Item 1. Financial Statements

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)						September 30, 2024						December 31, 2023
Assets
Current assets:
Cash and cash equivalents						$	1,078,118					$	1,102,007
Trade accounts receivable, less allowance for doubtful accounts (2024 – $64,138; 2023 – $56,608)						2,380,518						2,223,431
Merchandise inventories, net						5,527,034						4,676,686
Prepaid expenses and other current assets						1,723,832						1,603,728
Total current assets						10,709,502						9,605,852
Goodwill						3,034,339						2,734,681
Other intangible assets, less accumulated amortization						1,915,832						1,792,913
Property, plant and equipment, less accumulated depreciation (2024 – $1,783,163; 2023 – $1,592,658)						1,909,522						1,616,785
Operating lease assets						1,665,818						1,268,742
Other assets						1,024,165						949,481
Total assets						$	20,259,178					$	17,968,454
Liabilities and equity
Current liabilities:
Trade accounts payable						$	6,100,534					$	5,499,536
Current portion of debt						810,982						355,298
Dividends payable						139,111						132,635
Other current liabilities						2,072,781						1,839,640
Total current liabilities						9,123,408						7,827,109
Long-term debt						3,806,950						3,550,930
Operating lease liabilities						1,372,283						979,938
Pension and other post–retirement benefit liabilities						224,019						219,644
Deferred tax liabilities						483,262						437,674
Other long-term liabilities						539,102						536,174
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 – 2024 – 139,078,065 shares; 2023 – 139,567,071 shares						139,078						139,567
Additional paid-in capital						193,491						173,025
Accumulated other comprehensive loss						(942,852)						(976,872)
Retained earnings						5,306,755						5,065,327
Total parent equity						4,696,472						4,401,047
Noncontrolling interests in subsidiaries						13,682						15,938
Total equity						4,710,154						4,416,985
Total liabilities and equity						$	20,259,178					$	17,968,454

See accompanying Notes to Condensed Consolidated Financial Statements.

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

						Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands, except per share data)						2024						2023						2024						2023
Net sales						$	5,970,198					$	5,824,602					$	17,716,396					$	17,504,726
Cost of goods sold						3,771,757						3,715,361						11,262,997						11,247,341
Gross profit						2,198,441						2,109,241						6,453,399						6,257,385
Operating expenses:
Selling, administrative and other expenses						1,722,400						1,551,799						4,944,783						4,644,696
Depreciation and amortization						106,036						83,860						295,848						261,948
Provision for doubtful accounts						7,119						8,417						19,008						22,378
Restructuring and other costs						41,023						—						153,825						—
Total operating expenses						1,876,578						1,644,076						5,413,464						4,929,022
Non-operating (income) expense:
Interest expense, net						27,818						15,827						67,429						49,146
Other						(3,548)						(15,722)						(36,469)						(44,338)
Total non-operating (income) expense						24,270						105						30,960						4,808
Income before income taxes						297,593						465,060						1,008,975						1,323,555
Income taxes						71,011						113,862						237,955						323,906
Net income						$	226,582					$	351,198					$	771,020					$	999,649
Dividends declared per common share						$	1.00					$	0.95					$	3.00					$	2.85
Basic earnings per share						$	1.63					$	2.50					$	5.53					$	7.11
Diluted earnings per share						$	1.62					$	2.49					$	5.51					$	7.08

See accompanying Notes to Condensed Consolidated Financial Statements.

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

						Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands)						2024						2023						2024						2023
Net income						$	226,582					$	351,198					$	771,020					$	999,649
Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustments						90,001						(77,314)						25,359						(63,027)
Cash flow hedge, net of income taxes in 2023 — $0 and $951 respectively						—						—						—						2,572
Pension and postretirement benefit adjustments, net of income taxes in 2024 — $1,062 and $3,188; 2023 — $703 and $2,108 respectively						2,886						1,909						8,661						5,735
Other comprehensive income (loss), net of income taxes						92,887						(75,405)						34,020						(54,720)
Comprehensive income						$	319,469					$	275,793					$	805,040					$	944,929

See accompanying Notes to Condensed Consolidated Financial Statements.

