Have you been searching for a stock that might be well-positioned to maintain its earnings-beat streak in its upcoming report? It is worth considering Genuine Parts (GPC) , which belongs to the Zacks Automotive - Replacement Parts industry.When looking at the last two reports, this auto and industrial parts distributor has recorded a strong streak of surpassing earnings estimates. The company has topped estimates by 3.24%, on average, in the last two quarters.For the most recent quarter, Genuine Parts was e ...

PART I [Business](index=4&type=section&id=Item%201.%20Business) GPC is a global distributor of automotive and industrial replacement parts, operating through Automotive and Industrial segments - GPC is a global service organization engaged in the distribution of automotive and industrial replacement parts, with over **10,700 locations** primarily in North America, Europe, and Australasia[15](index=15&type=chunk) - The company is organized into two business segments: the Automotive Parts Group, representing approximately **62% of total net sales**, and the Industrial Parts Group, representing approximately **38%**[18](index=18&type=chunk)[21](index=21&type=chunk)[40](index=40&type=chunk) - As of December 31, 2023, the company employed more than **60,000 people worldwide** across **17 countries**[57](index=57&type=chunk) [Our Segments](index=4&type=section&id=1.1%20Our%20Segments) GPC's operations are divided into Automotive and Industrial segments, serving distinct customer bases and markets Automotive Distribution Network as of Dec 31, 2023 | | North America | Europe | Australasia | Total | | :--- | :--- | :--- | :--- | :--- | | Distribution Centers | 77 | 81 | 14 | 172 | | Company-Owned Stores | 1,797 | 798 | 551 | 3,146 | | Independently-Owned Stores | 4,961 | 1,698 | — | 6,659 | | **Total Automotive Locations** | **6,835** | **2,577** | **565** | **9,977** | Industrial Distribution Network as of Dec 31, 2023 | | North America | Australasia | Total | | :--- | :--- | :--- | :--- | | Distribution Centers | 17 | 13 | 30 | | Branches | 503 | 150 | 653 | | Service Centers | 68 | 2 | 70 | | **Total Industrial Locations** | **588** | **165** | **753** | - The Automotive segment's customer base is approximately **80% do-it-for-me (DIFM)** and **20% do-it-yourself (DIY)**[22](index=22&type=chunk) - The Industrial segment (Motion) serves over **200,000 MRO and OEM customers** and has access to a database of over **19 million parts**[40](index=40&type=chunk)[42](index=42&type=chunk) [Human Capital Management](index=9&type=section&id=1.2%20Human%20Capital%20Management) GPC focuses on attracting, retaining, and developing its over 60,000 employees through well-being, development, and DEI initiatives - The company employs over **60,000 people worldwide** and operates in **17 countries** as of December 31, 2023[57](index=57&type=chunk) - GPC periodically conducts global engagement surveys, with recent results indicating employees are proud to work for the company. Action plans are developed based on survey feedback[58](index=58&type=chunk) - The company launched three new business resource groups (BRGs) in 2023 to support personal and professional development, networking, and community engagement[62](index=62&type=chunk) [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces strategic, macroeconomic, legal, and operational risks including demand fluctuations, supply chain issues, and cybersecurity threats - Strategic risks include slowing demand for products, disruption of supplier relationships, substantial competition from chains like AutoZone and O'Reilly, and the potential failure to integrate acquisitions successfully[69](index=69&type=chunk)[71](index=71&type=chunk)[73](index=73&type=chunk) - Cybersecurity is a significant risk, with threats of data breaches, system failures, and cyber-attacks potentially disrupting operations, harming reputation, and leading to legal claims[78](index=78&type=chunk)[79](index=79&type=chunk)[81](index=81&type=chunk) - Macroeconomic risks include adverse impacts from inflation, fluctuating foreign currency exchange rates, and the effects of high debt levels on cash flow[90](index=90&type=chunk)[93](index=93&type=chunk)[95](index=95&type=chunk) - Legal and regulatory risks stem from potential climate change regulations affecting vehicle technology, ongoing litigation (including product liability lawsuits), and changes in tax and international trade policies[98](index=98&type=chunk)[99](index=99&type=chunk)[102](index=102&type=chunk) [Unresolved Staff Comments](index=17&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - Not applicable[106](index=106&type=chunk) [Cybersecurity](index=17&type=section&id=Item%201C.%20Cybersecurity) GPC's cybersecurity program, led by a CISO and overseen by the Board, follows the NIST framework to manage ongoing threats - The information security program is led by a CISO, with oversight from the CIDO, the Audit Committee, and the Board of Directors[108](index=108&type=chunk) - The company's risk management practices are based on the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF)[109](index=109&type=chunk) - To date, the company has not experienced a material breach of cybersecurity, though it continues to face threats such as phishing attempts and malware[110](index=110&type=chunk) [Properties](index=18&type=section&id=Item%202.%20Properties) As of December 31, 2023, the company operates 4,071 locations, primarily owning distribution centers and leasing retail stores Company-Owned and Operated Locations as of Dec 31, 2023 | | Distribution Centers | Other Locations | | :--- | :--- | :--- | | **Automotive:** | | | | North America | 77 | 1,797 | | Europe | 81 | 798 | | Australasia | 14 | 551 | | *Total Automotive* | *172* | *3,146* | | **Industrial:** | | | | North America | 17 | 571 | | Australasia | 13 | 152 | | *Total Industrial* | *30* | *723* | | **Total** | **202** | **3,869** | - The company generally owns its distribution centers and leases its retail stores and branches. Corporate headquarters are in two owned office buildings in Atlanta, Georgia[112](index=112&type=chunk) [Legal Proceedings](index=19&type=section&id=Item%203.