)		(26,897)		(77,454)		Other	(15,722)		(7,616)		(44,338)		(26,897)
Total non-operating expense (income)	Total non-operating expense (income)	10,604		(3,380)		31,421		(29,601)		Total non-operating expense (income)	105		10,604		4,808		31,421
Income before income taxes	Income before income taxes	417,936		298,974		1,235,219		854,440		Income before income taxes	465,060		417,936		1,323,555		1,235,219
Income taxes	Income taxes	105,578		70,389		304,494		211,649		Income taxes	113,862		105,578		323,906		304,494
Net income	Net income	$	312,358	$	228,585	$	930,725	$	642,791	Net income	$	351,198	$	312,358	$	999,649	$	930,725
Dividends declared per common share	Dividends declared per common share	$	0.8950	$	0.8150	$	2.6850	$	2.4450	Dividends declared per common share	$	0.950	$	0.895	$	2.850	$	2.685
Basic earnings per share	Basic earnings per share	$	2.21	$	1.60	$	6.57	$	4.47	Basic earnings per share	$	2.50	$	2.21	$	7.11	$	6.57
Diluted earnings per share	Diluted earnings per share	$	2.20	$	1.59	$	6.53	$	4.44	Diluted earnings per share	$	2.49	$	2.20	$	7.08	$	6.53

Weighted average common shares outstanding		141,336		142,871		141,609		143,826
Dilutive effect of stock options and non-vested restricted stock awards		773		718		819		796
Weighted average common shares outstanding – assuming dilution		142,109		143,589		142,428		144,622

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Net income $ 312,358 $ 228,585 $ 930,725 $ 642,791
Other comprehensive loss, net of income taxes:
Foreign currency translation adjustments, net of income taxes in 2022 — $33,843 and $73,892; 2021 — $11,328 and $25,494, respectively (131,811) (82,574) (248,757) (75,738)
Cash flow hedge adjustments, net of income taxes in 2022 — $1,384 and $4,151 ; 2021 — $1,384 and $4,151, respectively 3,741 3,741 11,223 11,223
Pension and postretirement benefit adjustments, net of income taxes in 2022 — $2,576 and $7,736; 2021 — $3,425 and $10,280, respectively 6,982 9,301 20,957 27,931
Other comprehensive loss, net of income taxes (121,088) (69,532) (216,577) (36,584)
Comprehensive income $ 191,270 $ 159,053 $ 714,148 $ 606,207


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Net income	$	351,198	$	312,358	$	999,649	$	930,725
Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustments	(77,314)		(131,811)		(63,027)		(248,757)
Cash flow hedge adjustments, net of income taxes in 2023 — $0 and $951; 2022 — $1,384 and $4,151, respectively	—		3,741		2,572		11,223
Pension and postretirement benefit adjustments, net of income taxes in 2023 — $703 and $2,108; 2022 — $2,576 and $7,736, respectively	1,909		6,982		5,735		20,957
Other comprehensive income (loss), net of income taxes	(75,405)		(121,088)		(54,720)		(216,577)
Comprehensive income	$	275,793	$	191,270	$	944,929	$	714,148

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)


		Three Months Ended September 30, 2022																Three Months Ended September 30, 2023
(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, 2022		141,280,841	$	141,281	$	123,388	$	(953,228)	$	4,329,115	$	3,640,556	$	13,007	$	3,653,563
July 1, 2023																	July 1, 2023	140,467,550	$	140,468	$	153,748	$	(1,011,857)	$	4,788,852	$	4,071,211	$	14,583	$	4,085,794
Net income	Net income	—	—		—		—		312,358		312,358		—		312,358		Net income	—	—		—		—		351,198		351,198		—		351,198
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—	—		—		(121,088)		—		(121,088)		—		(121,088)		Other comprehensive loss, net of tax	—	—		—		(75,405)		—		(75,405)		—		(75,405)
Cash dividend declared, $0.895 per share		—	—		—		—		(126,434)		(126,434)		—		(126,434)
Share-based awards exercised, including tax benefit of $731		14,619	15		(1,039)		—		—		(1,024)		—		(1,024)
Cash dividend declared, $0.9500 per share																	Cash dividend declared, $0.9500 per share	—	—		—		—		(133,254)		(133,254)		—		(133,254)
Shares issued from employee incentive plans																	Shares issued from employee incentive plans	5,991	6		(541)		—		—		(535)		—		(535)
Share-based compensation	Share-based compensation	—	—		9,891		—		—		9,891		—		9,891		Share-based compensation	—	—		10,395		—		—		10,395		—		10,395
Purchase of stock	Purchase of stock	(333,451)	(334)		—		—		(49,474)		(49,808)		—		(49,808)		Purchase of stock	(238,755)	(239)		—		—		(37,258)		(37,497)		—		(37,497)
Noncontrolling interest activities	Noncontrolling interest activities	—	—		—		—		—		—		734		734		Noncontrolling interest activities	—	—		—		—		—		—		579		579
September 30, 2022		140,962,009	$	140,962	$	132,240	$	(1,074,316)	$	4,465,565	$	3,664,451	$	13,741	$	3,678,192
September 30, 2023																	September 30, 2023	140,234,786	$	140,235	$	163,602	$	(1,087,262)	$	4,969,538	$	4,186,113	$	15,162	$	4,201,275

Nine Months Ended September 30, 2022
(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, 2022 142,180,683 $ 142,181 $ 119,975 $ (857,739) $ 4,086,325 $ 3,490,742 $ 12,548 $ 3,503,290
Net income — — — — 930,725 930,725 — 930,725
Other comprehensive loss, net of tax — — — (216,577) — (216,577) — (216,577)
Cash dividend declared, $2.685 per share — — — — (380,041) (380,041) — (380,041)
Share-based awards exercised, including tax benefit of $3,868 63,877 64 (15,508) — — (15,444) — (15,444)
Share-based compensation — — 27,773 — — 27,773 — 27,773
Purchase of stock (1,282,551) (1,283) — — (171,444) (172,727) — (172,727)
Noncontrolling interest activities — — — — — — 1,193 1,193
September 30, 2022 140,962,009 $ 140,962 $ 132,240 $ (1,074,316) $ 4,465,565 $ 3,664,451 $ 13,741 $ 3,678,192


	Nine Months Ended September 30, 2023
(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, 2023	140,941,649	$	140,941	$	140,324	$	(1,032,542)	$	4,541,640	$	3,790,363	$	14,084	$	3,804,447
Net income	—	—		—		—		999,649		999,649		—		999,649
Other comprehensive loss, net of tax	—	—		—		(54,720)		—		(54,720)		—		(54,720)
Cash dividend declared, $2.8500 per share	—	—		—		—		(400,483)		(400,483)		—		(400,483)
Shares issued from employee incentive plans	372,471	373		(24,062)		—		—		(23,689)		—		(23,689)
Share-based compensation	—	—		47,340		—		—		47,340		—		47,340
Purchase of stock	(1,079,334)	(1,079)		—		—		(171,268)		(172,347)		—		(172,347)
Noncontrolling interest activities	—	—		—		—		—		—		1,078		1,078
September 30, 2023	140,234,786	$	140,235	$	163,602	$	(1,087,262)	$	4,969,538	$	4,186,113	$	15,162	$	4,201,275

Table of Contents


		Three Months Ended September 30, 2021																Three Months Ended September 30, 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
July 1, 2022																	July 1, 2022	141,280,841	$	141,281	$	123,388	$	(953,228)	$	4,329,115	$	3,640,556	$	13,007	$	3,653,563
Net income	Net income	—	—		—		—		228,585		228,585		—		228,585		Net income	—	—		—		—		312,358		312,358		—		312,358
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—	—		—		(69,532)		—		(69,532)		—		(69,532)		Other comprehensive loss, net of tax	—	—		—		(121,088)		—		(121,088)		—		(121,088)
Cash dividend declared, $0.815 per share		—	—		—		—		(116,486)		(116,486)		—		(116,486)
Share-based awards exercised, including tax benefit of $40		2,256	1		(69)		—		—		(68)		—		(68)
Cash dividend declared, $0.8950 per share																	Cash dividend declared, $0.8950 per share	—	—		—		—		(126,434)		(126,434)		—		(126,434)
Shares issued from employee incentive plans																	Shares issued from employee incentive plans	14,619	15		(1,039)		—		—		(1,024)		—		(1,024)
Share-based compensation	Share-based compensation	—	—		6,320		—		—		6,320		—		6,320		Share-based compensation	—	—		9,891		—		—		9,891		—		9,891
Purchase of stock	Purchase of stock	(800,436)	(800)		—		—		(98,721)		(99,521)		—		(99,521)		Purchase of stock	(333,451)	(334)		—		—		(49,474)		(49,808)		—		(49,808)
Noncontrolling interest activities	Noncontrolling interest activities	—	—		—		—		—		—		2,115		2,115		Noncontrolling interest activities	—	—		—		—		—		—		734		734
September 30, 2021		142,503,493	$	142,503	$	118,223	$	(1,073,086)	$	3,995,537	$	3,183,177	$	13,381	$	3,196,558
September 30, 2022																	September 30, 2022	140,962,009	$	140,962	$	132,240	$	(1,074,316)	$	4,465,565	$	3,664,451	$	13,741	$	3,678,192

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, $2.445 per share — — — — (351,606) (351,606) — (351,606)
Share-based awards exercised, including tax benefit of $6,667 385,419 385 (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

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


	Nine Months Ended September 30, 2022
(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, 2022	142,180,683	$	142,181	$	119,975	$	(857,739)	$	4,086,325	$	3,490,742	$	12,548	$	3,503,290
Net income	—	—		—		—		930,725		930,725		—		930,725
Other comprehensive loss, net of tax	—	—		—		(216,577)		—		(216,577)		—		(216,577)
Cash dividend declared, $2.6850 per share	—	—		—		—		(380,041)		(380,041)		—		(380,041)
Shares issued from employee incentive plans	63,877	64		(15,508)		—		—		(15,444)		—		(15,444)
Share-based compensation	—	—		27,773		—		—		27,773		—		27,773
Purchase of stock	(1,282,551)	(1,283)		—		—		(171,444)		(172,727)		—		(172,727)
Noncontrolling interest activities	—	—		—		—		—		—		1,193		1,193
September 30, 2022	140,962,009	$	140,962	$	132,240	$	(1,074,316)	$	4,465,565	$	3,664,451	$	13,741	$	3,678,192

