UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2019~~March 31, 2020



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-5690

__________________________________________

GENUINE PARTS CO~~MPANY~~COMPANY

(Exact name of registrant as specified in its charter)

__________________________________________



GA		~~58-0254510~~
~~(State or other jurisdiction of~~ ~~incorporation or organization)~~		~~(I.R.S. Employer~~ ~~Identification No.)~~



GA						58-0254510
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2999 WILDWOOD PARKWAY,

30339

ATLANTA,

(Address of principal executive offices)

(Zip Code)

~~678~~-~~934-5000~~678-934-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of each exchange on which registered

Common Stock, $1.00 par value per share

GPC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

~~Large accelerated~~Non-accelerated filer

☒☐

~~Accelerated filer~~Smaller reporting company

☐

~~Non-accelerated filer~~Emerging growth company

☐

~~Smaller reporting company~~

☐

~~Emerging growth company~~

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were ~~145,293,115~~144,260,282 shares of common stock outstanding as of ~~the September~~April 30, ~~2019.~~

2020.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(in thousands, except share and per share data)	September 30, 2019			December 31, 2018			(in thousands, except share and per share data)	March 31, 2020		December 31, 2019
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	451,275		$	333,547		Cash and cash equivalents	$	354,469	$	276,992
Trade accounts receivable, less allowance for doubtful accounts (2019 – $32,374; 2018 – $21,888)	2,739,971			2,493,636
Trade accounts receivable, less allowance for doubtful accounts (2020 – $38,519; 2019 – $37,905)							Trade accounts receivable, less allowance for doubtful accounts (2020 – $38,519; 2019 – $37,905)	2,705,192		2,635,155
Merchandise inventories, net	3,718,307			3,609,389			Merchandise inventories, net	3,698,928		3,831,183
Prepaid expenses and other current assets	1,149,118			1,139,118			Prepaid expenses and other current assets	1,234,461		1,195,286
Total current assets	8,058,671			7,575,690			Total current assets	7,993,050		7,938,616
Goodwill	2,278,066			2,128,776			Goodwill	2,206,650		2,293,519
Other intangible assets, less accumulated amortization	1,523,656			1,411,642			Other intangible assets, less accumulated amortization	1,468,948		1,568,926
Deferred tax assets	30,301			29,509			Deferred tax assets	61,572		54,851
Property, plant and equipment, less accumulated depreciation (2019 – $1,341,995; 2018 – $1,208,694)	1,118,912			1,027,231
Property, plant and equipment, less accumulated depreciation (2020 – $1,285,954; 2019 – $1,282,952)							Property, plant and equipment, less accumulated depreciation (2020 – $1,285,954; 2019 – $1,282,952)	1,180,205		1,214,783
Operating lease assets	1,048,462			—			Operating lease assets	1,049,538		1,075,969
Other assets	455,122			510,192			Other assets	491,392		498,965
Total assets	$	14,513,190		$	12,683,040		Total assets	$	14,451,355	$	14,645,629

Liabilities and equity							Liabilities and equity
Current liabilities:							Current liabilities:
Trade accounts payable	$	4,195,869		$	3,995,789		Trade accounts payable	$	4,067,400	$	4,106,163
Current portion of debt	622,132			711,147			Current portion of debt	908,865		624,043
Dividends payable	110,784			105,369			Dividends payable	114,476		110,851
Other current liabilities	1,444,028			1,088,428			Other current liabilities	1,490,479		1,553,063
Total current liabilities	6,372,813			5,900,733			Total current liabilities	6,581,220		6,394,120
Long-term debt	2,795,878			2,432,133			Long-term debt	2,726,391		2,802,056
Operating lease liabilities	797,166			—			Operating lease liabilities	803,565		825,567
Pension and other post–retirement benefit liabilities	202,188			235,228			Pension and other post–retirement benefit liabilities	249,887		249,832
Deferred tax liabilities	236,064			196,843			Deferred tax liabilities	211,160		232,902
Other long-term liabilities	444,344			446,112			Other long-term liabilities	456,101		445,652
Equity:							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 – 2019 – 145,293,115 shares; 2018 – 145,936,613 shares	145,293			145,937
Preferred stock, par value – $1 per share; authorized – 10,000,000 shares; NaN issued							Preferred stock, par value – $1 per share; authorized – 10,000,000 shares; NaN issued	—		—
Common stock, par value – $1 per share; authorized – 450,000,000 shares; issued and outstanding – 2020 – 144,249,343 shares; 2019 – 145,378,158 shares							Common stock, par value – $1 per share; authorized – 450,000,000 shares; issued and outstanding – 2020 – 144,249,343 shares; 2019 – 145,378,158 shares	144,249		145,378
Additional paid-in capital	90,560			78,380			Additional paid-in capital	103,878		98,777
Retained earnings	4,674,918			4,341,212			Retained earnings	4,487,904		4,571,860
Accumulated other comprehensive loss	(1,268,580		)	(1,115,078		)	Accumulated other comprehensive loss	(1,333,329)		(1,141,308)
Total parent equity	3,642,191			3,450,451			Total parent equity	3,402,702		3,674,707
Noncontrolling interests in subsidiaries	22,546			21,540			Noncontrolling interests in subsidiaries	20,329		20,793
Total equity	3,664,737			3,471,991			Total equity	3,423,031		3,695,500
Total liabilities and equity	$	14,513,190		$	12,683,040		Total liabilities and equity	$	14,451,355	$	14,645,629

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
(in thousands, except per share data)	2019			2018			2019			2018			(in thousands, except per share data)	2020		2019
Net sales	$	5,015,023		$	4,722,922		$	14,686,116		$	14,131,281		Net sales	$	4,559,532	$	4,736,833
Cost of goods sold	3,390,597			3,238,687			9,954,941			9,689,653			Cost of goods sold	3,058,741		3,228,665
Gross profit	1,624,426			1,484,235			4,731,175			4,441,628			Gross profit	1,500,791		1,508,168
Operating expenses:													Operating expenses:
Selling, administrative and other expenses	1,269,893			1,119,266			3,684,026			3,401,254			Selling, administrative and other expenses	1,232,743		1,203,905
Depreciation and amortization	68,922			61,082			197,053			177,896			Depreciation and amortization	70,443		61,977
Provision for doubtful accounts	1,693			4,939			11,624			11,306			Provision for doubtful accounts	7,300		3,969
Restructuring costs													Restructuring costs	1,439		—
Total operating expenses	1,340,508			1,185,287			3,892,703			3,590,456			Total operating expenses	1,311,925		1,269,851
Non-operating (income) expenses:													Non-operating (income) expenses:
Interest expense	26,485			25,084			73,664			75,669			Interest expense	20,969		23,883
Other	(47,100		)	(17,871		)	(53,366		)	(45,822		)	Other	(11,048)		2,922
Total non-operating (income) expenses	(20,615		)	7,213			20,298			29,847			Total non-operating (income) expenses	9,921		26,805
Income before income taxes	304,533			291,735			818,174			821,325			Income before income taxes	178,945		211,512
Income taxes	77,046			71,508			206,007			197,550			Income taxes	42,410		51,262
Net income	$	227,487		$	220,227		$	612,167		$	623,775		Net income	$	136,535	$	160,250
Basic net income per common share	$	1.56		$	1.50		$	4.20		$	4.25		Basic net income per common share	$	0.94	$	1.10
Diluted net income per common share	$	1.56		$	1.49		$	4.18		$	4.23		Diluted net income per common share	$	0.94	$	1.09
Dividends declared per common share	$	.7625		$	.7200		$	2.2875		$	2.1600		Dividends declared per common share	$	.7900	$	.7625
Weighted average common shares outstanding	145,572			146,763			145,875			146,746			Weighted average common shares outstanding	145,052		145,981
Dilutive effect of stock options and non-vested restricted stock awards	617			690			654			574			Dilutive effect of stock options and non-vested restricted stock awards	571		713
Weighted average common shares outstanding – assuming dilution	146,189			147,453			146,529			147,320			Weighted average common shares outstanding – assuming dilution	145,623		146,694

Net income	$	227,487		$	220,227		$	612,167		$	623,775		Net income	$	136,535	$	160,250
Other comprehensive loss, net of income taxes:
Foreign currency translation adjustments	(126,350		)	(26,590		)	(88,369		)	(147,703		)
Cash flow and net investment hedge adjustments, net of income taxes in 2019 — $16,988 and $15,057; 2018 — $278 and $6,213 respectively	45,925			752			40,704			16,797
Pension and postretirement benefit adjustments, net of income taxes in 2019 — $2,592 and $6,166; 2018 — $2,560 and $7,850 respectively	7,024			6,912			16,689			21,221
Other comprehensive loss, net of income taxes	(73,401		)	(18,926		)	(30,976		)	(109,685		)
Comprehensive income	$	154,086		$	201,301		$	581,191		$	514,090
Other comprehensive income (loss), net of income taxes:													Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustments, net of income taxes in 2020 and 2019 — $15,560 and $7,710 respectively													Foreign currency translation adjustments, net of income taxes in 2020 and 2019 — $15,560 and $7,710 respectively	(182,613)		47,964
Cash flow hedge adjustments, net of income taxes in 2020 and 2019 — $6,604 and $1,915, respectively													Cash flow hedge adjustments, net of income taxes in 2020 and 2019 — $6,604 and $1,915, respectively	(17,856)		(5,179)
Pension and postretirement benefit adjustments, net of income taxes in 2020 and 2019 — $3,017 and $1,788, respectively													Pension and postretirement benefit adjustments, net of income taxes in 2020 and 2019 — $3,017 and $1,788, respectively	8,448		4,832
Other comprehensive income (loss), net of income taxes													Other comprehensive income (loss), net of income taxes	(192,021)		47,617
Comprehensive income (loss)													Comprehensive income (loss)	$	(55,486)	$	207,867

See accompanying notes to condensed consolidated financial statements.

~~GENUINE PARTS COMPANY AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EQUITY~~

~~(UNAUDITED)~~

Three Months Ended September 30, 2019
(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, 2019 146,078,369
$ 146,078
$ 83,949
$ (1,195,179 ) $ 4,630,480
$ 3,665,328
$ 22,647
$ 3,687,975
Net income —
—
—
—
227,487
227,487
—
227,487
Other comprehensive loss, net of tax —
—
—
(73,401 ) —
(73,401 ) —
(73,401 )
Cash dividends declared, $0.7625 per share —
—
—
—
(110,786 ) (110,786 ) —
(110,786 )
Share-based awards exercised, including tax benefit of $68 2,953
4
(128 ) —
—
(124 ) —
(124 )
Share-based compensation —
—
6,739
—
—
6,739
—
6,739
Purchase of stock (788,207 ) (789 ) —
—
(72,263 ) (73,052 ) —
(73,052 )
Noncontrolling interest activities —
—
—
—
—
—
(101 ) (101 )
September 30, 2019 145,293,115
$ 145,293
$ 90,560
$ (1,268,580 ) $ 4,674,918
$ 3,642,191
$ 22,546
$ 3,664,737

Nine Months Ended September 30, 2019
(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, 2019 145,936,613
$ 145,937
$ 78,380
$ (1,115,078 ) $ 4,341,212
$ 3,450,451
$ 21,540
$ 3,471,991
Net income —
—
—
—
612,167
612,167
—
612,167
Other comprehensive loss, net of tax —
—
—
(30,976 ) —
(30,976 ) —
(30,976 )
Cash dividends declared, $2.2875 per share —
—
—
—
(333,521 ) (333,521 ) —
(333,521 )
Share-based awards exercised, including tax benefit of $4,054 144,709
145
(7,640 ) —
—
(7,495 ) —
(7,495 )
Share-based compensation —
—
19,820
—
—
19,820
—
19,820
Purchase of stock (788,207 ) (789 ) —
—
(72,263 ) (73,052 ) —
(73,052 )
Cumulative effect from adoption of ASU 2018-02 (1) —
—
—
(122,526 ) 122,526
—
—
—
Cumulative effect from adoption of ASU 2016-02, net of tax (1) —
—
—
—
4,797
4,797
—
4,797
Noncontrolling interest activities —
—
—
—
—
—
1,006
1,006
September 30, 2019 145,293,115
$ 145,293
$ 90,560
$ (1,268,580 ) $ 4,674,918
$ 3,642,191
$ 22,546
$ 3,664,737


~~(1)~~	~~The Company adopted Accounting Standards Update ("ASU") 2016-02,~~ ~~Leases,~~ ~~and ASU 2018-02,~~ ~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,~~ ~~during the first quarter of 2019. Refer to the recent accounting pronouncements footnote for further details.~~Table of Contents

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)


	Three Months Ended March 31, 2020
(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, 2020	145,378,158	$	145,378	$	98,777	$	(1,141,308)	$	4,571,860	$	3,674,707	$	20,793	$	3,695,500
Net income	—	—		—		—		136,535		136,535		—		136,535
Other comprehensive loss, net of tax	—	—		—		(192,021)		—		(192,021)		—		(192,021)
Cash dividend declared, $0.7900 per share	—	—		—		—		(114,476)		(114,476)		—		(114,476)
Share-based awards exercised, including tax benefit of $221	7,629	7		(348)		—		—		(341)		—		(341)
Share-based compensation	—	—		5,449		—		—		5,449		—		5,449
Purchase of stock	(1,136,444)	(1,136)		—		—		(94,583)		(95,719)		—		(95,719)
Cumulative effect from adoption of ASU 2016-13 (1)	—	—		—		—		(11,432)		(11,432)		—		(11,432)
Noncontrolling interest activities	—	—		—		—		—		—		(464)		(464)
March 31, 2020	144,249,343	$	144,249	$	103,878	$	(1,333,329)	$	4,487,904	$	3,402,702	$	20,329	$	3,423,031