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

						Three Months Ended September 30, 2024
(in thousands, except share and per share data)						Common Stock Shares						Common Stock Amount						Additional Paid-In Capital						Accumulated Other Comprehensive Loss						Retained Earnings						Total Parent Equity						Non-controlling Interests in Subsidiaries						Total Equity
July 1, 2024						139,346,018						$	139,346					$	180,527					$	(1,035,739)					$	5,256,514					$	4,540,648					$	15,475					$	4,556,123
Net income						—						—						—						—						226,582						226,582						—						226,582
Other comprehensive income, net of tax						—						—						—						92,887						—						92,887						—						92,887
Cash dividend declared, $1.00 per share						—						—						—						—						(139,111)						(139,111)						—						(139,111)
Shares issued from employee incentive plans						1,693						2						2,254						—						—						2,256						—						2,256
Share-based compensation						—						—						10,710						—						—						10,710						—						10,710
Purchase of stock						(269,646)						(270)						—						—						(37,230)						(37,500)						—						(37,500)
Noncontrolling interest activities						—						—						—						—						—						—						(1,793)						(1,793)
September 30, 2024						139,078,065						$	139,078					$	193,491					$	(942,852)					$	5,306,755					$	4,696,472					$	13,682					$	4,710,154

						Nine Months Ended September 30, 2024
(in thousands, except share and per share data)						Common Stock Shares						Common Stock Amount						Additional Paid-In Capital						Accumulated Other Comprehensive Loss						Retained Earnings						Total Parent Equity						Non-controlling Interests in Subsidiaries						Total Equity
January 1, 2024						139,567,071						$	139,567					$	173,025					$	(976,872)					$	5,065,327					$	4,401,047					$	15,938					$	4,416,985
Net income						—						—						—						—						771,020						771,020						—						771,020
Other comprehensive income, net of tax						—						—						—						34,020						—						34,020						—						34,020
Cash dividend declared, $3.00 per share						—						—						—						—						(417,872)						(417,872)						—						(417,872)
Shares issued from employee incentive plans						290,206						290						(16,814)						—						—						(16,524)						—						(16,524)
Share-based compensation						—						—						37,280						—						—						37,280						—						37,280
Purchase of stock						(779,212)						(779)						—						—						(111,720)						(112,499)						—						(112,499)
Noncontrolling interest activities						—						—						—						—						—						—						(2,256)						(2,256)
September 30, 2024						139,078,065						$	139,078					$	193,491					$	(942,852)					$	5,306,755					$	4,696,472					$	13,682					$	4,710,154

						Three Months Ended September 30, 2023
(in thousands, except share and per share data)						Common Stock Shares						Common Stock Amount						Additional Paid-In Capital						Accumulated Other Comprehensive Loss						Retained Earnings						Total Parent Equity						Non-controlling Interests in Subsidiaries						Total Equity
July 1, 2023						140,467,550						$	140,468					$	153,748					$	(1,011,857)					$	4,788,852					$	4,071,211					$	14,583					$	4,085,794
Net income						—						—						—						—						351,198						351,198						—						351,198
Other comprehensive loss, net of tax						—						—						—						(75,405)						—						(75,405)						—						(75,405)
Cash dividend declared, $0.95 per share						—						—						—						—						(133,254)						(133,254)						—						(133,254)
Shares issued from employee incentive plans						5,991						6						(541)						—						—						(535)						—						(535)
Share-based compensation						—						—						10,395						—						—						10,395						—						10,395
Purchase of stock						(238,755)						(239)						—						—						(37,258)						(37,497)						—						(37,497)
Noncontrolling interest activities						—						—						—						—						—						—						579						579
September 30, 2023						140,234,786						$	140,235					$	163,602					$	(1,087,262)					$	4,969,538					$	4,186,113					$	15,162					$	4,201,275

