Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

ANNUAL REPORT ON FORM 10-K

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

			Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)			35
Consolidated Balance Sheets as of December 31, 2023 and 2022			37
Consolidated Statements of Income for the Years Ended December 31, 2023, 2022 and 2021			38
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2023, 2022, and 2021			39
Consolidated Statements of Equity for the Years Ended December 31, 2023, 2022 and 2021			40
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021			41
Notes to Consolidated Financial Statements			42

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Genuine Parts Company and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Genuine Parts Company and Subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 22, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

			Loss Contingencies Related to Product Liabilities
Description of the Matter			As disclosed in Notes 1 and 16 to the consolidated financial statements, the Company is subject to pending product liability lawsuits resulting from its national distribution of automotive parts and supplies. The Company accrues for loss contingencies related to product liabilities if it is probable that the Company will incur a loss and the loss can be reasonably estimated. The amount accrued for product liabilities as of December 31, 2023 was $244 million. Auditing the Company’s loss contingencies related to product liabilities was complex due to the significant measurement uncertainty associated with the estimate, management’s application of significant judgment and the use of valuation techniques. In addition, the loss contingencies related to product liabilities are sensitive to significant management assumptions, including the number, type, and severity of claims incurred and estimated to be incurred in future periods.

How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design and tested the operating effectiveness of relevant controls over the Company’s process for estimating loss contingencies related to product liabilities. For example, we tested controls over management's review of the significant assumptions described above and the reconciliation of claims data to that used by the Company’s actuarial specialist. To test the estimated loss contingencies related to product liabilities, our audit procedures included, among others, assessing the methodology used, testing the significant assumptions, including testing the completeness and accuracy of the underlying data, and comparing significant assumptions to historical claims as well as external data. We evaluated the legal letters obtained from internal and external legal counsel, held discussions with legal counsel, and performed a search for new or contrary evidence affecting the estimate. We involved our actuarial specialists to assist in our evaluation of the methodology and assumptions used by management and to independently develop a range of estimated product liabilities using the Company’s historical data as well as other information available for similar cases. We compared the Company's estimated loss contingencies related to product liabilities to the range developed by our actuarial specialists. We also assessed the adequacy of the Company’s disclosures, included in Notes 1 and 16 to the consolidated financial statements, in relation to this matter.

/s/ Ernst & Young LLP

We have served as the company’s auditor since 1948.

Atlanta, Georgia

February 22, 2024

Genuine Parts Company and Subsidiaries

Consolidated Balance Sheets

(In Thousands, Except Share Data and per Share Amounts)

			As of December 31,
			2023						2022
Assets
Current assets:
Cash and cash equivalents			$	1,102,007					$	653,463
Trade accounts receivable, net			2,223,431						2,188,868
Merchandise inventories, net			4,676,686						4,441,649
Prepaid expenses and other current assets			1,603,728						1,532,759
Total current assets			9,605,852						8,816,739
Goodwill			2,734,681						2,588,113
Other intangible assets, net			1,792,913						1,812,510
Property, plant and equipment, net			1,616,785						1,326,014
Operating lease assets			1,268,742						1,104,678
Other assets			949,481						847,325
Total assets			$	17,968,454					$	16,495,379
Liabilities and equity
Current liabilities:
Trade accounts payable			$	5,499,536					$	5,456,550
Current portion of debt			355,298						252,029
Other current liabilities			1,839,640						1,851,340
Dividends payable			132,635						126,191
Total current liabilities			7,827,109						7,686,110
Long-term debt			3,550,930						3,076,794
Operating lease liabilities			979,938						836,019
Pension and other post-retirement benefit liabilities			219,644						197,879
Deferred tax liabilities			437,674						391,163
Other long-term liabilities			536,174						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 - 139,567,071 shares and 2022 - 140,941,649 shares			139,567						140,941
Additional paid-in capital			173,025						140,324
Accumulated other comprehensive loss			(976,872)						(1,032,542)
Retained earnings			5,065,327						4,541,640
Total parent equity			4,401,047						3,790,363
Noncontrolling interests in subsidiaries			15,938						14,084
Total equity			4,416,985						3,804,447
Total liabilities and equity			$	17,968,454					$	16,495,379

See accompanying notes.

Genuine Parts Company and Subsidiaries

Consolidated Statements of Income

(In Thousands, Except per Share Amounts)

			Year Ended December 31,
			2023						2022						2021
Net sales			$	23,090,610					$	22,095,973					$	18,870,510
Cost of goods sold			14,799,938						14,355,869						12,236,374
Gross profit			8,290,672						7,740,104						6,634,136
Operating expenses:
Selling, administrative and other expenses			6,167,143						5,758,295						5,162,506
Depreciation and amortization			350,529						347,819						290,971
Provision for doubtful accounts			25,947						19,791						17,739
Total operating expenses			6,543,619						6,125,905						5,471,216
Non-operating expenses (income):
Interest expense, net			64,469						73,887						62,150
Other			(59,764)						(32,290)						(99,576)
Total non-operating expenses (income)			4,705						41,597						(37,426)
Income before income taxes			1,742,348						1,572,602						1,200,346
Income taxes			425,824						389,901						301,556
Net income			$	1,316,524					$	1,182,701					$	898,790

See accompanying notes.

Genuine Parts Company and Subsidiaries

Consolidated Statements of Comprehensive Income

(In Thousands, Except per Share Amounts)

			Year Ended December 31,
			2023						2022						2021
Net income			$	1,316,524					$	1,182,701					$	898,790
Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustments			64,429						(143,890)						(65,843)
Cash flow hedge adjustments, net of income taxes in 2023 — $951, 2022 — $4,612, and 2021 — $5,535			2,572						12,470						14,965
Pension and postretirement benefit adjustments, net of income taxes of 2023 — $4,174, 2022 — $15,846, and 2021 — $84,650			(11,331)						(43,383)						229,641
Other comprehensive income (loss), net of tax			55,670						(174,803)						178,763
Comprehensive income			$	1,372,194					$	1,007,898					$	1,077,553

See accompanying notes.

Genuine Parts Company and Subsidiaries

Consolidated Statements of Equity

(In Thousands, Except Share Data and per Share Amounts)

			Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive Loss						Retained Earnings						Total Parent Equity						Non- controlling Interests in Subsidiaries						Total Equity
Shares						Amount
Balance at 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			—						—						—						—						898,790						898,790						—						898,790
Other comprehensive income, net of tax			—						—						—						178,763						—						178,763						—						178,763
Cash dividends declared, $3.26 per share			—						—						—						—						(467,482)						(467,482)						—						(467,482)
Share-based awards exercised, including tax benefit of $7,076			440,667						441						(22,787)						—						—						(22,346)						—						(22,346)
Share-based compensation			—						—						25,597						—						—						25,597						—						25,597
Purchase of stock			(2,614,319)						(2,614)						—						—						(330,985)						(333,599)						—						(333,599)
Cumulative effect from adoption of ASU No. 2019-12			—						—						—						—						6,223						6,223						—						6,223
Noncontrolling interest activities			—						—						—						—						—						—						(659)						(659)
Balance at December 31, 2021			142,180,683						142,181						119,975						(857,739)						4,086,325						3,490,742						12,548						3,503,290
Net income			—						—						—						—						1,182,701						1,182,701						—						1,182,701
Other comprehensive loss, net of tax			—						—						—						(174,803)						—						(174,803)						—						(174,803)
Cash dividends declared, $3.58 per share			—						—						—						—						(506,232)						(506,232)						—						(506,232)
Share-based awards exercised, including tax benefit of $5,495			333,185						332						(17,709)						—						—						(17,377)						—						(17,377)
Share-based compensation			—						—						38,058						—						—						38,058						—						38,058
Purchase of stock			(1,572,219)						(1,572)						—						—						(221,154)						(222,726)						—						(222,726)
Noncontrolling interest activities			—						—						—						—						—						—						1,536						1,536
Balance at December 31, 2022			140,941,649						140,941						140,324						(1,032,542)						4,541,640						3,790,363						14,084						3,804,447
Net income			—						—						—						—						1,316,524						1,316,524						—						1,316,524
Other comprehensive income, net of tax			—						—						—						55,670						—						55,670						—						55,670
Cash dividend declared, $3.80 per share			—						—						—						—						(533,118)						(533,118)						—						(533,118)
Share-based awards exercised, including tax benefit of $6,802			380,376						380						(24,525)						—						—						(24,145)						—						(24,145)
Share-based compensation			—						—						57,226						—						—						57,226						—						57,226
Purchase of stock			(1,754,954)						(1,754)						—						—						(259,719)						(261,473)						—						(261,473)
Noncontrolling interest activities			—						—						—						—						—						—						1,854						1,854
Balance at December 31, 2023			139,567,071						$	139,567					$	173,025					$	(976,872)					$	5,065,327					$	4,401,047					$	15,938					$	4,416,985

See accompanying notes.