%20Legal%20Proceedings) Legal proceedings information is incorporated by reference from the Commitments and Contingencies Footnote in Item 8 - Details on legal proceedings are located in the Commitments and Contingencies Footnote within Item 8 of this report[113](index=113&type=chunk) [Mine Safety Disclosures](index=19&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is reported as not applicable - Not applicable[114](index=114&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=20&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) GPC's common stock trades on the NYSE, with a 67-year dividend increase streak and ongoing share repurchase program - The company has increased its annual dividend for **67 consecutive years** through 2023[117](index=117&type=chunk) Issuer Purchases of Equity Securities (Q4 2023) | Period | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Average Price Paid per Share ($) | Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | | Oct 2023 | 534,870 | $140.57 | 8,678,794 | | Nov 2023 | 93,917 | $133.57 | 8,584,877 | | Dec 2023 | 46,832 | $137.92 | 8,538,045 | | **Total Q4** | **675,619** | **$136.69 (weighted avg)** | **8,538,045** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) GPC achieved 4.5% net sales growth in 2023, driven by strong Industrial segment performance and improved gross margin, while maintaining strong liquidity Consolidated Results of Operations (2023 vs 2022) | (in thousands, except per share data) | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $23,090,610 | $22,095,973 | 4.5% | | Gross profit | $8,290,672 | $7,740,104 | 7.1% | | Net income | $1,316,524 | $1,182,701 | 11.3% | | Diluted EPS | $9.33 | $8.31 | 12.3% | | Adjusted EBITDA | $2,157,346 | $1,999,329 | 7.9% | - The Industrial segment profit increased **24.4%** to **$1.1 billion**, with segment margin improving **200 basis points** to **12.5%**[154](index=154&type=chunk) - The Automotive segment profit decreased **1.4%** to **$1.2 billion**, with segment margin decreasing **50 basis points** to **8.2%**[153](index=153&type=chunk) - In February 2024, the company announced a global restructuring expected to incur costs of **$100-$200 million** in 2024, with anticipated annualized savings of **$45-$90 million**[151](index=151&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=7.1%20Liquidity%20and%20Capital%20Resources) GPC ended 2023 with strong liquidity of $2.6 billion, supported by operating cash flow and new debt issuances Summary of Cash Flows (in thousands) | | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,435,610 | $1,466,971 | | Net cash used in investing activities | $(705,792) | $(1,684,240) | | Net cash (used in) provided by financing activities | $(292,161) | $205,101 | - The company ended 2023 with **$2.6 billion** of total liquidity, comprising **$1.5 billion** availability on its revolving credit facility and **$1.1 billion** of cash[182](index=182&type=chunk) - In November 2023, the company issued **$425 million** of **6.50% Senior Notes due 2028** and **$375 million** of **6.88% Senior Notes due 2033**[179](index=179&type=chunk) [Critical Accounting Policies](index=32&type=section&id=7.2%20Critical%20Accounting%20Policies) Critical accounting policies involve significant estimates for vendor consideration, goodwill impairment, employee benefits, business combinations, and legal liabilities - Key critical accounting policies include: Consideration Received from Vendors, Impairment of Goodwill, Employee Benefit Plans, Business Combinations, and Legal and Product Liabilities[191](index=191&type=chunk) - For 2024 pension income measurement, the expected rate of return on plan assets is **7.61%** and the weighted average discount rate was **5.30%** at December 31, 2023[196](index=196&type=chunk)[197](index=197&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risks from foreign currency fluctuations, interest rate changes, and inflation, with specific impacts quantified for currency and interest rates - A hypothetical **10% shift** in exchange rates for the Euro, Canadian dollar, and Australian dollar would have impacted 2023 translated net sales by approximately **$797 million**[210](index=210&type=chunk) - A **100 basis point increase** in interest rates would have an immaterial impact on debt but would increase fees on the A/R Sales Agreement by **$10 million**[211](index=211&type=chunk) [Financial Statements and Supplementary Data](index=36&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents consolidated financial statements and notes, with an unqualified audit opinion from Ernst & Young LLP on financials and internal controls - The independent auditor, Ernst & Young LLP, issued an **unqualified opinion** on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2023[217](index=217&type=chunk)[218](index=218&type=chunk) - The auditor identified 'Loss Contingencies Related to Product Liabilities' as a **Critical Audit Matter** due to the significant measurement uncertainty and judgment involved in estimating the liability[221](index=221&type=chunk)[222](index=222&type=chunk) Consolidated Balance Sheet Highlights (As of Dec 31) | (In Thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Total current assets | $9,605,852 | $8,816,739 | | Total assets | $17,968,454 | $16,495,379 | | Total current liabilities | $7,827,109 | $7,686,110 | | Total liabilities | $13,551,469 | $12,690,932 | | Total equity | $4,416,985 | $3,804,447 | [Controls and Procedures](index=73&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and auditors concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - Management concluded that disclosure controls and procedures were **effective** as of December 31, 2023[386](index=386&type=chunk) - Based on the COSO framework, management concluded that internal control over financial reporting was **effective** as of December 31, 2023[390](index=390&type=chunk) - No **material changes** were made to internal control over financial reporting during the fourth quarter of 2023[391](index=391&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=76&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section provides executive officer biographies and incorporates director and corporate governance information by reference from the Proxy Statement - Provides biographical details for key executive officers including Paul D. Donahue (Chairman & CEO), William P. Stengel (President & COO), and Bert Nappier (EVP & CFO)[406](index=406&type=chunk)[407](index=407&type=chunk)[408](index=408&type=chunk) - Additional required information is incorporated by reference from the company's Proxy Statement[414](index=414&type=chunk) [Executive Compensation](index=77&type=section&id=Item%2011.