						Nine Months Ended September 30, 2023
(in thousands, except share and per share data)						Common Stock Shares						Common Stock Amount						Additional Paid-In Capital						Accumulated Other Comprehensive Loss						Retained Earnings						Total Parent Equity						Non-controlling Interests in Subsidiaries						Total Equity
January 1, 2023						140,941,649						$	140,941					$	140,324					$	(1,032,542)					$	4,541,640					$	3,790,363					$	14,084					$	3,804,447
Net income						—						—						—						—						999,649						999,649						—						999,649
Other comprehensive loss, net of tax						—						—						—						(54,720)						—						(54,720)						—						(54,720)
Cash dividend declared, $2.85 per share						—						—						—						—						(400,483)						(400,483)						—						(400,483)
Shares issued from employee incentive plans						372,471						373						(24,062)						—						—						(23,689)						—						(23,689)
Share-based compensation						—						—						47,340						—						—						47,340						—						47,340
Purchase of stock						(1,079,334)						(1,079)						—						—						(171,268)						(172,347)						—						(172,347)
Noncontrolling interest activities						—						—						—						—						—						—						1,078						1,078
September 30, 2023						140,234,786						$	140,235					$	163,602					$	(1,087,262)					$	4,969,538					$	4,186,113					$	15,162					$	4,201,275

See accompanying Notes to Condensed Consolidated Financial Statements.

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

						Nine Months Ended September 30,
(in thousands)						2024						2023
Operating activities:
Net income						$	771,020					$	999,649
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization						295,848						261,948
Share-based compensation						37,280						47,340
Excess tax benefits from share-based compensation						(8,301)						(6,770)
Other operating activities, including changes in operating assets and liabilities						378						(219,721)
Net cash provided by operating activities						1,096,225						1,082,446
Investing activities:
Purchases of property, plant and equipment						(385,590)						(349,858)
Proceeds from sale of property, plant and equipment						74,215						7,339
Acquisitions of businesses						(954,207)						(218,177)
Proceeds from divestitures of businesses						3,401						—
Proceeds from sale of investments						—						80,482
Other investing activities						16,989						6,785
Net cash used in investing activities						(1,245,192)						(473,429)
Financing activities:
Proceeds from debt						797,602						2,543,882
Payments on debt						(124,337)						(2,544,619)
Shares issued from employee incentive plans						(16,524)						(23,689)
Dividends paid						(411,396)						(393,420)
Purchases of stock						(112,499)						(172,347)
Other financing activities						(8,018)						(8,826)
Net cash provided by (used in) financing activities						124,828						(599,019)
Effect of exchange rate changes on cash and cash equivalents						250						(8,824)
Net (decrease) increase in cash and cash equivalents						(23,889)						1,174
Cash and cash equivalents at beginning of period						1,102,007						653,463
Cash and cash equivalents at end of period						$	1,078,118					$	654,637

See accompanying Notes to Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.General

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes required by accounting principles generally accepted in the U.S. (“U.S. GAAP”) for complete financial statements. Except as disclosed herein, there have been no material changes in the information disclosed in the Notes to the Consolidated Financial Statements included in the Annual Report on Form 10-K of Genuine Parts Company (the “Company,” “we,” “our,” “us,” or “its”) for the year ended December 31, 2023. Accordingly, the unaudited Condensed Consolidated Financial Statements and related disclosures herein should be read in conjunction with our 2023 Annual Report on Form 10-K.

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

In the opinion of management, all adjustments necessary for a fair presentation of our financial results for the interim periods have been made. These adjustments are of a normal recurring nature. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of results for the year ended December 31, 2024. We have evaluated subsequent events through the date the unaudited Condensed Consolidated Financial Statements covered by this quarterly report were issued.

Recent Accounting Pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASU”) to the FASB Accounting Standards Codification (“ASC”). We consider the applicability and impact of all ASUs and any not listed below were assessed and determined to not be applicable or are expected to have an immaterial impact on our Condensed Consolidated Financial Statements.

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. This standard also requires disclosure of the title and position of the CODM. 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.