Genuine Parts Company and Subsidiaries

Consolidated Statements of Cash Flows

(In Thousands)

			Year Ended December 31,
			2023						2022						2021
Operating activities:
Net income			$	1,316,524					$	1,182,701					$	898,790
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			350,529						347,819						290,971
Deferred income taxes			42,114						2,220						31,676
Share-based compensation			57,226						38,058						25,597
Gain on sale of real estate			—						(102,803)						—
Other operating activities			(41,626)						18,377						22,575
Changes in operating assets and liabilities:
Trade accounts receivable, net			31,989						(244,371)						(258,994)
Merchandise inventories, net			(69,148)						(380,420)						(329,237)
Trade accounts payable			2,038						676,406						777,318
Other assets and liabilities			(254,036)						(71,016)						(200,411)
Net cash provided by operating activities			1,435,610						1,466,971						1,258,285
Investing activities:
Purchases of property, plant and equipment			(512,675)						(339,632)						(266,136)
Proceeds from sale of property, plant and equipment			25,099						145,007						26,549
Proceeds from divestitures of businesses			10,754						33,604						17,738
Proceeds from sale of investment			80,482						—						—
Proceeds from settlement of net investment hedge			—						158,441						—
Acquisitions and other investing activities			(309,452)						(1,681,660)						(284,315)
Net cash used in investing activities			(705,792)						(1,684,240)						(506,164)
Financing activities:
Proceeds from debt			3,769,132						5,108,641						892,694
Payments on debt			(3,237,959)						(4,147,773)						(1,053,423)
Shares issued from employee incentive plans			(24,145)						(17,377)						(22,346)
Dividends paid			(526,674)						(495,917)						(465,649)
Purchase of stock			(261,473)						(222,726)						(333,599)
Other financing activities			(11,042)						(19,747)						(7,209)
Net cash (used in) provided by financing activities			(292,161)						205,101						(989,532)
Effect of exchange rate changes on cash and cash equivalents			10,887						(49,070)						(38,054)
Net increase (decrease) in cash and cash equivalents			448,544						(61,238)						(275,465)
Cash and cash equivalents at beginning of year			653,463						714,701						990,166
Cash and cash equivalents at end of year			$	1,102,007					$	653,463					$	714,701
Supplemental disclosures of cash flow information
Cash paid during the year for:
Income taxes			$	366,270					$	362,859					$	305,326
Interest			$	90,405					$	73,368					$	65,732

See accompanying notes.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023

1.Summary of Significant Accounting Policies

Business

Genuine Parts Company is a distributor of automotive replacement parts and industrial parts and materials. We serve a diverse customer base through a network of more than 10,700 locations throughout North America, Europe, and Australasia and, therefore, have limited exposure from credit losses to any particular customer, region, or industry segment. We perform periodic credit evaluations of our customers’ financial condition and generally do not require collateral.

We have evaluated subsequent events through the date the financial statements were issued.

Principles of Consolidation

The consolidated financial statements include all of our accounts. The net income attributable to noncontrolling interests is not material to our consolidated net income. Intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements, in conformity with U.S. generally accepted accounting principles, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates and the differences could be material.

Revenue Recognition

We primarily recognize revenue at the point the customer obtains control of the products or services and at an amount that reflects the consideration expected to be received for those products or services.

Revenue is recognized net of allowances for returns, variable consideration and any taxes collected from customers that will be remitted to governmental authorities. Revenue recognized over time is not significant. Payment terms with customers vary by the type and location of the customer and the products or services offered. We do not adjust the promised amount of consideration for the effects of significant financing components based on the expectation that the period between when we transfer a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Arrangements with customers that include payment terms extending beyond one year are not significant. Liabilities for customer incentives, discounts, or rebates are included in other current liabilities in the consolidated balance sheets.

Product Distribution Revenues

We generate revenue primarily by distributing products through wholesale and retail channels. For wholesale customers, revenue is recognized when title and control of the goods has passed to the wholesale customer. Retail revenue is recognized at the point of sale when the goods are transferred to customers and consideration is received. Shipping and handling activities are performed prior to the customer obtaining control of the products. Costs associated with shipping and handling to our customers are considered costs to fulfill a contract and are included in selling, administrative and other expenses in the period they are incurred.

Other Revenues

We offer software support, product cataloging, marketing, training and other membership program and support services to certain customers. This revenue is recognized as services are performed. Revenue from these services is recognized over a short duration and the impact to our consolidated financial statements is not significant.

Variable Consideration

Our products are generally sold with a right of return and may include variable consideration in the form of incentives, discounts, credits or rebates. We estimate variable consideration based on historical experience to determine the expected amount to which we will be entitled in exchange for transferring the promised goods or services to a customer. We recognize estimated variable consideration as an adjustment to the transaction price when control of the related product or service is transferred. The realization of variable consideration occurs within a short period of time from product delivery; therefore, the time value of money effect is not significant.

Foreign Currency Translation

The consolidated balance sheets and statements of income of our foreign subsidiaries have been translated into U.S. dollars at the current and average exchange rates, respectively. The foreign currency translation adjustment is included as a component of accumulated other comprehensive loss.

Cash and Cash Equivalents

We consider all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

Trade Accounts Receivable and the Allowance for Doubtful Accounts

We evaluate the collectability of trade accounts receivable based on a combination of factors. We estimate an allowance for doubtful accounts as a percentage of net sales based on various factors, including historical experience, current economic conditions and future expected credit losses and collectability trends. We will periodically adjust this estimate when we become aware of a specific customer’s inability to meet its financial obligations (e.g., bankruptcy filing) or as a result of changes in the overall aging of accounts receivable. While we have a large customer base that is geographically dispersed, a general economic downturn in any of the industry segments in which we operate could result in higher than expected defaults and, therefore, the need to revise estimates for bad debts. For the years ended December 31, 2023, 2022, and 2021, we recorded provisions for doubtful accounts of approximately $26 million, $20 million, and $18 million, respectively. At December 31, 2023 and 2022, the allowance for doubtful accounts was approximately $57 million and $54 million, respectively.

Merchandise Inventories, Including Consideration Received From Vendors

Merchandise inventories are valued at the lower of cost or net realizable value. Cost is determined by the last-in, first-out ("LIFO") method for a majority of U.S. automotive and industrial parts, and generally by the weighted average method for non-U.S. and certain other inventories. If the FIFO method had been used in place of LIFO, cost would have been approximately $880 million and $835 million higher than reported at December 31, 2023 and 2022, respectively. Reductions in certain industrial parts inventories resulted in liquidations of LIFO inventory layers, which reduced cost of goods sold by immaterial amounts in 2023 and 2021. There were no liquidations of LIFO inventory layers in 2022.

We identify slow moving or obsolete inventories and estimate appropriate provisions related thereto. Historically, these losses have not been significant as the vast majority of our inventories are not highly susceptible to obsolescence and are eligible for return under various vendor return programs. While we have no reason to believe our inventory return privileges will be discontinued in the future, our risk of loss associated with obsolete or slow moving inventories would increase if such were to occur.

We enter into agreements at the beginning of each year with many of our vendors that provide for inventory purchase incentives. Generally, we earn inventory purchase incentives upon achieving specified volume purchasing levels or other criteria. We accrue for the receipt of these incentives as part of our inventory cost based on cumulative purchases of inventory to date and projected inventory purchases through the end of the year. While management believes we will continue to receive consideration from vendors in 2024 and beyond, there can be no assurance that vendors will continue to provide comparable amounts of incentives in the future.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist primarily of consideration receivable from vendors, prepaid expenses, income taxes and other miscellaneous receivables.

The following table provides a reconciliation of prepaid expenses and other current assets reported within the consolidated balance sheets at December 31:

(in thousands)						2023						2022
Prepaid expenses						$	110,863					$	113,522
Consideration receivable from vendors						928,499						847,341
Other current assets						564,366						571,896
Total prepaid expenses and other current assets						$	1,603,728					$	1,532,759

Consideration receivable from vendors include rebates receivable for various vendor funding programs.

Goodwill

We review our goodwill annually for impairment in the fourth quarter, or sooner if circumstances indicate that the carrying amount may exceed fair value. We test goodwill for impairment at the reporting unit level, which is an operating segment or a level below an operating segment (a component). A component is a reporting unit if the component constitutes a business for which discrete financial information and operating results are available and management regularly reviews that information. However, we may aggregate two or more components of an operating segment into a single reporting unit if the components have similar economic characteristics.

To review goodwill at a reporting unit for impairment, we generally elect to first assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. Qualitative factors include adverse macroeconomic, industry or market conditions, cost factors, or financial performance. If we elect not to perform a qualitative assessment or conclude from our assessment of qualitative factors that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, we must perform a quantitative test to evaluate goodwill impairment.

To perform a quantitative test, we calculate the fair value of the reporting unit and compare that amount to the reporting unit's carrying value. We typically calculate the fair value by using a combination of a market approach and an income approach that is based on a discounted cash flow model. The assumptions used in the market approach generally include benchmark company market multiples and the assumptions used in the income approach generally include the projected cash flows of the reporting unit, which are based on projected revenue growth rates and EBITDA margins, the estimated weighted average cost of capital, working capital and terminal value. We use inputs and assumptions we believe are consistent with those a hypothetical marketplace participant would use. We recognize goodwill impairment (if any) as the excess of the reporting unit's carrying value over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

Refer to the Goodwill and Other Intangible Assets Footnote for further information on the results of our annual goodwill impairment testing.

Long-Lived Assets Other Than Goodwill

We assess our long-lived assets other than goodwill for impairment whenever facts and circumstances indicate that the carrying amount may not be fully recoverable. To analyze recoverability, we project undiscounted net future cash flows over the remaining life of such assets. If these projected cash flows are less than the carrying amount, an impairment would be recognized, resulting in a write-down of assets with a corresponding charge to earnings. Impairment losses, if any, are measured based upon the difference between the carrying amount and the fair value of the assets. There were no impairment losses in 2023. In 2022 and 2021, we recognized losses related to impairments and disposals of $17 million and $61 million, respectively. Refer to the Goodwill and Other Intangible Assets Footnote and the Property, Plant and Equipment Footnote for more information on the losses that occurred in 2022 and 2021, respectively.

Other Assets

Other assets consist primarily of cash surrender value of life insurance policies, equity method and other investments, guarantee fees receivable, and deferred compensation benefits.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation and amortization are primarily determined on a straight-line basis over the following estimated useful lives of each asset: buildings, 10 to 40 years; machinery and equipment, 5 to 15 years; software, 3 to 5 years; and the shorter of lease term or useful life for leasehold improvements.

Other Current Liabilities

Other current liabilities consist primarily of current lease obligations, allowances for sales returns expected within the next year, accrued compensation, accrued income and other taxes, and other reserves for expenses incurred.