Three Months Ended September 30, 2018
(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, 2018 146,752,732
$ 146,753
$ 72,211
$ (943,351 ) $ 4,236,359
$ 3,511,972
$ 50,355
$ 3,562,327
Net income —
—
—
—
220,227
220,227
—
220,227
Other comprehensive loss, net of tax —
—
—
(18,926 ) —
(18,926 ) —
(18,926 )
Cash dividends declared, $0.7200 per share —
—
—
—
(105,673 ) (105,673 ) —
(105,673 )
Share-based awards exercised, including tax benefit of $480 25,829
25
(1,035 ) —
—
(1,010 ) —
(1,010 )
Share-based compensation —
—
6,382
—
—
6,382
—
6,382
Purchase of stock (19,288 ) (19 ) —
—
(1,899 ) (1,918 ) —
(1,918 )
Noncontrolling interest activities —
—
—
—
—
—
1,670
1,670
September 30, 2018 146,759,273
$ 146,759
$ 77,558
$ (962,277 ) $ 4,349,014
$ 3,611,054
$ 52,025
$ 3,663,079

Nine Months Ended September 30, 2018
(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, 2018 146,652,615
$ 146,653
$ 68,126
$ (852,592 ) $ 4,049,965
$ 3,412,152
$ 52,004
$ 3,464,156
Net income —
—
—
—
623,775
623,775
—
623,775
Other comprehensive loss, net of tax —
—
—
(109,685 ) —
(109,685 ) —
(109,685 )
Cash dividends declared, $2.1600 per share —
—
—
—
(316,984 ) (316,984 ) —
(316,984 )
Share-based awards exercised, including tax benefit of $3,079 125,946
125
(5,985 ) —
—
(5,860 ) —
(5,860 )
Share-based compensation —
—
15,417
—
—
15,417
—
15,417
Purchase of stock (19,288 ) (19 ) —
—
(1,899 ) (1,918 ) —
(1,918 )
Cumulative effect from adoption of ASU 2014-09, net of tax —
—
—
—
(5,843 ) (5,843 ) —
(5,843 )
Noncontrolling interest activities —
—
—
—
—
—
21
21
September 30, 2018 146,759,273
$ 146,759
$ 77,558
$ (962,277 ) $ 4,349,014
$ 3,611,054
$ 52,025
$ 3,663,079


	Three Months Ended March 31, 2019
(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, 2019	145,936,613	$	145,937	$	78,380	$	(1,115,078)	$	4,341,212	$	3,450,451	$	21,540	$	3,471,991
Net income	—	—		—		—		160,250		160,250		—		160,250
Other comprehensive income, net of tax	—	—		—		47,617		—		47,617		—		47,617
Cash dividend declared, $0.7625 per share	—	—		—		—		(111,355)		(111,355)		—		(111,355)
Share-based awards exercised, including tax benefit of $3,812	127,298	127		(6,966)		—		—		(6,839)		—		(6,839)
Share-based compensation	—	—		6,010		—		—		6,010		—		6,010
Cumulative effect from adoption of ASU 2018-02 (2)	—	—		—		(122,526)		122,526		—		—		—
Cumulative effect from adoption of ASU 2016-02, net of tax (2)	—	—		—		—		4,797		4,797		—		4,797
Noncontrolling interest activities	—	—		—		—		—		—		361		361
March 31, 2019	146,063,911	$	146,064	$	77,424	$	(1,189,987)	$	4,517,430	$	3,550,931	$	21,901	$	3,572,832

(1)The Company adopted Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments, during the first quarter of 2020. Refer to the recent accounting pronouncements footnote.

(2)The Company adopted ASU 2016-02, Leases, and ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, during the first quarter of 2019.

See accompanying notes to condensed consolidated financial statements.

Table of Contents

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine Months Ended September 30,							Three Months Ended March 31,
(in thousands)	2019			2018			(in thousands)	2020		2019
Operating activities:							Operating activities:
Net income	$	612,167		$	623,775		Net income	$	136,535	$	160,250
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	197,053			177,896			Depreciation and amortization	70,443		61,977
Share-based compensation	19,820			15,417			Share-based compensation	5,449		6,010
Excess tax benefits from share-based compensation	(4,054		)	(3,079		)	Excess tax benefits from share-based compensation	(221)		(3,812)
Other non-operating activities	(22,329		)	—
Other operating activities							Other operating activities	176		27,037
Changes in operating assets and liabilities	(57,445		)	111,517			Changes in operating assets and liabilities	(138,322)		(189,732)
Net cash provided by operating activities	745,212			925,526			Net cash provided by operating activities	74,060		61,730
Investing activities:							Investing activities:
Purchases of property, plant and equipment	(182,612		)	(91,942		)	Purchases of property, plant and equipment	(45,414)		(45,621)
Proceeds from sale of property, plant and equipment							Proceeds from sale of property, plant and equipment	3,332		2,735
Proceeds from divestitures of businesses	416,784			—			Proceeds from divestitures of businesses	10,442		12,028
Acquisitions of businesses and other investing activities	(625,565		)	(153,988		)	Acquisitions of businesses and other investing activities	(3,833)		(153,180)
Net cash used in investing activities	(391,393		)	(245,930		)	Net cash used in investing activities	(35,473)		(184,038)
Financing activities:							Financing activities:
Proceeds from debt	3,928,716			3,406,975			Proceeds from debt	1,318,905		1,350,002
Payments on debt	(3,749,509		)	(3,710,934		)	Payments on debt	(1,057,667)		(1,092,115)
Share-based awards exercised	(7,495		)	(5,860		)	Share-based awards exercised	(341)		(6,839)
Dividends paid	(328,106		)	(310,310		)	Dividends paid	(110,851)		(105,369)
Purchases of stock	(73,052		)	(1,918		)	Purchases of stock	(95,719)		—
Net cash used in financing activities	(229,446		)	(622,047		)
Other financing activities							Other financing activities	(871)		—
Net cash provided by financing activities							Net cash provided by financing activities	53,456		145,679
Effect of exchange rate changes on cash and cash equivalents	(6,645		)	(13,343		)	Effect of exchange rate changes on cash and cash equivalents	(14,566)		7
Net increase in cash and cash equivalents	117,728			44,206			Net increase in cash and cash equivalents	77,477		23,378
Cash and cash equivalents at beginning of period	333,547			314,899			Cash and cash equivalents at beginning of period	276,992		333,547
Cash and cash equivalents at end of period	$	451,275		$	359,105		Cash and cash equivalents at end of period	$	354,469	$	356,925

See accompanying notes to condensed consolidated financial statements.

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

1. 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"~~GAAP”) for complete financial statements. Except as disclosed herein, there has been no material change 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,"~~“we,” “our,” “us,” or ~~"its"~~“its”) for the year ended December 31, ~~2018.~~2019. Accordingly, the unaudited interim condensed consolidated financial statements and related disclosures herein should be read in conjunction with the Company’s ~~2018~~2019 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 interim condensed consolidated financial statements. Specifically, the Company makes estimates and assumptions in its interim 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 ~~upon~~on a consideration of historical ~~experience.~~experience, current conditions, and reasonable and supportable forecasts. Volume incentives are estimated based upon cumulative and projected purchasing levels. ~~The estimates and assumptions for interim reporting may change upon final determination at year-end, and such changes may be significant.~~

In the opinion of management, all adjustments necessary for a fair presentation of the Company’s financial results for the interim periods have been made. These adjustments are of a normal recurring nature. The Company has reclassified certain prior period amounts to conform to the current period presentation.

The results of operations for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 are not necessarily indicative of results for the entire year. The Company's operations are concentrated in North America, Europe and Australasia and are vulnerable to the significantly reduced economic activity caused by temporary social distancing and shelter-in-place mandates instituted in those areas in response to the COVID-19 outbreak, which was declared a pandemic in March 2020. The Company's Automotive Group, Industrial Group and Business Products Group each have been classified “essential” businesses by government authorities and the Company’s operations remain substantially open to serve customers throughout this pandemic (except for operations in France and New Zealand, which individually account for less than 5% of sales for the three months ended March 31, 2020). The Company's customers also are benefiting from various forms of government economic assistance, including assistance provided by the Coronavirus Aid, Relief, and Economic Security Act in the United States. Nonetheless, if the pandemic persists or worsens, the estimates and assumptions management made as of March 31, 2020 could change in subsequent interim reports and upon final determination at year-end, and it is reasonably possible such changes could be significant (although the potential effects cannot be estimated at this time). The Company has evaluated subsequent events through the date the condensed consolidated financial statements covered by this quarterly report were issued.

Table of Contents

2. Segment Information

The following table presents a summary of the Company's reportable segment financial information:


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
	2019			2018			2019			2018				2020		2019
Net sales:													Net sales:
Automotive	$	2,790,607		$	2,649,716		$	8,187,760		$	7,950,176		Automotive	$	2,581,636	$	2,622,345
Industrial	1,732,831			1,577,329			5,049,975			4,727,938			Industrial	1,509,841		1,635,423
Business products	491,585			495,877			1,448,381			1,453,167			Business products	468,055		479,065
Total net sales	$	5,015,023		$	4,722,922		$	14,686,116		$	14,131,281		Total net sales	$	4,559,532	$	4,736,833
Operating profit:
Segment profit:													Segment profit:
Automotive	$	222,100		$	226,742		$	629,713		$	655,059		Automotive	$	142,314	$	179,228
Industrial	137,525			119,153			394,887			356,535			Industrial	113,933		121,028
Business products	21,611			19,846			63,727			62,869			Business products	20,199		21,220
Total operating profit	381,236			365,741			1,088,327			1,074,463
Total segment profit													Total segment profit	276,446		321,476
Interest expense, net	(24,770		)	(21,881		)	(70,313		)	(70,713		)	Interest expense, net	(19,836)		(23,029)
Intangible asset amortization	(26,224		)	(23,593		)	(72,725		)	(66,802		)	Intangible asset amortization	(24,007)		(22,584)
Corporate expense (1)	(25,709		)	(28,532		)	(127,115		)	(115,623		)
Corporate expense													Corporate expense	(52,742)		(30,237)
Other unallocated costs (1)													Other unallocated costs (1)	(916)		(34,114)
Income before income taxes	$	304,533		$	291,735		$	818,174		$	821,325		Income before income taxes	$	178,945	$	211,512

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

~~(1)~~

~~Includes $12,413 of income and $25,809 of expense for the three and nine months ended September 30, 2019, respectively, in certain~~


	Three Months Ended March 31,
	2020		2019
Other unallocated costs:
Gain on insurance proceeds related to SPR Fire	$	12,283	$	—
Transaction and other costs	(11,760)		(7,077)
Restructuring costs	(1,439)		—
Realized currency loss	—		(27,037)
Total other unallocated costs	$	(916)	$	(34,114)

Refer to the commitments and contingencies footnote for discussion of gain on insurance proceeds. Refer to restructuring footnote for discussion of restructuring costs. Refer to acquisitions and divestitures footnote for discussion of realized currency loss and transactions that give rise to transaction and other costs. Transaction and other costs related to acquisitions and dispositions. Also includes the realized currency losses incurred on the March 7, 2019 sale of Grupo Auto Todo and the September 30, 2019 sale of EIS Inc. ("EIS"), net of a gain from remeasuring the Company's preexisting 35% equity investment to fair value upon acquiring the remaining equity of Inenco on July 1, 2019. Refer to the acquisitions and divestitures footnote for further details.

~~Includes $3,104 of income and $19,010 of expense~~ for the three ~~and nine~~ months ended ~~September 30, 2018, respectively, in certain transaction~~March 31, 2020 included $6,035 of COVID-19 incremental costs incurred relating to fees to cancel marketing events and increased cleaning and sanitization materials, among other ~~costs related to the acquisition~~things.