Prepaid Expenses and Other Current Assets

The following table provides a detail of prepaid expenses and other current assets reported within the Condensed Consolidated Balance Sheets as of:

(in thousands)						September 30, 2024						December 31, 2023
Prepaid expenses						$	145,377					$	110,863
Consideration receivable from vendors						1,013,785						928,499
Other current assets						564,670						564,366
Total prepaid expenses and other current assets						$	1,723,832					$	1,603,728

Derivatives and Hedging

We are exposed to various risks arising from business operations and market conditions, including fluctuations in certain foreign currencies. We use derivative and non-derivative instruments as risk management tools to mitigate the potential impact of foreign exchange rate risks. The objective of using these tools is to reduce fluctuations in our earnings and cash flows associated with changes in these rates. Derivative instruments are recognized in the Condensed Consolidated Balance Sheets at fair value and are designated as Level 2 in the fair value hierarchy. They are valued using inputs other than quoted prices, such as foreign exchange rates and yield curves.

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

												September 30, 2024												December 31, 2023
Instrument						Balance Sheet Location						Notional						Balance						Notional						Balance
Net investment hedges:
Forward contracts						Prepaid expenses and other current assets						$	481,140					$	23,809					$	606,950					$	37,676
Forward contracts						Other current liabilities						$	1,020,460					$	24,928					$	106,800					$	4,383
Foreign currency debt						Long-term debt						€	700,000					$	781,480					€	700,000					$	772,660

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

						Gain (Loss) Recognized in AOCL before Reclassifications												Gain Recognized in Interest Expense for Excluded Components
(in thousands)						2024						2023						2024						2023
Three Months Ended September 30,
Net investment hedges:
Forward contracts						$	(52,429)					$	19,217					$	4,731					$	3,158
Foreign currency debt						(31,570)						20,300						—						—
Total						$	(83,999)					$	39,517					$	4,731					$	3,158

						Gain (Loss) Recognized in AOCL before Reclassifications												Gain Recognized in Interest Expense for Excluded Components
(in thousands)						2024						2023						2024						2023
Nine Months Ended September 30,
Net investment hedges:
Forward contracts						$	(32,174)					$	4,681					$	13,750					$	9,475
Foreign currency debt						(8,820)						9,100						—						—
Total						$	(40,994)					$	13,781					$	13,750					$	9,475

Fair Value of Financial Instruments

As of September 30, 2024, the fair value of our senior unsecured notes was approximately $4.5 billion, which are designated as Level 2 in the fair value hierarchy. Our valuation technique is based primarily on prices and other relevant information generated by observable transactions involving identical or comparable assets or liabilities.

Guarantees

We guarantee the borrowings of certain independently controlled automotive parts stores and businesses (“independents”) and certain other affiliates in which we have a noncontrolling equity ownership interest (“affiliates”). While such borrowings of the independents and affiliates are outstanding, we are required to maintain compliance with certain covenants. As of September 30, 2024, we were in compliance with all such covenants.

As of September 30, 2024, the total borrowings of the independents and affiliates subject to guarantee by us were approximately $626 million. This number decreased from $954 million as of December 31, 2023 due to acquisitions of our independent stores, including Motor Parts and Equipment Corporation ("MPEC") in April 2024 and Walker Automotive Supply, Inc. ("Walker") in July 2024. 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 the current expected credit losses over the lives of the loans in the guaranteed loan portfolio, based on a consideration of historical experience, current conditions, the nature and expected value of any collateral, and reasonable and supportable forecasts. To date, we have not had significant losses in connection with guarantees of independents’ and affiliates’ borrowings and the current expected credit loss reserve is not material. As of September 30, 2024, there are no material guaranteed loans for which the borrower is experiencing financial difficulty and recovery is expected to be provided substantially through the operation or sale of the collateral.

As of September 30, 2024, we have recognized $45 million of certain assets and liabilities for the guarantees related to the independents’ and affiliates’ borrowings. These assets and liabilities are included in other assets and other long-term liabilities in the Condensed Consolidated Balance Sheets. The liabilities relate to our noncontingent obligation to stand ready to perform under the guarantee programs and they are distinct from our current expected credit loss reserve.