Other Long-Term Liabilities

Other long-term liabilities consist primarily of allowances for sales returns expected after the next year, guarantee obligations, accrued taxes and other non-current obligations.

Self-Insurance

We are self-insured for the majority of our group health insurance costs. A reserve for claims incurred but not reported is developed by analyzing historical claims data provided by our claims administrators. These reserves are

included in accrued expenses in the accompanying consolidated balance sheets as the expenses are expected to be paid within one year.

Long-term insurance liabilities consist primarily of reserves for our workers’ compensation program. We carry high deductible policies for a majority of these liabilities. We record our reserves based on an analysis performed by an independent actuary. The analysis involves calculating loss development factors and applying them to reserves supplied by our insurance providers. While we believe the assumptions used in these calculations are appropriate, significant changes in actual experience or our assumptions could materially affect the worker’s compensation costs and reserves recorded.

Business Combinations

When we acquire businesses, we apply the acquisition method of accounting and recognize the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests in an acquiree at their fair values on the acquisition date, which requires significant estimates and assumptions. Goodwill is measured as the excess of the fair value of the consideration transferred over the net of the acquisition date fair values of the identifiable assets acquired and liabilities assumed. The acquisition method requires us to record provisional amounts for any items for which the accounting is not complete at the end of a reporting period. We must complete the accounting during the measurement period, which cannot exceed one year. Adjustments made during the measurement period could have a material impact on our financial condition and results of operations.

We typically measure customer relationships and other intangible assets using an income approach. Significant estimates and assumptions used in this approach include discount rates and certain assumptions that form the basis of the forecasted cash flows expected to be generated from the asset (e.g., future revenue growth rates and EBITDA Margin). If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could record impairment charges. In addition, we have estimated the economic lives of certain acquired tangible and intangible assets and these lives are used to calculate depreciation and amortization expense. If our estimates of the economic lives change, depreciation or amortization expenses could be increased or decreased, or the acquired asset could be impaired.

Legal and Product Liabilities

We accrue for potential losses related to legal disputes, litigation, product liabilities, and regulatory matters when it is probable (the future event or events are likely to occur) that we will incur a loss and the amount of the loss can be reasonably estimated.

The product liability amount reflects our reasonable estimate of losses based upon currently known facts. To calculate the liability, we estimate potential losses relating to pending claims and also estimates the likelihood of additional, similar claims being filed against us in the future. To estimate potential losses on claims that could be filed in the future, we consider claims pending against us, claim filing rates, the number of codefendants and the extent to which they share in settlements, and the amount of loss by claim type. The estimated losses for pending and potential future claims are calculated on a discounted basis using risk-free interest rates derived from market data about monetary assets with maturities comparable to those of the projected product liabilities. We use an actuarial specialist to assist with measuring our product liabilities.

Fair Value Measurements

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

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

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

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

At December 31, 2023 and 2022, the fair value of our senior unsecured notes was approximately $3.7 billion and $2.9 billion, respectively, 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.

Derivative instruments are recognized in the 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.

Fair value measurements of non-financial assets and non-financial liabilities are primarily used in the impairment analyses of goodwill, other intangible assets, and long-lived assets. These involve fair value measurements on a nonrecurring basis using Level 3 inputs as defined in the fair value hierarchy. The carrying amounts reflected in the consolidated balance sheets for cash and cash equivalents, trade accounts receivable, trade accounts payable, and borrowings under the line of credit approximate their respective fair values based on the short-term nature of these instruments.

Fair value measurement using unobservable inputs is inherently uncertain, and the use of different methodologies or assumptions to determine the fair value instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used since December 31, 2022.

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 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, cash flows and net investments in certain foreign subsidiaries associated with changes in these rates. Derivative financial instruments are not used for trading or other speculative purposes. We have not historically incurred, and do not expect to incur in the future, any losses as a result of counterparty default related to derivative instruments.

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

Shipping and Handling Costs

Shipping and handling costs are classified as selling, administrative and other expenses in the accompanying consolidated statements of income and totaled approximately $451 million, $407 million, and $350 million, for the years ended December 31, 2023, 2022, and 2021, respectively.

Advertising Costs

Advertising costs are expensed as incurred and totaled $234 million, $236 million, and $211 million in the years ended December 31, 2023, 2022, and 2021, respectively.

Accounting for Legal Costs

We expense legal costs related to loss contingencies as they are incurred.

Share-Based Compensation

We maintain various long-term incentive plans, which provide for the granting of stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units ("RSUs"), performance awards, dividend equivalents and other share-based awards. SARs represent a right to receive upon exercise an amount, payable in shares of common stock, equal to the excess, if any, of the fair market value of our common stock on the date of exercise over the base value of the grant. The terms of such SARs require net settlement in shares of common stock and do not provide for cash settlement. RSUs represent a contingent right to receive one share of our common stock at a future date. The majority of awards previously granted vest on a pro-rata basis for periods ranging from one to three years and are expensed accordingly on a straight-line basis. Forfeitures are accounted for as they occur. We issue new shares upon exercise or conversion of awards under these plans.

Income Taxes

We account for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amount and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets and liabilities are recorded net as noncurrent deferred income taxes. In addition, valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be

realized. In making this determination, we consider all available positive and negative evidence including projected future taxable income, future reversals of existing temporary differences, recent financial operations and tax planning strategies.

We recognize a tax benefit from uncertain tax positions when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.

Net Income per Common Share

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the year. The computation of diluted net income per common share includes the dilutive effect of stock options, stock appreciation rights and nonvested restricted stock awards options. Options to purchase approximately 3 thousand, 4 thousand, and 186 thousand shares of common stock ranging from $72 - $179 per share were outstanding at December 31, 2023, 2022, and 2021, respectively. These options were excluded from the computation of diluted net income per common share because the options’ exercise prices were greater than the average market prices of common stock in each respective year.

The following table summarizes basic and diluted shares outstanding for the year ended December 31:

(in thousands, except per share data)						2023						2022						2021
Net income						$	1,316,524					$	1,182,701					$	898,790
Weighted average common shares outstanding						140,367						141,468						143,435
Dilutive effect of stock options and non-vested restricted stock awards						667						854						786
Weighted average common shares outstanding – assuming dilution						141,034						142,322						144,221
Basic earnings per share						$	9.38					$	8.36					$	6.27
Diluted earnings per share						$	9.33					$	8.31					$	6.23

Recent Accounting Pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standard Updates (“ASUs”) 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 be not applicable or are expected to have a minimal impact on our consolidated financial statements.

Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes*.* This standard removes certain exceptions for performing intraperiod tax allocations, requires recognition of deferred taxes for investments, and requires calculating income taxes in interim periods. The guidance also simplifies the accounting for franchise taxes, transactions that result in a step-up in the tax basis of goodwill, and the effect of enacted changes in tax laws or rates in interim periods. We adopted ASU 2019-12 as of January 1, 2021, and recognized a cumulative-effect adjustment to increase opening retained earnings by $6 million.

Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations

In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. 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 was effective in the first quarter of 2023, except for the rollforward, which is effective for our Quarterly Report on Form 10-Q for the period ended March 31, 2024. We adopted ASU 2022-04, including the early adoption of the rollforward, during the year ended December 31, 2023. For additional information, refer to the Supply Chain Finance Programs Footnote.

Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This standard requires disclosures of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss, an amount and description of other segment items by reportable segment, and all annual disclosures

currently required by Topic 280 to be included in interim periods. The guidance is effective for our Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent interim periods, with early adoption permitted. We are currently evaluating the impact of adopting this standard on our financial statements and disclosures.

Income Taxes (Topic 740): Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The standard requires disclosure of specific categories in the rate reconciliation and additional information for reconciling items, income before tax expense disaggregated between domestic and foreign, income tax expense disaggregated by federal, state and foreign, as well as further information on income taxes paid. The guidance is effective for our Annual Report on Form 10-K for the year ended December 31, 2025, with early adoption permitted. The guidance should be applied on a prospective basis, with retrospective application permitted. We are currently evaluating the impact of adopting this standard on our financial statements and disclosures.

2. Segment Data

Our reportable segments consist of the Automotive Parts Group ("Automotive") and Industrial Parts Group ("Industrial"). Within the reportable segments, certain of our operating segments are aggregated since they have similar economic characteristics, products and services, type and class of customers, and distribution methods.

Our Automotive segment distributes replacement parts (other than body parts) for substantially all makes and models of automobiles, trucks, and other vehicles.

Our Industrial segment distributes a wide variety of industrial bearings, mechanical and fluid power transmission equipment, including hydraulic and pneumatic products, material handling components and related parts and supplies.

Inter-segment sales are not significant. Segment profit for each industry segment is calculated as net sales less costs of goods sold, operating expenses, and certain non-operating expenses attributable to the segment (e.g., foreign currency), excluding general corporate expenses, net interest expense, intangible asset amortization, and other unallocated amounts that are primarily driven by corporate initiatives. Approximately $577 million, $472 million, and $438 million of income before income taxes were generated in jurisdictions outside the U.S. for the years ended December 31, 2023, 2022, and 2021, respectively. Net sales and net property, plant and equipment by country relate directly to our operations in the respective country. Corporate assets are principally cash and cash equivalents and headquarters’ facilities and equipment.