Table of ~~Alliance Automotive Group ("AAG") and the attempted Business Products Group spin-off, net of a $12,000 termination fee received in the third quarter of 2018.~~Contents

Net sales are disaggregated by geographical region for each of the Company’s reportable segments, as the Company deems 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 March 31,
	2020		2019
North America:
Automotive	$	1,730,447	$	1,813,785
Industrial	1,410,715		1,635,423
Business products	468,055		479,065
Total North America	$	3,609,217	$	3,928,273
Australasia:
Automotive	272,924		284,553
Industrial	99,126		—
Total Australasia	372,050		284,553
Europe – Automotive	578,265		524,007
Total net sales	$	4,559,532	$	4,736,833

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
North America:
Automotive $ 1,942,922
$ 1,918,814
$ 5,720,290
$ 5,646,108
Industrial 1,624,303
1,577,329
4,941,447
4,727,938
Business products 491,585
495,877
1,448,381
1,453,167
Total North America $ 4,058,810
$ 3,992,020
$ 12,110,118
$ 11,827,213
Australasia:
Automotive 295,424
298,797
866,694
903,600
Industrial 108,528
—
108,528
—
Total Australasia 403,952
298,797
975,222
903,600
Europe – Automotive 552,261
432,105
1,600,776
1,400,468
Total net sales $ 5,015,023
$ 4,722,922
$ 14,686,116
$ 14,131,281

3. Accumulated Other Comprehensive Loss

The following tables present the changes in accumulated other comprehensive loss ~~("AOCL"~~(“AOCL”) by component for the ~~nine~~three months ended ~~September 30:~~March 31:


	Changes in Accumulated Other Comprehensive Loss by Component
	Pension and Other Post-Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation		Total
Beginning balance, January 1, 2020	$	(704,415)	$	(20,671)	$	(416,222)	$	(1,141,308)
Other comprehensive loss before reclassifications	—		(19,300)		(182,613)		(201,913)
Amounts reclassified from accumulated other comprehensive loss	8,448		1,444		—		9,892
Other comprehensive income (loss), net of income taxes	8,448		(17,856)		(182,613)		(192,021)
Ending balance, March 31, 2020	$	(695,967)	$	(38,527)	$	(598,835)	$	(1,333,329)

Changes in Accumulated Other
Comprehensive Loss by Component
Pension and Other Post-Retirement Benefits Cash Flow and Net Investment Hedges Foreign Currency Translation Total
Beginning balance, January 1, 2019 $ (626,322 ) $ 10,726
$ (499,482 ) $ (1,115,078 )
Other comprehensive loss before reclassifications —
54,180
(123,070 ) (68,890 )
Amounts reclassified from accumulated other comprehensive loss (1) 22,855
1,581
34,701
59,137
Income taxes (6,166 ) (15,057 ) —
(21,223 )
Other comprehensive loss, net of income taxes 16,689
40,704
(88,369 ) (30,976 )
Cumulative effect from adoption of ASU 2018-02 (122,526 ) —
—
(122,526 )
Ending balance, September 30, 2019 $ (732,159 ) $ 51,430
$ (587,851 ) $ (1,268,580 )


~~(1)~~	Amount includes realized currency losses of $34,701 that were reclassified out of foreign currency translation into earnings in connection with the March 7, 2019 sale of Grupo Auto Todo and the September 30, 2019 sale of EIS. Refer to the acquisitions and divestitures footnote for further details.

Changes in Accumulated Other
Comprehensive Loss by Component
Pension and Other Post-Retirement Benefits Cash Flow and Net Investment Hedges Foreign Currency Translation Total
Beginning balance, January 1, 2018 $ (568,957 ) $ (17,388 ) $ (266,247 ) $ (852,592 )
Other comprehensive loss before reclassifications —
22,124
(147,703 ) (125,579 )
Amounts reclassified from accumulated other comprehensive loss 29,071
886
—
29,957
Income taxes (7,850 ) (6,213 ) —
(14,063 )
Other comprehensive loss, net of income taxes 21,221
16,797
(147,703 ) (109,685 )
Ending balance, September 30, 2018 $ (547,736 ) $ (591 ) $ (413,950 ) $ (962,277 )


	Changes in Accumulated Other Comprehensive Loss by Component
	Pension and Other Post-Retirement Benefits		Cash Flow Hedges		Foreign Currency Translation		Total
Beginning balance, January 1, 2019	$	(626,322)	$	(4,631)	$	(484,125)	$	(1,115,078)
Other comprehensive income (loss) before reclassifications	—		(4,178)		20,927		16,749
Amounts reclassified from accumulated other comprehensive loss (1)	4,832		(1,001)		27,037		30,868
Other comprehensive income (loss), net of income taxes	4,832		(5,179)		47,964		47,617
Cumulative effect from adoption of ASU 2018-02	(122,526)		—		—		(122,526)
Ending balance, March 31, 2019	$	(744,016)	$	(9,810)	$	(436,161)	$	(1,189,987)

Table of Contents

(1) Amount includes realized currency losses of $27,037 that were reclassified out of foreign currency translation into earnings in connection with the March 7, 2019 sale of Grupo Auto Todo. Refer to the acquisitions and divestitures footnote for further details.

The ~~accumulated other comprehensive loss~~AOCL components related to the pension benefits are included in the computation of net periodic benefit income in the employee benefit plans footnote. The nature of the cash flow ~~and net investment~~ hedges are discussed in the derivatives and hedging footnote. Generally, tax effects in ~~accumulated other comprehensive loss~~AOCL are established at the currently enacted tax rate and reclassified to net income in the same period that the related pre-tax accumulated other comprehensive loss reclassifications are recognized.

4. Recent Accounting Pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board ~~("FASB"~~(“FASB”) in the form of ASUs to the FASB Accounting Standards Codification ~~("ASC"~~(“ASC”). The Company considers the applicability and impact of all ASUs and any not listed below were assessed and determined to be not applicable or are expected to have a minimal impact on the Company's condensed consolidated financial statements.

~~Leases (Topic 842)~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~, which, among other things, requires an entity to recognize a right-of-use asset and a lease liability on the balance sheet for substantially all leases, including operating leases. Expanded disclosures with additional qualitative and quantitative information are also required. ASU 2016-02 and its amendments were effective for interim and annual reporting periods beginning after December 15, 2018 and early adoption was permitted. The ASU's transition provisions could be applied under a modified retrospective approach to each prior reporting period presented in the financial statements or only at the beginning of the period of adoption (i.e., on the effective date).

The Company adopted ASU 2016-02 and its amendments and applied the transition provisions as of January 1, 2019, which included recognizing a cumulative-effect adjustment through opening retained earnings as of that date. Prior year amounts were not recast under this transition approach and, therefore, prior year amounts are excluded from the leased properties footnote. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward its historical assessments of: (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition, the Company did not elect the hindsight practical expedient to determine the reasonably certain lease term for existing leases. The Company elected a policy of not recording leases on its condensed consolidated balance sheets when the leases have a term of 12 months or less and the Company is not reasonably certain to elect an option to purchase the leased asset. The Company recognizes payments on these leases within selling, administrative and other expenses on a straight-line basis over the lease term.

The Company's adoption of the standard resulted in a cumulative-effect adjustment to retained earnings of $4,797, net of taxes, as of January 1, 2019. The standard did not materially impact the Company's consolidated net income or liquidity. The standard did not have an impact on debt-covenant compliance under the Company's current debt agreements.

~~Income Statement - Reporting Comprehensive Income (Topic 220)~~

~~In February 2018, the FASB issued ASU 2018-02,~~ ~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~. The ASU permits a company to make a one-time election to reclassify stranded tax effects caused by the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. The ASU also requires companies to disclose their accounting policies for releasing income tax effects from accumulated other comprehensive income. ASU 2018-02 was effective for periods beginning after December 15, 2018, with an election to adopt early. The Company adopted ASU 2018-02 as of January 1, 2019 and recognized an adjustment to increase retained earnings and to adjust accumulated other comprehensive loss by approximately $122,526.

Financial Instruments - Credit Losses (Topic ~~220)~~

326)

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. Among other things, the ASU and its amendments replace the incurred loss impairment model for receivables and ~~certain other financial instruments~~loan guarantees with a current expected credit loss model. The new model measures impairment based on expected credit losses over the remaining contractual life of an asset, considering available information about the collectability of cash flows, past events, current conditions, and reasonable and supportable forecasts. Additional quantitative and qualitative disclosures are required. ~~ASU 2016-13 is effective for periods beginning after December 15, 2019, with an option to adopt early.~~ The Company plans to adopt the ASU and its amendments on January 1, 2020, and any changes to allowances for credit losses caused by the adoption will be made through a cumulative effect adjustment to retained earnings as of that date. The adoption ofadopted ASU 2016-13 and its amendments ~~is not expected~~as of January 1, 2020, which included recognizing a cumulative-effect adjustment to ~~have a significant impact on the Company's consolidated financial statements.~~reduce opening retained earnings by $11,432, net of taxes.

Compensation - Retirement Benefits (Topic 715)

In August 2018, the FASB issued ASU 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans. The updated accounting guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing, adding and clarifying certain disclosures. These provisions must be applied retrospectively. ASU 2018-14 is effective for periods beginning after December 15, 2020, with an option to adopt early. The adoption of ASU 2018-14 is not expected to have a significant impact on the Company’s financial position, results of operations or disclosures. The Company does not plan to early adopt the standard.

5. Employee Benefit Plans

Net periodic benefit income from the Company's pension plans included the following components for the three months ended ~~September 30:~~March 31:

Pension Benefits
2019 2018
Service cost $ 2,395
$ 2,584
Interest cost 24,362
22,044
Expected return on plan assets (38,551 ) (38,470 )
Amortization of prior service credit (17 ) (37 )
Amortization of actuarial loss 7,752
9,920
Net periodic benefit income $ (4,059 ) $ (3,959 )

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

Pension Benefits
2019 2018
Service cost $ 7,164
$ 7,850
Interest cost 73,045
66,228
Expected return on plan assets (115,585 ) (115,574 )
Amortization of prior service credit (51 ) (111 )
Amortization of actuarial loss 23,247
29,814
Net periodic benefit income $ (12,180 ) $ (11,793 )


	Pension Benefits
	2020		2019
Service cost	$	2,982	$	2,390
Interest cost	20,925		24,348
Expected return on plan assets	(38,523)		(38,527)
Amortization of prior service credit	173		(17)
Amortization of actuarial loss	11,122		7,749
Net periodic benefit income	$	(3,321)	$	(4,057)

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

Table of Contents

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~~earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio and certain limitations on additional borrowings. At ~~September 30, 2019,~~March 31, 2020, the Company was in compliance with all such covenants.

As of ~~September 30, 2019,~~March 31, 2020, the total borrowings of the independents and affiliates subject to guarantee by the Company were approximately ~~$864,398.~~$939,933. These loans generally mature over periods from one to six years. The Company regularly monitors 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 the Company is required to make payments in connection with 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 substantial portion of the amounts paid under the guarantees. ~~When it is deemed probable that the~~The Company ~~will incur a loss in connection with a guarantee,~~recognizes a liability ~~is recorded~~ equal to ~~this estimated loss.~~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, the Company has had no significant losses in connection with guarantees of independents’ and affiliates’ ~~borrowings.~~borrowings and the current expected credit loss reserve is not material. As of March 31, 2020, 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, 2019,~~March 31, 2020, the Company has recognized certain assets and liabilities amounting to ~~$87,000~~$93,000 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 liabilities relate to the Company's noncontingent obligation to stand ready to perform under the guarantee programs and they are distinct from the Company's current expected credit loss reserve.

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. As of ~~September 30, 2019,~~March 31, 2020, the carrying amount, net of debt issuance costs, and the fair value of fixed rate debt were approximately ~~$1,913,359~~$1,905,444 and ~~$2,017,415,~~$1,652,826, 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 amount, net of debt issuance costs, of fixed rate debt of ~~$1,913,359~~$1,905,444 is included in long-term debt in the condensed consolidated balance sheets. Refer to the derivatives and hedging footnote for information on the fair value of derivative instruments.

8. ~~Credit Facilities~~

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 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.

On June 30, 2019, the Company entered into a private placement agreement of Australian dollar ("A$") denominated long-term fixed rate debt of A$310,000. The A$310,000 of long-term fixed rate debt includes A$155,000, 3.10% Series A Guaranteed Senior Note maturing on June 30, 2024 and A$155,000, 3.43% Series B Guaranteed Senior Note maturing on June 30, 2026.

All borrowings require the Company to comply with a financial covenant with respect to a maximum debt to earnings before interest, taxes, depreciation and amortization ("EBITDA") ratio. At September 30, 2019, the Company was in compliance with all such covenants. For information on the Company's other credit facilities please see the Company's 2018 Annual Report on Form 10-K.

9. Derivatives and Hedging

The Company is exposed to various risks arising from business operations and market conditions, including fluctuations in interest rates and certain foreign currencies. When deemed appropriate, the Company uses derivative and non-derivative instruments as risk management tools to mitigate the potential impact of interest rate and foreign exchange rate risks. The objective of using these tools is to reduce fluctuations in the Company’s earnings and cash flows associated with changes in these rates. Derivative financial instruments are not used for trading or other speculative purposes. The Company has not historically incurred, and does not expect to incur in the future, any losses as a result of counterparty default related to derivative instruments.

Table of Contents

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

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

September 30, 2019 December 31, 2018
Instrument Balance sheet location Notional Balance Notional Balance
Cash flow hedges:
Interest rate swaps Other current liabilities $ 800,000
$ 29,832
$ 500,000
$ 6,345
Net investment hedges:
Cross-currency swap Prepaid expenses and other current assets —
—
$ 500,000
$ 6,006
Forward contracts Prepaid expenses and other current assets $ 925,810
$ 55,050
—
—
Foreign currency debt Long-term debt € 700,000
$ 765,870
€ 700,000
$ 801,010


		March 31, 2020						December 31, 2019
Instrument	Balance sheet location	Notional		Balance		Notional		Balance
Cash flow hedges:
Interest rate swaps	Other current liabilities	$	800,000	$	47,275	$	800,000	$	24,792
Net investment hedges:
Forward contracts	Prepaid expenses and other current assets	$	1,513,760	$	93,335	$	925,810	$	39,965
Foreign currency debt	Long-term debt	€	700,000	$	773,220	€	700,000	$	784,000

The 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.

Cash Flow Hedges

The Company uses interest rate swaps to mitigate variability in forecasted interest payments on a portion of the Company’s U.S. dollar-denominated unsecured variable rate debt. The interest rate swaps effectively convert a portion of the floating rate interest payment into a fixed rate interest payment. The Company designates the interest rate swaps as qualifying hedging instruments and accounts for them as cash flow hedges. Gains and losses from fair value adjustments on the cash flow hedges are initially classified in accumulated other comprehensive loss and are reclassified to interest expense on the dates interest payments are accrued.

