The following tables present the changes in accumulated other comprehensive loss by component for the ninethree months ended September 30:

The accumulated other comprehensive loss components related to the pension benefits are included in the computation of net periodic benefit income in the employee benefit plans footnote.

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

The Company guarantees the borrowings of certain independently controlled automotive parts stores and businesses (“independents”) and certain other affiliates in which the Company has a noncontrolling equity ownership interest (“affiliates”). Presently, the independents are generally consolidated by unaffiliated enterprises that have controlling financial interests through ownership of a majority voting interest in the independents. The Company has no voting interest or equity conversion rights in any of the independents. The Company does not control the independents or the affiliates, but receives a fee for the guarantees. The Company has concluded that the independents are variable interest entities, but that the Company is not the primary beneficiary. Specifically, the equity holders of the independents have the power to direct the activities that most significantly impact the entities’ economic performance including, but not limited to, decisions about hiring and terminating personnel, local marketing and promotional initiatives, pricing and selling activities, credit decisions, monitoring and maintaining appropriate inventories, and store hours. Separately, the Company concluded that the affiliates are not variable interest entities. The Company’s maximum exposure to loss as a result of its involvement with these independents and affiliates is generally equal to the total borrowings subject to the Company’s guarantees. While such borrowings of the independents and affiliates are outstanding, the Company is required to maintain compliance with certain covenants, including a maximum debt to capitalization ratio and certain limitations on additional borrowings. At September 30, 2017,March 31, 2019, the Company was in compliance with all such covenants.

At September 30, 2017,March 31, 2019, the total borrowings of the independents and affiliates subject to guarantee by the Company were approximately $554.2 million.$809,784. These loans generally mature over periods from one to six years. In the event that the Company is required to make payments in connection with guaranteed obligations of the independents or the affiliates, the Company would obtain and liquidate certain collateral (e.g., accounts receivable and inventory) to recover all or a portion of the amounts paid under the guarantees. When it is deemed probable that the Company will incur a loss in connection with a guarantee, a liability is recorded equal to this estimated loss. To date, the Company has had no significant losses in connection with guarantees of independents’ and affiliates’ borrowings.

As of September 30, 2017,March 31, 2019, the Company has recognized certain assets and liabilities amounting to $59.0 million$85,000 each for the guarantees related to the independents’ and affiliates’ borrowings. These assets and liabilities are included in other assets and other long-term liabilities in the condensed consolidated balance sheets.

The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash equivalents, trade accounts receivable, trade accounts payable, and borrowings under the line of credit and term loan approximate their respective fair values based on the short-term nature of these instruments. At September 30, 2017,As of March 31, 2019, the carrying valueamount, net of debt issuance costs, and the fair value of fixed rate debt were approximately $550.0 million$1,451,281 and $563.6 million,$1,473,599, respectively. The fair value of fixed rate debt is designated as Level 2 in the fair value hierarchy (i.e., significant observable inputs) and is based primarily on the discounted value of future cash flows using current market interest rates offered for debt of similar credit risk and maturity. The carrying valueamount, net of debt issuance costs, of fixed rate debt of $550.0 million$1,451,281 is included in long-term debt in the accompanying condensed consolidated balance sheets.sheet.

The Company acquired several businesses for approximately $153,200, net of cash acquired, during the ninethree months ended September 30, 2017,March 31, 2019. These included Hennig Fahrzeugteile Group and several bolt-on acquisitions in the Automotive Parts Group and Axis New England and Axis New York in the Industrial Parts Group.

As more fully discussed in the share-based compensation footnote of the Company’s notes to the consolidated financial statements in its 2018 Annual Report on their respective acquisition dates. TheForm 10-K, the Company recorded approximately $105.4 millionmaintains various long-term incentive plans, which provide for the granting of goodwillstock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance awards, dividend equivalents and other intangible assets associated withshare-based awards. Options to purchase approximately 3 shares of common stock were outstanding but excluded from the acquisitions. The Company is incomputations of diluted earnings per share for the processthree month period ended March 31, 2019 as compared to approximately 1,334 for the three month period ended March 31, 2018. These options were excluded from the computations of analyzingdiluted net income per common share because the estimated values of assets and liabilities acquired and is obtaining third-party valuations of certain tangible and intangible assets. The allocationsoptions’ exercise prices were greater than the average market price of the respective purchase prices are therefore preliminary and subject to revision. Additional disclosure of the Inenco investment is provided below.common stock.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes contained herein and with the audited consolidated financial statements, accompanying notes, related information and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2016.2018.