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

(in thousands)						2023						2022						2021
Net sales:
Automotive						$	14,246,783					$	13,666,634					$	12,544,131
Industrial						8,843,827						8,429,339						6,326,379
Total net sales						$	23,090,610					$	22,095,973					$	18,870,510
Segment profit:
Automotive						$	1,174,880					$	1,191,674					$	1,073,427
Industrial						1,102,836						886,636						595,232
Total segment profit						$	2,277,716					$	2,078,310					$	1,668,659
Interest expense, net						(64,469)						(73,886)						(62,150)
Corporate expense						(323,721)						(269,364)						(174,842)
Intangible asset amortization						(147,178)						(157,437)						(103,273)
Other unallocated costs						—						(5,021)						(128,048)
Income before income taxes						$	1,742,348					$	1,572,602					$	1,200,346

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

(in thousands)						2023						2022						2021
Other unallocated costs:
Gain on sales of real estate (1)						$	—					$	102,803					$	—
Gain on insurance proceeds (2)						—						1,507						3,862
Product liability adjustment (3)						—						(28,730)						—
Product liability damages award (4)						—						—						(77,421)
Loss on software disposal (5)						—						—						(61,063)
Gain on equity investment (6)						—						—						10,229
Transaction and other costs (7)						—						(80,601)						(3,655)
Total other unallocated costs						$	—					$	(5,021)					$	(128,048)

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

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

*(3)*Amount to remeasure product liability for a revised estimate of the number of claims to be incurred in future periods, among other assumptions.

*(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)*Adjustment relates to gains recognized upon remeasurement of certain equity investments to fair value upon acquiring the remaining equity of those entities.

*(7)*Amount for 2022 primarily includes costs of $67 million associated with the January 3, 2022 acquisition and integration of KDG which includes a $17 million impairment charge. The impairment charge was driven by a decision to retire certain legacy trade names, classified as other intangible assets, prior to the end of their estimated useful lives as part of executing our KDG integration and rebranding strategy. Separately, this adjustment includes an $11 million loss related to an investment. Amount for 2021 includes transaction and other costs related to acquisitions.

The following table presents a summary of our reportable segment total assets:

(in thousands)						2023						2022
Assets:
Automotive						$	9,845,644					$	8,755,363
Industrial						2,535,404						2,474,392
Corporate						1,059,812						865,001
Goodwill and other intangible assets						4,527,594						4,400,623
Total assets						$	17,968,454					$	16,495,379

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

(in thousands)						2023						2022						2021
Depreciation and amortization:
Automotive						$	163,517					$	146,819					$	143,052
Industrial						30,082						29,670						24,100
Corporate						9,752						13,893						20,546
Intangible asset amortization						147,178						157,437						103,273
Total depreciation and amortization						$	350,529					$	347,819					$	290,971
Capital expenditures:
Automotive						$	279,943					$	235,182					$	198,268
Industrial						53,823						33,165						35,626
Corporate						178,909						71,285						32,242
Total capital expenditures						$	512,675					$	339,632					$	266,136
Net sales:
United States						$	15,247,740					$	14,965,462					$	12,136,689
Europe						3,611,453						3,071,964						2,908,156
Canada						2,011,343						1,960,227						1,779,663
Australasia						2,149,376						2,044,432						2,002,188
Mexico						70,698						53,888						43,814
Total net sales						$	23,090,610					$	22,095,973					$	18,870,510
Net property, plant and equipment:
United States						$	935,583					$	790,121					$	750,267
Europe						339,330						200,898						179,001
Canada						147,404						113,574						102,484
Australasia						193,638						220,839						201,971
Mexico						830						582						676
Total net property, plant and equipment						$	1,616,785					$	1,326,014					$	1,234,399

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:

(in thousands)						2023						2022						2021
North America:
Automotive						$	9,010,337					$	9,015,501					$	8,103,896
Industrial						8,319,444						7,964,076						5,856,270
Total North America						$	17,329,781					$	16,979,577					$	13,960,166
Australasia:
Automotive						$	1,624,993					$	1,579,169					$	1,532,079
Industrial						524,383						465,263						470,109
Total Australasia						$	2,149,376					$	2,044,432					$	2,002,188
Europe - Automotive						$	3,611,453					$	3,071,964					$	2,908,156
Total net sales						$	23,090,610					$	22,095,973					$	18,870,510

3. Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill during the years ended December 31, 2023 and 2022 by reportable segment, as well as other identifiable intangible assets, are summarized as follows:

						Goodwill
(in thousands)						Automotive						Industrial						Total						Other Intangible Assets, Net
Balance as of January 1, 2022						$	1,507,462					$	407,845					$	1,915,307					$	1,406,401
Additions						149,896						609,892						759,788						663,077
Amortization						—						—						—						(157,437)
Impairments						—						—						—						(17,461)
Foreign currency translation						(77,824)						(9,158)						(86,982)						(82,070)
Balance as of December 31, 2022						1,579,534						1,008,579						2,588,113						1,812,510
Additions						111,831						8,046						119,877						98,652
Amortization						—						—						—						(147,178)
Foreign currency translation						26,068						623						26,691						28,929
Balance as of December 31, 2023						$	1,717,433					$	1,017,248					$	2,734,681					$	1,792,913

We completed our annual goodwill impairment testing as of October 1, 2023. We assess the value of our goodwill under either a quantitative or qualitative assessment for our various reporting units. To complete a qualitative assessment, we evaluate historical revenue and operating profit growth trends, market conditions and other factors to determine whether it is more likely than not that the reporting unit's goodwill is impaired. We complete quantitative assessments for reporting units that fail our qualitative assessments, or otherwise on a periodic basis. To complete a quantitative assessment, we calculate a reporting unit's fair value using a combination of income and market approaches, which involve significant unobservable inputs (Level 3). In the income approach, we primarily use these assumptions: projected revenue growth rates, EBITDA margins, the estimated weighted average cost of capital, and terminal value. In the market approach, we primarily use benchmark company market multiples. We believe the inputs and assumptions we use are consistent with those a hypothetical marketplace participant would use. Once calculated, we verify whether the reporting unit's fair value is higher than its carrying amount. If the fair value is lower, we recognize an impairment, generally for the difference. Based on these assessments, we did not recognize any goodwill impairments during 2023 or 2022.

If there are sustained declines in macroeconomic or business conditions in future periods affecting the projected earnings and cash flows at our reporting units, among other things, there can be no assurance that goodwill at one or more reporting units may not be impaired.

In June 2022, we recognized 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.

Other Intangible Assets

The gross carrying amounts and accumulated amortization relating to other intangible assets at December 31, 2023 and 2022 are as follows:

						2023																		2022
(in thousands)						Gross Carrying Amount						Accumulated Amortization						Net						Gross Carrying Amount						Accumulated Amortization						Net
Customer relationships						$	2,252,553					$	(695,934)					$	1,556,619					$	2,121,171					$	(566,111)					$	1,555,060
Trademarks						349,022						(113,123)						235,899						342,136						(85,188)						256,948
Non-competition agreements						5,619						(5,224)						395						5,575						(5,073)						502
						$	2,607,194					$	(814,281)					$	1,792,913					$	2,468,882					$	(656,372)					$	1,812,510

Amortization expense for other intangible assets totaled $147 million, $157 million, and $103 million for the years ended December 31, 2023, 2022, and 2021, respectively. Estimated other intangible assets amortization expense for the succeeding five years is as follows (in thousands):

2024			$	131,365
2025			129,822
2026			128,357
2027			122,591
2028			119,995
			$	632,130

4. Property, Plant and Equipment

Property, plant and equipment as of December 31, 2023 and December 31, 2022, consisted of the following:

(in thousands)						2023						2022
Land						$	95,865					$	115,845
Buildings and leasehold improvements						901,341						834,786
Machinery, equipment and other						2,212,237						1,811,060
Property, plant and equipment, at cost						3,209,443						2,761,691
Less: accumulated depreciation						1,592,658						1,435,677
Property, plant and equipment, net						$	1,616,785					$	1,326,014

5. Accounts Receivable Sales Agreement

We have an A/R sales agreement to sell short-term receivables from certain customer trade accounts to the unaffiliated financial institutions on a revolving basis. The A/R Sales Agreement has a 3 year term, which we intend to renew.

As part of the A/R Sales Agreement, we routinely sell designated pools of receivables as they are originated by it and certain U.S. subsidiaries to a separate bankruptcy-remote special purpose entity (“SPE”). The assets of the SPE would be first available to satisfy the creditor claims of the unaffiliated financial institutions. We control and therefore consolidate the SPE in our consolidated financial statements.

The SPE transferred ownership and control of certain receivables that met certain qualifying conditions to the unaffiliated financial institutions in exchange for cash. We account for transactions with the unaffiliated financial institutions as sales of financial assets, with the associated receivables derecognized from our consolidated balance sheet. The remaining receivables held by the SPE were pledged to secure the collectability of the sold receivables. The amount of receivables pledged as collateral as of December 31, 2023 and December 31, 2022 is approximately $1.2 billion and $1.1 billion, respectively.

We continue to be involved with the receivables transferred by the SPE to the unaffiliated financial 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 institutions so that the total principal amount outstanding of receivables sold is approximately $1.0 billion at any point in time (which is the maximum amount allowed under the agreement). The future amount of receivables outstanding as sold could decrease, based on the level of activity and other factors. Total principal amount outstanding of receivables sold is approximately $1.0 billion and $1.0 billion as of December 31, 2023 and December 31, 2022, respectively.

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

(in thousands)						December 31, 2023						December 31, 2022
Receivables sold to the financial institutions and derecognized						$	8,673,477					$	8,946,730
Cash collected on sold receivables						$	8,673,472					$	8,746,740

Continuous cash activity related to the A/R Sales Agreement is reflected in cash from operating activities in the consolidated statement of cash flows.

The SPE incurs fees due to the unaffiliated financial institutions related to the accounts receivable sales transactions. Those fees, which totaled $60 million, $27 million, and $11 million in 2023, 2022, and 2021,

respectively, are recorded within other non-operating expense (income) in the consolidated statements of income. The SPE has a recourse obligation to repurchase from the unaffiliated financial 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 December 31, 2023 and December 31, 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.

6. Debt

The weighted average interest rate on our outstanding borrowings was approximately 3.16% and 2.33% at December 31, 2023 and 2022, respectively.