Hedges of Net Investments in Foreign Operations

The Company has designated certain derivative instruments and a portion of its foreign currency denominated debt, a non-derivative financial instrument, as hedges of the foreign currency exchange rate exposure of the Company's Euro-denominated net investment in a European subsidiary. The Company applies the spot method to assess the hedge effectiveness of the derivative instruments and this assessment for each instrument excludes the initial value related to the difference at contract inception between the foreign exchange spot rate and the forward rate (i.e., the forward points). The initial value of this excluded component is recognized as a reduction to interest expense in a systematic and rational manner over the term of the derivative instrument. All other changes in value for the net investment hedges are included in accumulated other comprehensive loss within foreign currency translation and would only be reclassified to earnings if the European subsidiary were liquidated, or otherwise disposed.

Table of Contents

The table below presents gains and losses related to designated cash flow hedges and net investment hedges:

Gain (Loss) Recognized in AOCL Before Reclassifications Gain Recognized in Interest Expense For Excluded Components
2019 2018 2019 2018
Three Months Ended September 30,
Cash Flow Hedges:
Interest rate contract $ (3,766 ) $ 1,079
$ —
$ —
Net Investment Hedges:
Cross-currency swap $ —
$ (6,536 ) $ —
$ 3,256
Forward contracts 35,796
—
5,596
—
Foreign currency debt 30,030
5,600
—
—
Total $ 62,060
$ 143
$ 5,596
$ 3,256
Nine Months Ended September 30,
Cash Flow Hedges:
Interest rate contract $ (25,332 ) $ 1,079
$ —
$ —
Net Investment Hedges:
Cross-currency swap $ 2,936
$ (6,536 ) $ 2,294
$ 3,256
Forward contracts 41,436
—
12,220
—
Foreign currency debt 35,140
27,581
—
—
Total $ 54,180
$ 22,124
$ 14,514
$ 3,256


	Gain (Loss) Recognized in AOCL Before Reclassifications						Gain Recognized in Interest Expense For Excluded Components
	2020		2019		2020		2019
Three Months Ended March 31,
Cash Flow Hedges:
Interest rate contract	$	(24,461)	$	(7,447)	$	—	$	—
Net Investment Hedges:
Cross-currency swap	—		2,936		—		2,294
Forward contracts	46,848		9,941		6,522		1,616
Foreign currency debt	10,780		15,680		—		—
Total	$	33,167	$	21,110	$	6,522	$	3,910

Amounts reclassified from accumulated other comprehensive loss to interest expense for the periods presented were not material.

~~10. Leased Properties~~

~~The Company primarily leases real estate for certain retail stores, distribution centers, office space~~9. Commitments and ~~land. The Company also leases equipment (primarily vehicles).~~

Most real estate leases include one or more options to renew, with renewal terms that generally can extend the lease term from one to 20 years. The exercise of lease renewal options is at the Company's discretion. The Company evaluates renewal options at lease inception and on an ongoing basis, and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities. Lease agreements generally do not require material variable lease payments, residual value guarantees or restrictive covenants.

~~The table below presents the locations of the operating lease assets and liabilities on the condensed consolidated balance sheets as of September 30, 2019:~~

Balance Sheet Line Item September 30, 2019
Operating lease assets Operating lease assets $ 1,048,462

Operating lease liabilities:
Current operating lease liabilities Other current liabilities $ 274,687
Noncurrent operating lease liabilities Operating lease liabilities 797,166
Total operating lease liabilities $ 1,071,853

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

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

~~The Company's weighted average remaining lease term and weighted average discount rate for operating leases as of September 30, 2019 are:~~



~~Weighted average remaining lease term (in years)~~	~~5.58~~
~~Weighted average discount rate~~	~~3.21~~	%

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized on the condensed consolidated balance sheets as of September 30, 2019:

October 1, 2019 through December 31, 2019 $ 77,339
2020 296,219
2021 230,421
2022 173,932
2023 122,529
Thereafter 276,067
Total undiscounted future minimum lease payments 1,176,507
Less: Difference between undiscounted lease payments and discounted operating lease liabilities 104,654
Total operating lease liabilities $ 1,071,853

~~Operating lease payments include $53,104 related to options to extend lease terms that are reasonably certain of being exercised.~~

Operating lease costs were $86,704 and $244,090 for the three and nine months ended September 30, 2019, respectively. Operating lease costs are included within selling, administrative and other expenses on the condensed consolidated statements of income and comprehensive income. Short-term lease costs, variable lease costs and sublease income were not material for the periods presented.

Cash paid for amounts included in the measurement of operating lease liabilities were $234,860 for the nine months ended September 30, 2019, and this amount is included in operating activities in the condensed consolidated statements of cash flows. Operating lease assets obtained in exchange for new operating lease liabilities were $277,900 for the nine months ended September 30, 2019.

~~11. Commitments &~~ Contingencies

Legal Matters

As more fully discussed in the ~~legal matter~~commitments and contingencies footnote of the Company's notes to the consolidated financial statements in its ~~2018~~2019 Annual Report on Form 10-K, a jury awarded damages against the Company in a litigated automotive product liability dispute. On February 19, 2020, the higher court issued an order entirely reversing the jury’s finding on damages and ordering a new trial on damages. The plaintiffs have since appealed this order to the Washington Supreme Court; a decision is expected later this year as to whether the Washington Supreme Court will consider this matter. At the time of the filing of these financial statements, based upon the Company’s legal defenses, insurance coverage, and reserves, the Company does not believe this matter will have a material impact to the condensed consolidated financial statements.

Fire at S.P. Richards Headquarters and Distribution Center

On July 19, 2019, a fire occurred at the S.P. Richards headquarters in Atlanta, Georgia. The building primarily held the S.P. Richards headquarters office and was connected to ~~their~~its Atlanta distribution center. The Company maintains property and casualty loss insurance coverage. The Company ~~expects to recover all~~recognized a gain of $12,283 during the three months ended March 31, 2020 for insurance recoveries in excess of losses it has incurred on inventory, property, plant and equipment and other fire-related ~~costs from~~costs. The gain is included within other non-operating expenses (income) on the condensed consolidated statements of income and comprehensive income. The Company expects to receive additional insurance ~~proceeds.~~recoveries in the future which will result in additional gains.

~~12.~~10. Acquisitions and Divestitures

Acquisitions

The ~~Company's acquisitions of~~Company acquired several businesses ~~totaled $642,468,~~for approximately $20,874 and $153,200, net of cash acquired, during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020 and March 31, 2019, respectively. The measurement period is still open for certain 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

~~equity method of accounting. The acquisition-date fair value of the 35% investment was $123,385 and is included in the~~prior periods, but there have been no significant measurement ~~of the consideration transferred. The difference between the acquisition-date fair value and the carrying amount of the equity method investment resulted in the recognition of a gain of $38,663~~on the acquisition date. The acquisition-date fair value was determined using a market and income approach with the assistance of a third party valuation firm. The gain is included in the line item "other" within non-operating (income) expenses on the condensed consolidated statement of income and comprehensive income for the period ~~ended September 30, 2019.~~

The acquisition date fair value of the consideration transferred for the aggregate of the acquired businesses was approximately $765,853, net of cash acquired of $12,149, which consisted of the following:

September 30, 2019
Cash $ 642,468
Fair value of 35% investment in Inenco held prior to business combination 123,385
Total $ 765,853

~~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. Additional~~ adjustments ~~may be made to the acquisition accounting~~ during the ~~measurement period primarily related to intangible asset revaluations and tax accounting.~~

September 30, 2019
Trade accounts receivable $ 127,823
Merchandise inventories 281,764
Prepaid expenses and other current assets 11,066
Intangible assets 318,301
Deferred tax assets 1,046
Property and equipment 60,313
Operating lease assets 96,845
Other assets 40,840
Total identifiable assets acquired 937,998
Current liabilities 101,564
Long-term debt 150,879
Operating lease liabilities 96,371
Deferred tax liabilities 58,903
Other long-term liabilities 97,407
Total liabilities assumed 505,124
Net identifiable assets acquired 432,874
Goodwill 332,979
Net assets acquired $ 765,853

The acquired intangible 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.

The estimated goodwill recognized as part of the acquisitions is generally not tax deductible. $174,048 of goodwill has been assigned to the automotive segment and $158,931 has been assigned to the industrial segment. The goodwill is attributable primarily to the expected synergies and assembled workforces of the acquired businesses.

three months ended March 31, 2020.

Divestitures

Grupo Auto Todo

On March 7, 2019, the Company sold all of its equity in Grupo Auto Todo, a Mexican subsidiary within the Automotive Parts Group. Grupo Auto Todo contributed annual revenues of approximately ~~$93,000 of revenues~~ $15,900 for the year ended December 31, ~~2018.~~2019 ~~Proceeds from the transaction of $12,028 are included in proceeds from divestitures on the condensed consolidated statement of cash flows for the nine months ended September 30, 2019.~~. The Company incurred realized currency losses of $27,037 from this transaction during the ~~nine~~three months ended ~~September 30,~~March 31, 2019. These losses are included in the line item ~~"other"~~“other” within non-operating (income) expenses on the condensed consolidated statements of income and comprehensive income.

~~EIS~~SPR Canada and Safety Zone Canada

~~During the third quarter of 2019,~~On January 1, 2020 and March 2, 2020, the Company ~~approved a transaction to sell EIS, a wholly owned subsidiary~~sold all its equity in SPR Canada and Safety Zone Canada, respectively. SPR Canada and Safety Zone Canada were both Canadian subsidiaries within the ~~Industrial Parts~~Business Products Group. ~~The transaction closed on September 30, 2019. EIS~~SPR Canada and

Table of Contents

Safety Zone Canada contributed annual revenues of approximately ~~$817,249 of revenue~~$47,300 and $7,900, respectively, 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 incurred realized currency losses of $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.

~~13.~~11. Earnings Per Share

As more fully discussed in the share-based compensation footnote of the Company’s notes to the consolidated financial statements in its ~~2018~~2019 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 share-based awards. Options to purchase approximately ~~544 and 223~~1,410 shares of common stock were outstanding but excluded from the computations of diluted earnings per share for the three ~~and nine~~ month ~~periods~~period ended ~~September 30, 2019, respectively,~~March 31, 2020, as compared to approximately ~~643 and 1,495~~3 for the three ~~and nine~~ month ~~periods~~period ended ~~September 30, 2018, respectively.~~March 31, 2019. These options were excluded from the computations of diluted net income per common share because the options’ exercise prices were greater than the average market price of the common stock.

12 . Restructuring

2019 Cost Savings Plan

As more fully discussed in the restructuring footnote of the Company's notes to the consolidated financial statements in its 2019 Annual Report on Form 10-K, the Company approved and began to implement certain restructuring actions (the “2019 Cost Savings Plan”) across its subsidiaries primarily targeted at simplifying organizational structures and distribution networks. The Company believes these actions will reduce costs in the future and allow it to more effectively and efficiently manage its businesses.

The table below summarizes costs associated with the 2019 Cost Savings Plan:


	Total
Total restructuring costs incurred in 2020	$	1,439
Remaining costs expected but not yet incurred	14,793
Total costs	$	16,232

The 2019 Cost Savings Plan was approved and funded by the Company's corporate office and therefore these costs are not allocated to the Company's segments.

The table below summarizes the activity related to the restructuring costs discussed above. As of March 31, 2020, the current portion of the restructuring liability of $37,982 is included in other current liabilities on the consolidated balance sheet.


	Severance and other employee costs		Facility and closure costs		Accelerated operating lease costs		Asset impairments		Total
Liability as of January 1, 2020	$	77,597	$	8,967	$	—	$	—	$	86,564
Restructuring costs	(454)		(414)		2,071		236		1,439
Cash payments	(44,393)		(1,757)		—		—		(46,150)
Non-cash charges	—		—		(2,071)		(236)		(2,307)
Translation	(1,037)		(235)		—		—		(1,272)
Liability as of March 31, 2020	$	31,713	$	6,561	$	—	$	—	$	38,274

Table of Contents

13. Subsequent Events

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its operations, including how it will impact its customers, employees, suppliers and distribution channels. While the Company experienced lower sales trends in the last two weeks of the quarter, it cannot reasonably estimate at this time the impact of COVID-19 on its financial condition, results of operations or cash flows for the foreseeable future. The Company is preparing for multiple scenarios to facilitate its continued ability to protect its employees while also keeping operations ongoing to serve its customers. Events and changes in circumstances arising after March 31, 2020, including those resulting from the impacts of COVID-19, will be reflected in management’s estimates for future periods.

On May 1, 2020, the Company entered into an amendment to the Amended and Restated Syndicated Credit Facility Agreement, dated as of October 30, 2017, and the Notes Purchase Agreement, dated as of October 30, 2017. The financial covenants were amended to provide for the debt to EBITDA ratio to increase from 3.50 to 1.0 to 4.00 to 1.0 through December 31, 2020 (and then to revert to 3.50 to 1.0 after such date) and interest rates were incrementally increased, among other changes.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements 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, ~~2018.~~2019.

Forward-Looking Statements

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. All statements in the future tense and all statements accompanied by words such as “expect,” “likely,” “outlook,” “forecast,” “preliminary,” “would,” “could,” “should,” “position,” “will,” “project,” “intend,” “plan,” “on track,” “anticipate,” “to come,” “may,” “possible,” “assume,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Senior officers may also make verbal statements to analysts, investors, the media and others that are forward-looking. ~~Forward-looking~~These forward-looking statements ~~may relate,~~include, without limitation, our expected ability to operate and protect our workforce during the COVID-19 pandemic, the execution and effect of our cost savings initiatives, our efforts and initiatives to help us emerge from the pandemic well-positioned, our ongoing efforts to maintain compliance and flexibility under our debt covenants, our liquidity position to continue to operate during these highly uncertain times and plans for ~~example, to the anticipated strategic benefits, synergies and 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.~~cost savings.

