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

Note H –6. Guarantees

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

AtAs of September 30, 2017,2019, the total borrowings of the independents and affiliates subject to guarantee by the Company were approximately $554.2 million.$864,398. 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,these guarantees, the Company would obtain and liquidate certain collateral pledged by the independents or affiliates (e.g., accounts receivable and inventory) to recover all or a 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, 2017,2019, the Company has recognized certain assets and liabilities amounting to $59.0 million$87,000 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.

Note I –7. Fair Value of Financial Instruments

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. AtAs of September 30, 2017,2019, the carrying valueamount, net of debt issuance costs, and the fair value of fixed rate debt were approximately $550.0 million$1,913,359 and $563.6 million,$2,017,415, 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$1,913,359 is included in long-term debt in the accompanying condensed consolidated balance sheets. Refer to the derivatives and hedging footnote for information on the fair value of derivative instruments.

On May 31, 2019, the Company entered into a private placement agreement of €250,000 long-term fixed rate debt. The €250,000 of long-term fixed rate debt includes €50,000, 1.55% Series A Guaranteed Senior Note J – maturing on May 31, 2029, €100,000, 1.74% Series B Guaranteed Senior Note maturing on May 31, 2031 and €100,000, 1.95% Series C Guaranteed Senior Note maturing on May 31, 2034.

Note K –12. Acquisitions and Equity InvestmentsDivestitures

The Company's acquisitions of businesses totaled $642,468, net of cash acquired, during the nine months ended September 30, 2017,2019. The businesses acquired included Hennig Fahrzeugteile Group ("Hennig"), PartsPoint Group and several bolt-on acquisitions in the Automotive Parts Group and Axis New England, Axis New York and Inenco in the Industrial Parts Group.

The Company acquired the remaining 65% equity investment in Inenco in July 2019. Inenco is one of Australasia's leading industrial distributors of key product categories such as bearings, power transmission and seals and it generates estimated annual revenues of approximately $400,000. Prior to the 65% acquisition, the Company accounted for its 35% investment under the

The acquisition date fair value of the consideration transferred for the aggregate of the acquired certain companies and equity investments forbusinesses was approximately $266.4 million. $765,853, net of cash acquired of $12,149, which consisted of the following:

The Company recognized and measuredfollowing table summarizes the preliminary, estimated fair values of the assets acquired and liabilities assumed based on their fair values as of their respectiveat the acquisition dates. The results of operationsdates for the aggregate of these businesses. Additional adjustments may be made to the acquisition accounting during the measurement period primarily related to intangible asset revaluations and tax accounting.

The acquired companiesintangible assets of approximately $318,301 were provisionally assigned to customer relationships of $281,804, trademarks of $34,207, and other intangibles of $2,290 with weighted average amortization lives of 16.8, 21.3, and 5.0 years, respectively, for a total weighted average amortization life of 17.2 years. The fair value of the acquired identifiable intangible assets is provisional pending completion of the final valuations for these assets. 

During the third quarter of 2019, the Company approved a transaction to sell EIS, a wholly owned subsidiary within the Industrial Parts Group. The transaction closed on their respective acquisition dates.September 30, 2019. EIS contributed approximately $817,249 of revenue for the year ended December 31, 2018 and $588,031 for the nine months ended September 30, 2019. Proceeds from the transaction of $365,876 are included in proceeds from divestitures on the condensed consolidated statement of cash flows for the nine months ended September 30, 2019. The Company recorded approximately $105.4 millionincurred realized currency losses of goodwill$7,664 from this transaction, which are included in the line item "other" within non-operating (income) expenses on the condensed consolidated statement of income for the three and nine months ended September 30, 2019. This divestiture is not considered a strategic shift that will have a major effect on the Company’s operations or financial results; therefore, it is not reported as discontinued operations.