Certain borrowings require us to comply with a financial covenant with respect to a maximum debt to EBITDA ratio. At December 31, 2023, we were in compliance with all such covenants. Due to the workers’ compensation and insurance reserve requirements in certain states, we also had unused letters of credit of approximately $71 million outstanding at December 31, 2023 and 2022.

On November 1, 2023, we issued $425 million of unsecured 6.50% Senior Notes due 2028. Simultaneously, we issued $375 million of unsecured 6.88% Senior Notes due 2033. For both offerings, interest is payable semi-annually on November 1 and May 1 of each year, beginning May 1, 2024. We utilized the proceeds from these offerings to repay the Series F Private Placement Notes and outstanding indebtedness under the Unsecured Revolving Credit Facility and for other general corporate purposes.

On November 29, 2023, we established a commercial paper program that allows us to issue unsecured commercial paper notes up to $1.5 billion outstanding. The maturities of the commercial paper notes vary but may not exceed 364 days from the date of issuance. The commercial paper notes are sold under customary terms in the commercial paper market and will rank pari passu with unsecured and unsubordinated indebtedness. The notes are issued at par less a discount representing an interest factor or, if interest bearing, at par. The net proceeds of issuances of the commercial paper notes are expected to be used for general corporate purposes. As of December 31, 2023, we had no borrowings outstanding under our commercial paper program.

The following table summarizes our debt as of December 31, 2023 and December 31, 2022:

(in thousands)						December 31, 2023						December 31, 2022
Unsecured Revolving Credit Facility, $1,500,000, LIBOR plus 1.13% variable, due September 30, 2026						$	—					$	—
December 2, 2013, Series F Senior Unsecured Notes, $250,000, 3.24% fixed, due December 2, 2023						—						250,000
June 30, 2019, Series A Senior Unsecured Notes, A$155,000, 3.10% fixed, due June 30, 2024						105,571						105,664
October 30, 2017, Series J Senior Unsecured Notes, €225,000, 1.40% fixed, due October 30, 2024						248,355						240,840
January 6, 2022, Senior Unsecured Notes, $500,000, 1.75% fixed, due February 1, 2025						500,000						500,000
June 30, 2019, Series B Senior Unsecured Notes, A$155,000, 3.43% fixed, due June 30, 2026						105,571						105,664
November 30, 2016, Series H Senior Unsecured Notes, $250,000, 3.24% fixed, due November 30, 2026						250,000						250,000
October 30, 2017, Series K Senior Unsecured Notes, €250,000, 1.81% fixed, due October 30, 2027						275,950						267,600
October 30, 2017, Series I Senior Unsecured Notes, $120,000, 3.70% fixed, due October 30, 2027						120,000						120,000
November 1, 2023 Senior Unsecured Notes, $425,000, 6.50% fixed, due November 1, 2028						425,000						—
May 31, 2019, Series A Senior Unsecured Notes, €50,000, 1.55% fixed, due May 31, 2029						55,190						53,520
October 30, 2017, Series L Senior Unsecured Notes, €125,000, 2.02% fixed, due October 30, 2029						137,975						133,800
October 27, 2020, Senior Unsecured Notes, $500,000, 1.88% fixed, due November 1, 2030						500,000						500,000
May 31, 2019, Series B Senior Unsecured Notes, €100,000, 1.74% fixed, due May 31, 2031						110,380						107,040
January 6, 2022, Senior Unsecured Notes, $500,000, 2.75% fixed, due February 1, 2032						500,000						500,000
October 30, 2017, Series M Senior Unsecured Notes, €100,000, 2.32% fixed, due October 30, 2032						110,380						107,040
November 1, 2023 Senior Unsecured Notes, $375,000, 6.88% fixed, due November 1, 2033						375,000						—
May 31, 2019, Series C Senior Unsecured Notes, €100,000, 1.95% fixed, due May 31, 2034						110,380						107,040
Other unsecured debt						4,622						2,977
Total unsecured debt						3,934,374						3,351,185
Unamortized discount and debt issuance cost						(28,146)						(22,362)
Total debt						3,906,228						3,328,823
Less debt due within one year						355,298						252,029
Long-term debt, excluding current portion						$	3,550,930					$	3,076,794

The following table summarizes scheduled maturities of our debt for the years succeeding December 31, 2023 (in thousands):

2024			$	355,298
2025			500,494
2026			356,133
2027			397,065
2028			426,078
Thereafter			1,899,306
			$	3,934,374

7. 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 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.

(in thousands)						December 31, 2023						December 31, 2022
Obligations outstanding at the beginning of the year						$	3,106,713					$	2,678,205
Invoices confirmed during the year						3,987,656						4,079,259
Confirmed invoices paid during the year						(4,060,279)						(3,650,751)
Confirmed obligations outstanding at the end of the year						$	3,034,090					$	3,106,713

8. Derivatives and Hedging

Net Investment Hedges

We have designated certain derivative instruments and a portion of our foreign currency denominated debt, a non-derivative financial instrument, as hedges of the foreign currency exchange rate exposure of our Euro-denominated net investment in a European subsidiary. We apply the spot method to assess the hedge effectiveness of the derivative instruments and this assessment for each instrument excludes the initial value related to the difference at contract inception between the foreign exchange spot rate and the forward rate (i.e., the forward points). The initial value of this excluded component is recognized as a reduction to interest expense in a systematic and rational manner over the term of the derivative instrument. All other changes in value for the net investment hedges are included in AOCL within foreign currency translation and would only be reclassified to earnings if the European subsidiary were liquidated, or otherwise disposed. Upon settlement, the cash paid or received generally is reflected in investing activities in the statement of cash flows.

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

												December 31, 2023												December 31, 2022
Instrument						Balance sheet location						Notional						Balance						Notional						Balance
Net investment hedges:
Forward contracts						Prepaid expenses and other current assets						$	606,950					$	37,676					$	606,950					$	46,670
Forward contract						Other current liabilities						$	106,800					$	4,383					$	106,800					$	3,064
Foreign currency debt						Current portion of debt and long-term debt						€	700,000					$	772,660					€	700,000					$	749,280

The table below presents pre-tax gains and losses related to net investment hedges for the year ended December 31:

						(Loss) Gain Recognized in AOCL Before Reclassifications																		Gain Recognized in Interest Expense For Excluded Components
(in thousands)						2023						2022						2021						2023						2022						2021
Net Investment Hedges:
Forward contracts						$	(22,946)					$	103,240					$	56,362					$	12,634					$	27,923					$	26,295
Foreign currency debt						(23,380)						43,540						68,250						—						—						—
Total						$	(46,326)					$	146,780					$	124,612					$	12,634					$	27,923					$	26,295

9. Leased Properties

We primarily lease real estate for retail stores, branches, distribution centers, office space and land. We also lease equipment (primarily vehicles).

Most real estate leases include one or more options to renew, with renewal terms that generally can extend the lease term from one to 20 years or more. The exercise of lease renewal options is at our discretion. We evaluate renewal options at lease inception and on an ongoing basis, and include renewal options that we are reasonably certain to exercise in the expected lease terms when classifying leases and measuring lease liabilities. We elected a policy of not recording leases on the consolidated balance sheets when the leases have a term of 12 months or less and we are not reasonably certain to elect an option to purchase the leased asset. Lease agreements generally do not require material variable lease payments, residual value guarantees or restrictive covenants.

The table below presents the locations of the operating lease assets and liabilities on the consolidated balance sheets:

(in thousands)						Balance Sheet Line Item						December 31, 2023						December 31, 2022
Operating lease assets						Operating lease assets						$	1,268,742					$	1,104,678
Operating lease liabilities:
Current operating lease liabilities						Other current liabilities						$	298,415					$	286,713
Noncurrent operating lease liabilities						Operating lease liabilities						$	979,938					$	836,019
Total operating lease liabilities												$	1,278,353					$	1,122,732

The depreciable lives of operating lease assets and leasehold improvements are limited by the expected lease term.

Our leases generally do not provide an implicit rate, and therefore we use our incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. We used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date.

Our weighted average remaining lease term and weighted average discount rate for operating leases are:

						December 31, 2023						December 31, 2022
Weighted average remaining lease term (in years)						6.34						5.32
Weighted average discount rate						3.67		%				2.51		%

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized on the consolidated balance sheets as of December 31, 2023 (in thousands):

2024			$	348,947
2025			303,037
2026			230,009
2027			166,920
2028			112,998
Thereafter			347,113
Total undiscounted future minimum lease payments			1,509,024
Less: Difference between undiscounted lease payments and discounted operating lease liabilities			230,671
Total operating lease liabilities			$	1,278,353

Future minimum lease payments include $52 million related to options to extend lease terms that are reasonably certain of being exercised. Future minimum lease payments exclude $77 million related to operating leases that have not yet commenced. These leases are expected to commence in 2024 with lease terms of 3 to 15 years.

The table below presents operating lease costs and supplemental cash flow information related to leases:

(in thousands)						2023						2022						2021
Operating lease costs						$	380,730					$	350,025					$	336,228
Cash paid for amounts included in the measurement of operating lease liabilities						$	389,610					$	358,767					$	340,243
Operating lease assets obtained in exchange for new operating lease liabilities						$	493,039					$	411,052					$	358,393

Operating lease costs are included within selling, administrative and other expenses on the consolidated statements of income. Short-term lease costs, variable lease costs and sublease income were not material for the periods presented. Cash paid for amounts included in the measurement of operating lease liabilities is included in operating activities in the consolidated statements of cash flows.