Supply Chain Finance Programs

Several global financial institutions offer voluntary supply chain finance (“SCF”) programs which enable our suppliers (generally those that grant extended terms), at their sole discretion, to sell their receivables from us to these financial institutions on a non-recourse basis at a rate that takes advantage of our credit rating and may be beneficial to them. We and our suppliers agree on commercial terms for the goods and services we procure, including prices, quantities and payment terms, regardless of whether the supplier elects to participate in the SCF program. Our current payment terms with the majority of our suppliers range from 30 to 360 days. The suppliers sell goods or services, as applicable, to us and they issue the associated invoices to us based on the agreed-upon contractual terms. Then, if they are participating in the SCF program, our suppliers, at their sole discretion, determine which invoices, if any, they want to sell to the financial institutions. In turn, we direct payment to the financial institutions, rather than the suppliers, for the invoices sold to the financial institutions. No guarantees are provided by us or any of our subsidiaries on third-party performance under the SCF program; however, we guarantee the payment by our subsidiaries to the financial institutions participating in the SCF program for the applicable invoices. We have no economic interest in a supplier’s decision to participate in the SCF program, and we have no direct financial relationship with the financial institutions, as it relates to the SCF program. Accordingly, amounts due to our suppliers that elected to participate in the SCF program are included in the line item accounts payable in our Condensed Consolidated Balance Sheets.

All activity related to amounts due to suppliers that elected to participate in the SCF program is reflected in cash flows from operating activities in our Condensed Consolidated Statement of Cash Flows. As of September 30, 2024 and December 31, 2023, the outstanding payment obligations to the financial institutions are $3.3 billion and $3.0 billion, respectively.

(in thousands)						September 30, 2024
Obligations outstanding at the beginning of the year						$	3,054,586
Invoices confirmed during the year						3,207,893
Confirmed invoices paid during the year						(2,980,121)
Confirmed obligations outstanding at the end of period						$	3,282,358

Earnings Per Share

We calculate basic earnings per share by dividing net income by the weighted average number of common shares outstanding. Certain outstanding options are not included in the diluted earnings per share calculation because their inclusion would have been anti-dilutive. Antidilutive common stock equivalents excluded from the diluted earnings per share calculation are not material.

The following table summarizes basic and diluted shares outstanding:

						Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands, except per share data)						2024						2023						2024						2023
Net income						$	226,582					$	351,198					$	771,020					$	999,649
Weighted average common shares outstanding						139,193						140,335						139,326						140,569
Dilutive effect of non-vested restricted stock awards						406						599						500						716
Weighted average common shares outstanding – assuming dilution						139,599						140,934						139,826						141,285
Basic earnings per share						$	1.63					$	2.50					$	5.53					$	7.11
Diluted earnings per share						$	1.62					$	2.49					$	5.51					$	7.08

2. Segment Information

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

						Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands)						2024						2023						2024						2023
Net sales:
Automotive						$	3,799,789					$	3,626,943					$	11,100,800					$	10,787,769
Industrial						2,170,409						2,197,659						6,615,596						6,716,957
Total net sales						$	5,970,198					$	5,824,602					$	17,716,396					$	17,504,726
Segment profit:
Automotive						$	262,195					$	322,004					$	849,106					$	915,771
Industrial						258,753						282,807						806,433						828,166
Interest expense, net						(27,818)						(15,827)						(67,429)						(49,146)
Intangible asset amortization						(36,292)						(33,667)						(105,077)						(113,414)
Corporate expense (1)						(113,949)						(90,257)						(283,695)						(257,822)
Other unallocated costs (2)						(45,296)						—						(190,363)						—
Income before income taxes						$	297,593					$	465,060					$	1,008,975					$	1,323,555

(1) Amount reflects costs related to headquarter's broad based support to our business units and other costs that are managed centrally and not allocated to business segments. These include personnel and other costs for company-wide functions such as executive leadership, human resources, technology,

cybersecurity, legal, corporate finance, internal audit, and risk management, as well as product liability costs and A/R Sales Agreement fees.