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 extent and duration of the disruption to our business operations caused by the global health crisis associated with the COVID-19 outbreak, including the effects on the financial health of our business partners and customers, on supply chains and our suppliers, on vehicle miles driven as well as other metrics that affect our business, and on access to capital and liquidity provided by the financial and capital markets; the Company’s ability to maintain compliance with its debt covenants and amend such credit facilities as necessary; the Company's ability to successfully integrate acquired 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; ~~changes in~~ the ~~European aftermarket;~~Company's ability to successfully divest businesses; the ~~Company’s~~Company's ability to successfully implement its business initiatives in each of its three business segments; slowing demand for the ~~Company’s~~Company's products; the ability to maintain favorable supplier arrangements and relationships; disruptions in our suppliers' operations, including the impact of COVID-19 on our suppliers as well as our supply chain, including potential problems with inventory availability and the potential result of higher cost of product and international freight due to the high demand of products and low supply for an unpredictable period of time; changes in national and international legislation or government regulations or policies, including ~~new~~changes to import tariffs and the unpredictability of ~~additional tariffs and~~such changes, data security policies and ~~requirements;~~requirements as well as privacy legislation; changes in general economic conditions, including unemployment, inflation (including the impact of ~~potential~~ tariffs) or deflation and the United ~~Kingdom’s referendum to~~Kingdom's exit from the European Union, commonly known as ~~Brexit;~~Brexit, and the unpredictability of the impact following such exit from the European Union; changes in tax policies; volatile exchange rates; volatility in oil prices; significant cost increases, such as rising fuel and freight expenses; labor ~~shortages;~~shortages and the Company's ability to successfully attract and retain employees in the current labor market; uncertain credit markets and other macroeconomic conditions; competitive product, service and pricing pressures; the ability to maintain favorable vendor arrangements and relationships; disruptions in our vendors’ operations, including the impact of tariffs and trade considerations on their operations and output, as required to meet product demand; failure or weakness in our disclosure controls and procedures and internal controls over financial reporting; including as a result of the work from home environment; the uncertainties and costs of litigation; disruptions caused by a failure or breach of the ~~Company’s~~Company's information systems, as well as other risks and uncertainties discussed in the ~~Company’s~~Company's Annual Report on Form 10-K for ~~2018~~2019 and Item 1A, risk factors, in this report on Form 10-Q (all of which risks may be amplified by the COVID-19 outbreak) and from time to time in the ~~Company’s~~Company's subsequent filings with the SEC.

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 Forms 10-K, 10-Q, 8-K and other reports filed with the SEC.

Table of Contents

Overview

Genuine Parts Company is a service organization engaged in the global distribution of automotive replacement parts, industrial parts and business products. We have a long tradition of growth dating back to 1928, the year we were founded in Atlanta, Georgia. ~~During~~The Company conducts business in North America, Europe and Australasia from approximately 3,600 locations. At Genuine Parts Company, our mission is to be a world-class service organization and the ~~nine~~employer of choice, supplier of choice, valued customer, good corporate citizen and investment of choice. Our strategic financial objectives are intended to align with our mission and drive value for all our stakeholders. Our strategic financial objectives include: (1) top line revenue growth (2) improved operating margin, (3) strong balance sheet and cash flow and (4) effective capital allocation.

The Company's Automotive Parts Group operated in the U.S., Canada, Mexico, France, the U.K., Germany, Poland, the Netherlands, Belgium, Australia and New Zealand as of March 31, 2020, and accounted for 57% of total revenues for the three months ended ~~September 30, 2019, business was conducted throughout~~March 31, 2020. Our Industrial Parts Group operated in the ~~United States,~~U.S., Canada, Mexico, ~~Puerto Rico,~~ Australia, New Zealand, Indonesia ~~Singapore,~~and Singapore. The Industrial Parts Group accounted for 33% of the ~~U.K.~~Company's total revenues for the three months ended March 31, 2020. Our Business Products Group operated in the U.S. as of March 31, 2020, as its Canadian operations were divested, effective January 1, 2020. The Business Products Group accounted for 10% of total revenues for the three months ended March 31, 2020.

COVID-19 Pandemic

The COVID-19 outbreak, which was declared a pandemic by the World Health Organization (“WHO”) on March 11, 2020, continues to evolve rapidly. Our deepest and sincere thoughts go out to all affected by COVID-19, as well as the dedicated healthcare workers and first responders who are on the front lines for all our citizens.

Overall, our business segments face many uncertainties. These uncertainties include the severity of the virus, the duration of the outbreak, governmental, business or other actions taken in response to the pandemic, impacts on our supply chain, the effect on customer demand, store closures or changes to our operations. Our business segments experienced slowing sales trends over the last two weeks of March due to growing pandemic concerns and the expansion of efforts to combat COVID-19 by government authorities, such as “shelter in place” and other similar orders and mandates. We expect the sales environment to slow further due to COVID-19 and the decline in global economic activity during the second quarter, and on a preliminary and estimated basis, the Company has experienced a decrease in total daily sales of approximately 25% in April, excluding divestitures, with our Automotive Group, Industrial Group and Business Products Group down approximately 30%, 10% and 20%, respectively. While the negative impact on our business operations cannot be reasonably estimated at this time, our teams are preparing for multiple scenarios to ensure we continue to protect our employees while also keeping our operations up and running to serve our customers.

We have created a dedicated COVID-19 Taskforce and added enhanced protocols in response to COVID-19, including recommendations and requirements issued by the Centers for Disease Control and Prevention, WHO, and local, state and national health authorities, to protect our employees, customers, suppliers and communities.

Our operations are deemed “essential” across all markets in which we serve. As of March 31, 2020, substantially all operations are open for business, with France ~~Germany, Poland,~~and New Zealand mostly closed due to government mandates. Our supply chain partners have been very supportive and they continue to do their part to ensure our service levels to our customers remain strong. We remain in constant communication with our employees regarding changing conditions and protocol.

For further information regarding the ~~Netherlands,~~impact of COVID-19 on the Company, please see “Results of Operations,” “Financial Condition,” “Liquidity and ~~Belgium from~~Capital Resources,” “Changes in Internal Control over Financial Reporting,” item 1A, “Risk Factors,” item 2, “Issuer Repurchase of Equity Securities” and item 5, “Other Information” in this report, which is incorporated herein by reference.

Key Business Metrics

We consider comparable sales, daily sales and number of miles driven to be key business metrics. These metrics should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in this report.

Comparable Sales

Our comparable sales growth is a significant driver of our net sales, profitability, cash flow, and overall business results. Comparable sales (also called organic sales or core sales) refer to period-over-period comparisons of our net sales excluding the impact of acquisitions, divestitures and foreign currency. The Company considers this metric useful to investors because it provides greater transparency into management’s view and assessment of the Company’s core ongoing operations. This is a metric that is widely used by analysts, investors and competitors in our industry, although our calculation of the metric may not

Table of Contents

be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate this metric in the same manner.

Daily Sales

Daily sales is a key metric that represents the amounts invoiced to the Company's customers each day. Daily sales do not represent GAAP-based sales because, among other things, invoices are not always generated at the same time goods and services are delivered to customers and the amounts do not include adjustments for estimates of returns, rebates or other forms of variable consideration. Management uses this metric to monitor demand trends at each of its subsidiaries throughout each month for the purposes of monitoring performance against forecasts and to make operational decisions. The Company considers this metric useful to investors because it provides greater transparency into management’s view and assessment of the Company’s core ongoing operations. The calculation of this metric may not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate this metric in the same manner.

Number of Miles Driven

The Company considers the number of miles driven, which is an industry-generated metric, to be a key metric because it influences the demand for repair and maintenance products sold within the automotive aftermarket. We believe including this metric is useful to investors because it provides greater transparency into management’s view and assessment of trends in the Automotive Parts Group.

Results of Operations

Overview

As the Company’s automotive, industrial and business products operations are each classified “essential” businesses to the communities in which we serve, the Company has remained substantially open during the COVID-19 pandemic, with the exception of the temporary lockdowns in France and New Zealand due to preemptive government mandates. As an overview of our quarterly results, the Company’s sales and operating environment were severely impacted by the COVID-19 pandemic in the last two weeks of the quarter. Overall, the Company attributes an approximate 3% impact to sales and a 0.7% impact to segment margin, or $0.21 per share, to COVID-19. Despite the challenges of these unprecedented business conditions, our North American industrial operations, as well as our businesses in Australasia, operated well and reported improved profit margins. In addition, the Company improved its total gross margin in the quarter and implemented accelerated cost savings initiatives to more ~~than 3,100 locations.~~effectively leverage our cost structure.

Sales

Sales for the three months ended ~~September 30, 2019~~March 31, 2020 were ~~$5.0~~$4.6 billion, a ~~6.2% increase~~3.7% decrease as compared to $4.7 billion in the same period of the prior year. ~~For the three months ended September 30, 2019, the Company recorded consolidated net income of $227.5 million, an increase of 3.3% as compared~~The decline in sales is due to ~~consolidated net income of $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~~4.8% impact from divestitures, a 3.5% comparable sales decrease due primarily to $1.49 for the same three month period of 2018. For the nine months ended September 30, 2019, sales were $14.7 billion, a 3.9% increase as compared to $14.1 billion in the same period of the prior year. For the nine months ended September 30, 2019, the Company recorded consolidated net income of $612.2 million compared to consolidated net income of $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.

~~During the three and nine months ended September 30, 2019, the Company incurred $12.4 million of income and $25.8 million of expense, respectively,~~decreased demand from ~~realized currency losses, transaction and other costs~~COVID-19 and a ~~gain on an equity investment, before taxes. The realized~~slightly negative foreign currency ~~losses and transaction and other costs primarily resulted from acquisition activity and the March 7,~~

~~2019 sale of Grupo Auto Todo, a Mexican subsidiary in the Automotive Parts Group~~. Additionally, the Company incurred realized currency losses and transaction and other costs related to the September 30, 2019 sale of EIS, the Electrical Specialties Group of Motion Industries. The investment gain relates to the remeasurement of the Company's preexisting 35% equity investment to fair value upon acquiring the remaining equity in Inenco on July 1, 2019. The three and nine months ended September 30, 2018 include $3.1 million of income and $19.0 million of expense in transaction and other costs primarily related to the AAG acquisition as well as income and expense items associated with the attempted spin-off of the Business Products Group.

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 remains committed to its key growth initiatives, which include: driving greater share of spend with existing customers; employing an aggressive but disciplined acquisition strategy focused on both geographical in-fill and product line adjacencies; expanding the Company's digital capabilities; and the further expansion of our U.S. and international footprint.

We continue to execute on these initiatives, and also focus on our plans and strategic 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~~

Sales for the three months ended September 30, 2019 were $5.0 billion, a 6.2% increase as compared to $4.7 billion in the same period of the prior year. Approximately 1.2% of the revenue increase for the three months ended September 30, 2019 represents the growth in comparable sales, while 6.7% came from acquisitions.impact. These items were partially offset by a ~~1.0% negative currency~~5.3% positive impact and 0.7% primarily due to the sale of Grupo Auto Todo. For the nine months ended September 30, 2019 sales were $14.7 billion, a 3.9% increase as compared to $14.1 billion in the same period of the prior year. This reflects an approximate 2.1% increase in comparable sales, a 3.9% contribution from acquisitions and a 1.5% unfavorable currency impact, as compared to the same nine month period in 2018. In addition, automotive sales were negatively impacted by 0.6% primarily due to the sale of Grupo Auto Todo.acquisitions.

Sales for the Automotive Parts Group ~~increased 5.3%~~decreased 1.6% for the three months ended ~~September 30, 2019,~~March 31, 2020, as compared to the same period in the prior year. This group’s decline in revenue ~~increase~~ for the three months ended ~~September 30, 2019~~March 31, 2020 consisted of an approximate ~~1.8% increase~~5.0% decrease in comparable sales, ~~and~~ a ~~6.5% benefit from acquisitions. These items were partially offset by an~~1.7% unfavorable foreign currency impact ~~of approximately 1.8%~~ and a ~~1.2%~~0.6% impact ~~primarily~~ from the sale of Grupo Auto ~~Todo. This group’s 3.0% revenue increase for the nine months ended September 30, 2019 consisted~~Todo, which closed in March of ~~an approximate 2.1% increase in comparable sales and~~2019. These items were mostly offset by a ~~4.3%~~5.3% 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 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 in the quarters ahead.

Sales for the Industrial Parts Group ~~increased 9.9%~~decreased 7.7% for the three months ended ~~September 30, 2019,~~March 31, 2020, as compared to the same period in ~~2018.~~2019. The ~~increase~~decrease in this group’s revenues reflects an approximate ~~0.9% increase~~12.4% impact from the September 2019 sale of EIS and a 3.1% decrease in comparable ~~sales and~~sales. Foreign currency was flat for the three months ended March 31, 2020. These items were partially offset by a ~~9.0%~~7.8% benefit from ~~acquisitions. This group's 6.8% sales increase for the nine months ended September 30, 2019 reflects a 2.7% increase in comparable sales, a 4.3% increase from~~ acquisitions, and a slightly unfavorable foreign currency impact. The Industrial Parts Group has initiatives in place to drive continued market share expansion through both organic and acquisitive sales growth in the quarters ahead. We believe these ongoing initiatives bode well for Industrial Parts Group's long-term growth prospects.including Inenco which closed on July 1, 2019.