10. Employee Benefit Plans

Our defined benefit pension plans cover employees in the U.S., Canada, and Europe who meet eligibility requirements. The plan covering U.S. employees is noncontributory, and our U.S. qualified defined benefit plan was frozen as of December 31, 2013. No further benefits were provided after this date for additional credited service or earnings, and all participants became fully vested as of December 31, 2013. The Canadian plan is contributory, and benefits are based on career average compensation. Our funding policy is to contribute an amount equal to the minimum required contribution under applicable pension legislation. For the plans in the U.S. and Canada, we may increase our contribution above the minimum, if appropriate to our tax and cash position and the plans’ funded position. The European plans are funded in accordance with local regulations.

We also sponsor supplemental retirement plans covering employees in the U.S. and Canada. We use a measurement date of December 31 for our pension and supplemental retirement plans.

Several assumptions are used to determine the benefit obligations, plan assets, and net periodic income. The discount rate for the U.S. pension plan is calculated using a bond matching approach to select specific bonds that would satisfy the projected benefit payments. The bond matching approach reflects the process that would be used to settle the pension obligations. The discount rate for non U.S. plans are set by using Willis Towers Watson's RATE:Link model. For each plan, this approach reflects yields available on high quality corporate bonds that would generate the cash flow necessary to pay the plan's benefits when due. The expected return on plan assets is based on a calculated market-related value of plan assets, where gains and losses on plan assets are amortized over a five year period and accumulate in other comprehensive income. Other non-investment unrecognized gains and losses are amortized in future net income based on a “corridor” approach, where the corridor is equal to 10% of the greater of the benefit obligation or the market-related value of plan assets at the beginning of the year. The unrecognized gains and losses in excess of the corridor criteria are amortized over the average future lifetime or service of plan participants, depending on the plan. These assumptions are updated at each annual measurement date.

Changes in benefit obligations for the years ended December 31, 2023 and 2022 were:

(in thousands)						2023						2022
Changes in benefit obligation
Benefit obligation at beginning of year						$	1,923,163					$	2,532,973
Service cost						5,991						10,204
Interest cost						104,490						75,248
Plan participants’ contributions						1,765						1,892
Actuarial loss (gain)						76,072						(546,266)
Foreign currency exchange rate changes						5,580						(15,744)
Gross benefits paid						(137,742)						(135,907)
Plan amendments						2,464						—
Settlements						—						(276)
Acquired plans						—						1,039
Benefit obligation at end of year						$	1,981,783					$	1,923,163

The benefit obligations for our U.S. pension plans included in the above were $1.7 billion and $1.7 billion at December 31, 2023 and 2022, respectively. The total accumulated benefit obligation for our defined benefit pension plans in the U.S., Canada, and Europe was approximately $2.0 billion and $1.9 billion at December 31, 2023 and 2022, respectively.

For the U.S. pension plan, there was a net actuarial liability loss of $50 million and an asset gain of $47 million. The liability loss was comprised primarily from a decrease in the discount rate. For the U.S. supplemental retirement plan, there was a net actuarial liability loss of $20 million. The liability loss is the result of a $5 million loss associated with a decrease in the discount rate, an $11.2 million demographic loss related to new entrants, and an $8.5 million loss associated with higher than expected incentive payouts.These losses were offset by updates that were made to other assumptions, including termination rates, retirement rates, percent married, spouse age difference, and benefit payment form elected based on the results of an experience study performed during 2023. The net impact of these updates is a gain of $4.8 million.

The assumptions used to measure the pension benefit obligations for the plans at December 31, 2023 and 2022, were:

			2023						2022
Weighted average discount rate			5.30		%				5.61		%
Rate of increase in future compensation levels			3.18		%				3.16		%

Changes in plan assets for the years ended December 31, 2023 and 2022 were:

(in thousands)						2023						2022
Changes in plan assets
Fair value of plan assets at beginning of year						$	2,129,058					$	2,756,803
Actual return on plan assets						217,767						(493,359)
Foreign currency exchange rate changes						5,407						(15,599)
Employer contributions						16,824						15,504
Plan participants’ contributions						1,765						1,892
Benefits paid						(137,742)						(135,907)
Settlements						—						(276)
Fair value of plan assets at end of year						$	2,233,079					$	2,129,058

The fair values of plan assets for our U.S. pension plans included in the above were $2.0 billion and $1.9 billion at December 31, 2023 and 2022, respectively.

For the years ended December 31, 2023 and 2022, the aggregate projected benefit obligation and aggregate fair value of plan assets for plans with projected benefit obligations in excess of plan assets were as follows:

(in thousands)						2023						2022
Aggregate projected benefit obligation						$	231,741					$	208,939
Aggregate fair value of plan assets						$	—					$	—

For the years ended December 31, 2023 and 2022, the aggregate accumulated benefit obligation and aggregate fair value of plan assets for plans with accumulated benefit obligations in excess of plan assets were as follows:

(in thousands)						2023						2022
Aggregate accumulated benefit obligation						$	215,380					$	192,421
Aggregate fair value of plan assets						$	—					$	—

The asset allocations for our funded pension plans at December 31, 2023 and 2022, and the target allocation for 2024, by asset category were:

			Target Allocation						Percentage of Plan Assets at December 31
			2024			2023						2022
Asset Category
Equity securities			58		%				58		%				59		%
Debt securities			41		%				42		%				41		%
Other			1		%				—		%				—		%
			100		%				100		%				100		%

Our benefit plan committees in the U.S. and Canada establish investment policies and strategies and regularly monitor the performance of the funds. The plans in Europe are unfunded and, therefore, there are no plan assets. The pension plan strategy implemented by our management is to achieve long-term objectives and invest the pension assets in accordance with the applicable pension legislation in the U.S. and Canada as well as fiduciary standards. The long-term primary investment objectives for the pension plans are to provide for a reasonable amount of long-term growth of capital, without undue exposure to risk, protect the assets from erosion of purchasing power, and provide investment results that meet or exceed the pension plans’ actuarially assumed long-term rates of return. Our investment strategy with respect to pension plan assets is to generate a return in excess of the passive portfolio benchmark (38% U.S. Large-cap stocks, 4% U.S. Mid-cap stocks, 5% U.S. Small-cap stocks, 10% International stocks, 3% Emerging Market stocks and 40% Barclays U.S. Gov/Credit Index).

The fair values of the plan assets as of December 31, 2023 and 2022, by asset category, are shown in the tables below. Various inputs are considered when determining the value of our pension plan assets. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. Level 1 represents observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 represents other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.). Level 3 represents significant unobservable inputs (including our own assumptions in determining the fair value of investments). Certain investments are measured at fair value using the net asset value ("NAV") per share as a practical expedient and have not been classified in the fair value hierarchy.

The valuation methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. Equity securities are valued at the closing price reported on the active market on which the individual securities are traded on the last day of the calendar plan year. Debt securities including corporate bonds, U.S. Government securities, and asset-backed securities are valued using price evaluations reflecting the bid and/or ask sides of the market for an investment as of the last day of the calendar plan year.

						2023
(in thousands)						Total						Assets Measured at NAV						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Equity Securities
Common stocks — mutual funds — equity						$	318,418					$	53,876					$	264,542					$	—					$	—
Genuine Parts Company common stock						209,384						—						209,384						—						—
Other stocks						763,451						—						763,451						—						—
Debt Securities
Short-term investments						38,235						—						38,235						—						—
Cash and equivalents						6,608						—						6,608						—						—
Government bonds						389,199						—						536						388,663						—
Corporate bonds						436,418						—						—						436,418						—
Asset-backed and mortgage-backed securities						10,396						—						—						10,396						—
Convertible Securities						1,720						—						—						1,720						—
Other-international						45,059						—						—						45,059						—
Municipal bonds						14,295						—						—						14,295						—
Other
Options and Futures						(104)						—						—						(105)						1
Total						$	2,233,079					$	53,876					$	1,282,756					$	896,446					$	1

						2022
(in thousands)						Total						Assets Measured at NAV						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Equity Securities
Common stocks — mutual funds — equity						$	285,103					$	48,521					$	236,582					$	—					$	—
Genuine Parts Company common stock						261,869						—						261,869						—						—
Other stocks						711,830						—						711,830						—						—
Debt Securities
Short-term investments						41,076						—						41,076						—						—
Cash and equivalents						8,632						—						8,632						—						—
Government bonds						344,787						—						411						344,376						—
Corporate bonds						412,896						—						—						412,896						—
Asset-backed and mortgage-backed securities						9,925						—						—						9,925						—
Convertible securities						1,159						—						—						1,159						—
Other-international						37,304						—						37,304						—						—
Municipal bonds						14,442						—						—						14,442						—
Other
Options and Futures						35						—						35						—						—
Total						$	2,129,058					$	48,521					$	1,297,739					$	782,798					$	—

Equity securities include Genuine Parts Company common stock in the amounts of $209 million (9% of total plan assets) and $262 million (12% of total plan assets) at December 31, 2023 and 2022, respectively. Dividend payments received by the plan on company stock totaled approximately $6 million and $5 million in 2023 and 2022, respectively. Fees paid during the year for services rendered by parties in interest were based on customary and reasonable rates for such services.

Based on the investment policy for the pension plans, as well as an asset study that was performed based on our asset allocations and future expectations, our expected rate of return on plan assets for measuring 2024 pension income is 7.61% for the plans. The asset study forecasted expected rates of return for the approximate duration of our benefit obligations, using capital market data and historical relationships.