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

						Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands)						2024						2023						2024						2023
Other unallocated costs:
Restructuring and other costs (2)						$	(41,023)					$	—					$	(161,312)					$	—
Acquisition and integration related costs and other (3)						(4,273)						—						(29,051)						—
Total other unallocated costs						$	(45,296)					$	—					$	(190,363)					$	—

(2) Amount reflects costs related to our global restructuring initiative which includes a voluntary retirement offer in the U.S., inventory liquidation costs, and rationalization and optimization of certain distribution centers, stores and other facilities. Refer to the Restructuring Footnote in the Notes to Condensed Consolidated Financial Statements for more information.

(3) Amount primarily reflects ongoing acquisition and integration costs related to the acquisitions of MPEC in April 2024 and Walker in July 2024, including professional services costs, personnel costs, and lease and other exit costs. Refer to the Acquisitions Footnote in the Notes to Condensed Consolidated Financial Statements for more information.

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

						Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands)						2024						2023						2024						2023
North America:
Automotive						$	2,390,463					$	2,315,733					$	6,939,607					$	6,865,819
Industrial						2,026,759						2,066,284						6,208,696						6,325,746
Total North America						$	4,417,222					$	4,382,017					$	13,148,303					$	13,191,565
Australasia:
Automotive						$	449,296					$	411,422					$	1,262,527					$	1,226,037
Industrial						143,650						131,375						406,900						391,211
Total Australasia						$	592,946					$	542,797					$	1,669,427					$	1,617,248
Europe – Automotive						$	960,030					$	899,788					$	2,898,666					$	2,695,913
Total net sales						$	5,970,198					$	5,824,602					$	17,716,396					$	17,504,726

3. Accounts Receivable Sales Agreement

Under our accounts receivable sales agreement (the "A/R Sales Agreement"), we continuously sell designated pools of receivables as they are originated by us and certain U.S. subsidiaries to a separate bankruptcy-remote special purpose entity (“SPE”). The A/R Sales Agreement has a three-year term expiring in January 2025, which we intend to renew.

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 currently allowed under the A/R Sales Agreement).

The total principal amount outstanding of receivables sold is approximately $1.0 billion as of both September 30, 2024 and December 31, 2023. The amount of receivables pledged as collateral as of September 30, 2024 and December 31, 2023 is approximately $1.4 billion and $1.2 billion, respectively.

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

						Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands)						2024						2023						2024						2023
Receivables sold to the financial institutions and derecognized						$	2,144,736					$	2,206,769					$	6,450,489					$	6,511,568
Cash collected on sold receivables						$	2,144,742					$	2,206,755					$	6,450,412					$	6,511,559

Continuous cash activity related to the A/R Sales Agreement is reflected in net cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows. The SPE incurs fees due to the unaffiliated financial institutions related to the accounts receivable sales transactions. Those fees, which totaled $47 million and $44 million for the nine months ended September 30, 2024 and 2023, respectively, are recorded within other non-operating (income) expense in the Condensed 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 September 30, 2024 and December 31, 2023 is not material. The servicing liability related to our collection services also is not material, given the high quality of the customers underlying the receivables and the anticipated short collection period.

4. Debt

On October 30, 2020, we entered into a $1.5 billion Syndicated Facility Agreement (as amended, the "Unsecured Revolving Credit Facility"). The Unsecured Revolving Credit Facility is scheduled to mature on September 30, 2026. We had no outstanding borrowings under the Unsecured Revolving Credit Facility as of September 30, 2024 or December 31, 2023.

Due to the workers’ compensation and insurance reserve requirements in certain states, we also had unused letters of credit of approximately $71 million outstanding as of September 30, 2024.

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 may not exceed 364 days from the date of issuance. The Unsecured Revolving Credit Facility is used as a liquidity backstop for the repayment of commercial paper outstanding under the program. We had no borrowings outstanding under our commercial paper program as of September 30, 2024 or December 31, 2023.