%20Executive%20Compensation) All executive compensation information is incorporated by reference from the company's definitive Proxy Statement - Information required by this item is incorporated by reference from the Proxy Statement[415](index=415&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=77&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details equity compensation plan information and incorporates additional security ownership data by reference from the Proxy Statement Equity Compensation Plan Information as of Dec 31, 2023 | Plan Category | Number of Securities to be Issued upon Exercise | Weighted Average Exercise Price ($) | Number of Securities Remaining Available for Future Issuance | | :--- | :--- | :--- | :--- | | Equity Compensation Plans Approved by Shareholders | 1,208,597 | $94.81 | 6,598,166 | | Equity Compensation Plans Not Approved by Shareholders | 142,651 | n/a | 857,349 | | **Total** | **1,351,248** | **—** | **7,455,515** | - Additional information on security ownership is incorporated by reference from the Proxy Statement[416](index=416&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=78&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related person transactions and director independence is incorporated by reference from the Proxy Statement - Information required by this item is incorporated by reference from the Proxy Statement[419](index=419&type=chunk) [Principal Accountant Fees and Services](index=78&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the Proxy Statement - Information required by this item is incorporated by reference from the Proxy Statement[420](index=420&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=79&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits and financial statement schedules filed with or incorporated by reference into the Form 10-K report - Lists all financial statements, which are incorporated by reference from Item 8[422](index=422&type=chunk) - Provides a detailed list of all exhibits filed as part of the report, including articles of incorporation, debt agreements, and management compensation plans[423](index=423&type=chunk)[425](index=425&type=chunk) [Form 10-K Summary](index=83&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is reported as not applicable - Not applicable[431](index=431&type=chunk)

Financial Data and Key Metrics Changes - Total sales for Genuine Parts Company (GPC) reached $23.1 billion in 2023, an increase of 4.5% from 2022, with fourth-quarter sales increasing by 1.1% [7][84] - The company achieved a gross margin of 35.9% for the year, an improvement of 80 basis points from the previous year [85] - Earnings per diluted share for 2023 were $9.33, up 11.9% from $8.34 in 2022 [87] Business Segment Data and Key Metrics Changes - Global Automotive segment sales increased by approximately 1% in the fourth quarter, with comparable store sales decreasing by 3% [19] - The Industrial segment reported a profit of $1.1 billion for the year, up 24%, with a segment profit margin of 12.5% [43][93] - Motion's sales grew by $414 million or 5% for the full year, with comparable sales also up by 5% [42] Market Data and Key Metrics Changes - In Europe, automotive sales grew by 10% in local currency during the fourth quarter, with a total sales growth of 16% for the year [74] - The Asia-Pacific automotive business saw a 2% increase in sales in the fourth quarter, with comparable sales growth of 1% [21] - In North America, automotive sales declined by 5.6% in the fourth quarter, with comparable sales down 6.1% [76] Company Strategy and Development Direction - The company is focused on long-term growth through strategic initiatives, including the expansion of fulfillment centers and bolton acquisitions [9][11] - GPC aims to simplify and streamline operations as part of a global restructuring initiative to improve efficiency and reduce costs [39][61] - The company plans to continue investing in technology and supply chain capabilities to enhance customer experience and operational productivity [88][94] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the supportive industry fundamentals for both Automotive and Industrial markets, despite challenges from high interest rates and inflation [38][61] - The company anticipates a more moderated first half of 2024, with expectations for stronger performance in the second half [98] - Management remains optimistic about the NAPA business, noting improvements in January 2024 compared to December 2023 [70][98] Other Important Information - GPC returned approximately $788 million to shareholders in 2023 through dividends and share repurchases [60] - The company announced a $4 per share annual dividend for 2024, marking the 68th consecutive increase [66] - GPC completed approximately 90 transactions in 2023, investing $309 million, primarily in the Automotive segment [60] Q&A Session Summary Question: What is the performance comparison between independent and company-operated stores? - Management indicated that the first half of 2024 is expected to be moderated, but they are encouraged by January's performance, which improved sequentially from December [98] Question: Why is the U.S. auto business losing market share? - Management acknowledged challenges in the U.S. auto business but expressed confidence in actions being taken to improve performance, particularly in January [100][101] Question: What are the margin expectations for the Industrial segment? - Management guided for a margin expansion of 10 to 20 basis points for the Industrial segment in 2024, following significant growth in previous years [104] Question: What is the strategy for expanding the NAPA company-owned store base? - The company is strategically prioritizing markets for acquiring more company-owned stores to enhance service consistency and operational efficiency [111]

Financial Performance Highlights - GPC's Q4 2023 sales reached $56 billion, a 11% increase year-over-year[16] - The company's gross margin was 364%, improved by 70 bps[3] - EBITDA increased by 6% to $523 million[3] - Diluted EPS increased by 10% to $226[3] - Free cash flow for FY'23 was approximately $923 million[16,18] Segment Performance - Industrial segment profit increased by 19% to $275 million[17] - Automotive segment profit was $259 million, a decrease of 12%[36] - Total segment profit margin was 99%[10] - Industrial segment margin was 129%, improved by 190 bps[5] - Automotive segment margin was 75%, down 110 bps[36] 2023 Full Year Results - Global sales reached $231 billion, a 45% increase[8,32] - EBITDA was $22 billion, an 8% increase[32] - Adjusted diluted earnings per share was $933[50,106] 2024 Outlook - The company projects total sales growth of 3% to 5%[54] - Automotive sales are expected to grow by 2% to 4%[54] - Industrial sales are expected to grow by 3% to 5%[54] - Diluted EPS is projected to be between $895 and $915[54] - Adjusted diluted EPS is projected to be between $970 and $990[54] - Free cash flow is expected to be between $800 million and $1 billion[54]

October 19, 2023 Headquarters Atlanta, GA ~10,680 ~210 ~700 • Retail (Owned/Independent) Employees ~58,000 Market Capitalization ~$20.2B • Automotive 62% 38% Segment Profit Margin2 9.9% Dividend Yield3 2.6% 76% North America 15% Europe 9% Australasia Global Footprint Key Statistics TTM Revenue by Region GPC Q3'23 EARNINGS PRESENTATION | 2 GPC Q3'23 EARNINGS PRESENTATION | 3 IGPC Solid quarter, which includes double-digit earnings growth Strategic transformation to a global Automotive and Industrial company ...