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		Nine Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	930,725	$	642,791	Net income	$	999,649	$	930,725
Adjustments to reconcile net income to net cash provided by operating activities:	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	259,822		218,377		Depreciation and amortization	261,948		259,822
Loss on software disposal		—		61,063
Share-based compensation	Share-based compensation	27,773		20,841		Share-based compensation	47,340		27,773
Excess tax benefits from share-based compensation						Excess tax benefits from share-based compensation	(6,770)		(3,868)
Gain on sale of real estate	Gain on sale of real estate	(102,803)		—		Gain on sale of real estate	—		(102,803)
Intangible asset impairment		17,461		—
Excess tax benefits from share-based compensation		(3,868)		(6,667)
Changes in operating assets and liabilities	Changes in operating assets and liabilities	115,481		71,791		Changes in operating assets and liabilities	(219,721)		132,942
Net cash provided by operating activities	Net cash provided by operating activities	1,244,591		1,008,196		Net cash provided by operating activities	1,082,446		1,244,591
Investing activities:	Investing activities:					Investing activities:
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(243,998)		(138,206)		Purchases of property, plant and equipment	(349,858)		(243,998)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	141,228		24,184		Proceeds from sale of property, plant and equipment	7,339		141,228
Proceeds from divestitures of businesses		32,620		16,687
Acquisitions of businesses and other investing activities		(1,586,812)		(142,567)
Proceeds from sale of investments						Proceeds from sale of investments	80,482		—
Acquisitions and other investing activities						Acquisitions and other investing activities	(211,392)		(1,554,192)
Net cash used in investing activities	Net cash used in investing activities	(1,656,962)		(239,902)		Net cash used in investing activities	(473,429)		(1,656,962)
Financing activities:	Financing activities:					Financing activities:
Proceeds from debt	Proceeds from debt	4,547,511		242,332		Proceeds from debt	2,543,882		4,547,511
Payments on debt	Payments on debt	(3,586,954)		(403,126)		Payments on debt	(2,544,619)		(3,586,954)
Share-based awards exercised		(15,444)		(19,398)
Shares issued from employee incentive plans						Shares issued from employee incentive plans	(23,689)		(15,444)
Dividends paid	Dividends paid	(369,483)		(349,293)		Dividends paid	(393,420)		(369,483)
Purchases of stock	Purchases of stock	(172,727)		(283,886)		Purchases of stock	(172,347)		(172,727)
Other financing activities	Other financing activities	(16,869)		(5,353)		Other financing activities	(8,826)		(16,869)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	386,034		(818,724)		Net cash provided by (used in) financing activities	(599,019)		386,034
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(59,166)		(20,639)		Effect of exchange rate changes on cash and cash equivalents	(8,824)		(59,166)
Net decrease in cash and cash equivalents		(85,503)		(71,069)
Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	1,174		(85,503)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	714,701		990,166		Cash and cash equivalents at beginning of period	653,463		714,701
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	629,198	$	919,097	Cash and cash equivalents at end of period	$	654,637	$	629,198

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~1. General~~1.General

Basis of Presentation

The accompanying unaudited ~~condensed consolidated financial statements~~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. Except as disclosed herein, there have been no material changes in the information disclosed in the ~~notes~~Notes to the ~~consolidated financial statements~~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, ~~2021.~~2022. Accordingly, the unaudited ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements and related disclosures herein should be read in conjunction with our ~~2021~~2022 Annual Report on Form 10-K. ~~Significant accounting policies and other items disclosed in our Annual Report have been omitted from this report because they have not changed.~~

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.~~Condensed Consolidated Financial Statements. Specifically, we make estimates and assumptions in our unaudited ~~condensed consolidated financial statements~~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 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, ~~2022~~2023 are not necessarily indicative of results for the year ended December 31, ~~2022.~~2023. We have evaluated subsequent events through the date the unaudited ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements covered by this quarterly report were issued.

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 any not listed below were assessed and determined to not be applicable or are expected to have ~~determined that any recently adopted accounting pronouncements did not have a material~~an immaterial impact on our ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

In September 2022, the FASB issued ASU 2022-04, Liabilities-Supplier Finance ~~Programs.~~ Programs. This standard requires disclosure of the key terms of outstanding supply chain finance programs and a rollforward of the related amounts due to vendors participating in these programs. The new standard does not affect the recognition, measurement or financial statement presentation of any amounts due. The guidance iswas effective in the first quarter of 2023, except for the rollforward, which isbecomes effective in the first quarter of 2024. ~~Early adoption is permitted. We are evaluating~~For additional information, please refer to the ~~adoption of this new guidance.~~supply chain finance programs section herein.

~~Debt~~Prepaid Expenses and Other Current Assets

~~1.750%~~The following table provides a detail of prepaid expenses and ~~2.750% Senior Notes Offering~~other current assets reported within the Condensed Consolidated Balance Sheets as of:

We utilized the proceeds from these offerings to repay borrowings under our Revolving Credit Facility, which were incurred to finance a significant portion of the Kaman Distribution Group ("KDG") acquisition.


(in thousands)	September 30, 2023		December 31, 2022
Prepaid expenses	$	117,310	$	113,522
Consideration receivable from vendors	825,347		847,341
Other current assets	555,020		571,896
Total prepaid expenses and other current assets	$	1,497,677	$	1,532,759

Table of Contents

Derivatives and Hedging

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, we~~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 our earnings and cash flows associated with changes in these rates. Derivative instruments are recognized in the ~~condensed consolidated balance sheets~~Condensed Consolidated Balance Sheets at fair value and are designated as Level 2 in the fair value hierarchy. They are valued using inputs other than quoted prices, such as foreign exchange rates and yield curves.

The following table summarizes the classification 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 (in thousands):


			September 30, 2022				December 31, 2021						September 30, 2023				December 31, 2022
Instrument	Instrument	Balance Sheet Classification	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	$	1,513,750	$	261,813	$	925,810	$	73,819	Forward contracts	Prepaid expenses and other current assets	$	606,950	$	57,968	$	606,950	$	46,670
Forward contract	Forward contract	Other current liabilities	$	—	$	—	$	235,180	$	2,935	Forward contract	Other current liabilities	$	106,800	$	206	$	106,800	$	3,064
Foreign currency debt	Foreign currency debt	Long-term debt	€	700,000	$	686,980	€	700,000	$	792,820	Foreign currency debt	Long-term debt	€	700,000	$	740,180	€	700,000	$	749,280

The tables below present gains and losses related to designated net investment hedges:


		Gain Recognized in AOCL before Reclassifications				Gain Recognized in Interest Expense for Excluded Components					Gain Recognized in AOCL before Reclassifications				Gain Recognized in Interest Expense for Excluded Components
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
Three months ended September 30,
Three Months Ended September 30,										Three Months Ended September 30,
Net investment hedges:										Net investment hedges:
Forward contracts	Forward contracts	$	81,454	$	20,958	$	7,965	$	6,574	Forward contracts	$	19,217	$	81,454	$	3,158	$	7,965
Foreign currency debt	Foreign currency debt	43,890		21,000		—		—		Foreign currency debt	20,300		43,890		—		—
Total	Total	$	125,344	$	41,958	$	7,965	$	6,574	Total	$	39,517	$	125,344	$	3,158	$	7,965


		Gain Recognized in AOCL before Reclassifications				Gain Recognized in Interest Expense for Excluded Components					Gain Recognized in AOCL before Reclassifications				Gain Recognized in Interest Expense for Excluded Components
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
Nine months ended September 30,
Nine Months Ended September 30,										Nine Months Ended September 30,
Net investment hedges:										Net investment hedges:
Forward contracts	Forward contracts	$	167,834	$	45,143	$	23,095	$	19,722	Forward contracts	$	4,681	$	167,834	$	9,475	$	23,095
Foreign currency debt	Foreign currency debt	105,840		49,280		—		—		Foreign currency debt	9,100		105,840		—		—
Total	Total	$	273,674	$	94,423	$	23,095	$	19,722	Total	$	13,781	$	273,674	$	9,475	$	23,095

Fair Value of Financial Instruments

As of September 30, ~~2022~~2023 the fair value of our senior unsecured notes was approximately ~~$2.8~~$2.9 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.

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 September 30, ~~2022,~~2023, we were in compliance with all such covenants.

Table of Contents

As of September 30, ~~2022,~~2023, the total borrowings of the independents and affiliates subject to guarantee by us were approximately ~~$908~~$991 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

~~Table of Contents~~

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 September 30, ~~2022,~~2023, 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, ~~2022,~~2023, we have recognized certain assets and liabilities amounting to ~~$74~~$63 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.~~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.

Supply Chain Finance Programs

Several global financial institutions offer voluntary supply chain finance (“SCF”) programs which enable our suppliers (generally those that grant extended terms), at their sole discretion, to sell their receivables from 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. We and our suppliers 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. Our current payment terms with the majority of our suppliers range from 30 to 360 days. The suppliers sell goods or services, as applicable, to us and they issue the associated invoices to 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 us or any of our subsidiaries on third-party performance under the SCF program; however, 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 consolidated statement of cash flows. As of September 30, 2023 and December 31, 2022, the outstanding payment obligations to the financial institutions are $2.9 billion and $3.1 billion, respectively. The amount settled through the SCF program was $3.1 billion and $2.7 billion for the nine months ended September 30, 2023 and 2022 respectively.

Earnings Per Share

We ~~maintain various long-term incentive plans, which provide for~~calculate basic earnings per share by dividing net income by the ~~granting~~weighted average number of ~~stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance awards, dividend equivalents and other share-based awards.~~common shares outstanding. Certain outstanding options are not included in the diluted earnings per share calculation

Table of Contents

because their inclusion would have been anti-dilutive. Antidilutive common stock equivalents excluded from the diluted earnings per share calculation are not material.