In the Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2024, we have presented commercial paper activity with original maturities of three-months or less on a net basis given their short-term nature. In the Statements of Cash Flows for the six months ended June 30, 2024, such amounts were presented on a gross basis in “Proceeds from debt” and “Payments on debt” line items. This change in presentation does not impact previously reported net cash used in financing activities. We had no net commercial paper activity for the nine months ended September 30, 2024 and no activity in the prior year period.

On August 7, 2024, we issued $750 million of unsecured 4.95% Senior Notes due 2029. Interest is payable on February 15 and August 15 of each year, beginning February 15, 2025. We intend to utilize the proceeds of this offering to repay the Series J Private Placement Notes and have utilized a portion of the proceeds to repay indebtedness under our commercial paper program that was outstanding as of June 30, 2024. Any remaining amounts will be utilized for general corporate purposes.

The weighted average interest rate on our outstanding borrowings was approximately 3.49% as of September 30, 2024. Certain borrowings require us to comply with a financial covenant with respect to a maximum debt to EBITDA ratio. We were in compliance with all such covenants as of September 30, 2024.

See Note 6 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for further information regarding the Company's indebtedness.

5. Employee Benefit Plans

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

						Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands)						2024						2023						2024						2023
Service cost						$	1,718					$	1,504					$	5,156					$	4,501
Interest cost						25,335						26,141						76,024						78,394
Expected return on plan assets						(44,352)						(41,270)						(133,095)						(123,773)
Amortization of prior service cost						281						173						843						519
Amortization of actuarial loss						3,564						2,340						10,698						7,021
Net periodic benefit income						$	(13,454)					$	(11,112)					$	(40,374)					$	(33,338)

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

Planned Pension Plan Termination

On April 29, 2024, our Board of Directors approved the termination of the frozen U.S. qualified defined benefit plan (pension plan), effective September 30, 2024. We intend to transfer the management and delivery of continuing benefits associated with the pension plan to a third-party insurance company. The pension plan settlement process involves several regulatory steps and approvals. Subject to completion of these steps and approvals, settlement is expected between late 2025 and early 2026. As part of the plan settlement process, pension plan participants not currently receiving payments will have the opportunity to select a single lump sum payment or an annuity from the insurance company that will pay and administer future benefit payments.

Upon settlement, we expect to recognize a non-cash, pre-tax pension settlement charge in 2025 equal to the actuarial losses accumulated in AOCI, which totaled approximately $620 million ($450 million, net of tax) as of September 30, 2024. The actual amount of the settlement charges will depend on the valuation of the pension obligation at the settlement date, which is dependent upon interest rates, U.S. pension plan asset returns, the lump sum election rate, and other factors. Once settled, we will be fully relieved of all obligations under the pension plan.

6. Acquisitions

We acquired various businesses for approximately $1.1 billion and $230 million, which includes certain non-cash consideration and is net of cash acquired, during the nine months ended September 30, 2024 and September 30, 2023, respectively.

For each acquisition, we allocate the purchase price to the assets acquired and the liabilities assumed based on their fair values as of the respective acquisition date. The fair values of the assets acquired and liabilities assumed are preliminary and may be subject to additional adjustments, particularly to inventory and intangible assets during the measurement period, which may be up to one year from the respective acquisition dates.

The results of operations for acquired businesses are included in our Condensed Consolidated Statements of Income beginning on their respective acquisition dates. We recognized approximately $300 million and $20 million of revenue for the nine months ended September 30, 2024 for our Automotive and Industrial acquisitions, respectively.

2024 Acquisitions

The following table summarizes the preliminary, estimated fair values of the assets acquired and liabilities assumed at the acquisition dates for the aggregate of these businesses during the nine months ended September 30, 2024:

(in thousands)						As of Acquisition Dates
Trade accounts receivable						$	130,000
Merchandise inventories						520,000
Prepaid expenses and other current assets						10,000
Other intangible assets						200,000
Property, plant and equipment						90,000
Operating lease assets						210,000
Other assets						10,000
Total identifiable assets acquired						1,170,000
Current liabilities						(90,000)
Operating lease liabilities						(210,000)
Deferred tax liabilities						(30,000)
Other long-term liabilities						(10,000)
Total liabilities assumed						(340,000)
Net identifiable assets acquired						830,000
Goodwill						270,000
Net assets acquired						$	1,100,000

Other intangible assets acquired, totaling approximately $200 million, consisted primarily of customer relationships and trade names with weighted average amortization lives of 19 years. The provisional fair value of the identifiable intangible assets are subject to adjustment pending final valuation.