Sales for the Business Products Group decreased ~~0.9%~~2.3% for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to the same three month period in ~~2018,~~2019, primarily due to a 3.8% negative impact from the sale of SPR Canada in January 2020 and Garland C. Norris in December 2019. This decrease was partially offset by an increase of 1.5% in comparable ~~sales. For the nine months ended September 30, 2019, this group's revenues were essentially flat compared~~sales primarily due to the ~~same nine month period~~increase in ~~2018. We will remain focused on our core growth initiatives for this business, including~~sales of janitorial, sanitization and safety supplies as a result of the ~~further enhancement of our Facilities, Breakroom and Safety Products offering.~~COVID-19 pandemic.

Cost of Goods Sold and Operating Expenses

Cost of goods sold for the three months ended ~~September 30, 2019~~March 31, 2020 was ~~$3.4~~$3.1 billion, a ~~4.7% increase~~5.3% decrease from $3.2 billion for the same period in ~~2018.~~2019. As a percentage of net sales, cost of goods sold was ~~67.6%~~67.1% for the three months ended ~~September 30, 2019,~~March 31, 2020, as compared to ~~68.6%~~68.2% in the same three month period of ~~2018. Cost of goods sold for the nine months ended September 30, 2019 was $10.0 billion, a 2.7% increase from $9.7 billion for the same period in 2018. As a percentage of net sales, cost of goods sold~~

~~was 67.8% for the nine months ended September 30, 2019, as compared to 68.6% in the same nine month period of 2018.~~2019. The ~~increase~~decrease in cost of goods sold for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 primarily relates to the impact of divestitures and the sales ~~increase~~decrease due to COVID-19 for these periods as

Table of Contents

compared to the same three ~~and nine~~ month ~~periods~~period of the prior year. The ~~increase for these periods was partially due~~improvement in gross margin is attributable to ~~lower cost~~the favorable impact of ~~goods due to favorable global supplier negotiations, more flexible and sophisticated pricing strategies, a shift in product mix to products that carry a~~divestitures as well as the acquisitions of higher gross margin businesses in the Automotive and ~~higher~~Industrial segment. These items and favorable product mix shifts were partially offset by a decrease in 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.~~lower purchasing volumes. 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, (v) changes in foreign currency exchange rates, and (vi) the impact of tariffs. Tariffs did not have a material impact in the periods presented.

Total operating expenses increased to ~~$1.3~~$1.31 billion for the three months ended ~~September 30, 2019~~March 31, 2020 as compared to ~~$1.2~~$1.27 billion for the same three month period in ~~2018.~~2019. As a percentage of net sales, operating expenses increased to ~~26.7%~~28.8% as compared to ~~25.1%~~26.8% in the same three month period of the previous year. For the nine months ended September 30, 2019, these expenses totaled $3.9 billion, or 26.5% as a percentage of net sales, compared to $3.6 billion, or 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~~ months ended ~~September 30, 2019~~March 31, 2020 reflects the effect of rising costs in areas such as ~~payroll,~~ freight, insurance, IT and cyber-security. In addition, the Company’s ability to leverage its expenses was negatively impacted due to lower than expected comparable sales ~~in certain operations~~ relative to the prior year. The Company's ongoing cost control initiatives, as reflected in the decrease in comparable payroll costs in the first quarter of 2020 relative to 2019, partially offset these increases in operating expenses.

The Company’s operating expenses are substantially comprised of compensation and benefit-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 generally remain ~~consistent.The Company continues~~consistent.

Segment Profit

Segment profit decreased 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.

~~Operating Profit~~

~~Operating profit increased to $381.2~~$276.4 million for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$365.7~~$321.5 million for the same three month period of the prior year, ~~an increase~~a decrease of ~~4.2%~~14.0%. As a percentage of net sales, ~~operating~~segment profit was ~~7.6%~~6.1% as compared to ~~7.7%~~6.8% in the same three month period of ~~2018. For the nine months ended September 30, 2019, operating~~2019. The decrease in segment profit ~~increased to $1.09 billion compared to $1.07 billion for the same nine month period of the prior year, and~~ as a percentage ~~of net sales, operating profit was 7.4% as compared to 7.6% in the same nine month period of 2018. The decrease in operating profit as a percent~~ of sales for the three ~~and nine~~ months ended ~~September 30, 2019 is~~March 31, 2020 occurred primarily ~~due to the increase in operating expenses due to the effect of rising costs in areas such as payroll, freight, IT and cyber-security. In addition,~~because the Company’s ability to leverage its expenses was negatively impacted due to lower than expected comparable sales ~~in certain operations, primarily in Europe,~~ relative to the prior year. ~~These increases~~In addition, segment expenses were impacted by the effect of rising costs in areas such as freight, insurance, IT and cyber-security. This decrease in segment profit as a percentage of sales was partially offset by the improvement in gross margin for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 as compared to the same ~~periods~~period in ~~2018.~~2019.

As more fully discussed in our 2019 Form 10-K, the Company approved and began to implement certain restructuring actions across its subsidiaries under the 2019 Cost Savings Plan, primarily targeted at simplifying organizational structures and distribution networks. We believe that these actions, coupled with our ongoing focus on driving top line sales growth, will continue to create value for our stakeholders.

The Automotive Parts Group’s ~~operating~~segment profit decreased ~~2.0%~~20.6% in the three months ended ~~September 30, 2019~~March 31, 2020 as compared to the same period of ~~2018,~~2019, and its ~~operating~~segment profit margin was ~~8.0%~~5.5% as compared to ~~8.6%~~6.8% 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 2018. The decrease in ~~operating~~segment profit as a ~~percent~~percentage of sales for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 is primarily due to the deleveraging of expenses due to lower than expected comparable sales in the U.S., Canadian and European automotive businesses as well as the impact of rising ~~costs and the deleveraging of expenses in the European automotive business. These decreases were~~costs. This decrease is partially offset by the improvement in ~~gross margin for these periods~~segment margins in Australasia as compared to the same ~~periods~~period of the previous year.

The Industrial Parts Group’s ~~operating~~segment profit ~~increased 15.4%~~decreased 5.9% in the three months ended ~~September 30, 2019~~March 31, 2020 as compared to the same three month period of ~~2018,~~2019, and the ~~operating~~segment profit margin for this group ~~was 7.9%~~improved to 7.5% compared to ~~7.6%~~7.4% for the same period of the previous year. ~~Operating profit for the Industrial Parts Group increased by 10.8% for the nine months ended September 30, 2019, compared to the same period in 2018, and the operating~~The improved segment profit margin ~~was 7.8% compared to 7.5% for~~reflects the ~~same nine month period~~benefit of a more efficient operating structure in ~~2018. The improved operating profit reflects~~the North American business as well as the positive impact of ~~sales growth, improved gross margins~~acquisitions and ~~the controlling~~sale of ~~expenses in the three and nine months ended September 30, 2019 as compared to the same periods in 2018, driven by the effective execution of Industrial's strategic growth initiatives.~~

EIS.

The Business Products Group’s ~~operating~~segment profit ~~increased 8.9%~~decreased 4.8% for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to the same three month period in ~~2018,~~2019, and the ~~operating~~segment profit margin was ~~4.4%~~4.3% compared to ~~4.0%~~4.4% for the same period of the previous year. ~~For the nine months ended September 30, 2019, the Business Products Group's operating profit increased 1.4% compared to the same period~~The decrease in ~~2018, and the operating profit margin was 4.4% compared to 4.3% for the same period in 2018. The increase in operating~~segment profit margin for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 is primarily due to ~~improved gross margins and the effective control~~deleverage of expenses as compared to the same periods in ~~2018.~~2019.

Table of Contents

If there are sustained declines in macroeconomic or business conditions in future periods, including as a result of the COVID-19 pandemic, affecting the projected earnings and cash flows at our reporting units, among other things, there can be no assurance that goodwill at one or more reporting units may not be impaired. Nonetheless, as of ~~September 30, 2019,~~March 31, 2020, we believe goodwill is recoverable for all our reporting units.

In particular, we qualitatively assessed whether it was more likely than not that the goodwill of our European automotive reporting unit was impaired. The reporting unit had $1.2 billion in goodwill as of March 31, 2020. The reporting unit primarily operates in the U.K., France, Germany and the Netherlands and these countries have instituted varying levels of social distancing and shelter-in-place mandates in response to the COVID-19 pandemic, including substantially closing business operations in France. The reporting unit is vulnerable to the significantly reduced economic activity caused by these mandates. We are optimistic these conditions are temporary and have not impacted the long-term expectations for the business. The reporting unit is also benefiting from temporary government economic assistance throughout the region. Based on our interim impairment assessment as of March 31, 2020, which included reviewing our previous revenue and operating margin growth forecasts based on our current projections, we have determined that it is not more likely than not that the goodwill is impaired.

Income Taxes

The Company's effective income tax rate was ~~25.3%~~23.7% for the three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~24.5%~~24.2% for the same three month period in ~~2018. The effective income tax rate was 25.2% for the nine months ended September 30, 2019, compared to 24.1% for the same period in 2018.~~2019. The rate ~~increase~~decrease is primarily due to ~~differences in~~geographic income tax ~~rates associated with~~rate mix and the impact of one-time transaction and ~~statute-related adjustments~~other costs, which was partially offset by a decrease in stock compensation excess tax benefits recorded in the comparable ~~periods.~~period.

Net Income

For the three months ended ~~September 30, 2019,~~March 31, 2020, the Company recorded consolidated net income of ~~$227.5~~$136.5 million, ~~an increase~~a decrease of ~~3.3%~~14.8% as compared to consolidated net income of ~~$220.2~~$160.3 million in the same three month period of the prior year. On a per share diluted basis, net income was ~~$1.56, an increase~~$0.94, a decrease of ~~4.7%~~13.8% as compared to ~~$1.49~~$1.09 for the same three month period of 2018. For the nine months ended September 30, 2019, the Company recorded consolidated net income of $612.2 million, a decrease of 1.9% as compared to consolidated net income of $623.8 million in the same nine month period of the prior year. 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 2018.2019.

During the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, the Company incurred ~~$12.4~~$0.9 million of ~~income and $25.8 million of~~net expense, ~~respectively, from realized currency losses, transaction and other~~which represent restructuring costs ~~and a gain on an equity investment, before taxes. The realized currency losses~~ and transaction and other costs, primarily ~~resulted~~incremental costs associated with COVID-19 and divestitures, mostly offset by income from ~~acquisition activity and~~ the ~~March 7, 2019 sale of Grupo Auto Todo, a Mexican subsidiary in the Automotive Parts Group. Additionally, the Company incurred realized currency losses and transaction and other costs related~~SPR Fire insurance proceeds. Refer to the September 30, 2019 sale of EIS, the Electrical Specialties Group of Motion Industries. The investment gain relates to the remeasurement of the Company's preexisting 35% equity investment to fair value upon acquiring the remaining equity in Inenco on July 1, 2019. ~~The three~~acquisitions and ~~nine months ended September 30, 2018 included $3.1 million of income~~divestitures footnote and ~~$19.0 million of expense, respectively, in transaction~~commitments and ~~other costs primarily related to the AAG acquisition as well as income and expense items associated with the attempted spin-off of the Business Products Group.~~contengencies footnote for more information.

Before the impact of realized currency losses, restructuring, transaction and other costs and ~~the equity investment gain,~~income, the Company's adjusted net income was ~~$219.0~~$133.4 million, ~~an increase~~a decrease of ~~0.6%~~28.7% as compared to adjusted net income of ~~$217.6~~$187.2 million in the same three month period of the prior year. ~~Adjusted~~On a per share basis, adjusted net income was $0.92 for the three months ended March 31, 2020, a decrease of 28.1% as compared to $1.28 for the same three month period of 2019. Each of adjusted net income and adjusted diluted net income per common share 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 following table sets forth a reconciliation of net income and diluted net income per common share to adjusted net income and adjusted diluted net income per common share to account for the impact of these adjustments. The Company believes that the presentation of adjusted net income and adjusted diluted net income per common share, which are not calculated in accordance with GAAP, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provide meaningful supplemental information to both management and investors that is indicative of the Company's core operations. The Company considers these metrics useful to investors because they provide greater transparency into management’s view and assessment of the Company’s ongoing operating performance by removing items management believes are not representative of our continuing operations and may distort our longer-term operating trends. We believe these measures to be useful to enhance the comparability of our results from period to period and with our competitors, as well as to show ongoing results from operations distinct from items that are infrequent or not associated with the Company’s core operations. The Company does not, nor does it suggest investors should, consider such non-GAAP financial measures, as superior to, in isolation from, or as a substitute for, GAAP financial information.

Table of Contents


																		Amounts Per Share Assuming Dilution
	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,							Three Months Ended March 31,
(in thousands, except per share data)	2019			2018			2019			2018			(in thousands, except per share data)	2020		2019		2020			2019
GAAP net income	$	227,487		$	220,227		$	612,167		$	623,775		GAAP net income	$	136,535	$	160,250	$	0.94	0	$	1.09
Diluted net income per common share	$	1.56		$	1.49		$	4.18		$	4.23

Adjustments:													Adjustments:
Realized currency losses	$	7,664		$	—		$	34,701		$	—
Termination fee	—			(12,000		)	—			(12,000		)
Gain on equity investment	(38,663		)	—			(38,663		)	—
Transaction and other costs	18,586			8,896			29,771			31,010
Gain on insurance proceeds related to SPR Fire (1)													Gain on insurance proceeds related to SPR Fire (1)	(12,283)		—		(0.08)			—
Transaction and other costs (2)													Transaction and other costs (2)	11,760		7,077		0.08			0.05
Restructuring costs (3)													Restructuring costs (3)	1,439		—		0.01			—
Realized currency loss (4)													Realized currency loss (4)	—		27,037		—			0.18
Total adjustments	$	(12,413	)	$	(3,104	)	$	25,809		$	19,010		Total adjustments	916		34,114		0.01			0.23
Tax impact of adjustments	3,973			512			(1,450		)	(5,137		)	Tax impact of adjustments	(4,048)		(7,150)		(0.03)			(0.04)
Adjusted net income	$	219,047		$	217,635		$	636,526		$	637,648		Adjusted net income	$	133,403	$	187,214	$	0.92		$	1.28
Adjusted diluted net income per common share	$	1.50		$	1.48		$	4.34		$	4.33
Weighted average common shares outstanding – assuming dilution													Weighted average common shares outstanding – assuming dilution					145,623			146,694

The table below clarifies where the items that have been adjusted above to improve comparability of the financial information from period to period are presented in the condensed consolidated statements of income.