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets at December 31:

(in thousands)						2023						2022
Other long-term asset						$	483,037					$	414,834
Other current liability						(13,039)						(12,537)
Pension and other post-retirement liabilities						(219,644)						(197,879)
						$	250,354					$	204,418

Amounts recognized in accumulated other comprehensive loss consist of:

(in thousands)						2023						2022
Net actuarial loss						$	697,794					$	682,884
Prior service cost						9,044						7,273
						$	706,838					$	690,157

The following table reflects the total benefits expected to be paid from the pension plans’ or our assets. Of the pension benefits expected to be paid in 2024, approximately $13 million is expected to be paid from employer assets. Expected employer contributions below reflect amounts expected to be contributed to funded plans. Information about the expected cash flows for the pension plans follows (in thousands):

Employer contribution
2024 (expected)			$	4,384
Expected benefit payments:
2024			$	141,637
2025			$	144,652
2026			$	147,018
2027			$	149,040
2028			$	150,626
2029 through 2033			$	745,950

Net periodic benefit income included the following components:

(in thousands)						2023						2022						2021
Service cost						$	5,991					$	10,204					$	12,218
Interest cost						104,490						75,248						71,693
Expected return on plan assets						(164,984)						(150,318)						(153,822)
Amortization of prior service cost						692						691						690
Amortization of actuarial loss						9,361						37,065						49,897
Net periodic benefit income						$	(44,450)					$	(27,110)					$	(19,324)

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

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) are as follows:

(in thousands)						2023						2022						2021
Current year actuarial loss (gain)						$	23,289					$	97,412					$	(264,547)
Recognition of actuarial loss						(9,361)						(37,065)						(49,897)
Recognition of prior service cost						(692)						(691)						(690)
Recognition of curtailment loss						—						—						(5)
Other						2,464						68						(29)
Total recognized in other comprehensive income (loss)						$	15,700					$	59,724					$	(315,168)
Total recognized in net periodic benefit income and other comprehensive income (loss)						$	(28,750)					$	32,614					$	(334,492)

The assumptions used in measuring the net periodic benefit income for the plans follow:

			2023						2022						2021
Weighted average discount rate			5.61		%				3.04		%				2.72		%
Rate of increase in future compensation levels			3.16		%				3.13		%				3.11		%
Expected long-term rate of return on plan assets			7.09		%				6.34		%				6.88		%

We have one defined contribution plan in the U.S. that covers substantially all of our domestic employees. Employees receive a matching contribution of 100% of the first 5% of the employees’ salary. Total plan expense was approximately $77 million in 2023, $69 million in 2022, and $60 million in 2021.

11. Acquisitions

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

2023

We acquired several businesses for approximately $322 million, net of cash acquired, during the year ended December 31, 2023. Approximately $300 million was related to our Automotive segment and $22 million was related to Industrial. During the year we recognized approximately $389 million and $48 million of sales, net of store closures, related to our 2023 Automotive and Industrial acquisitions, respectively. We recognized approximately $219 million of goodwill and other intangible assets associated with these acquisitions. Other intangible assets acquired of $99 million consisted of customer relationships with a weighted average amortization life of 20 years.

We did not recognize any significant measurement period adjustments related to finalizing acquisition accounting during the year ended December 31, 2023.

2022

We acquired several businesses for approximately $1.6 billion, net of cash acquired, during the year ended December 31, 2022. Approximately $1.3 billion was related to our Industrial segment, primarily the acquisition of KDG discussed further below, and $300 million was related to Automotive.

We recognized approximately $562 million of sales, net of store closures, and $239 million of goodwill and other intangible assets related to our Automotive acquisitions during the year ended December 31, 2022. The other intangible assets acquired consisted of customer relationships of $76 million, trademarks of $9 million, and other intangibles of $4 million with weighted average amortization lives of 18, 15, and 3 years, respectively.

On January 3, 2022, the company, through its 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, net of cash acquired of approximately $30 million. KDG contributed approximately 5% of net sales included in our consolidated statement of income from January 3, 2022 to December 31, 2022. The KDG acquisition was financed using a combination of borrowing 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 fair values of the assets acquired and liabilities assumed at the acquisition date for the KDG acquisition as well as adjustments made when finalizing the acquisition accounting during the year ended December 31, 2022 (referred to as the "measurement period adjustments"). The measurement period adjustments primarily resulted from revisions to the valuation of inventory and intangible assets, deferred taxes, and long-term liabilities.

						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			(14,000)			152,000
Prepaid expenses and other current assets						39,000			(1,000)			38,000
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			9,000			601,000
Total assets acquired						1,603,000			(19,000)			1,584,000
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			(13,000)			108,000
Other long-term liabilities						39,000			(8,000)			31,000
Total liabilities assumed						294,000			(22,000)			272,000
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. We used the multi-period excess earnings method under the income approach to measure KDG's customer relationships, which is sensitive to certain assumptions including discount rates and certain assumptions that form the basis for the forecasted results (e.g., future revenue growth rates and EBITDA margins). These assumptions are forward-looking in nature and are dependent on the future performance of the acquired business and could be affected by future economic and market conditions.

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

For the twelve months ended December 31, 2022, approximately $5 million of inventory amortization step-up cost related to this acquisition was included in cost of goods sold. Further, $62 million of transaction and other one-time costs, inclusive of an impairment charge, were included in selling, administrative, and other expenses in the consolidated statements of income. Refer to the Goodwill and Other Intangible Assets Footnote for more information on the impairment charge.

If the KDG acquisition had occurred on January 1, 2021 and if its results of operations had been included in our consolidated results since that date, our unaudited pro forma consolidated statements of income would have reflected net sales of approximately $22.1 billion and $19.9 billion and net income on a per share diluted basis of $8.47 and $6.02 for the years ended December 31, 2022 and 2021, respectively. The pro forma information is not necessarily indicative of the results of operations that we would have reported had the transaction actually occurred at the beginning of this period, nor is it necessarily indicative of future results.

The adjustments to the pro forma amounts include, but are not limited to, applying our accounting policies, amortization related to fair value adjustments to intangible assets, one-time acquisition accounting adjustments, interest expense on acquisition related debt and debt not assumed, and any associated tax effects. The pro forma results do not include any cost savings or other synergies that may result from the acquisition.

Earnings related to KDG included in our consolidated statement of income from January 3, 2022 to December 31, 2022 are impracticable to provide due to KDG’s ongoing integration into Motion, which commenced shortly after the acquisition date.

2021

We acquired several businesses for approximately $282 million, net of cash acquired, during the year ended December 31, 2021.

During the year ended December 31, 2021, we recognized approximately $220 million and $25 million of sales, net of store closures, related to our 2021 Automotive and Industrial acquisitions, respectively. We recognized approximately $160 million of goodwill and other intangible assets associated with the 2021 acquisitions. Other intangible assets acquired consisted of customer relationships with a weighted average amortization life of 20 years.

We did not recognize any significant measurement period adjustments related to finalizing acquisition accounting for the year ended December 31, 2021.

12. Share-Based Compensation

Share-based compensation costs of $57 million, $38 million, and $26 million, were recorded for the years ended December 31, 2023, 2022, and 2021, respectively. The total income tax benefits recognized in the consolidated statements of income for share-based compensation arrangements were approximately $15 million, $10 million, and $7 million for 2023, 2022, and 2021, respectively. At December 31, 2023, total compensation cost related to nonvested awards not yet recognized was approximately $60 million. There have been no modifications to valuation methodologies or methods during the years ended December 31, 2023, 2022, or 2021.

As of December 31, 2023, there were 7 million shares of common stock available for issuance pursuant to future equity-based compensation awards.

A summary of our restricted stock units activity and related information is as follows:

Nonvested Share Awards (RSUs)						Shares						Weighted Average Grant Date Fair Value						Weighted Average Remaining Contractual Life (Years)						Aggregate Intrinsic Value
Nonvested at beginning of year						994						$	110.45
Granted						410						$	162.58
Vested						(464)						$	88.55
Forfeited						(52)						$	136.55
Nonvested at end of year						888						$	144.46					1.5						$	123,044

A summary of our stock appreciation rights activity and related information is as follows:

Stock Appreciation Rights (SARs)						Shares						Weighted Average Exercise Price						Weighted Average Remaining Contractual Life (Years)						Aggregate Intrinsic Value
Outstanding at beginning of year						317						$	92.65
Granted						—						$	—
Exercised						(93)						$	90.91
Forfeited						—						$	—
Outstanding at end of year						224						$	93.36					1.6						$	10,115
Exercisable at end of year						224						$	93.36					1.6						$	10,115

The aggregate intrinsic value of SARs exercised and RSUs vested during the years ended December 31, 2023, 2022, and 2021 was $89 million, $62 million, and $73 million, respectively. The fair value of RSUs is based on the price of our stock on the date of grant. The fair value of SARs is estimated using a Black-Scholes option pricing model. We ceased issuing SARs in 2017. The total fair value of SARs and RSUs vested during the years ended December 31, 2023, 2022, and 2021 were $41 million, $29 million, and $25 million, respectively.

13. Accumulated Other Comprehensive Loss

The following tables present the changes in AOCL by component:

						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, 2023						$	(506,610)					$	(2,572)					$	(523,360)					$	(1,032,542)
Other comprehensive (loss) income before reclassifications						(18,965)						2,765						64,429						48,229
Amounts reclassified from accumulated other comprehensive loss						7,634						(193)						—						7,441
Net current period other comprehensive (loss) income						(11,331)						2,572						64,429						55,670
Ending balance, December 31, 2023						$	(517,941)					$	—					$	(458,931)					$	(976,872)

						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						(71,258)						—						(143,890)						(215,148)
Amounts reclassified from accumulated other comprehensive loss						27,875						12,470						—						40,345
Net current period other comprehensive (loss) income						(43,383)						12,470						(143,890)						(174,803)
Ending balance, December 31, 2022						$	(506,610)					$	(2,572)					$	(523,360)					$	(1,032,542)

The AOCL components related to the pension benefits are included in the computation of net periodic benefit income in the Employee Benefit Plans Footnote. The nature of the cash flow hedges are discussed in the Derivatives and Hedging Footnote. Generally, tax effects in AOCL are established at the currently enacted tax rate and reclassified to net income in the same period that the related pre-tax AOCL reclassifications are recognized.