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 Form 10-K, the Company maintains 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 intangible assets associated withshare-based awards. Options to purchase approximately 544 and 223 shares of common stock were outstanding but excluded from the acquisitions. The Company is incomputations of diluted earnings per share for the processthree and nine month periods ended September 30, 2019, respectively, as compared to approximately 643 and 1,495 for the three and nine month periods ended September 30, 2018, respectively. 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 businesses into the Company, including the challenges associated with the integration of processes and systems 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 the unpredictability of additional 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 tofiled with 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 nine months ended September 30, 2017,2019, business was conducted throughout the United States, Canada, Mexico, Puerto Rico, Australia, New Zealand, MexicoIndonesia, Singapore, the U.K., France, Germany, Poland, the Netherlands, and Puerto RicoBelgium from approximately 2,670more than 3,100 locations.

Sales for the three months ended September 30, 20172019 were $4.10$5.0 billion, a 4%6.2% increase as compared to $3.94$4.7 billion in the same period of the prior year. For the three months ended September 30, 2017,2019, the Company recorded consolidated net income of $158.4$227.5 million, a decreasean increase of 15%3.3% as compared to consolidated net income of $185.3$220.2 million in the same three month period of the prior year. On a per share diluted basis, net income was $1.56 for the three months ended September 30, 2019, an increase of 4.7% as compared to $1.49 for the same three month period of 2018. For the nine months ended September 30, 20172019, sales were $12.10$14.7 billion, a 4.7%3.9% increase as compared to $11.56$14.1 billion in the same period of the prior year. For the nine months ended September 30, 2017,2019, the Company recorded consolidated net income of $508.6$612.2 million compared to consolidated net income of $534.7$623.8 million in the same nine month period of the prior year, a decrease of 1.9%. On a per share diluted basis, net income was $4.18, a decrease of 1.2% as compared to $4.23 in the same nine month period of 2018.

Before the impact of realized currency losses, transaction and other costs and the equity investment gain, the Company's adjusted net income was $219.0 million, an increase of 0.6% as compared to adjusted net income of $217.6 million in the same three month period of the prior year. Adjusted net income is a non-GAAP measure (see table below for reconciliation to GAAP net income). On a per share basis, adjusted net income was $1.50 for the three months ended September 30, 2019, an increase of 1.4% as compared to $1.48 for the same three month period of 2018. Adjusted net income for the nine months ended September 30, 2019 was $636.5 million, a decrease of 0.2% for the same nine month period of 2018. On a per share diluted basis, adjusted net income was $4.34 for the nine months ended September 30, 2019, which was up slightly compared to the same nine month period of the prior year.

The Company incurred certain transaction costs primarily relatedremains committed to the pending $2.0 billion Europeanits key growth initiatives, which include: driving greater share of spend with existing customers; employing an aggressive but disciplined acquisition of Alliance Automotive Group in the third quarter of 2017. Before the impact of these costs,strategy focused on both geographical in-fill and product line adjacencies; expanding the Company's net income was $170.0 milliondigital capabilities; and $520.2 million in the threefurther expansion of our U.S. and nine month periods ended September 30, 2017.international footprint.

The Company continuesWe continue to execute on these initiatives, and also focus on a variety ofour plans and strategic initiatives to facilitate continued growth including strategic acquisitions,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 introduction of new and expanded product lines, geographic expansion, sales to new markets, enhanced customer marketing programs and a variety of gross margin and cost savings initiatives.Company's operating performance over the long-term.