The following table summarizes ~~anti-dilutive~~basic and diluted shares outstanding:

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Anti-dilutive shares outstanding 360 — 1,142 158


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	2023		2022		2023		2022
Net income	$	351,198	$	312,358	$	999,649	$	930,725

Weighted average common shares outstanding	140,335		141,336		140,569		141,609
Dilutive effect of stock options and non-vested restricted stock awards	599		773		716		819
Weighted average common shares outstanding – assuming dilution	140,934		142,109		141,285		142,428
Basic earnings per share	$	2.50	$	2.21	$	7.11	$	6.57
Diluted earnings per share	$	2.49	$	2.20	$	7.08	$	6.53

2. Segment Information

The following table presents a summary of our reportable segment financial information:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
Net sales:	Net sales:									Net sales:
Automotive	Automotive	$	3,490,462	$	3,204,534	$	10,233,577	$	9,353,998	Automotive	$	3,626,943	$	3,490,462	$	10,787,769	$	10,233,577
Industrial	Industrial	2,184,812		1,614,315		6,338,746		4,713,303		Industrial	2,197,659		2,184,812		6,716,957		6,338,746
Total net sales	Total net sales	$	5,675,274	$	4,818,849	$	16,572,323	$	14,067,301	Total net sales	$	5,824,602	$	5,675,274	$	17,504,726	$	16,572,323
Segment profit:	Segment profit:									Segment profit:
Automotive	Automotive	$	309,349	$	281,150	$	896,475	$	807,586	Automotive	$	322,004	$	309,349	$	915,771	$	896,475
Industrial	Industrial	242,505		165,754		656,330		441,459		Industrial	282,807		242,505		828,166		656,330
Total segment profit	Total segment profit	551,854		446,904		1,552,805		1,249,045		Total segment profit	604,811		551,854		1,743,937		1,552,805
Interest expense, net	Interest expense, net	(18,220)		(14,167)		(58,318)		(47,853)		Interest expense, net	(15,827)		(18,220)		(49,146)		(58,318)
Intangible asset amortization	Intangible asset amortization	(39,416)		(25,311)		(118,740)		(78,239)		Intangible asset amortization	(33,667)		(39,416)		(113,414)		(118,740)
Corporate expense	Corporate expense	(72,820)		(47,389)		(187,883)		(130,029)		Corporate expense	(90,257)		(72,820)		(257,822)		(187,883)
Other unallocated (expenses) income (1)		(3,462)		(61,063)		47,355		(138,484)
Other unallocated (loss) income, net (1)										Other unallocated (loss) income, net (1)	—		(3,462)		—		47,355
Income before income taxes	Income before income taxes	$	417,936	$	298,974	$	1,235,219	$	854,440	Income before income taxes	$	465,060	$	417,936	$	1,323,555	$	1,235,219

(1) The following table presents a summary of the other unallocated income, ~~and expenses:~~net:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Other unallocated income, net:
Gain on sale of real estate (2)	$	—	$	—	$	—	$	102,803
Gain on insurance proceeds (3)	—		—		—		1,507
Transaction and other costs (4)	—		(3,462)		—		(56,955)
Total other unallocated (loss) income, net	$	—	$	(3,462)	$	—	$	47,355

1011

Table of Contents

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Other unallocated (expenses) income:
Gain on sale of real estate (2) $ — $ — $ 102,803 $ —
Gain on insurance proceeds (3) — — 1,507 —
Product liability damages award (4) — — — (77,421)
Loss on software disposal (5) — (61,063) — (61,063)
Transaction and other costs (6) (3,462) — (56,955) —
Total other unallocated (expenses) income $ (3,462) $ (61,063) $ 47,355 $ (138,484)

(2) Amount reflects a gain on the sale of real estate that had been leased to S.P. Richards.

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

(4) ~~Amount reflects damages reinstated by the Washington Supreme Court order on July 8, 2021 in connection with a 2017 automotive product liability claim.~~

~~(5)~~ ~~Amount 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.~~

~~(6)~~ Amount primarily reflects costs associated with the January 3, 2022 acquisition of Kaman Distribution Group.

Beginning in 2023, certain functions, including cybersecurity and ~~integration~~the management of ~~KDG.~~our product liability litigation, were transferred to corporate to be streamlined and centrally managed. These costs ~~also include a~~totaled $15 million and $44 million for the three and nine months ended September 30, 2022, of which $9 million and $27 million were allocated to Automotive and $6 million and $17 million ~~impairment charge driven by a decision~~were allocated to ~~retire certain legacy trade names, classified as other intangible assets, prior~~Industrial based on several factors, including sales volumes and headcount. Beginning in 2023, these costs, which totaled $30 million and $49 million for the three and nine months ended September 30, 2023, are no longer allocated to our segments when measuring their operating performance. We have not restated the ~~end of their estimated useful lives as part of executing our KDG integration and rebranding strategy. Refer to the acquisition footnote for more information regarding the acquisition.~~2022 comparative segment financial information.

Net sales are disaggregated by geographical region for each of our reportable segments, as 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 September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
North America:	North America:									North America:
Automotive	Automotive	$	2,333,390	$	2,100,250	$	6,766,271	$	6,039,617	Automotive	$	2,315,733	$	2,333,390	$	6,865,819	$	6,766,271
Industrial	Industrial	2,064,569		1,493,618		5,996,299		4,362,792		Industrial	2,066,284		2,064,569		6,325,746		5,996,299
Total North America	Total North America	$	4,397,959	$	3,593,868	$	12,762,570	$	10,402,409	Total North America	$	4,382,017	$	4,397,959	$	13,191,565	$	12,762,570
Australasia:	Australasia:									Australasia:
Automotive	Automotive	$	404,708	$	374,167	$	1,182,557	$	1,130,744	Automotive	$	411,422	$	404,708	$	1,226,037	$	1,182,557
Industrial	Industrial	120,243		120,697		342,447		350,511		Industrial	131,375		120,243		391,211		342,447
Total Australasia	Total Australasia	$	524,951	$	494,864	$	1,525,004	$	1,481,255	Total Australasia	$	542,797	$	524,951	$	1,617,248	$	1,525,004
Europe – Automotive	Europe – Automotive	$	752,364	$	730,117	$	2,284,749	$	2,183,637	Europe – Automotive	$	899,788	$	752,364	$	2,695,913	$	2,284,749
Total net sales	Total net sales	$	5,675,274	$	4,818,849	$	16,572,323	$	14,067,301	Total net sales	$	5,824,602	$	5,675,274	$	17,504,726	$	16,572,323

3. Accounts Receivable Sales Agreement

Under our accounts receivable sales agreement (the "A/R Sales Agreement"), we continuously sell designated pools of receivables as they are originated by us and certain U.S. subsidiaries to a separate bankruptcy-remote special purpose entity (“SPE”). The A/R Sales Agreement has a ~~three year~~three-year term, which we intend to renew.

We continue to be involved with the receivables transferred by the SPE to the unaffiliated financial ~~institution~~institutions 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~~institutions so that the total principal amount outstanding of receivables sold is approximately $1$1.0 billion at any point in time (which is the maximum amount allowed under the agreement as amended on January 3, 2022).

~~Table of Contents~~

The total principal amount outstanding of receivables sold is approximately $1.0 billion ~~and $800 million~~ as of both September 30, ~~2022~~2023 and December 31, ~~2021, respectively.~~2022. The amount of receivables pledged as collateral as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 is approximately ~~$1.1~~$1.3 billion and ~~$973 million,~~$1.1 billion, respectively.

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
Receivables sold to the financial institution and derecognized	Receivables sold to the financial institution and derecognized	$	2,281,934	$	1,884,023	$	6,760,652	$	5,700,895	Receivables sold to the financial institution and derecognized	$	2,206,769	$	2,281,934	$	6,511,568	$	6,760,652
Cash collected on sold receivables	Cash collected on sold receivables	$	2,281,926	$	1,884,028	$	6,560,655	$	5,700,896	Cash collected on sold receivables	$	2,206,755	$	2,281,926	$	6,511,559	$	6,560,655

Table of Contents

Continuous cash activity related to the A/R Sales Agreement is reflected in net cash provided by operating activities in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~cash flows.~~Cash Flows. The SPE incurs fees due to the unaffiliated financial ~~institution~~institutions related to the accounts receivable sales transactions. Those fees, which ~~are immaterial,~~totaled $15 million and $8 million for the three months ended and $44 million and $14 million for the nine months ended September 30, 2023 and 2022, respectively, are recorded within other non-operating expense (income) in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~income.~~Income. The SPE has a recourse obligation to repurchase from the unaffiliated financial ~~institution~~institutions 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, ~~2022~~2023 and December 31, ~~2021~~2022 is not material. The servicing liability related to our collection services also is not material, given the high quality of the customers underlying the receivables and the anticipated short collection period.