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, 2023 OR (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.) 2999 WILDWOOD PARKWAY, 30339 (Address of principal executive offices) (Zip Co ...

July 20, 2023 Countries Served 17 ~205 Employees ~58,000 $22.9B 38% Dividend Yield3 2.2% Leading Global Distributor in Diversified End Markets FORWARD-LOOKING STATEMENTS: Some statements in this presentation, as well as in other materials we file with the Securities and Exchange Commission (SEC), release to the public, or 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 ...

Financial Data and Key Metrics Changes - Total sales for Q2 2023 reached $5.9 billion, reflecting a 5.6% increase from the previous year [5][43] - Earnings per share (EPS) were $2.44, marking a 10.9% increase from adjusted EPS last year, representing the 12th consecutive quarter of double-digit adjusted earnings growth [5][22] - Gross margin improved to 36.1%, a 110 basis point increase from the same quarter last year, driven by pricing and sourcing initiatives [21][22] Business Line Data and Key Metrics Changes - The Industrial segment reported sales of $2.3 billion, a 5.9% increase, with comparable sales growth of 6.0% [36] - The Automotive segment achieved total sales of $3.7 billion, up 5.4% year-over-year, with comparable sales growth of 4.3% [65] - The Industrial segment profit was $283 million, representing 12.5% of sales, a 190 basis point increase from the previous year [15] Market Data and Key Metrics Changes - U.S. automotive sales grew approximately 2%, while Canadian sales increased about 6% in local currency [16][17] - International automotive businesses experienced strong mid-single to double-digit growth, particularly in Europe where sales grew approximately 15% in local currency [18][40] - The Asia Pacific automotive business saw sales increase by approximately 9% in local currency, with comparable sales growth of about 7% [68] Company Strategy and Development Direction - The company is focused on strategic initiatives highlighted at the Investor Day in March, emphasizing a "One GPC" approach to enhance financial performance [6] - Future reshoring opportunities and growth in domestic manufacturing are seen as significant opportunities for the Motion segment [7] - The company aims to leverage its scale through strategic acquisitions to capture market share in fragmented markets [41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic plans and the ability to navigate a dynamic macro environment, raising the outlook for 2023 earnings per share [9][32] - The fundamentals of the automotive aftermarket remain favorable, driven by increasing miles driven and an aging vehicle fleet [31] - Management noted that inflation is expected to moderate throughout 2023, with a focus on maintaining operational efficiency [115] Other Important Information - The company completed the first phase of implementing the Workday HR platform in North America, showcasing modernization efforts [10] - The company returned $395 million to shareholders through dividends and share repurchases in 2023 [74] - The company is on track to deliver EUR 400 million in sales of NAPA-branded products in 2023 [18] Q&A Session Summary Question: What are the expectations for U.S. NAPA comps in the back half of the year? - Management noted an improvement in early July, driven by extreme heat, and expressed optimism about building on this momentum [55][56] Question: Is the gross margin performance sustainable? - Management indicated that the gross margin improvement reflects strong execution and is optimistic about maintaining or improving this level [58] Question: Are there any share shifts occurring in the U.S. auto market? - Management stated that they do not see material differences across regions and believe their strategies are effective [61][87] Question: How did the independent dealers and NAPA AutoCare perform? - The AutoCare business continues to perform well, and management emphasized the importance of partnering with independent dealers [137] Question: What are the growth expectations for the industrial and automotive segments? - Management expects moderate growth in the industrial segment in the second half of the year, while international automotive is anticipated to outpace U.S. growth [132][131]

PART I – FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's analysis for the periods ended June 30, 2023 and 2022 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Genuine Parts Company, including balance sheets, income statements, comprehensive income, equity, and cash flows, along with detailed notes explaining accounting policies, segment information, and other financial disclosures for the periods ended June 30, 2023 and 2022 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a slight increase in total assets and equity from December 31, 2022, to June 30, 2023, driven by increases in trade accounts receivable, merchandise inventories, and property, plant and equipment, while cash and cash equivalents decreased Condensed Consolidated Balance Sheet Data (in thousands) | Metric (in thousands) | June 30, 2023 | December 31, 2022 | Change | % Change | | :-------------------- | :------------ | :---------------- | :----- | :------- | | Cash and cash equivalents | $530,105 | $653,463 | $(123,358) | -18.88% | | Total current assets | $9,083,706 | $8,816,739 | $266,967 | 3.03% | | Total assets | $16,941,635 | $16,495,379 | $446,256 | 2.71% | | Total current liabilities | $7,899,794 | $7,686,110 | $213,684 | 2.78% | | Total equity | $4,085,794 | $3,804,447 | $281,347 | 7.39% | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For the three months ended June 30, 2023, net sales increased by 5.6%, but net income decreased by 7.5% due to higher operating expenses. For the six months ended June 30, 2023, net sales grew by 7.2%, and net income increased by 4.9% Three Months Ended June 30, (in thousands, except per share data) | Metric | 2023 | 2022 | Change | % Change | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Net