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

The Company cautions that its forward-looking statements involve risks and uncertainties, and while we believe that our expectations for the future are reasonable in view of currently available information, you are cautioned not to place undue reliance on our forward-looking statements. Actual results or events may differ materially from those indicated as a result of various important factors. Such factors may include, among other things, the inability to complete the acquisition due to failure to satisfy the customary closing conditions and/or the delay of or inability to obtain all regulatory approvals related to the acquisition, the Company’s ability to successfully integrate AAGacquired companies into the Company, including the challenges associated with the integration of processes to ensure the adequacy of our internal controls in regard to the Alliance Automotive Group business, and to realize the anticipated synergies and benefits,benefits; changes in the European aftermarket,aftermarket; the Company’s ability to successfully implement its business initiatives in each of its fourthree business segments; slowing demand for the Company’s products; changes in national and international legislation or government regulations or policies;policies, including new import tariffs and data security policies and requirements; changes in general economic conditions, including unemployment, inflation (including the impact of potential tariffs) or deflation;deflation and the United Kingdom’s referendum to exit from the European Union, commonly known as Brexit; changes in tax policies; volatile exchange rates; high energy costs;volatility in oil prices; significant cost increases, such as rising fuel and freight expenses; labor shortages; uncertain credit markets and other macro-economicmacroeconomic conditions; competitive product, service and pricing pressures; the

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

Genuine Parts Company is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts office products and electrical/electronic materials. The Company hasbusiness products. We have a long tradition of growth dating back to 1928, the year we were founded in Atlanta, Georgia. During the ninethree months ended September 30, 2017,March 31, 2019, business was conducted throughout the United States, Canada,North America, Australia, New Zealand, Mexicothe U.K., France, Germany, Poland, and Puerto Rico from approximately 2,6703,100 locations.

Sales for the three months ended September 30, 2017March 31, 2019 were $4.10$4.7 billion, a 4%3.3% increase as compared to $3.94$4.6 billion in the same period of the prior year. For the three months ended September 30, 2017,March 31, 2019, the Company recorded consolidated net income of $158.4$160.3 million, a decrease of 15%9.2% as compared to consolidated net income of $185.3$176.6 million in the same three month period of the prior year. ForOn a per share diluted basis, net income was $1.09 for the ninethree months ended September 30, 2017March 31, 2019, a decrease of 9.2% as compared to $1.20 for the same three month period of 2018.

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

Sales for the three months ended March 31, 2019 were $12.10$4.7 billion, a 4.7%3.3% increase as compared to $11.56$4.6 billion in the same period of the prior year. For the nine months ended September 30, 2017, the Company recorded consolidated net income of $508.6 million compared to consolidated net income of $534.7 million in the same nine month periodApproximately 3.3% of the prior year.

Sales for the Automotive Parts Group increased 3.6% in2.3% for the third quarter of 2017,three months ended March 31, 2019, as compared to the same period in the prior year. This group’s revenue increase for the three months ended September 30, 2017March 31, 2019 consisted of an approximate 1.4% benefit from acquisitions, a positive 1% net impact of3.1% increase in organic sales and a 1.2% favorable2.9% benefit from acquisitions. These items were partially offset by an unfavorable foreign currency impact. This group’s 3.6% sales increase for the nine month period ended September 30, 2017 reflects a 1% increase from organic sales growth, an approximate 2% contribution from acquisitions,impact of approximately 3.4% and a 0.6% favorable currency0.3% negative impact from our businesses throughout Australia, Canada and Mexico.the sale of Grupo Auto Todo. We anticipate the Company’s initiatives to drive both organic and acquisitive growth will positively benefit the Automotive Parts Group through increased sales in the quarters ahead.

Sales for the OfficeBusiness Products Group decreased 4.7%increased 1.0% for the three months ended September 30, 2017, due to its decrease in organic salesMarch 31, 2019, compared to the same three month period in 2016. For the nine months ended September 30, 2017, this group’s revenues increased 2.7%2018, primarily due to a 6.3% accretive impact from acquisitions less an approximate 3.6% decreaseincrease in organic sales. We expect

Cost of goods sold for the three months ended September 30, 2017March 31, 2019 was $2.87$3.23 billion, a 5%2.5% increase from $2.74$3.15 billion for the same period in 2016.2018. As a percentage of net sales, cost of goods sold was 70.0%68.2% for the three month periodmonths ended September 30, 2017,March 31, 2019, as compared to 69.6%68.7% in the same three month period of 2016. Cost of goods sold for the nine months ended September 30, 2017 was $8.48 billion, a 5% increase from $8.09 billion for the same period in the prior year. As a percent of net sales, cost of goods sold was 70.1% as compared to 70.0% in the same nine month period of 2016.2018. The increase in cost of goods sold for the three and nine month periodsmonths ended September 30, 2017March 31, 2019 primarily relates to the sales increase for this period as compared to the same three and nine month periodsperiod of the prior year. The increase for this period was partially offset by lower cost of goods sold in the Automotive Parts Group and Industrial Parts Group due to favorable global supplier negotiations, more flexible and sophisticated pricing strategies, a shift in product mix to products that carry a higher gross margin and higher supplier incentives due to improved volumes for these segments. The Company’s cost of goods sold includes the total cost of merchandise sold, including freight expenses associated with moving merchandise from our vendors to our distribution centers, retail stores and branches, as well as vendor volume incentives and inventory adjustments. Gross profit as a percentage of net sales may fluctuate based on (i) changes in merchandise costs and related vendor volume incentives or pricing, (ii) variations in product and customer mix, (iii) price changes in response to competitive pressures, (iv) physical inventory and LIFO adjustments, and (v) changes in foreign currency exchange rates.