4. Employee Benefit Plans

Net periodic benefit income from our pension plans included the following components for our pension benefits:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
Service cost	Service cost	$	2,532	$	3,043	$	7,734	$	9,185	Service cost	$	1,504	$	2,532	$	4,501	$	7,734
Interest cost	Interest cost	18,804		17,915		56,520		53,783		Interest cost	26,141		18,804		78,394		56,520
Expected return on plan assets	Expected return on plan assets	(37,569)		(38,755)		(112,887)		(116,345)		Expected return on plan assets	(41,270)		(37,569)		(123,773)		(112,887)
Amortization of prior service cost	Amortization of prior service cost	172		172		516		516		Amortization of prior service cost	173		172		519		516
Amortization of actuarial loss	Amortization of actuarial loss	9,264		12,465		27,818		37,430		Amortization of actuarial loss	2,340		9,264		7,021		27,818
Net periodic benefit income	Net periodic benefit income	$	(6,797)	$	(5,160)	$	(20,299)	$	(15,431)	Net periodic benefit income	$	(11,112)	$	(6,797)	$	(33,338)	$	(20,299)

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

5. Acquisitions

We acquired several businesses ~~including KDG,~~ for approximately $232 million and $1.6 billion, net of cash acquired, during the nine months ended September 30, ~~2022. For the nine months ended September 30, 2021, acquisitions totaled $143 million, net of cash acquired.~~

2023 and 2022, respectively. During the nine months ended September 30, ~~2022,~~2023, we recognized approximately ~~$408~~$290 million and ~~$818~~$38 million of revenue, net of store closures, related to our current year Automotive and Industrial acquisitions, respectively. ~~The results~~We recorded approximately $172 million of ~~operations for~~goodwill and other intangible assets associated with these acquisitions. Other intangible assets acquired ~~businesses are included in our condensed consolidated statements~~ of ~~income beginning on their respective acquisition dates.~~

$77 million consisted of customer relationships with a weighted average amortization lives of 20 years. 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. ~~Excluding KDG,~~The results of operations for ~~the nine months ended September 30, 2022 and September 30, 2021, we recorded approximately $200 million and $97 million~~acquired businesses are included in our Condensed Consolidated Statements of goodwill and other intangible assets associated with acquisitions. Other intangible assets acquired consisted primarily of customer relationships with a weighted average amortization lives of 20 years.

~~Table of Contents~~

Income beginning on their respective acquisition dates.

KDG Acquisition

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.~~cash, net of cash acquired of approximately $30 million. 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~~maintenance, repair, and ~~OEM~~operation and original equipment manufacturer 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 billion.~~

~~The net cash consideration transferred of approximately $1.3 billion is net of the estimated cash acquired of approximately $30 million.~~

The KDG acquisition was financed using a combination of borrowings under the existing unsecured revolving credit facility, proceeds of $200 million from the selling of additional receivables under our amended A/R Sales Agreement and $109 million of cash.

The following table summarizes the preliminary, estimated fair values of the assets acquired and liabilities assumed at the acquisition date as well as adjustments made to the acquisition accounting during the nine months ended September 30, 2022 (referred to as the "measurement period adjustments"). The measurement period adjustments primarily resulted from revisions to the valuation of certain tangible and intangible assets. 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.

As of January 3, 2022
(in thousands) Initial Balance Measurement Period Adjustments As Adjusted
Trade accounts receivable $ 156,000 $ — $ 156,000
Merchandise inventories 166,000 (1,000) 165,000
Prepaid expenses and other current assets 39,000 (2,000) 37,000
Property, plant and equipment 26,000 (2,000) 24,000
Operating lease assets 49,000 (5,000) 44,000
Other assets 1,000 — 1,000
Other intangible assets 574,000 (6,000) 568,000
Goodwill 592,000 4,000 596,000
Total assets acquired 1,603,000 (12,000) 1,591,000
Trade accounts payable 85,000 — 85,000
Other current liabilities 32,000 — 32,000
Operating lease liabilities 17,000 (1,000) 16,000
Deferred tax liabilities 121,000 (10,000) 111,000
Other long-term liabilities 39,000 (4,000) 35,000
Total liabilities assumed 294,000 (15,000) 279,000
Net assets acquired $ 1,309,000 $ 3,000 $ 1,312,000

The other intangible assets acquired included $527 million of customer relationship intangibles and a $41 million favorable trade name licensing agreement, with amortization lives of 17 and 1.5 years, respectively. The other intangible assets have a total weighted amortization life of 16 years.

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 nine months ended September 30, 2022, approximately $5 million of inventory amortization step-up cost related to this acquisition was included in cost of goods sold. Further, $49 million of transaction and other one-time

Table of Contents

~~costs, inclusive of the impairment charge described below, were included in selling, administrative, and other expenses in the condensed consolidated statements of income.~~

In June 2022, we incurred a $17 million non-cash impairment charge related to our decision to retire certain legacy Industrial trade names, classified as other intangible assets, prior to the end of their estimated useful lives as part of the KDG integration and rebranding strategy. We evaluate other intangible assets for potential impairment indicators annually or more frequently if circumstances change.

6. Accumulated Other Comprehensive Loss

The following tables present the changes in AOCL by component for the nine months ended September 30:


		Changes in Accumulated Other Comprehensive Loss by Component									Changes in Accumulated Other Comprehensive Loss by Component
(in thousands)	(in thousands)	Pension and Other Post-Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation		Total		(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 loss before reclassifications		—		—		(248,757)		(248,757)
Beginning balance, January 1, 2023										Beginning balance, January 1, 2023	$	(506,610)	$	(2,572)	$	(523,360)	$	(1,032,542)
Other comprehensive income (loss) before reclassifications										Other comprehensive income (loss) before reclassifications	—		2,765		(63,027)		(60,262)
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	20,957		11,223		—		32,180		Amounts reclassified from accumulated other comprehensive loss	5,735		(193)		—		5,542
Other comprehensive income (loss), net of income taxes	Other comprehensive income (loss), net of income taxes	20,957		11,223		(248,757)		(216,577)		Other comprehensive income (loss), net of income taxes	5,735		2,572		(63,027)		(54,720)
Ending balance, September 30, 2022		$	(442,270)	$	(3,819)	$	(628,227)	$	(1,074,316)
Ending balance, September 30, 2023										Ending balance, September 30, 2023	$	(500,875)	$	—	$	(586,387)	$	(1,087,262)

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 income before reclassifications — — (75,738) (75,738)
Amounts reclassified from accumulated other comprehensive loss 27,931 11,223 — 39,154
Other comprehensive income, 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)


	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 loss before reclassifications	—		—		(248,757)		(248,757)
Amounts reclassified from accumulated other comprehensive loss	20,957		11,223		—		32,180
Other comprehensive income (loss), net of income taxes	20,957		11,223		(248,757)		(216,577)
Ending balance, September 30, 2022	$	(442,270)	$	(3,819)	$	(628,227)	$	(1,074,316)

The AOCL components related to the pension benefits are included in the computation of net periodic benefit income in the ~~employee benefit plans footnote.~~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.

7. Commitments and Contingencies

Legal Matters

~~From time~~We are subject to ~~time, we are involved in~~ various ~~claims~~legal proceedings, many involving routine litigation incidental to the businesses, including approximately 2,309 pending product liability lawsuits resulting from our national distribution of automotive parts 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~~supplies. Many of these ~~actions will have~~involve claims of personal injury allegedly resulting from the use of automotive parts we distributed. The amount accrued for pending and future claims was $225 million as of September 30, 2023, which represented our best estimate of the liability within our calculated range of $199 million to $283 million, discounted using a ~~material adverse effect on~~discount rate of 4.59%. The amount accrued for pending and future claims was $220 million as of December 31, 2022, which represented our ~~financial position, results~~best estimate of ~~operations, liquidity~~the liability within our calculated range of $190 million to $270 million, discounted using a discount rate of 3.83%. Our undiscounted product liability was $297 million and ~~capital resources.~~$285 million as of September 30, 2023 and December 31, 2022, respectively. There have been no significant developments to the information presented in our ~~2021~~2022 Annual Report on Form 10-K with respect to litigation or commitments and 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 we reasonably believe will exceed an applied threshold not to exceed $1 million. Applying this threshold, there are no environmental matters to disclose for this period.

Table of Contents

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~~Condensed Consolidated Financial Statements and accompanying notes contained herein and with the audited ~~consolidated financial statements,~~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, ~~2021.~~2022. The results of operations for the three and nine months ended September 30, ~~2022~~2023 are not necessarily indicative of results for the year ended December 31, ~~2022.~~2023.

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 view of business and economic trends for the remainder of the year and our expectations regarding our ability to capitalize on these business and economic trends and to execute our 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, changes in general economic conditions, including unemployment, inflation (including the impact of tariffs) or deflation, financial institution disruptions and geopolitical conflicts such as the conflict between Russia and ~~Ukraine;~~Ukraine and the conflict in the Gaza strip; volatility in oil prices; significant cost increases, such as rising fuel and freight expenses; ~~the extent and duration of the disruption to our business operations caused by the global~~public health ~~crisis associated with the COVID-19 pandemic,~~emergencies, 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; 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, our suppliers and customers; changes in tax policies; volatile exchange rates; 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 ~~2021~~2022 Annual Report on Form 10-K and Item 1A, Risk Factors, in our report on Form 10-Q for the quarter ended March 31, 2022 (all of which may be amplified by the COVID-19 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.

~~Table of Contents~~

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 ~~10,300~~10,000 locations.

At Genuine Parts Company, our mission is to be a world-class service organization and the employer of choice, supplier of choice, valued customer of choice and investment of 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) strong balance sheet and cash flows; and (4) effective capital allocation.

Our Automotive Parts Group ~~operated~~("Automotive") operates in the U.S., Canada, Mexico, France, the U.K., Ireland, Germany, Poland, the Netherlands, Belgium, Spain, Portugal, Australia and New Zealand, ~~as of September 30, 2022,~~ and accounted for 62% of total revenues for the ~~three and~~ nine months ended September 30, ~~2022.~~2023. Our Industrial Parts Group ~~operated~~("Industrial") operates in the U.S., Canada, Mexico, Australia, New Zealand, Indonesia and ~~Singapore. The Industrial Parts Group~~Singapore, and accounted for 38% of our total revenues for the ~~three and~~ nine months ended September 30, ~~2022.~~2023.

Table of Contents

Key ~~Business Metrics - Comparable Sales~~Performance Indicators

We consider ~~comparable sales, which refers to period-over-period comparisons~~a variety of ~~our net sales excluding the impact of acquisitions, foreign currency~~performance and other, to be a key business metric. Management uses comparable sales to evaluate the results of operations and we believe that this key indicator provides additional perspective and insights when analyzing the operating performance offinancial measures in assessing our business, ~~from period~~and the key performance indicators used to ~~period~~measure our results are Comparable Sales, Gross Profit and ~~trends~~Gross Margin, Selling, Administrative and Other Expenses ("SG&A"), Segment Profit and Segment Margin, as well as Net Income and EBITDA along with their adjusted measures. For more information regarding our key performance indicators please reference the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in ~~its historical operating results. While this metric is widely used by industry stakeholders,~~ our ~~calculation of~~Annual Report on Form 10-K for 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. 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.year ended December 31, 2022.