sales | $5,915,006 | $5,602,414 | $312,592 | 5.6% | | Gross profit | $2,134,743 | $1,960,799 | $173,944 | 8.9% | | Income before income taxes | $454,089 | $491,567 | $(37,478) | -7.6% | | Net income | $344,494 | $372,529 | $(28,035) | -7.5% | | Basic earnings per share | $2.45 | $2.63 | $(0.18) | -6.84% | | Diluted earnings per share | $2.44 | $2.62 | $(0.18) | -6.87% | Six Months Ended June 30, (in thousands, except per share data) | Metric | 2023 | 2022 | Change | % Change | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Net sales | $11,680,124 | $10,897,049 | $783,075 | 7.2% | | Gross profit | $4,148,144 | $3,786,746 | $361,398 | 9.5% | | Income before income taxes | $858,495 | $817,283 | $41,212 | 5.0% | | Net income | $648,451 | $618,367 | $30,084 | 4.9% | | Basic earnings per share | $4.61 | $4.36 | $0.25 | 5.73% | | Diluted earnings per share | $4.58 | $4.34 | $0.24 | 5.53% | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for the three months ended June 30, 2023, was $339.4 million, a significant increase from $224.2 million in the prior year, primarily due to a much smaller foreign currency translation loss. For the six months, comprehensive income also increased substantially Three Months Ended June 30, (in thousands) | Metric | 2023 | 2022 | Change | | :-------------------------------- | :----------- | :----------- | :----------- | | Net income | $344,494 | $372,529 | $(28,035) | | Foreign currency translation adjustments | $(9,540) | $(159,078) | $149,538 | | Other comprehensive income (loss), net of income taxes | $(5,056) | $(148,351) | $143,295 | | Comprehensive income | $339,438 | $224,178 | $115,260 | Six Months Ended June 30, (in thousands) | Metric | 2023 | 2022 | Change | | :-------------------------------- | :----------- | :----------- | :----------- | | Net income | $648,451 | $618,367 | $30,084 | | Foreign currency translation adjustments | $14,287 | $(116,946) | $131,233 | | Other comprehensive income (loss), net of income taxes | $20,685 | $(95,489) | $116,174 | | Comprehensive income | $669,136 | $522,878 | $146,258 | [Condensed Consolidated Statements of Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) Total equity increased from $3.80 billion at January 1, 2023, to $4.09 billion at June 30, 2023, primarily driven by net income and other comprehensive income, partially offset by cash dividends declared and stock repurchases Six Months Ended June 30, 2023 (in thousands) | Metric | January 1, 2023 | June 30, 2023 | Change | | :-------------------------------- | :-------------- | :------------ | :----------- | | Total Parent Equity | $3,790,363 | $4,071,211 | $280,848 | | Noncontrolling interests in subsidiaries | $14,084 | $14,583 | $499 | | Total Equity | $3,804,447 | $4,085,794 | $281,347 | Key Activities (Six Months Ended June 30, 2023) * Net income: **$648,451** * Other comprehensive income, net of tax: **$20,685** * Cash dividend declared: **$(267,229)** * Purchase of stock: **$(134,849)** [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities decreased significantly to $457.0 million for the six months ended June 30, 2023, compared to $791.0 million in the prior year, mainly due to changes in operating assets and liabilities. Net cash used in investing activities decreased, while net cash used in financing activities increased Six Months Ended June 30, (in thousands) | Activity | 2023 | 2022 | Change | | :-------------------------------- | :----------- | :----------- | :----------- | | Net cash provided by operating activities | $457,003 | $790,985 | $(333,982) | | Net cash used in investing activities | $(226,120) | $(1,543,453) | $1,317,333 | | Net cash provided by (used in) financing activities | $(357,750) | $584,511 | $(942,261) | | Net decrease in cash and cash equivalents | $(123,358) | $(195,570) | $72,212 | | Cash and cash equivalents at end of period | $530,105 | $519,131 | $10,974 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide essential context to the financial statements, detailing the basis of presentation, recent accounting pronouncements, derivative and hedging activities, financial instrument fair values, guarantees, supply chain finance programs, earnings per share calculations, segment information, accounts receivable sales agreements, employee benefit plans, acquisitions, accumulated other comprehensive loss, and commitments and contingencies [1. General](index=9&type=section&id=1.General) The financial statements are unaudited and prepared in accordance with Form 10-Q, requiring management estimates. The company has evaluated subsequent events and reclassified certain prior period amounts for consistent presentation. A new accounting standard (ASU 2022-04) on supplier finance programs is effective in Q1 2023 for disclosures and Q1 2024 for rollforward - Unaudited Condensed Consolidated Financial Statements are prepared in accordance with Form 10-Q, relying on management estimates for items like inventory adjustments, bad debts, and sales returns[22](index=22&type=chunk)[23](index=23&type=chunk) - ASU 2022-04, Liabilities-Supplier Finance Programs, requires disclosure of key terms and a rollforward of related amounts. It is effective for disclosures in **Q1 2023** and for the rollforward in **Q1 2024**[26](index=26&type=chunk) [Derivatives and Hedging](index=9&type=section&id=Derivatives%20and%20Hedging) The company uses derivative and non-derivative instruments, primarily forward contracts and foreign currency debt, to mitigate foreign exchange rate risks. These instruments are recognized at fair value (Level 2 hierarchy). For the six months ended June 30, 2023, net investment hedges resulted in a gain of $148.3 million in AOCL before reclassifications, compared to a loss of $25.7 million in 2022 - Derivative instruments (forward contracts) and foreign currency debt are used as risk management tools to mitigate foreign exchange rate risks, recognized at fair value (Level 2)[27](index=27&type=chunk) Gains (Losses) Recognized in AOCL before Reclassifications (in thousands) | Period | Forward Contracts | Foreign Currency Debt | Total | | :-------------------- | :---------------- | :-------------------- | :----------- | | Three Months Ended June 30, 2023 | $(9,212) | $2,940 | $(6,272) | | Three Months Ended June 30, 2022 | $66,986 | $50,190 | $117,176 | | Six Months Ended June 30, 2023 | $(14,536) | $61,950 | $47,414 | | Six Months Ended June 30, 2022 | $86,380 | $(11,200) | $75,180 | [Fair Value of Financial Instruments](index=10&type=section&id=Fair%20Value%20of%20Financial%20Instruments) As of June 30, 2023, the fair value of the company's senior unsecured notes was approximately $3.0 billion, classified as Level 2 in the fair value hierarchy, based on observable market transactions - Fair value of senior unsecured notes was approximately **$3.0 billion** as of June 30, 2023, classified as **Level 2** in the fair value hierarchy[29](index=29&type=chunk) [Guarantees](index=10&type=section&id=Guarantees) The company guarantees approximately $956 million in borrowings for independently controlled automotive parts stores and affiliates as of June 30, 2023. The current expected credit loss reserve for these guarantees is not material, and the company has not experienced significant losses - Total borrowings of independents and affiliates subject to company guarantee were approximately **$956 million** as of June 30, 2023[31](index=31&type=chunk) - The company recognizes assets and liabilities of **$68 million** each for these guarantees, distinct from the current expected credit loss reserve, which is not material[33](index=33&type=chunk) [Supply Chain Finance Programs](index=11&type=section&id=Supply%20Chain%20Finance%20Programs) The company participates in voluntary supply chain finance (SCF) programs, allowing suppliers to sell receivables to financial institutions. Outstanding payment obligations to financial institutions were $2.9 billion as of June 30, 2023, down from $3.1 billion at December 31, 2022. All SCF activity is reflected in operating cash flows - Outstanding payment obligations to financial institutions under SCF programs were **$2.9 billion** as of June 30, 2023, a decrease from **$3.1 billion** at December 31, 2022[35](index=35&type=chunk) - The amount settled through the SCF program was **$2.1 billion** for the six months ended June 30, 2023, up from **$1.8 billion** in the prior year[35](index=35&type=chunk) [Earnings Per Share](index=11&type=section&id=Earnings%20Per%20Share) Basic earnings per share for the three months ended June 30, 2023, was $2.45, down from $2.63 in the prior year, while diluted EPS was $2.44, down from $2.62. For the six months, basic EPS increased to $4.61 from $4.36, and diluted EPS increased to $4.58 from $4.34 Earnings Per Share (in thousands, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income | $344,494 | $372,529 | $648,451 | $618,367 | | Weighted average common shares outstanding | 140,574 | 141,581 | 140,688 | 141,747 | | Basic earnings per share | $2.45 | $2.63 | $4.61 | $4.36 | | Diluted earnings per share | $2.44 | $2.62 | $4.58 | $4.34 | [2. Segment Information](index=12&type=section&id=2.%20Segment%20Information) The company operates in two reportable segments: Automotive and Industrial. For the three months ended June 30, 2023, total net sales increased to $5.9 billion, with Automotive sales at $3.7 billion and Industrial sales at $2.3 billion. Total segment profit increased by 11.8% to $612.7 million, driven by a 25.7% increase in Industrial segment profit. Certain corporate costs were reallocated starting in 2023, impacting segment profit comparability Three Months Ended June 30, (in thousands) | Metric | 2023 | 2022 | Change | % Change | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Automotive Net sales | $3,654,999 | $3,467,494 | $187,505 | 5.4% | | Industrial Net sales | $2,260,007 | $2,134,920 | $125,087 | 5.9% | | Total net sales | $5,915,006 | $5,602,414 | $312,592 | 5.6% | | Automotive Segment profit | $329,347 | $322,553 | $6,794 | 2.1% | | Industrial Segment profit | $283,372 | $225,472 | $57,900 | 25.7% | | Total segment profit | $612,719 | $548,025 | $64,694 | 11.8% | Six Months Ended June 30, (in thousands) | Metric | 2023 | 2022 | Change | % Change | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Automotive Net sales | $7,160,826 | $6,743,115 | $417,711 | 6.2% | | Industrial Net sales | $4,519,298 | $4,153,934 | $365,364 | 8.8% | | Total net sales | $11,680,124 | $10,897,049 | $783,075 | 7.2% | | Automotive Segment profit | $593,767 | $587,126 | $6,641 | 1.1% | | Industrial Segment profit | $545,359 | $413,825 | $131,534 | 31.8% | | Total segment profit | $1,139,126 | $1,000,951 | $138,175 | 13.8% | - Beginning in 2023, certain corporate functions (cybersecurity, product liability litigation management) are no longer allocated to segments, impacting comparability with 2022 segment financial information[39](index=39&type=chunk) [3. Accounts Receivable Sales Agreement](index=13&type=section&id=3.%20Accounts%20Receivable%20Sales%20Agreement) Under the A/R Sales Agreement, the company continuously sells designated receivables to a special purpose entity, maintaining approximately $1.0 billion outstanding. Receivables sold for the six months ended June 30, 2023, totaled $4.3 billion, with associated fees of $29 million - The total principal amount outstanding of receivables sold under the A/R Sales Agreement is approximately **$1.0 billion** as of June 30, 2023 and December 31, 2022[43](index=43&type=chunk) Receivables Sold and Cash Collected (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Receivables sold and derecognized | $2,139,392 | $2,242,273 | $4,304,799 | $4,478,718 | | Cash collected on sold receivables | $2,139,393 | $2,242,274 | $4,304,804 | $4,278,729 | | Fees due to financial institutions | $15,000 | $4,000 | $29,000 | $7,000 | [4. Employee Benefit Plans](index=14&type=section&id=4.