	Three Months Ended March 31,
(in thousands)	2020		2019
Line item:
Selling, administrative and other expenses	$	9,825	$	7,077
Restructuring costs	1,439		—
Non-operating (income): Other	(10,348)		27,037
Total adjustments	$	916	$	34,114

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2019 2018 2019 2018
Line item:
Cost of goods sold $ 4,521
$ —
$ 7,481
$ 5,779
Selling, administrative and other expenses 15,879
(3,104 ) 24,103
13,231
Non-operating (income): Other (32,813 ) —
(5,775 ) —
Total adjustments $ (12,413 ) $ (3,104 ) $ 25,809
$ 19,010
(1) Adjustment reflects insurance recoveries in excess of losses incurred on inventory, property, plant and equipment and other fire-related costs related to the S.P. Richards Headquarters and Distribution Center.

(2) Adjustment reflects (i) $6.0 million of incremental costs associated with COVID-19 and (ii) costs associated with divestitures. COVID-19 related costs include incremental costs incurred relating to fees to cancel marketing events and increased cleaning and sanitization materials, among other things.

(3) Adjustment reflects restructuring costs related to the 2019 Cost Savings Plan announced in the fourth quarter of 2019. The costs are primarily associated with severance and other employee costs, including a voluntary retirement program, and facility and closure costs related to the consolidation of operations.

(4) Adjustment reflects realized currency loss related to the sale Grupo Auto Todo in March 2019.

Financial Condition

The Company’s cash balance of ~~$451.3~~$354.5 million at ~~September 30, 2019~~March 31, 2020 increased ~~$117.7~~$77.5 million, or ~~35.3%~~28.0%, from December 31, ~~2018.~~2019. For the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company had net cash provided by operating activities of ~~$745.2~~$74.1 million, net cash used in investing activities of ~~$391.4~~$35.5 million and net cash ~~used in~~provided by financing activities of ~~$229.4~~$53.5 million. The investing activities consisted primarily of ~~$625.6~~$45.4 million for capital expenditures and $3.8 million for acquisitions and other investing activities, ~~$182.6~~slightly offset by $13.8 million ~~for capital expenditures and $416.8 million in~~ proceeds from ~~divestitures.~~divestitures and the sale of property, plant and equipment. The financing activities consisted primarily of ~~$328.1~~$261.2 million net proceeds from debt to enhance liquidity in light of the uncertain environment, offset by $110.9 million for dividends paid to the Company’s shareholders ~~as well as $179.2~~and $95.7 million ~~net proceeds from debt that is primarily being used to fund acquisitions.~~paid for share repurchases.

Accounts receivable increased ~~$246.3~~$70.0 million, or ~~9.9%~~2.7%, from December 31, ~~2018, which is primarily due to acquisitions~~2019. As we continue into 2020 and this uncertain environment, we will be closely monitoring our collection trends. However, collection trends are currently meeting our expectations and we have observed that many of ~~businesses~~our small and ~~higher sales volume~~medium-sized customers in the ~~nine months ended September 30, 2019 as compared to the fourth quarter~~U.S. and international markets are receiving various forms of ~~2018.~~government assistance. Inventory ~~increased $108.9~~decreased $132.3 million, or ~~3.0%~~3.5%, and accounts payable ~~increased $200.1~~decreased $38.8 million, or ~~5.0%~~0.9% from December 31, ~~2018~~2019. Total debt of $3.6 billion at March 31, 2020 increased $209.2 million, or 6.1%, from December 31, 2019. We continue to negotiate extended payment dates with our vendors. Certain

Table of Contents

vendors participate in financing arrangements with financial institutions that allow the vendors to receive payment earlier while we pay the financial institution based on the underlying vendor invoice amounts and due ~~primarily to acquisitions of businesses and more favorable payment terms negotiated with certain of the Company's vendors. The Company’s debt is discussed below.~~dates.

Liquidity and Capital Resources

~~Total debt~~We have taken action and will continue to take actions intended to increase our cash position and preserve financial flexibility in light of ~~$3.4~~current uncertainty in the global markets resulting from COVID-19. These actions include negotiating appropriate covenant amendments to our credit arrangements due to macro uncertainty and evaluating alternative forms of liquidity to enhance credit capacity, reducing our planned capital expenditures for fiscal 2020 (specifically deferring our growth related capital spending), temporarily suspending our share repurchase program, and limiting merger and acquisition activity to select “bolt-on” acquisitions. Additionally, we are taking precautionary measures to conserve liquidity including, but not limited to, reducing our inventory levels and managing replenishment volumes to adjust to the new level of market demand and to the extent available, we are delaying tax payments as allowed by governmental authorities. We have a low level of capital expenditures related to maintenance items, which provides the flexibility to decrease spending as needed to further preserve funds.

We believe that we have sufficient liquidity to manage through the current market disruption caused by COVID-19. We ended the quarter with $1.1 billion ~~at September 30, 2019 increased $274.7 million,~~of total liquidity (comprising $0.7 billion availability on the revolving credit facility and $0.4 billion of cash and cash equivalents). From time to time, the Company may enter into other credit facilities or ~~8.7%,~~financing arrangements to provide additional liquidity and to manage against foreign currency risk. The Company currently believes that the existing lines of credit and cash generated from ~~December 31, 2018.~~operations will be sufficient to fund anticipated operations for the foreseeable future.

On April 6, 2020, the Board of Directors declared a regular quarterly cash dividend of seventy-nine cents ($0.79) per share on the Company’s common stock. The dividend is payable July 1, 2020 to shareholders of record June 5, 2020. At this time, we expect to continue to pay dividends in the ordinary course.

Although we expect our borrowing costs to increase in ~~debt primarily reflects additional borrowings associated with~~ the ~~Company's recent acquisitions. On May 31, 2019,~~near term as a result of credit market disruptions caused by the ~~Company entered into a private placement agreement~~COVID-19 pandemic, we expect to be able to continue to borrow funds at reasonable rates over the long term. Finally, the CARES Act was enacted during March 2020 and includes several significant provisions that we intend to take advantage 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 maturing on May 31, 2029, €100,000, 1.74% Series B Guaranteed Senior Note maturing on May 31, 2031including delaying certain payroll tax payments, mandatory transition tax payments, and €100,000, 1.95% Series C Guaranteed Senior Note maturing on May 31, 2034. On June 30, 2019, the Company entered into a private placement agreement of A$310,000 long-term fixed rate debt. The A$310,000 of long-term fixed rate debt includes A$155,000, 3.10% Series A Guaranteed Senior Note maturing on June 30, 2024 and A$155,000, 3.43% Series B Guaranteed Senior Note maturing on June 30, 2026.estimated income tax payments.

At ~~September 30, 2019,~~March 31, 2020, the Company's total average cost of debt was ~~2.2%~~2.00%, and the Company remained in compliance with all covenants connected with its ~~borrowings.~~borrowings, which covenants include, among others, a financial covenant to maintain a certain leverage ratio of consolidated debt to consolidated EBITDA under our credit facility.

On May 1, 2020, the Company entered into an amendment to each of the Amended and Restated Syndicated Credit Facility Agreement and the Notes Purchase Agreement, each dated as of October 30, 2017, to provide additional covenant flexibility on account of the COVID-19 pandemic. In consideration of the increased covenant flexibility, the Company agreed to certain interest rate increases under these facilities. See Part II, Item 5. “Other Information” for detailed information relating to the amended terms of the facilities.

Any failure to comply with our debt covenants or restrictions could result in a default under our financing arrangements or could require us to obtain waivers from our lenders for failure to comply with these restrictions. The ~~Company currently believes existing lines~~occurrence of ~~credit~~a default that remains uncured or the inability to secure a necessary consent or waiver could create cross defaults under other debt arrangements and have a material adverse effect on our business, financial condition, results of operations and cash ~~generated from~~flows.

~~operations will be sufficient to fund anticipated operations, including discretionary share repurchases, if any, for the foreseeable future.~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk

For quantitative and qualitative disclosures about market risk, refer to “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019. Our exposure to market risk has not changed materially since December 31, ~~2018.~~2019.

Table of Contents

Item 4. Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of 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, as such term is defined in SEC Rule 13a-15(e).~~procedures. 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 specified in the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including the CEO and CFO, ~~concluded that due~~as appropriate, to a previously reported material weakness, the Company’s disclosure controls and procedures were not effective. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on aallow timely basis. Specifically, AAG, the Company's European automotive subsidiary that generated approximately 10% of the Company's total net sales in 2018, did not adequately identify, design and maintain internal controls at the transaction level that mitigate the risk of material misstatement in financial reporting processes nor did it maintain appropriate information technology controls. Refer to Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 for more information.

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 weredecisions regarding required ~~as a result of these control deficiencies.~~

~~Remediation efforts to address material weakness~~

As previously described in Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, the Company began implementing a remediation plan to address the material weakness mentioned above. Management will continue to enhance the risk assessment process and design and implementation of internal control over financial reporting at AAG. This includes initiation of compensating controls and enhanced and revised design of existing financial reporting controls, information technology applications and procedures at AAG. During the nine months ended September 30, 2019, the Company continued testing those enhanced controls and procedures. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.disclosure.

Changes in internal control over financial reporting

During the nine months ended September 30, 2019, the Company adopted ASU 2016-02 and centralized the Company's lease accounting system and processes effective January 1, 2019. This implementation resulted in a material change to the Company's internal control over financial reporting as of that date. The operating effectiveness of these changes will be evaluated as part of our annual assessment of the effectiveness of internal control over financial reporting for the fiscal year ending December 31, 2019.

~~Other than with respect to the remediation efforts described above and changes related to the adoption of ASU 2016-02, there~~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 last fiscal quarter ended ~~September 30, 2019~~March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. As a result of COVID-19, certain members of our workforce shifted to a primarily work from home environment beginning in March 2020. We took precautionary actions to re-evaluate and refine our financial reporting process to provide reasonable assurance that we could report our financial results accurately and timely, and we will continue to evaluate the impact of any related changes to our internal control over financial reporting.

Table of Contents

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in various claims and legal actions that arise in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we do not believe that the ultimate resolution of these actions will have a material adverse effect on our financial position, results of operations, liquidity and capital resources. Except as set forth herein, there have been no significant developments to the information presented in our 2019 Form 10-K with respect to litigation or commitments and contingencies. See the Commitments and Contingencies footnote to the condensed consolidated financial statements for more information, which information is incorporated by reference herein.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our ~~2018~~2019 Annual Report on Form 10-K and the risk factor below entitled “The impact of COVID-19 may adversely affect our business and our financial results,” which could materially affect our business, financial condition or future results. The risks described in our ~~2018~~2019 Annual Report on Form 10-K and in this Item 1A 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. Except as presented below, there have been no material changes from the risk factors described in our Form 10-K.

The impact of COVID-19 may adversely affect our business and our financial results.

Concerns have rapidly grown regarding the outbreak of COVID-19, which was declared a pandemic on March 11, 2020 by the WHO. The COVID-19 pandemic has created significant volatility, uncertainty and economic disruption. The extent to which the COVID-19 pandemic impacts us will depend on numerous factors and future developments that we are not able to predict, including the severity of the virus and the duration of the outbreak and governmental, responses, mandates and orders relating to the pandemic. The COVID-19 pandemic has impacted a large portion of the world, including our domestic and international operations. Our substantial international business operations are important to our financial results, growth and prospects. In addition, if the pandemic continues to create disruptions or turmoil in the credit or financial markets, or impacts our credit ratings, it could adversely affect our ability to access capital on favorable terms or at all, meet our liquidity needs or amend and/or refinance our existing credit arrangements.

As the pandemic continues to grow, consumer fear about becoming ill with the virus and recommendations and/or mandates from federal, state and local authorities to avoid large gatherings of people or self-quarantine have increased, which has and will adversely affect our operations. For example, we witnessed significant disruptions in sales in the last two week of the quarter ended March 31, 2020 on account of the lower customer visits and that trend may continue. Additionally, a significant portion of our Automotive and Industrial operations in France and New Zealand (which represent less than 5% of consolidated annual sales) are temporarily closed by mandate of government officials. Countries, states or localities may adopt similar mandates or orders, which may result in additional cessation of company operations.

We may further restrict the operations of our various distribution center, branch or store facilities in each of our segments if we deem such action necessary or appropriate or if recommended or mandated by local government authorities. Additionally, we may incur significant additional costs to ensure we meet the needs of our customers and our employees, including additional cleanings of our stores and other facilities. Also, if we do not respond appropriately to the pandemic, or if customers do not perceive our response to be adequate or appropriate for a particular region or our company as a whole, we could suffer damage to our reputation and our brand, which could adversely affect our business in the future. These items could have a further material impact on our sales and profits and could lead to significantly higher losses on outstanding customer receivables, guaranteed loans and asset impairment charges, among other things.