Results of Operations

~~Overview~~Our results for the third quarter of 2023 reflect a 2.6% increase in sales driven by our international automotive businesses and continued growth in our Industrial segment. Our year-over-year sales growth was negatively impacted by one less selling day in the U.S., the moderating benefit of inflation on the pricing environment in our global automotive segment and declines in sales in our U.S. Automotive business. The combination of continued revenue growth and gross margin expansion led to earnings growth of 12.4% and further expansion of total segment margin.

For the nine months ended September 30, 2023, our revenue grew 5.6%, helping drive earnings growth of 7.4%, which reflects the ongoing benefits of our diverse business mix and geographic footprint. Our ~~Automotive Parts Group and Industrial Parts Group both reported strong sales and segment profit growth during~~results for the ~~three and~~ nine months ended September 30, 2022 ~~when compared to~~include costs of $47 million resulting from a gain on the ~~same prior year period.~~ June 2022 sale of real estate and KDG acquisition costs incurred throughout 2022.

Our ~~Industrial Parts Group also benefited from the January 2022 acquisition~~results of KDG. We expect this strategic and highly synergistic acquisition to significantly enhance our scale and to strengthen our market leading position in industrial solutions. Additionally both businesses continued to be highly effective in managing the impacts of inflationary pressures, a dynamic geopolitical landscape and ongoing supply chain challenges, all of which we expect to continue throughout the remainder of the year.

~~Sales~~

~~Sales~~operations are summarized below for the three months ended September 30, ~~2022 were $5.7 billion, a 17.8% increase~~2023 and 2022.


	Three Months Ended September 30,
	2023				2022
(in thousands)	$		% of Sales		$		% of Sales		$ Change		% Change
Net sales	$	5,824,602	100.0	%	$	5,675,274	100.0	%	$	149,328	2.6	%
Cost of goods sold	3,715,361		63.8	%	3,695,607		65.1	%	19,754		0.5	%
Gross profit	2,109,241		36.2	%	1,979,667		34.9	%	129,574		6.5	%
Operating expenses:
Selling, administrative and other expenses	1,551,799		26.6	%	1,458,418		25.7	%	93,381		6.4	%
Depreciation and amortization	83,860		1.4	%	86,563		1.5	%	(2,703)		(3.1)	%
Provision for doubtful accounts	8,417		0.1	%	6,146		0.1	%	2,271		37.0	%
Total operating expenses	1,644,076		28.2	%	1,551,127		27.3	%	92,949		6.0	%
Non-operating expense (income):
Interest expense, net	15,827		0.3	%	18,220		0.3	%	(2,393)		(13.1)	%
Other	(15,722)		(0.3)	%	(7,616)		(0.1)	%	(8,106)		106.4	%
Total non-operating expense (income)	105		—	%	10,604		0.2	%	(10,499)		(99.0)	%
Income before income taxes	465,060		8.0	%	417,936		7.4	%	47,124		11.3	%
Income taxes	113,862		2.0	%	105,578		1.9	%	8,284		7.8	%
Net income	$	351,198	6.0	%	$	312,358	5.5	%	$	38,840	12.4	%

Table of Contents


	Three Months Ended September 30,
(in thousands, except per share data)	2023			2022			$ Change		% Change
Diluted EPS	$	2.49		$	2.20		$	0.29	13.2	%
Total adjusted EBITDA	$	564,747		$	526,181		$	38,566	7.3	%
Automotive segment profit	$	322,004		$	309,349		$	12,655	4.1	%
Industrial segment profit	$	282,807		$	242,505		$	40,302	16.6	%
Total segment profit	$	604,811		$	551,854		$	52,957	9.6	%
Automotive segment margin	8.9		%	8.9		%
Industrial segment margin	12.9		%	11.1		%
Total segment margin	10.4		%	9.7		%

Our results of operations are summarized below for the nine months ended September 30, 2023 and 2022.


	Nine Months Ended September 30,
	2023				2022
(in thousands)	$		% of Sales		$		% of Sales		$ Change		% Change
Net sales	$	17,504,726	100.0	%	$	16,572,323	100.0	%	$	932,403	5.6	%
Cost of goods sold	11,247,341		64.3	%	10,805,910		65.2	%	441,431		4.1	%
Gross profit	6,257,385		35.7	%	5,766,413		34.8	%	490,972		8.5	%
Operating expenses:
Selling, administrative and other expenses	4,644,696		26.5	%	4,226,412		25.5	%	418,284		9.9	%
Depreciation and amortization	261,948		1.5	%	259,822		1.6	%	2,126		0.8	%
Provision for doubtful accounts	22,378		0.1	%	13,539		0.1	%	8,839		65.3	%
Total operating expenses	4,929,022		28.2	%	4,499,773		27.2	%	429,249		9.5	%
Non-operating expense (income):
Interest expense, net	49,146		0.3	%	58,318		0.4	%	(9,172)		(15.7)	%
Other	(44,338)		(0.3)	%	(26,897)		(0.2)	%	(17,441)		64.8	%
Total non-operating expense (income)	4,808		—	%	31,421		0.2	%	(26,613)		(84.7)	%
Income before income taxes	1,323,555		7.6	%	1,235,219		7.5	%	88,336		7.2	%
Income taxes	323,906		1.9	%	304,494		1.8	%	19,412		6.4	%
Net income	$	999,649	5.7	%	$	930,725	5.6	%	$	68,924	7.4	%


	Nine Months Ended September 30,
(in thousands, except per share data)	2023			2022			$ Change		% Change
Diluted EPS	$	7.08		$	6.53		$	0.55	8.4	%
Total adjusted EBITDA	$	1,634,649		$	1,506,004		$	128,645	8.5	%
Automotive segment profit	$	915,771		$	896,475		$	19,296	2.2	%
Industrial segment profit	$	828,166		$	656,330		$	171,836	26.2	%
Total segment profit	$	1,743,937		$	1,552,805		$	191,132	12.3	%
Automotive segment margin	8.5		%	8.8		%
Industrial segment margin	12.3		%	10.4		%
Total segment margin	10.0		%	9.4		%

Table of Contents

Net Sales

Our net sales for the three months ended September 30, 2023 increased 2.6% compared to ~~$4.8 billion for~~ the same period of the prior year. The increase in sales is attributable to a ~~12.7%~~0.5% increase in comparable sales, a 1.7% benefit from acquisitions and 0.4% favorable impact of foreign currency and other.

Our net sales for the nine months ended September 30, 2023 increased 5.6% compared to the same period of the prior year. The increase in sales is attributable to a 4.6% increase in comparable sales and a ~~9.1%~~2.0% benefit from acquisitions, ~~slightly~~partially offset by a net unfavorable impact of foreign currency and other of ~~4.0%~~1.0%. ~~Sales~~

Our comparable sales growth was driven by Industrial and our international automotive businesses for the three and nine months ended September 30, 2023. Both segments also experienced the ongoing benefits of strategic pricing initiatives and acquisitions completed in prior periods. For the three months ended September 30, 2023, sales growth was negatively impacted by one less sales day compared to the same prior year period and declines in our U.S. Automotive sales.

Automotive

Net sales for Automotive were $3.6 billion for the third quarter of 2023, an increase of 3.9%, compared to the same period in the prior year. The increase for the third quarter of 2023 consisted of a 2.4% benefit from acquisitions, 0.9% favorable impact of foreign currency and other and 0.6% increase in comparable sales. Comparable sales was impacted by one less sales day and lower sales in our U.S. Automotive business. While our sales growth was impacted by the prior year benefit from price increases to offset higher product costs and other inflationary pressures, we continued to benefit from the positive effects of our strategic sales initiatives in our European and Australasia businesses. The benefit from acquisitions includes our recent acquisition of Recambios y Accesorios Gaudí, S.L. ("Gaudi") in Spain, and the favorable impact from foreign currency primarily reflects the appreciation of the Euro against the U.S. dollar during the period.

Net sales for Automotive were $10.8 billion for the nine months ended September 30, ~~2022 were $16.6 billion, a 17.8%~~2023, an increase of 5.4%, compared to ~~$14.1 billion for~~ the same period ofin the prior year. The increase ~~in sales is due to~~for the nine months ended September 30, 2023 consisted of a ~~12.1%~~3.7% increase in comparable sales and a ~~8.7%~~2.8% benefit from acquisitions, ~~slightly~~ offset by a ~~3.0% net~~1.1% unfavorable impact of foreign currency and other. The increase in comparable sales ~~reflects~~is due to higher sales in our international businesses. The benefit from acquisitions includes the ~~benefits~~effects of ~~price increases to offset higher product costs~~our entry into new markets in Spain and ~~other inflationary pressures~~Portugal. The unfavorable impact of foreign currency primarily results from the weakening of the Australian and ~~to a lesser extent, continued increase in consumer activity when~~Canadian dollars compared to the ~~three and nine months ended September 30, 2021. We continue to execute our strategic pricing and other~~U.S. dollar throughout the period.

Industrial

Net sales ~~initiatives to mitigate product and other inflationary cost pressures.~~

~~Sales~~ for ~~the Automotive Parts Group increased 8.9% and 9.4% for the three and nine months ended September 30, 2022, respectively, compared to the same periods in the prior year. This group's revenue~~Industrial were $2.2 billion, an increase of 0.6% for the three months ended September 30, ~~2022 consisted of an approximate 9.2%~~2023 compared to the same period in 2022. The increase reflects a 0.3% increase in comparable sales ~~driven by price increases to offset higher product costs~~ and ~~other inflationary pressures and strong demand. The overall sales increase also included~~ a ~~5.3%~~0.6% benefit from acquisitions, ~~partially~~slightly offset by a ~~5.6% net~~0.3% unfavorable impact of foreign currency ~~and other. This group's revenue~~compared to the same period in 2022.