Sales

Sales for the Automotive Parts Group increased 3.6% in5.3% for the third quarter of 2017,three months ended September 30, 2019, as compared to the same period in the prior year. This group’s revenue increase for the three months ended September 30, 20172019 consisted of an approximate 1.4% benefit from acquisitions, a positive 1% net impact of organic1.8% increase in comparable sales and a 6.5% benefit from acquisitions. These items were partially offset by an unfavorable foreign currency impact of approximately 1.8% and a 1.2% favorable currency impact.impact primarily from the sale of Grupo Auto Todo. This group’s 3.6% sales3.0% revenue increase for the nine month periodmonths ended September 30, 2017 reflects a 1% increase from organic sales growth,2019 consisted of an approximate 2% contribution from acquisitions,2.1% increase in comparable sales and a 0.6% favorable4.3% benefit from acquisitions. These items were partially offset by an unfavorable foreign currency impact of approximately 2.6% and a 0.8% negative impact primarily from our businesses throughout Australia, Canada and Mexico.the sale of Grupo Auto Todo. We anticipate that 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%0.9% for the three months ended September 30, 2017, due to its decrease in organic sales2019, compared to the same three month period in 2016.2018, primarily due to a decrease in comparable sales. For the nine months ended September 30, 2017,2019, this group’sgroup's revenues increased 2.7% duewere essentially flat compared to a 6.3% accretive impact from acquisitions less an approximate 3.6% decreasethe same nine month period in organic sales.2018. We expect

Cost of goods sold for the three months ended September 30, 20172019 was $2.87$3.4 billion, a 5%4.7% increase from $2.74$3.2 billion for the same period in 2016.2018. As a percentage of net sales, cost of goods sold was 70.0%67.6% for the three month periodmonths ended September 30, 2017,2019, as compared to 69.6%68.6% in the same three month period of 2016.2018. Cost of goods sold for the nine months ended September 30, 20172019 was $8.48$10.0 billion, a 5%2.7% increase from $8.09$9.7 billion for the same period in the prior year.2018. As a percentpercentage of net sales, cost of goods sold

was 70.1%67.8% for the nine months ended September 30, 2019, as compared to 70.0%68.6% 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, 20172019 primarily relates to the sales increase for this periodthese periods as compared to the same three and nine month periods of the prior year. The increase for these periods was partially due to lower cost of goods 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. In addition, PartsPoint Group and Inenco, which were acquired in 2019, have higher gross margin profiles. 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, 20172019 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%25.1% in the same three month period of the previous year. For the nine months ended September 30, 2017,2019, these expenses totaled $2.84$3.9 billion, or 23.4%26.5% as a percentage of net sales, compared to $2.63$3.6 billion, or 22.8%25.4% 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, 20172019 reflects the Company’s deleveragingeffect of expenses on lower comparable sales, as well as higherrising costs in areas such as payroll, freight, IT digital, legal, professional and insurance, freight and delivery, 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 comparable sales in certain operations 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 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,businesses; however, the operating profit margins generally 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 2.0% in the three months ended September 30, 2019 as compared to the same period of 2018, and its operating profit margin was 8.0% as compared to 8.6% in the same period of the previous year. For the nine months ended September 30, 2019, the Automotive Parts Group's operating profit decreased 3.9% and the operating profit margin was 7.7% as compared to 8.2% in the same nine month period of 2016.2018. The decrease in operating profit as a percentagepercent of net sales for the three and nine month periodsmonths ended September 30, 20172019 is primarily due to the impact of rising costs and the deleveraging of fixed costs associated with lower comparable sales growth, higher expenses in areas such as IT, freight and delivery costs, lower volume incentives and a product mix shift to lower margin products, which wasthe European automotive business. These decreases were partially offset by the positive impactimprovement in gross margin for these periods as compared to the same periods of cost control initiatives.

The AutomotiveIndustrial Parts Group’s operating profit decreased 10%increased 15.4% in the three month period ended September 30, 2017, compared to the same period of 2016, and its operating profit margin was 8.2%, as compared to 9.4% in 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% and the operating profit margin was 8.5%2019 as compared to 9.1% in the same nine month period of 2016. The decrease in operating profit margin for the three and nine month periods ended September 30, 2017 is primarily due to the slow organic sales environment in our U.S. Automotive businesses and its impact on expense leverage, higher expenses in areas such as IT, freight and delivery costs lower volume incentives and a product mix shift to lower margin products.