14. Income Taxes

Significant components of our deferred tax assets and liabilities are as follows:

(in thousands)						2023						2022
Deferred tax assets related to:
Expenses not yet deducted for tax purposes						$	327,946					$	312,445
Operating lease liabilities						354,594						314,804
Pension liability not yet deducted for tax purposes						175,643						168,925
Net operating loss						49,270						49,787
						907,453						845,961
Deferred tax liabilities related to:
Employee and retiree benefits						242,132						225,947
Inventory						92,383						77,866
Operating lease assets						351,821						305,885
Other intangible assets						472,222						468,733
Property, plant and equipment						113,115						91,706
Other						40,264						38,597
						1,311,937						1,208,734
Net deferred tax liability before valuation allowance						(404,484)						(362,773)
Valuation allowance						(30,273)						(27,362)
Total net deferred tax liability						$	(434,757)					$	(390,135)

We currently hold approximately $170 million in gross net operating losses, of which approximately $81 million will carry forward indefinitely. The remaining net operating losses of approximately $89 million will begin to expire in 2024.

The components of income before income taxes are as follows:

(in thousands)						2023						2022						2021
United States						$	1,164,914					$	1,100,584					$	762,472
Foreign						577,434						472,018						437,874
Income before income taxes						$	1,742,348					$	1,572,602					$	1,200,346

The components of income tax expense are as follows:

(in thousands)						2023						2022						2021
Current:
Federal						$	201,929					$	196,634					$	116,425
State						51,244						70,453						34,311
Foreign						130,538						120,594						119,144
Deferred:
Federal						26,166						12,727						24,233
State						10,241						4,981						9,485
Foreign						5,706						(15,488)						(2,042)
						$	425,824					$	389,901					$	301,556

The reasons for the difference between total tax expense and the amount computed by applying the statutory Federal income tax rate to income before income taxes are as follows:

(in thousands)						2023						2022						2021
Statutory rate applied to income (1)						$	365,892					$	330,246					$	252,073
Plus state income taxes, net of Federal tax benefit						48,573						59,593						34,599
Taxation of foreign operations, net (2)						4,666						3,347						2,299
Foreign rate change - deferred tax remeasurement						—						—						17,032
Valuation allowance						2,911						(7,153)						(2,486)
Other						3,782						3,868						(1,961)
						$	425,824					$	389,901					$	301,556

(1)U.S. statutory rates applied to income are as follows: 2023, 2022 and 2021 at 21%.

(2)Our effective tax rate reflects the impact of having operations outside of the U.S. which are taxed at statutory rates different from the U.S. statutory rate, with some income being fully or partially exempt from income taxes due to various operating and financing activities.

We account for Global Intangible Low Taxed income in the year the tax is incurred as a period cost.

We, or one of our subsidiaries, file income tax returns in the U.S., various states, and foreign jurisdictions. With few exceptions, we are no longer subject to federal, state and local tax examinations by tax authorities for years before 2020 or subject to foreign income tax examinations for years ended prior to 2013. We are currently under audit in some of our state and foreign jurisdictions. Some audits may conclude in the next 12 months and the unrecognized tax benefits recognized in relation to the audits may differ from actual settlement amounts. It is not possible to estimate the effect, if any, of the amount of such change during the next 12 months to previously recognized uncertain tax positions in connection with the audits; however, we do not anticipate that total unrecognized tax benefits will significantly change in the next 12 months.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

(in thousands)						2023						2022						2021
Balance at beginning of year						$	19,621					$	19,501					$	23,237
Additions based on tax positions related to the current year						2,584						1,475						2,196
Additions for tax positions of prior years						1,752						89						156
Reductions for tax positions for prior years						(70)						(523)						(733)
Reduction for lapse in statute of limitations						(2,713)						(921)						(2,843)
Settlements						(647)						—						(2,512)
Balance at end of year						$	20,527					$	19,621					$	19,501

The amount of gross unrecognized tax benefits, including interest and penalties, as of December 31, 2023 and 2022 was approximately $22 million and $21 million, respectively, of which approximately $20 million and $19 million, respectively, if recognized, would affect the effective tax rate.

During the tax years ended December 31, 2023, 2022 and 2021, we paid, received refunds, or accrued insignificant interest and penalties. We recognize potential interest and penalties related to unrecognized tax benefits as a component of income tax expense.

As of December 31, 2023, we estimate that we have an outside basis difference in certain foreign subsidiaries of approximately $1.2 billion, which includes the cumulative undistributed earnings from our foreign subsidiaries. We continue to be indefinitely reinvested in this outside basis difference. Determining the amount of net unrecognized deferred tax liability related to any additional outside basis difference in these entities is not practicable. This is due to the complexities associated with the calculation to determine residual taxes on the undistributed earnings, including the availability of foreign tax credits, applicability of any additional local withholding tax and other indirect tax consequences that may arise due to the distribution of these earnings.

In 2023, certain countries have enacted legislation and implemented policies resulting from the Organization for Economic Co-operation and Development’s (“OECD”) Anti-Base Erosion and Profit Shifting project under Pillar Two, which establishes a global 15% per-country minimum tax. The rules are applicable for fiscal years starting on or

after December 31, 2023. We estimate an immaterial impact to the tax provision related to the Pillar Two legislation in 2024 and will continue to monitor implementation in the countries in which we operate.

15. 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”). Presently, the independents are generally consolidated by unaffiliated enterprises that have controlling financial interests through ownership of a majority voting interest in the independents. We have no voting interest or equity conversion rights in any of the independents. We do not control the independents or the affiliates but receive a fee for the guarantees. We have concluded that the independents are variable interest entities, but that we are not the primary beneficiary. Specifically, the equity holders of the independents have the power to direct the activities that most significantly impact the entities’ economic performance including, but not limited to, decisions about hiring and terminating personnel, local marketing and promotional initiatives, pricing and selling activities, credit decisions, monitoring and maintaining appropriate inventories, and store hours. Separately, we concluded that the affiliates are not variable interest entities. Our maximum exposure to loss as a result of its involvement with these independents and affiliates is generally equal to the total borrowings subject to our guarantees. While such borrowings of the independents and affiliates are outstanding, we are required to maintain compliance with certain covenants. At December 31, 2023, we were in compliance with all such covenants.

At December 31, 2023, the total borrowings of the independents and affiliates subject to guarantee by us were approximately $954 million. These loans generally mature over periods from one to six years. We regularly monitor the performance of these loans and the ongoing operating results, financial condition and ratings from credit rating agencies of the independents and affiliates that participate in the guarantee programs. In the event that we are required to make payments in connection with these guarantees, we would obtain and liquidate certain collateral pledged by the independents or affiliates (e.g., accounts receivable and inventory) to recover all or a substantial portion of the amounts paid under the guarantees. We recognize a liability equal to current expected credit losses over the lives of the loans in the guaranteed loan portfolio, based on a consideration of historical experience, current conditions, the nature and expected value of any collateral, and reasonable and supportable forecasts. To date, we have had no significant losses in connection with guarantees of independents’ and affiliates’ borrowings and the current expected credit loss reserve is not material. As of December 31, 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.

We have recognized certain assets and liabilities amounting to $59 million and $67 million for the guarantees related to the independents’ and affiliates’ borrowings at December 31, 2023 and 2022, respectively. These assets and liabilities are included in other assets and other long-term liabilities in the 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.

16. Commitments and Contingencies

Legal Matters

We are subject to various legal proceedings, many involving routine litigation incidental to the businesses, including approximately 2,451 pending product liability lawsuits resulting from our national distribution of automotive parts and supplies. Many of these involve claims of personal injury allegedly resulting from the use of automotive parts we distributed. The amount accrued for pending and future claims was $244 million as of December 31, 2023, which represented our best estimate of the liability within our calculated range of $196 million to $277 million, discounted using a discount rate of 3.88%. The amount accrued for pending and future claims was $220 million as of December 31, 2022, which represented our best estimate of 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 $308 million and $285 million as of December 31, 2023 and December 31, 2022, respectively.

The amounts recognized are based on the best available information and assumptions that we believe are reasonable. While litigation of any type contains an element of uncertainty, we believe that our insurance coverage and our defense, and ultimate resolution of pending and reasonably anticipated claims will continue to occur within the ordinary course of our business and that resolution of these claims will not have a material adverse effect on our business, results of operations or financial condition.

On April 17, 2017, a jury awarded damages against the company of $82 million in a litigated automotive product liability dispute. Through post-trial motions and offsets from previous settlements, the initial verdict was reduced to $77 million. We believed the verdict was not supported by the facts or the law and was contrary to our role in the automotive parts industry. We challenged the verdict through an appeal to a higher court. On February 19, 2020, the

Washington Court of Appeals issued an order entirely reversing the jury's finding on damages and ordering a new trial on damages. The plaintiffs subsequently appealed this order to the Washington Supreme Court. On July 7, 2020, the Washington Supreme Court indicated that it would consider a further appeal on this matter, and oral arguments occurred on November 10, 2020. On July 8, 2021, the Washington Supreme Court overturned the order of the Washington Court of Appeals and reinstated the trial court's damage award of $77 million against the company. We recorded an adjustment to increase selling, administrative and other expenses by approximately $77 million, inclusive of statutory interest and insurance coverage, in the consolidated statements of income for the year ended December 31, 2021. The damage award and statutory interest was fully paid as of December 31, 2021.

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.

17. Subsequent Events

In February 2024, we approved and announced a global restructuring designed to better align our assets and further improve the efficiency of the business. This initiative includes an announced voluntary retirement offer in the U.S., along with a rationalization and optimization of certain distribution centers, stores and other facilities. We expect to incur costs of between $100 million and $200 million related to the restructuring efforts in 2024. We expect to substantially complete the initiative by the end of 2025. The estimated charges that we expect to incur are subject to a number of assumptions, and actual amounts may differ materially from such estimates. We may also incur additional charges not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of these initiatives.