Net sales for Industrial were $6.7 billion, an increase of 6.0% for the nine months ended September 30, ~~2022~~2023 compared to the same period in 2022. The increase reflects a 6.0% increase in comparable sales and a 0.6% from acquisitions, slightly offset by a 0.6% unfavorable impact of foreign currency compared to the same period in 2022.

For the three months ended September 30, 2023, our results reflect anticipated softer economic activity and industry demand. For the nine months ended September 30, 2023, our growth in comparable sales reflects the positive impact of our ongoing sales and pricing initiatives and continued growth in many of the industry segments we serve. We attribute part of our sales growth to the diversification of our products and service offerings, and ongoing benefits from the KDG acquisition.

Gross Profit and Gross Margin

Gross profit for the three months ended September 30, 2023, increased $130 million, or approximately 6.5%, compared to the same period in the prior year. Gross margin increased 130 basis points to 36.2% for the three months ended September 30, 2023. Gross profit for the nine months ended September 30, 2023 increased $491 million or 8.5% compared to the same period in prior year. Gross margin increased 90 basis points to 35.7% for the nine months ended September 30, 2023.

Gross profit increases for the quarter and for the year-to-date periods were primarily driven by the increases in net sales and expanded gross margins. Gross margin improvements for the periods primarily reflect the positive contributions of our strategic pricing and sourcing initiatives.

1618

Table of Contents

~~consisted~~Operating Expenses

SG&A expenses represent 26.6% of ~~an approximate 9.3% increase in comparable~~ sales ~~and 4.4% benefit from acquisitions, partially offset by a 4.3% net unfavorable impact from foreign currency and other compared to the same period in 2021.~~

~~Sales for the Industrial Parts Group increased 35.3% and 34.5%~~ for the three ~~and~~months ended September 30, 2023, an increase of 90 basis points from 25.7% in the third quarter of 2022. SG&A expenses represent 26.5% for the nine months ended September 30, ~~2022, respectively, compared to~~2023, an increase of 100 basis points from 25.5% for the same ~~periods~~period in ~~2021. The increases for both periods reflect benefits~~2022. SG&A expenses as a percentage of ~~approximately 17% and primarily from the acquisition of KDG and increases of 19.6% and 17.9% in comparable~~ sales for the three and nine months ended September 30, 2022 ~~respectively. Our Industrial Parts Group continues~~include costs of $3 million and income of $47 million, respectively, which primarily related to the net benefit ~~from~~of a gain on the ~~ongoing execution~~June 2022 sale of real estate and KDG acquisition costs incurred throughout 2022. The increases in both periods are primarily driven by planned increases in personnel costs due to wage inflation and global investments in information technology to support our ~~pricing, supply chain and other~~ongoing strategic initiatives, and the ~~continued resilience and expansion in the industrial economy, which is evident in indicators such as the Purchasing Managers Index and Industrial Production Index.~~

~~Cost~~timing of ~~Goods Sold and Operating Expenses~~

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.

~~Cost of goods sold~~additional product liability expense for the three months ended September 30, ~~2022 was $3.7 billion, an 18.9% increase from $3.1 billion for~~2023 due to increases in our estimated product liability claim exposure.

Segment Profit

Beginning in 2023, certain functions, including cybersecurity and the ~~same period in 2021. As a percentage~~management of ~~net sales, cost of goods sold was 65.1% for the three months ended September 30, 2022 compared~~our product liability litigation, were transferred to ~~64.5% for the same period in 2021. As a result, gross margin declined~~corporate to 34.9% from 35.5% for the same period in 2021. For the nine months ended September 30, 2022, cost of goods sold was $10.8 billion, an 18.4% increase from $9.1 billion for the same nine month period in 2021. As a percentage of net sales, cost of goods sold was 65.2% for the nine months ended September 30, 2022 compared to 64.9% for the same period in 2021. As a result, gross margin declined to 34.8% from 35.1% in the same period in 2021.

~~The decreases in gross margin~~be streamlined and centrally managed. These costs totaled $15 million and $44 million for the three and nine months ended September 30, 2022, ~~was driven primarily by~~of which $9 million and $27 million were allocated to Automotive and $6 million and $17 million were allocated to Industrial based on several factors, including sales volumes and headcount. Beginning in 2023, these costs, which totaled $30 million and $49 million for the ~~impact of supplier incentives as~~three and nine months ended September 30, 2023, are no longer allocated to our segments when measuring their operating performance. We have not restated the 2022 comparative segment profit financial information.

Automotive

Automotive segment profit for the three months ended September 30, 2023 increased 4.1% compared to the same period in ~~2021, unfavorable foreign exchange,~~2022. Automotive segment margin remained at 8.9% for the three months ended September 30, 2023. For the nine months ended September 30, 2023, Automotive segment profit increased 2.2% compared to the same period in the prior year, and ~~a business mix shift~~Automotive segment margin decreased 30 basis points to 8.5% for the same period in 2022. Automotive segment margin was negatively impacted by the loss of expense leverage primarily caused by slowing demand and the impact of lower sales in the U.S., combined with planned investments in wages and information technology. Our results in the U.S. also reflect operational execution challenges and further tightening of market conditions.

Industrial

Industrial segment profit increased 16.6% and 26.2% for the three and nine months ended September 30, 2023 compared to the same periods in 2022. For the three and nine months ended September 30, 2023, Industrial segment margin increased 180 basis points and 190 basis points to 12.9% and 12.3%, respectively, when compared to the same periods in the previous year. The improved Industrial segment margin is primarily due to ~~the increased~~continued sales ~~from~~growth and our ~~Industrial Parts Group. This decline was partially offset by the ongoing favorable impact of~~focus on leveraging expenses and executing supply chain initiatives as well as other strategic initiatives in areas such as category management and ~~pricing initiatives in our business.~~pricing.

Income Taxes

Our ~~operating expenses are substantially comprised~~effective income tax rate for the three and nine months ended September 30, 2023 was 24.5%, compared to 25.3% and 24.7% for the same periods in 2022. The rate decrease is primarily due to statute-related adjustments and domestic tax credit benefits.

Net Income

For the three months ended September 30, 2023, net income was $351 million, an increase of ~~compensation and benefit-related costs~~12.4% compared to net income of $312 million for ~~personnel. Other major expense categories include facility occupancy costs~~the same three month period in the prior year. On a per share diluted basis, net income was $2.49, an increase of 13.2% compared to $2.20 for headquarters, distribution centers and retail store/branch operations, transportation and delivery costs, technology and digital costs, accounting, legal and professional services, insurance costs, and travel and advertising.

~~Total operating expenses increased 9.6% to $1.6 billion~~the same period in 2022. Our results for the three months ended September 30, 2022 include costs of $3 million, which primarily related to KDG acquisition costs. Excluding these amounts, on an adjusted basis, net income increased 10.7% compared to ~~$1.4 billion~~$317 million for the same ~~three~~period in the prior year. On an adjusted per share diluted basis, net income increased 11.7% compared to $2.23 for the same period in 2022.

For the nine months ended September 30, 2023, net income was $1.0 billion, an increase of 7.4% compared to net income of $931 million for the same nine month period in ~~2021. As~~the prior year. On a ~~percentage~~per share diluted basis, net income was $7.08, an increase of ~~net sales, operating expenses decreased to 27.3%~~8.4% compared to ~~29.4%~~$6.53 for the same period in 2022. Our results for the nine months ended September 30, 2022 include income of $47 million, which primarily related to the net benefit of a gain on sale of real estate and KDG acquisition costs. Excluding these amounts, on an adjusted basis, net income increased 11.6% compared to $896 million for the same period in the prior year. On an adjusted per share diluted basis, net income increased 12.6% compared to $6.29 for the same period in 2022.

Table of Contents

For the three months ended September 30, 2023, adjusted EBITDA was $565 million, an increase of 7.3% from $526 million for the same three month period in the prior year. For the nine months ended September 30, ~~2022, these expenses totaled $4.5~~2023, adjusted EBITDA was $1.6 billion, ~~compared to $4.1~~an increase of 8.5% from $1.5 billion ~~for the same period in 2021, and as a percentage of net sales, operating expenses decreased to 27.2% compared to 29.3%~~ for the same nine month period in ~~2021. For~~ the nine months ended September 30, 2022 operating expenses included $57 million of transaction and other costs associated with the KDG acquisition, inclusive of a non-cash impairment charge of $17 millionprior year.

The growth in these metrics in all periods presented reflects improved segment margin, primarily in our Industrial segment, driven by higher revenue, particularly in our international business. We also benefited from the retirement of certain legacy trade names that will no longer be used as result of the on-going KDG integration. The increase in total operating expenses for the nine month period was partially offset by a one-time benefit of $103 million from a gain on the sale of real estate that had been leased to S.P. Richards. The overall decrease in operating expenses as a percentage of net sales for the period is primarily related to improved leverage on stronger sales and cost control initiatives.

~~Segment Profit~~

The Automotive Parts Group's segment profit increased 10.0% in the three months ended September 30, 2022 compared to the same period of 2021, and its segment profit margin improved to 8.9% compared to 8.8% for the same period of the previous year. For the nine months ended September 30, 2022, segment profit increased 11.0% compared to the same period of the prior year, and segment profit margin increased to 8.8% compared to 8.6% for the same period in 2021. These improvements in segment profit and segment profit margin, despite inflationary headwinds, reflect strong operating results in all geographical regions, driven primarily by strong sales demand and thecontinued execution of our strategic ~~growth and operating initiatives around supply chain,~~ pricing and ~~technology.~~

~~The Industrial Parts Group's segment profit increased 46.3% and 48.7%~~other initiatives, as discussed more fully in the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, primarily driven by the acquisition of KDG. For the three months and nine months ended September 30, 2022, this group's segment profit margin increased to 11.1% and 10.4%, respectively, compared to 10.3% and 9.4%, respectively, for the same periods of the previous year. These improved segment profit margins are primarily due to the benefit of strong sales growth and strategic initiatives in areas such as supply chain, category management and pricing.