Total operating expenses increased to $980.5 million$1.3 billion for the three month periodmonths ended September 30, 2017March 31, 2019 as compared to $907.2 million$1.2 billion for the same three month period in 2016.2018. As a percentage of net sales, operating expenses increased to 23.9%26.7% as compared to 23.0%26.1% in the same three month period of the previous year. For the nine months ended September 30, 2017, these expenses totaled $2.84 billion, or 23.4% as a percentage of net sales, compared to $2.63 billion, or 22.8% as a percentage of net sales for the same nine month period in the prior year. The increase in operating expenses as a percentage of net sales for the three and nine month periodsmonths ended September 30, 2017March 31, 2019 reflects the Company’s deleveragingeffect of expenses on lower comparable sales, as well as higherrising costs in areas such as IT, digital, legal, professional and insurance,payroll, freight and delivery, IT and acquisition related costs.cyber-security. In addition, the increase includes approximately $18.5 million of transaction costs primarily relatedCompany’s ability to leverage its expenses was negatively impacted due to lower core sales in certain markets relative to the prior year. The Company's pending $2.0 billion European acquisition of Alliance Automotive Group recordedongoing cost control initiatives partially offset these increases and other headwinds in the three and nine month periods ended September 30, 2017. The Company continues to focus on effectively managing the costs in our businesses with ongoing investments in technology and supply chain initiatives primarily associated with freight, digital and logistics related functions.

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

structure. The Company's recent acquisitions have lower costs of goods sold and higher levels of operating costs as compared to the Company's other businesses, however, the operating profit margins remain consistent.consistent.The Company continues to focus on effectively managing the costs in our businesses with ongoing investments in technology, productivity and supply chain initiatives primarily associated with freight, digital, pricing, data analytics and logistics related functions.

The Automotive Parts Group’s operating profit decreased 10%3.0% in the three month periodmonths ended September 30, 2017,March 31, 2019 as compared to the same period of 2016,2018, and its operating profit margin was 8.2%,6.8% as compared to 9.4%7.2% in the same period of the previous year. The decrease in operating profit as a percent of sales for the three months ended March 31, 2019 is primarily due to the impact of rising costs and the deleveraging of expenses in the European automotive business. These increases were partially offset by the improvement in gross margin for the first quarter of 2019 as compared to the same period of the previous year.

The Industrial Parts Group’s operating profit increased 7.9% in the three months ended March 31, 2019 as compared to the same three month period of the prior year. For the nine months ended September 30, 2017, the Automotive Parts Group’s operating profit decreased approximately 3%2018, and the operating profit margin for this group was 8.5%7.4% compared to 7.2% for the same period of the previous year. The improved operating profit reflects the positive impact of strong sales growth, improved gross margins and the leveraging of expenses in the three months ended March 31, 2019 as compared to 9.1% in the same nineperiod in 2018, driven by a healthy industrial economy and the effective execution of Industrial's growth initiatives.

The effective income tax rate was 35.7%24.2% for the three month periodmonths ended September 30, 2017,March 31, 2019, compared to 36.4%23.0% for the same three month period in 2016. The effective2018, primarily due to differences in income tax rate was 35.4% for the nine month period ended September 30, 2017, compared to 36.2% for the same period in 2016. The rate decreaserates associated with transaction and other costs as well as statute adjustments recorded in the three and nine month periods ended September 30, 2017 reflects the higher mix of foreign earnings, taxed at a lower rate relative to our U.S. operations and the positive impact of the recognition of excess tax benefits due to the adoption of ASU 2016-09 pertaining to Stock Compensation as compared to the same periods in 2016.periods.

For the three months ended September 30, 2017,March 31, 2019, the Company recorded consolidated net income of $158.4$160.3 million, a decrease of 15%9.2% as compared to consolidated net income of $185.3$176.6 million in the same three month period of the prior year. On a per share diluted basis, net income was $1.08,$1.09, a decrease of 13%9.2% as compared to $1.24$1.20 for the same three month period of 2016. For2018.