The COVID-19 pandemic has resulted in work and travel restrictions and delays, which may expand depending on the progression and duration of the pandemic. These restrictions and delays have impacted and may continue to impact suppliers and manufacturers of certain of our products. This may make it difficult for our suppliers to source and manufacture products in, and to export our products from, affected areas. As a result, we may continue to face delays or difficulty sourcing certain products, which could negatively affect our business and financial results. Even if we are able to find alternate sources for such products, they may cost more, which could adversely impact our profitability and financial condition.

Further, the company and management is focused on mitigating the impact of the COVID-19 pandemic, which has required and will continue to require, a large investment of time and resources and may delay other strategic initiatives. Additionally, many of our employees are working remotely. An extended period of remote work arrangements could strain our business continuity plans, introduce operational risk, including but not limited to cyber-security risks, the effectiveness of our internal controls over

Table of Contents

financial reporting and impair our ability to manage our business. At this time, there is significant uncertainty relating to the potential effect of the COVID-19 pandemic on our business and the costs that we may incur as a result.

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

The following table provides information about the Company’s purchases of shares of the Company’s common stock during the three months ended ~~September 30, 2019:~~March 31, 2020:

ISSUER PURCHASES OF EQUITY SECURITIES


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
January 1, 2020 through January 31, 2020	12,744	$105.59	—	15,621,120
February 1, 2020 through February 29, 2020	351,982	$91.07	350,000	15,271,120
March 1, 2020 through March 31, 2020	793,498	$81.18	786,444	14,484,676
Totals	1,158,224	$84.46	1,136,444	14,484,676

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

(2)On August 21, 2017, the Board of Directors announced that it had authorized the repurchase of 15.0 million shares. The authorization for the repurchase continues until all such shares have been repurchased or the repurchase plan is terminated by action of the Board of Directors. Approximately 14.5 million shares authorized remain available to be repurchased by the Company. There were no other repurchase plans announced as of March 31, 2020 and we have temporarily suspended all future share repurchases under the repurchase plan due to COVID-19 implications.

Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
July 1, 2019 through July 31, 2019 285,200 $96.45 285,200 16,134,943
August 1, 2019 through August 31, 2019 478,007 $90.56 478,007 15,656,936
September 1, 2019 through September 30, 2019 37,882 $92.83 25,000 15,631,936
Totals 801,089 $92.76 788,207 15,631,936


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

~~(2)~~

On November 17, 2008 and August 21, 2017, the Board of Directors announced that it had authorized the repurchase of 15.0 million shares and 15.0 million shares, respectively. The authorization for these repurchase plans continues until all such shares have been repurchased or the repurchase plan is terminated by action of the Board of Directors. Approximately 0.6 million shares authorized in the 2008 plan and 15.0 million shares authorized in 2017 remain available to be repurchased by the Company. There were no other repurchase plans announced as of September 30, 2019.

Table of Contents

Item 5. Other Information

As previously disclosed, the Company entered into: (i) the Amended and Restated Syndicated Credit Facility Agreement, dated as of October 30, 2017 (the “Syndicated Credit Facility”), with the various financial institutions and other persons from time to time party to the agreement from time to time as lenders, and Bank of America, N.A., as the administrative agent; and (ii) the Notes Purchase Agreement with certain investors (the “Notes Agreement) governing our Series I, J, K, L and M senior notes, dated as of October 30, 2017 (the “Senior Notes”).

On May 1, 2020, the Company entered into an amendment to the Syndicated Credit Facility and the Notes Agreement (collectively, the “Amendments”). The Amendments effect certain changes applicable to each of the Syndicated Credit Facility and the Notes Agreement, including: (1) amending the financial covenants to provide for the “Leverage Ratio” to increase from 3.50 to 1.0 to 4.00 to 1.0 through December 31, 2020 (and then to revert to 3.50 to 1.0 after such date); (2) amending certain negative covenants to increase limitations on restricted payments, including a prohibition on share repurchases by the Company if the “Leverage Ratio” exceeds 3.50 to 1.0; (3) amending the definition of “EBITDA” for purposes of increasing the maximum amount of restructuring charges that can be added back from $55.0 million to $100.0 million through December 31, 2020; and (4) providing that to the extent the “Leverage Ratio” exceeds 3.50 to 1.0, then 50% of the net proceeds from certain capital market offerings to be used to prepay indebtedness under the Syndicated Credit Facility and the Notes Agreement (and if the “Leverage Ratio” is equal to or less than 3.50 to 1.0, then 25% of such proceeds must be applied in such manner).

With respect to interest rates, the Amendments provide for: (i), with respect to the Syndicated Credit Facility, increasing (x) the applicable rate by 75 basis points (resulting in a rate of LIBOR + 225 basis points) and (y) the LIBOR floor from 0.0% to 1.0%; and (ii), with respect to the Notes Agreement, increasing (x) the coupon applicable to each series of the Senior Notes by 50 basis points, effective immediately and applicable through December 31, 2020 and (y) the coupon applicable to each series of the Senior Notes by an additional 50 basis points, if and only if the “Leverage Ratio” exceeds 3.50 to 1.0. Other than the items noted above, the Amendments make no changes to significant terms of the Syndicated Credit Facility and the Notes Agreement.

The foregoing description of the Amendments is only a summary, does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendments, which will be filed as exhibits to our Quarterly Report on Form 10-Q for the quarter ending June 30, 2020.

Table of Contents

Item 6. Exhibits

(a) The following exhibits are filed or furnished as part of this report:



Exhibit 3.1						Amended and Restated Articles of Incorporation of the Company, dated April 23, 2007 (incorporated herein by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K dated April 23, 2007)

Exhibit 3.2						By-Laws of the Company, as amended and restated November 19, 2018 (incorporated herein by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K dated November 19, 2018)

Exhibit 31.1						Certification pursuant to SEC Rule 13a-14(a) signed by the Chief Executive Officer – filed herewith

Exhibit 31.2						Certification pursuant to SEC Rule 13a-14(a) signed by the Chief Financial Officer – filed herewith

Exhibit 32						Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer and Chief Financial Officer – furnished herewith

Exhibit 101.INS						XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

Exhibit 101.SCH						XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

Exhibit 101.LAB						XBRL Taxonomy Extension Labels Linkbase Document

Exhibit 101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit 104						The cover page from this Annual Report on Form 10-Q for the period ended March 31, 2020 formatted in Inline XBRL

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



						Genuine Parts Company (Registrant)

Date: ~~October 18, 2019~~May 6, 2020						/s/ Carol B. Yancey
						Carol B. Yancey
						Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer)



	Three Months Ended September 30, 2019
(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, 2019	146,078,369		$	146,078		$	83,949		$	(1,195,179	)	$	4,630,480		$	3,665,328		$	22,647		$	3,687,975
Net income	—		—			—			—			227,487			227,487			—			227,487
Other comprehensive loss, net of tax	—		—			—			(73,401		)	—			(73,401		)	—			(73,401		)
Cash dividends declared, $0.7625 per share	—		—			—			—			(110,786		)	(110,786		)	—			(110,786		)
Share-based awards exercised, including tax benefit of $68	2,953		4			(128		)	—			—			(124		)	—			(124		)
Share-based compensation	—		—			6,739			—			—			6,739			—			6,739
Purchase of stock	(788,207	)	(789		)	—			—			(72,263		)	(73,052		)	—			(73,052		)
Noncontrolling interest activities	—		—			—			—			—			—			(101		)	(101		)
September 30, 2019	145,293,115		$	145,293		$	90,560		$	(1,268,580	)	$	4,674,918		$	3,642,191		$	22,546		$	3,664,737



	Nine Months Ended September 30, 2019
(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, 2019	145,936,613		$	145,937		$	78,380		$	(1,115,078	)	$	4,341,212		$	3,450,451		$	21,540	$	3,471,991
Net income	—		—			—			—			612,167			612,167			—		612,167
Other comprehensive loss, net of tax	—		—			—			(30,976		)	—			(30,976		)	—		(30,976		)
Cash dividends declared, $2.2875 per share	—		—			—			—			(333,521		)	(333,521		)	—		(333,521		)
Share-based awards exercised, including tax benefit of $4,054	144,709		145			(7,640		)	—			—			(7,495		)	—		(7,495		)
Share-based compensation	—		—			19,820			—			—			19,820			—		19,820
Purchase of stock	(788,207	)	(789		)	—			—			(72,263		)	(73,052		)	—		(73,052		)
Cumulative effect from adoption of ASU 2018-02 (1)	—		—			—			(122,526		)	122,526			—			—		—
Cumulative effect from adoption of ASU 2016-02, net of tax (1)	—		—			—			—			4,797			4,797			—		4,797
Noncontrolling interest activities	—		—			—			—			—			—			1,006		1,006
September 30, 2019	145,293,115		$	145,293		$	90,560		$	(1,268,580	)	$	4,674,918		$	3,642,191		$	22,546	$	3,664,737



	Three Months Ended September 30, 2018
(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, 2018	146,752,732		$	146,753		$	72,211		$	(943,351	)	$	4,236,359		$	3,511,972		$	50,355	$	3,562,327
Net income	—		—			—			—			220,227			220,227			—		220,227
Other comprehensive loss, net of tax	—		—			—			(18,926		)	—			(18,926		)	—		(18,926		)
Cash dividends declared, $0.7200 per share	—		—			—			—			(105,673		)	(105,673		)	—		(105,673		)
Share-based awards exercised, including tax benefit of $480	25,829		25			(1,035		)	—			—			(1,010		)	—		(1,010		)
Share-based compensation	—		—			6,382			—			—			6,382			—		6,382
Purchase of stock	(19,288	)	(19		)	—			—			(1,899		)	(1,918		)	—		(1,918		)
Noncontrolling interest activities	—		—			—			—			—			—			1,670		1,670
September 30, 2018	146,759,273		$	146,759		$	77,558		$	(962,277	)	$	4,349,014		$	3,611,054		$	52,025	$	3,663,079



	Nine Months Ended September 30, 2018
(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, 2018	146,652,615		$	146,653		$	68,126		$	(852,592	)	$	4,049,965		$	3,412,152		$	52,004	$	3,464,156
Net income	—		—			—			—			623,775			623,775			—		623,775
Other comprehensive loss, net of tax	—		—			—			(109,685		)	—			(109,685		)	—		(109,685		)
Cash dividends declared, $2.1600 per share	—		—			—			—			(316,984		)	(316,984		)	—		(316,984		)
Share-based awards exercised, including tax benefit of $3,079	125,946		125			(5,985		)	—			—			(5,860		)	—		(5,860		)
Share-based compensation	—		—			15,417			—			—			15,417			—		15,417
Purchase of stock	(19,288	)	(19		)	—			—			(1,899		)	(1,918		)	—		(1,918		)
Cumulative effect from adoption of ASU 2014-09, net of tax	—		—			—			—			(5,843		)	(5,843		)	—		(5,843		)
Noncontrolling interest activities	—		—			—			—			—			—			21		21
September 30, 2018	146,759,273		$	146,759		$	77,558		$	(962,277	)	$	4,349,014		$	3,611,054		$	52,025	$	3,663,079



	Changes in Accumulated Other Comprehensive Loss by Component
	Pension and Other Post-Retirement Benefits			Cash Flow and Net Investment Hedges			Foreign Currency Translation			Total
Beginning balance, January 1, 2019	$	(626,322	)	$	10,726		$	(499,482	)	$	(1,115,078	)
Other comprehensive loss before reclassifications	—			54,180			(123,070		)	(68,890		)
Amounts reclassified from accumulated other comprehensive loss (1)	22,855			1,581			34,701			59,137
Income taxes	(6,166		)	(15,057		)	—			(21,223		)
Other comprehensive loss, net of income taxes	16,689			40,704			(88,369		)	(30,976		)
Cumulative effect from adoption of ASU 2018-02	(122,526		)	—			—			(122,526		)
Ending balance, September 30, 2019	$	(732,159	)	$	51,430		$	(587,851	)	$	(1,268,580	)



	Balance Sheet Line Item	September 30, 2019
Operating lease assets	Operating lease assets	$	1,048,462

Operating lease liabilities:
Current operating lease liabilities	Other current liabilities	$	274,687
Noncurrent operating lease liabilities	Operating lease liabilities	797,166
Total operating lease liabilities		$	1,071,853



October 1, 2019 through December 31, 2019	$	77,339
2020	296,219
2021	230,421
2022	173,932
2023	122,529
Thereafter	276,067
Total undiscounted future minimum lease payments	1,176,507
Less: Difference between undiscounted lease payments and discounted operating lease liabilities	104,654
Total operating lease liabilities	$	1,071,853



	September 30, 2019
Cash	$	642,468
Fair value of 35% investment in Inenco held prior to business combination	123,385
Total	$	765,853



	September 30, 2019
Trade accounts receivable	$	127,823
Merchandise inventories	281,764
Prepaid expenses and other current assets	11,066
Intangible assets	318,301
Deferred tax assets	1,046
Property and equipment	60,313
Operating lease assets	96,845
Other assets	40,840
Total identifiable assets acquired	937,998
Current liabilities	101,564
Long-term debt	150,879
Operating lease liabilities	96,371
Deferred tax liabilities	58,903
Other long-term liabilities	97,407
Total liabilities assumed	505,124
Net identifiable assets acquired	432,874
Goodwill	332,979
Net assets acquired	$	765,853