~~Table of Contents~~

~~Income Taxes~~

Our effective income tax rate for the three months ended September 30, 2022 was 25.3% compared to 23.5% for the same three month period in 2021. The rate increase is primarily due to geographic income mix shifts with a higher percentage in international.

The effective income tax rate for the nine months ended September 30, 2022 was 24.7% compared to 24.8%, for the same period in 2021. The rate decrease is primarily due to a prior year United Kingdom rate change that required deferred tax asset and liability remeasurement increasing the 2021 comparative rate, which was partially offset by geographic income mix shifts.commentary above.

~~Net Income~~Non-GAAP Financial Measures

For the three months ended September 30, 2022, net income was $312 million, an increase of 36.6% compared to net income of $229 million for the same three month period of the prior year. On a per share diluted basis, net income was $2.20, an increase of 38.4% compared to $1.59 for the same three month period of 2021. For the nine months ended September 30, 2022, net income was $931 million, an increase of 44.8% compared to net income of $643 million for the same nine month period in 2021. On a per share diluted basis, net income was $6.53, an increase of 47.1% compared to $4.44 for the same nine month period of the prior year.

For the three months ended September 30, 2022, net income on an adjusted basis was $317 million, an increase of 17.3% compared to adjusted net income of $270 million for the same three month period of the prior year. On a per share basis, net income on an adjusted diluted basis was $2.23 for the three months ended September 30, 2022, an increase of 18.6% compared to $1.88 for the same three month period of 2021. For the nine months ended September 30, 2022, net income on an adjusted basis was $896 million, an increase of 21.0% compared to adjusted net income of $741 million for the same nine month period of the prior year. On a per share basis, net income on an adjusted diluted basis was $6.29 for the nine months ended September 30, 2022, an increase of 22.9% compared to $5.12 for the same nine month period of 2021. Adjusted net income, adjusted diluted EPS, adjusted EBITDA, total segment profit, total segment margin, and adjusted ~~diluted earnings per share~~EBITDA for each segment are ~~both~~ non-GAAP measures (see table below for reconciliations to the most directly comparable GAAP measures).

The growth in net income and adjusted net income in all periods presented reflects strong operating results in both of our segments, driven primarily by strong sales demand, the benefits of key acquisitions (including KDG), and the execution of our strategic growth initiatives, despite inflationary and other macroeconomic headwinds.

~~The~~ following ~~table sets~~tables set forth ~~a reconciliation~~reconciliations of net income and diluted ~~net income per common share~~EPS to adjusted net income and adjusted diluted EPS, respectively, as well as net income ~~per common share~~to adjusted EBITDA, in each case, to account for the impact of ~~these~~ adjustments. We also include a reconciliation from net income to total segment profit and total segment margin, as well as a reconciliation from segment profit to adjusted EBITDA for each segment. We believe that the presentation ~~of adjusted net income and adjusted diluted net income per common share,~~these non-GAAP measures, when considered together with the corresponding GAAP financial measures and ~~the~~related reconciliations, ~~to those measures,~~ provide meaningful supplemental information to both management and investors that is indicative of our core operations. We consider these metrics useful to investors because they provide greater transparency into management’s view and assessment of our ongoing operating performance by removing items management believes are not representative of our continuing operations and may distort our longer-term operating trends. In the case of adjusted EBITDA by segment, we believe this additional metric is useful to investors as it provides further insight into the performance of our segments. We believe ~~these measures are useful and~~the non-GAAP metrics included herein also enhance the comparability of our results from period to period and with our competitors, as well as to show ongoing results from operations distinct from items that are infrequent or not associated with our core operations. We do not, nor 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.


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
GAAP net income	$	351,198	$	312,358	$	999,649	$	930,725

Adjustments:
Gain on sale of real estate (1)	—		—		—		(102,803)
Gain on insurance proceeds (2)	—		—		—		(1,507)
Transaction and other costs (3)	—		3,462		—		56,955
Total adjustments	—		3,462		—		(47,355)
Tax impact of adjustments (4)	—		1,464		—		12,651
Adjusted net income	$	351,198	$	317,284	$	999,649	$	896,021

Table of Contents

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
GAAP net income $ 312,358 $ 228,585 $ 930,725 $ 642,791
Adjustments:
Gain on sale of real estate (1) — — (102,803) —
Gain on insurance proceeds (2) — — (1,507) —
Product liability damages award (3) — — — 77,421
Loss on software disposal (4) — 61,063 — 61,063
Transaction and other costs (5) 3,462 — 56,955 —
Total adjustments 3,462 61,063 (47,355) 138,484
Tax impact of adjustments 1,464 (19,167) 12,651 (40,489)
Adjusted net income $ 317,284 $ 270,481 $ 896,021 $ 740,786

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	(in thousands, except per share data)	2022		2021		2022		2021		(in thousands, except per share data)	2023		2022		2023		2022
GAAP net income		$	2.20	$	1.59	$	6.53	$	4.44
GAAP diluted earnings per share										GAAP diluted earnings per share	$	2.49	$	2.20	$	7.08	$	6.53

Adjustments:	Adjustments:									Adjustments:
Gain on sale of real estate (1)	Gain on sale of real estate (1)	—		—		(0.72)		—		Gain on sale of real estate (1)	—		—		—		(0.72)
Gain on insurance proceeds (2)	Gain on insurance proceeds (2)	—		—		(0.01)		—		Gain on insurance proceeds (2)	—		—		—		(0.01)
Product liability damages award (3)		—		—		—		0.54
Loss on software disposal (4)		—		0.42		—		0.42
Transaction and other costs (5)		0.02		—		0.40		—
Transaction and other costs (3)										Transaction and other costs (3)	—		0.02		—		0.40
Total adjustments	Total adjustments	0.02		0.42		(0.33)		0.96		Total adjustments	—		0.02		—		(0.33)
Tax impact of adjustments		0.01		(0.13)		0.09		(0.28)
Adjusted diluted net income per common share		$	2.23	$	1.88	$	6.29	$	5.12
Tax impact of adjustments (4)										Tax impact of adjustments (4)	—		0.01		—		0.09
Adjusted diluted earnings per share										Adjusted diluted earnings per share	$	2.49	$	2.23	$	7.08	$	6.29
Weighted average common shares outstanding – assuming dilution	Weighted average common shares outstanding – assuming dilution	142,109		143,589		142,428		144,622		Weighted average common shares outstanding – assuming dilution	140,934		142,109		141,285		142,428

~~The table below clarifies where the adjusted items are presented in the condensed consolidated statements of income.~~
Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Line item:
Cost of goods sold $ — $ — $ 5,000 $ —
Selling, administrative and other expenses 3,462 61,063 (50,848) 138,484
Non-operating expense (income): Other — — (1,507) —
Total adjustments $ 3,462 $ 61,063 $ (47,355) $ 138,484

(1) Adjustment reflects a gain on the sale of real estate that had been leased to S.P. ~~Richards.~~Richards.

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

(3) ~~Adjustment reflects damages reinstated by the Washington Supreme Court order on July 8, 2021 in connection with a 2017 automotive product liability claim.~~

~~Table of Contents~~

~~(4) 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.~~

~~(5)~~ Adjustment primarily reflects costs associated with the January 3, 2022 acquisition of Kaman Distribution Group.

(4) We determine the tax effect of non-GAAP adjustments by considering the tax laws and ~~integration~~statutory income tax rates applicable in the tax jurisdictions of ~~KDG. These costs also include a $17 million impairment charge driven by a decision to retire certain legacy trade names, classified as other intangible assets, prior~~the underlying non-GAAP adjustments, including any related valuation allowances. For the three and nine months ended September 30, 2022, we applied the statutory income tax rates to the ~~end~~taxable portion of ~~their estimated useful lives~~all of our adjustments, which resulted in a tax impact of $1.5 million and $12.7 million respectively. A portion of our transaction costs included in our non-GAAP adjustments for the three and nine months ended September 30, 2022 were not deductible for income tax purposes; therefore, no statutory income tax rate was applied to such costs.

The table below represents a reconciliation from GAAP net income to adjusted EBITDA:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
GAAP net income	$	351,198	$	312,358	$	999,649	$	930,725
Depreciation and amortization	83,860		86,563		261,948		259,822
Interest expense, net	15,827		18,220		49,146		58,318
Income taxes	113,862		105,578		323,906		304,494
EBITDA	564,747		522,719		1,634,649		1,553,359
Total adjustments (1)	—		3,462		—		(47,355)
Adjusted EBITDA	$	564,747	$	526,181	$	1,634,649	$	1,506,004

(1) Amounts are the same as ~~part~~adjustments included within the adjusted net income table above.

Table of ~~executing our KDG integration~~Contents

The table below clarifies where the adjusted items are presented in the Condensed Consolidated Statements of Income:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Line item:
Cost of goods sold	$	—	$	—	$	—	$	5,000
Selling, administrative and other expenses	—		3,462		—		(50,848)
Non-operating income: Other	—		—		—		(1,507)
Total adjustments	$	—	$	3,462	$	—	$	(47,355)

The table below represents a reconciliation from GAAP net income to total segment profit:


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2023			2022			2023			2022
GAAP net income	$	351,198		$	312,358		$	999,649		$	930,725
Income taxes	113,862			105,578			323,906			304,494
Income before income taxes	465,060			417,936			1,323,555			1,235,219
Interest expense, net	15,827			18,220			49,146			58,318
Corporate expense	90,257			72,820			257,822			187,883
Intangible asset amortization	33,667			39,416			113,414			118,740
Other unallocated (loss) income, net (1)	—			3,462			—			(47,355)
Total segment profit	$	604,811		$	551,854		$	1,743,937		$	1,552,805

GAAP net sales	$	5,824,602		$	5,675,274		$	17,504,726		$	16,572,323
GAAP net income margin (2)	6.0		%	5.5		%	5.7		%	5.6		%
Total segment profit margin (3)	10.4		%	9.7		%	10.0		%	9.4		%

(1) Amounts are the same as adjustments included within the adjusted net income table above.