Before the impact of realized currency losses and transaction and other costs, the Company's adjusted net income was $187.2 million, an increase of 0.4% as compared to adjusted net income of $508.6 million as compared to consolidated net income of $534.7$186.5 million in the same ninethree month period of the prior year. On a per share diluted basis, adjusted net income was $3.44, a decrease$1.28 for the three months ended March 31, 2019, an increase of 3%0.8% as compared to $3.56 in$1.27 for the same ninethree month period ended September 30, 2016.of 2018.

The Company incurred certain transaction costs primarily relatedfollowing table sets forth a reconciliation of net income and diluted net income per common share to the pending $2.0 billion European acquisition of Alliance Automotive Group in the third quarter of 2017. Beforeadjusted net income and adjusted diluted net income per common share to account for the impact of these costs,adjustments. The Company believes that the presentation of adjusted net income and adjusted net income per common share, which are not calculated in accordance with generally accepted accounting principles in the U.S. (“GAAP”), provide meaningful supplemental information to both management and investors that is indicative of the Company's net income was $170.0 million,core operations. The Company does not, nor does it suggest investors should consider such non-GAAP financial measures in isolation from, or $1.16 onas a per share diluted basis, and $520.2 million, or $3.52 on a per share diluted basis, in the three and nine month periods ended September 30, 2017.substitute for, GAAP financial information.

The Company’s cash balance of $210.1$356.9 million at September 30, 2017 decreased $32.8March 31, 2019 increased $23.4 million, or 14%7.0%, from December 31, 2016.2018. For the ninethree months ended September 30, 2017,March 31, 2019, the Company used $289.4$138.4 million for acquisitions and other investing activities,

Accounts receivable increased $217.4$248.3 million, or 11%10.0%, from December 31, 2016,2018, which is primarily due to the Company’s acquisitions and higher sales volume in the nine month periodthree months ended September 30, 2017March 31, 2019 as compared to the fourth quarter or 2016.of 2018. Inventory increased $143.9$75.2 million, or approximately 4% compared to the inventory balance at2.1%, from December 31, 2016,2018 due primarily to acquisitions of businesses and planned increases to support sales growth. Accounts payable increased $62.4 million, or 1.6%, from December 31, 2018, primarily due to acquisitions and the impacthigher levels of foreign exchange. Accounts payable increased $194.0 million or 6% from December 31, 2016, primarily duepurchasing volumes to more favorable payment terms negotiated with the Company's vendors in the nine month period ended September 30, 2017.support higher sales. The Company’s debt is discussed below.

Total debt of $3.4 billion at September 30, 2017March 31, 2019 increased $270$278.3 million, or 31%8.9%, from December 31, 2016, primarily related to funding the Company’s working capital needs. The Company maintains a $1.20 billion unsecured revolving line of credit with a consortium of financial institutions with an option to increase the borrowing capacity by an additional $350.0 million. The line of credit bears interest at LIBOR plus various margins, which are based on the Company’s leverage ratio. In June 2017, the Company exercised its remaining option to extend the maturity date from June 2021 to June 2022.2018. At September 30, 2017, $595.0 million was outstanding under the line of credit.

Although the Company does not face material risks relatedFor quantitative and qualitative disclosures about market risk, refer to interest rates“Quantitative and commodity prices, the Company is exposed to changesQualitative Disclosures About Market Risk” in foreign currency rates with respect to foreign currency denominated operating revenues and expenses. The Company has translation gains or losses that result from translationItem 7A of the results of operations of an operating unit’s foreign functional currency into U.S. dollars for consolidated financial statement purposes. The Company’s principal foreign currency exchange exposures are the Australian dollar, Canadian dollar and Mexican peso, which are the functional currenciesPart II of our Australia, Canada and Mexico operations, respectively. As previously noted under “Sales,” foreign currency exchange exposure, particularly in regard to the Australian dollar and Canadian dollar, positively impacted our results for the three and nine month periods ended September 30, 2017. There have been no other material changes in market risk from the information provided in the Company’s 2016 Annual Report on Form10-K.Form 10-K for the fiscal year ended December 31, 2018. Our exposure to market risk has not changed materially since December 31, 2018.

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO)("CEO") and Chief Financial Officer (CFO)("CFO"), of the effectiveness of the Company’s disclosure controls and procedures.procedures, as such term is defined in SEC Rule 13a-15(e). Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or furnishes under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods

There were no material errors in the financial results or balances identified as a result of the control deficiencies, and there were no restatements of prior period financial statements and no changes in previously released financial results were required as a result of these control deficiencies.

Other than with respect to the remediation efforts described above and changes related to the adoption of ASU 2016-02, there have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 of the SEC that occurred during the Company’s lastfirst fiscal quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 20162018 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. The risks described in our 20162018 Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.