The estimated goodwill recognized as part of the acquisitions is generally not tax deductible. Goodwill of $240 million and $30 million has been assigned to the Automotive and Industrial segments, respectively. This goodwill is attributable primarily to the expected synergies and assembled work forces of the acquired businesses.

The businesses acquired included two of the largest independent owners of NAPA Auto Parts Stores in the U.S., MPEC in April 2024 and Walker in July 2024. We recognized approximately $100 million of goodwill and other intangible assets associated with the MPEC and Walker acquisitions. Approximate values of other assets acquired and liabilities assumed included inventory of $300 million, operating lease assets of $200 million and operating lease liabilities of $200 million.

7. Accumulated Other Comprehensive Loss

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

						Changes in Accumulated Other Comprehensive Loss by Component
(in thousands)						Pension and Other Post-Retirement Benefits						Cash Flow Hedges						Foreign Currency Translation						Total
Beginning balance, January 1, 2024						$	(517,941)					$	—					$	(458,931)					$	(976,872)
Other comprehensive income (loss) before reclassifications						—						—						25,359						25,359
Amounts reclassified from accumulated other comprehensive loss						8,661						—						—						8,661
Other comprehensive income (loss), net of income taxes						8,661						—						25,359						34,020
Ending balance, September 30, 2024						$	(509,280)					$	—					$	(433,572)					$	(942,852)

						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 income (loss) before reclassifications						—						2,765						(63,027)						(60,262)
Amounts reclassified from accumulated other comprehensive loss						5,735						(193)						—						5,542
Other comprehensive income (loss), net of income taxes						5,735						2,572						(63,027)						(54,720)
Ending balance, September 30, 2023						$	(500,875)					$	—					$	(586,387)					$	(1,087,262)

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

8. Commitments and Contingencies

Legal Matters

We are subject to various legal proceedings, many involving routine litigation incidental to the businesses, including approximately 2,617 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 $235 million as of September 30, 2024, which represented our best estimate of the liability within our calculated range of $181 million to $257 million, discounted using a discount rate of 3.81%. 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%. Our undiscounted product liability was $292 million and $308 million as of September 30, 2024 and December 31, 2023, respectively. There have been no significant developments to the information presented in our 2023 Annual Report on Form 10-K with respect to litigation or commitments and contingencies.

Environmental Liabilities

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

9. Restructuring and other costs

In February 2024, we approved and initiated 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.

For the three and nine months ended September 30, 2024, we incurred $41 million and $161 million, respectively, in costs related to our global restructuring initiative. We expect to incur total costs up to $200 million related to the global restructuring efforts in 2024 and to substantially complete the initiative by the end of 2025. We may incur additional charges not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of these initiatives. The global restructuring was approved and funded by our corporate office and therefore these costs are not allocated to our segments.

For the three months ended September 30, 2024, costs of $41 million include severance and other employee costs of $11 million, and other restructuring costs of $30 million.

The table below summarizes the activity related to these costs for the nine months ended September 30, 2024.

(in thousands)			Severance and other employee costs						Other restructuring costs (1)						Total (1)
Liability as of January 1, 2024			$	—					$	—					$	—
Restructuring and other costs			77,157						76,668						153,825
Cash payments			(55,832)						(59,715)						(115,547)
Non-cash charges			3,198						(15,619)						(12,421)
Translation			501						2						503
Liability as of September 30, 2024			$	25,024					$	1,336					$	26,360

(1) Amount reflects moving expenses, accelerated rent, professional fees, facility closure costs and asset impairment costs that are attributable to our restructuring. Amount excludes a $7 million non-cash charge reflected in cost of goods sold for inventory liquidated rather than moved during facility consolidation in connection with the restructuring.