(2) Represents GAAP net income as a percentage of GAAP net sales.

(3) Represents total segment profit as a percentage of GAAP net sales.

Table of Contents

The table below represents a reconciliation from segment profit to segment EBITDA and ~~rebranding strategy. Refer~~adjusted EBITDA:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Automotive:
Segment profit	$	322,004	$	309,349	$	915,771	$	896,475
Depreciation	40,673		36,335		119,683		109,028
Other costs (2)	—		8,927		—		26,780
Automotive segment adjusted EBITDA	362,677		354,611		1,035,454		1,032,283

Industrial:
Segment profit	282,807		242,505		828,166		656,330
Depreciation	7,644		7,340		21,774		21,865
Other costs (2)	—		5,587		—		16,761
Industrial segment adjusted EBITDA	290,451		255,432		849,940		694,956

Corporate:
Corporate expense	(90,257)		(72,820)		(257,822)		(187,883)
Depreciation	1,876		3,472		7,077		10,189
Other costs (2)	—		(14,514)		—		(43,541)
Other unallocated (loss) income, net (1)	—		(3,462)		—		47,355
Corporate EBITDA	(88,381)		(87,324)		(250,745)		(173,880)
Total adjustments (1)	—		3,462		—		(47,355)
Corporate adjusted EBITDA	(88,381)		(83,862)		(250,745)		(221,235)

Adjusted EBITDA	$	564,747	$	526,181	$	1,634,649	$	1,506,004

(1) Amounts are the same as adjustments included within the adjusted net income table above.

(2) These represent costs for certain functions, including cybersecurity and product liability litigation that were transferred to Corporate beginning in 2023 to be streamlined and centrally managed. We presented the ~~acquisition footnote for more information regarding the acquisition.~~2022 comparative period to reflect how management manages these costs in 2023 and going forward.

Financial Condition

Our cash balance ~~of $629~~was $655 million atas of September 30, ~~2022 decreased $86~~2023, an increase of $1.2 million from December 31, ~~2021.~~2022. For the nine months ended September 30, ~~2022,~~2023, we had net cash provided by operating activities of ~~$1.2~~$1.1 billion, net cash used in investing activities of ~~$1.7 billion~~$473 million and net cash ~~provided by~~used in financing activities of ~~$386~~$599 million.

The cash provided by operating activities ~~was~~decreased $162 million compared to the prior year period. The decrease is driven by ~~higher net income for the nine months ended September 30, 2022 and the effective management of our working capital, including~~ a $200 million benefit ~~related to~~in the prior year from increasing the facility limit of our A/R Sales Agreement. We had $473 million in net cash used ~~$1.7 billion cash~~ for investing activities, primarily ~~in connection with the acquisition of KDG, in addition to $244 million~~ for capital ~~expenditures.~~expenditures and acquisitions, and other investing activities of $561 million, partially offset by $80 million related to cash proceeds from the sale of our remaining investment in S.P. Richards and other investments. The financing activities consisted primarily of ~~$1 billion of net proceeds from debt primarily from the Senior Notes offering (as discussed below). This was partially offset by $369~~$393 million for dividends paid to our shareholders and ~~$173~~$172 million of ~~share~~stock repurchases.

~~Each~~ Total debt of our working capital line items were impacted by the acquisition of KDG (refer to our acquisitions footnote in the notes to condensed consolidated financial statements for further information). Accounts receivable increased $417$3.3 billion at September 30, 2023 decreased $11 million, or ~~23.2%~~0.3%, from December 31, 2021. Inventory increased $411 million, or 10.6%, from December 31, 2021. In addition to the KDG acquisition, accounts receivable and inventory were both impacted by increases in revenues and related product demand. Accounts payable increased $726 million, or 15.1% from December 31, 2021. Apart from KDG, this was due largely to increased purchases to meet demand, inflationary pressures, and extended payment terms with certain suppliers. Total debt of $3.2 billion at September 30, 2022 increased $824 million, or 34.2%, from December 31, 2021 driven primarily by the Senior Notes offering (as discussed below).

We continue to negotiate extended payment 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 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. Our suppliers and 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 us and they issue the associated invoices to 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 us or any of our subsidiaries on third-party performance under the SCF program; however, 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, 2022 and December 31, 2021, the outstanding payment obligations to the financial institutions are $3.1 billion and $2.7 billion, respectively. The amount settled through the SCF program was $2.7 billion and $2.3 billion for the nine months ended September 30, 2022 and September 30, 2021, respectively.2022.

Liquidity and Capital Resources

We ended the quarter with ~~$2.1~~$2.2 billion of total liquidity (comprising $1.5 billion availability on the revolving credit facility and $~~629~~655 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 our ongoing operating activities and our anticipated ~~operations~~cash commitments for ~~the foreseeable future.~~investing and financing activities, such as capital expenditures and potential acquisitions, future debt obligations, and dividends.

2023

Table of Contents

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

~~On January 3, 2022, we amended our A/R Sales Agreement~~We expect to ~~increase~~be able to continue to borrow funds at reasonable rates over the facility limit by an additional $200 million bringing the total to $1 billion. The terms of the A/R Sales Agreement limit the balance of receivables sold to approximately $1 billion at any point in time. Refer to the A/R Sales Agreement footnote in the notes to condensed consolidated financial statements for more information.

On January 6, 2022, we issued $500 million of unsecured 1.750% Senior Notes due 2025. Simultaneously, we issued $500 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 proceeds from these offerings to repay the borrowings under the Revolving Credit Facility which were incurred to finance a significant portion of the KDG Acquisition.

long term. At September 30, ~~2022,~~2023, our total average cost of debt was ~~2.34%~~2.33%, and we remain in compliance with all covenants connected with our borrowings.

On March 14, 2023, we entered into a second amendment to our syndicated facility agreement dated October 30, 2020 to replace the benchmark rate, the 1-month London Inter Bank Offered Rate, with the 1-month Secured Overnight Financing Rate for borrowings denominated in U.S. Dollar.

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,~~21, 2023, we announced a ~~10%~~6% increase in the regular quarterly cash dividend for ~~2022.~~2023. Our Board of Directors increased the cash dividend payable to an annual rate of ~~$3.58~~$3.80 per share compared with the ~~previous~~prior year dividend of ~~$3.26~~$3.58 per share. We have paid a cash dividend every year since going public in 1948, and ~~2022~~2023 marks the ~~66th~~67th 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 ~~2021~~2022 Annual Report on Form 10-K. Our exposure to market risk has not changed materially since December 31, ~~2021.~~2022.

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 our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures. Based on that evaluation, our CEO and CFO concluded that 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 us in the reports that we file or ~~furnishes~~furnish 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 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.~~

~~Excluding the KDG acquisition, there~~There have been no changes in 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 our last quarter ended September 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2124

Table of Contents

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Information with respect to our legal proceedings may be found in the Commitments and Contingencies ~~footnote~~Footnote in the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I, which is incorporated herein by reference.

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 ~~2021~~2022 Annual Report on Form 10-K, ~~and our quarterly report on Form 10-Q for the quarter ended March 31, 2022,~~ 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.

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

The following table provides information about the purchases of shares of our common stock during the three months ended September 30, ~~2022:~~2023:

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, 2022 through July 31, 2022 145,453 $139.71 145,453 10,770,664
August 1, 2022 through August 31, 2022 158,642 $155.69 129,558 10,641,106
September 1, 2022 through September 30, 2022 65,277 $159.24 58,440 10,582,666
Totals 369,372 $150.02 333,451 10,582,666


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, 2023 through July 31, 2023	86,951	$162.74	86,951	9,365,468
August 1, 2023 through August 31, 2023	120,355	$155.12	104,746	9,260,722
September 1, 2023 through September 30, 2023	48,709	$150.28	47,058	9,213,664
Totals	256,015	$156.79	238,755	9,213,664

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

(2)On August 21, 2017, the Board of Directors announced that it had authorized the repurchase of 15 million shares. The authorization for the repurchase continues until all such shares have been repurchased or the repurchase plan is terminated by action of the Board of Directors. Approximately ~~10.6~~9.2 million shares authorized remain available to be repurchased. There were no other repurchase plans announced as of September 30, ~~2022.~~2023.

Item 5. Other Information

Rule 10b5-1 Trading Plans

During the fiscal quarter ended September 30, 2023, none of the Company’s directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

2225

Table of Contents

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 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 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, ~~2022~~2023 formatted in Inline XBRL

2326

Table of Contents

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 ~~20, 2022~~19, 2023						/s/ Bert Nappier
						Bert Nappier
						Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer)

2427


Table of Contents

PART I		Page

Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Income	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Statements of Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2124
Item 4.	Controls and Procedures	2124

PART II

Item 1.	Legal Proceedings	2225
Item 1A.	Risk Factors	2225
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2225
Item 5.	Other Information	25
Item 6.	Exhibits	2326
	Signatures	2427


	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, $2.445 per share	—	—		—		—		(351,606)		(351,606)		—		(351,606)
Share-based awards exercised, including tax benefit of $6,667	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


	As of January 3, 2022
(in thousands)	Initial Balance		Measurement Period Adjustments		As Adjusted
Trade accounts receivable	$	156,000	$	—	$	156,000
Merchandise inventories	166,000		(1,000)		165,000
Prepaid expenses and other current assets	39,000		(2,000)		37,000
Property, plant and equipment	26,000		(2,000)		24,000
Operating lease assets	49,000		(5,000)		44,000
Other assets	1,000		—		1,000
Other intangible assets	574,000		(6,000)		568,000
Goodwill	592,000		4,000		596,000
Total assets acquired	1,603,000		(12,000)		1,591,000
Trade accounts payable	85,000		—		85,000
Other current liabilities	32,000		—		32,000
Operating lease liabilities	17,000		(1,000)		16,000
Deferred tax liabilities	121,000		(10,000)		111,000
Other long-term liabilities	39,000		(4,000)		35,000
Total liabilities assumed	294,000		(15,000)		279,000
Net assets acquired	$	1,309,000	$	3,000	$	1,312,000