%20Employee%20Benefit%20Plans) Net periodic benefit income from pension plans for the six months ended June 30, 2023, was a benefit of $22.2 million, an increase from $13.5 million in the prior year, primarily due to higher expected returns on plan assets Net Periodic Benefit Income (in thousands) | Component | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Service cost | $1,503 | $2,586 | $2,997 | $5,202 | | Interest cost | $26,136 | $18,849 | $52,253 | $37,716 | | Expected return on plan assets | $(41,263) | $(37,646) | $(82,503) | $(75,318) | | Amortization of prior service cost | $173 | $172 | $346 | $344 | | Amortization of actuarial loss | $2,340 | $9,275 | $4,681 | $18,554 | | Net periodic benefit income | $(11,111) | $(6,764) | $(22,226) | $(13,502) | [5. Acquisitions](index=14&type=section&id=5.%20Acquisitions) The company acquired businesses for approximately $116 million during the six months ended June 30, 2023, significantly less than the $1.6 billion spent in the prior year, which included the Kaman Distribution Group (KDG) acquisition - Acquired businesses for approximately **$116 million** (net of cash acquired) during the six months ended June 30, 2023[46](index=46&type=chunk) - In the prior year (January 3, 2022), the company acquired Kaman Distribution Group (KDG) for approximately **$1.3 billion** in cash[47](index=47&type=chunk) [6. Accumulated Other Comprehensive Loss](index=14&type=section&id=6.%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated Other Comprehensive Loss (AOCL) improved from $(1.03) billion at January 1, 2023, to $(1.01) billion at June 30, 2023, primarily due to positive foreign currency translation adjustments and pension and postretirement benefit adjustments Changes in Accumulated Other Comprehensive Loss by Component (Six Months Ended June 30, 2023, in thousands) | Component | Beginning Balance, Jan 1, 2023 | Other Comprehensive Income (Loss), net of income taxes | Ending Balance, June 30, 2023 | | :-------------------------------- | :------------------------------- | :----------------------------------------------------- | :---------------------------- | | Pension and Other Post Retirement Benefits | $(506,610) | $3,826 | $(502,784) | | Cash Flow Hedges | $(2,572) | $2,572 | $0 | | Foreign Currency Translation | $(523,360) | $14,287 | $(509,073) | | Total | $(1,032,542) | $20,685 | $(1,011,857) | [7. Commitments and Contingencies](index=15&type=section&id=7.%20Commitments%20and%20Contingencies) The company is involved in approximately 2,200 pending product liability lawsuits. The accrued liability for these claims was $208 million as of June 30, 2023, a decrease from $220 million at December 31, 2022. There are no material environmental matters to disclose - Approximately **2,200** pending product liability lawsuits are ongoing[50](index=50&type=chunk) - Accrued liability for pending and future product liability claims was **$208 million** as of June 30, 2023 (estimated range $182M-$257M), down from **$220 million** as of December 31, 2022 (estimated range $190M-$270M)[50](index=50&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition for the three and six months ended June 30, 2023. It highlights revenue growth driven by strong customer demand and strategic pricing, particularly in the Industrial segment, while also discussing changes in operating expenses, segment profitability, and liquidity. The company emphasizes its global distribution of automotive and industrial replacement parts and its strategic priorities for capital deployment [Overview](index=16&type=section&id=Overview) Genuine Parts Company is a global distributor of automotive and industrial replacement parts, operating in North America, Europe, and Australasia. The Automotive Parts Group accounted for 61% of total revenues, and the Industrial Parts Group accounted for 39% for the six months ended June 30, 2023 - Genuine Parts Company is a global distributor of automotive and industrial replacement parts, operating in North America, Europe, and Australasia[57](index=57&type=chunk) - Automotive Parts Group accounted for **61%** of total revenues, and Industrial Parts Group accounted for **39%** for the six months ended June 30, 2023[58](index=58&type=chunk) [Key Performance Indicators](index=17&type=section&id=Key%20Performance%20Indicators) The company assesses its business using key performance indicators such as Comparable Sales, Gross Profit and Gross Margin, Selling, Administrative and Other Expenses (SG&A), Segment Profit and Segment Margin, Net Income, and EBITDA, along with their adjusted measures - Key performance indicators include Comparable Sales, Gross Profit and Gross Margin, Selling, Administrative and Other Expenses (SG&A), Segment Profit and Segment Margin, Net Income, and EBITDA (and their adjusted measures)[59](index=59&type=chunk) [Results of Operations](index=17&type=section&id=Results%20of%20Operations) Overall revenues grew 5.6% for the three months and 7.2% for the six months ended June 30, 2023, driven by solid customer demand and strategic pricing. Gross margin expanded, but net income for the three-month period decreased due to higher operating expenses, while the six-month period saw net income growth [Net Sales](index=18&type=section&id=Net%20Sales) Net sales increased by 5.6% for the three months and 7.2% for the six months ended June 30, 2023, primarily due to comparable sales growth (4.9% and 6.8% respectively) and acquisitions, partially offset by unfavorable foreign currency impacts. Both Automotive and Industrial segments contributed to this growth - Net sales for the three months ended June 30, 2023, increased **5.6%** (**4.9%** comparable sales, **1.8%** acquisitions, offset by **1.1%** foreign currency)[65](index=65&type=chunk) - Net sales for the six months ended June 30, 2023, increased **7.2%** (**6.8%** comparable sales, **2.1%** acquisitions, offset by **1.7%** foreign currency)[66](index=66&type=chunk) Net Sales by Segment (in thousands) | Segment | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change (YoY) | | :-------------------- | :------------------------------- | :------------------------------- | :------------- | | Automotive | $3,654,999 | $3,467,494 | 5.4% | | Industrial | $2,260,007 | $2,134,920 | 5.9% | | Segment | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change (YoY) | | :-------------------- | :------------------------------- | :------------------------------- | :------------- | | Automotive | $7,160,826 | $6,743,115 | 6.2% | | Industrial | $4,519,298 | $4,153,934 | 8.8% | [Gross Profit and Gross Margin](index=19&type=section&id=Gross%20Profit%20and%20Gross%20Margin) Gross profit increased by 8.9% for the three months and 9.5% for the six months ended June 30, 2023. Gross margin expanded by 110 basis points to 36.1% for the three-month period and by 70 basis points to 35.5% for the six-month period, driven by strategic pricing and sourcing initiatives Gross Profit and Gross Margin | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change (YoY) | Basis Point Change | | :-------------------- | :------------------------------- | :------------------------------- | :------------- | :----------------- | | Gross profit | $2,134,743 | $1,960,799 | 8.9% | - | | Gross margin | 36.1% | 35.0% | - | +110 bps | | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change (YoY) | Basis Point Change | | :-------------------- | :------------------------------- | :------------------------------- | :------------- | :----------------- | | Gross profit | $4,148,144 | $3,786,746 | 9.5% | - | | Gross margin | 35.5% | 34.8% | - | +70 bps | - Gross margin improvements reflect positive contributions from strategic pricing and sourcing initiatives[75](index=75&type=chunk) [Operating Expenses](index=19&type=section&id=Operating%20Expenses) Selling, administrative and other expenses (SG&A) as a percentage of sales increased by 240 basis points to 26.7% for the three months and by 110 basis points to 26.5% for the six months ended June 30, 2023. Excluding prior year one-time benefits, the increase was 100 basis points and 60 basis points, respectively, primarily due to wage inflation and IT investments SG&A Expenses as % of Sales | Period | 2023 | 2022 | Change (bps) | | :-------------------- | :----- | :----- | :----------- | | Three Months Ended June 30, | 26.7% | 24.3% | +240 bps | | Six Months Ended June 30, | 26.5% | 25.4% | +110 bps | Adjusted SG&A Expenses as % of Sales (excluding prior year one-time benefits) | Period | Change (bps) | | :-------------------- | :----------- | | Three Months Ended June 30, | +100 bps | | Six Months Ended June 30, | +60 bps | - Increases in SG&A are primarily driven by increased personnel costs due to wage inflation and global investments in information technology[76](index=76&type=chunk) [Segment Profit](index=19&type=section&id=Segment%20Profit) Automotive segment profit increased slightly (2.1% for three months, 1.1% for six months), but segment margin decreased due to lower U.S. sales and higher costs. Industrial segment profit saw strong growth (25.7% for three months, 31.8% for six months) with significant margin expansion, driven by strong sales, expense leveraging, and strategic initiatives Segment Profit and Margin | Segment | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change (YoY) | Margin 2023 | Margin 2022 | Margin Change (bps) | | :-------------------- | :------------------------------- | :------------------------------- | :------------- | :---------- | :---------- | :------------------ | | Automotive | $329,347 | $322,553 | 2.1% | 9.0% | 9.3% | -30 bps | | Industrial | $283,372 | $225,472 | 25.7% | 12.5% | 10.6% | +190 bps | | Segment | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change (YoY) | Margin 2023 | Margin 2022 | Margin Change (bps) | | :-------------------- | :------------------------------- | :------------------------------- | :------------- | :---------- | :---------- | :------------------ | | Automotive | $593,767 | $587,126 | 1.1% | 8.3% | 8.7% | -40 bps | | Industrial | $545,359 | $413,825 | 31.8% | 12.1% | 10.0% | +210 bps | - Automotive segment profit was negatively impacted by lower than expected sales in the U.S. and higher wages/IT investments[78](index=78&type=chunk) - Industrial segment margin improved due to strong sales growth, expense leveraging, and strategic initiatives in category management and pricing[79](index=79&type=chunk) [Income Taxes](index=20&type=section&id=Income%20Taxes) The effective income tax rate for the three months ended June 30, 2023, was 24.1%, a slight decrease from 24.2% in the prior year, mainly due to excess tax stock compensation benefits. For the six months, the rate increased to 24.5% from 24.3% due to one-time adjustments in 2022. The full-year estimated effective tax rate is expected to be between 24.4% and 24.8% Effective Income Tax Rate | Period | 2023 | 2022 | Change (bps) | | :-------------------- | :----- | :----- | :----------- | | Three Months Ended June 30, | 24.1% | 24.2% | -10 bps | | Six Months Ended June 30, | 24.5% | 24.3% | +20 bps | Full Year Estimated Effective Tax Rate **24.4% to 24.8%** [Net Income](index=20&type=section&id=Net%20Income) Net income for the three months ended June 30, 2023, decreased by 7.5% to $344 million, or $2.44 diluted EPS. However, on an adjusted basis (excluding prior year one-time items), net income increased by 10.0% to $344 million, or $2.44 adjusted diluted EPS. For the six months, net income increased by 4.9% to $648 million, or $4.58 diluted EPS, and adjusted net income increased by 12.0% to $648 million, or $4.58 adjusted diluted EPS Net Income and Diluted EPS (GAAP) | Period | Net Income 2023 | Net Income 2022 | % Change (YoY) | Diluted EPS 2023 | Diluted EPS 2022 | % Change (YoY) | | :-------------------- | :-------------- | :-------------- | :------------- | :--------------- | :--------------- | :------------- | | Three Months Ended June 30, | $344,494 | $372,529 | -7.5% | $2.44 | $2.62 | -6.9% | | Six Months Ended June 30, | $648,451 | $618,367 | 4.9% | $4.58 | $4.34 | 5.5% | Adjusted Net Income and Diluted EPS (excluding prior year one-time items) | Period | Adjusted Net Income 2023 | Adjusted Net Income 2022 | % Change (YoY) | Adjusted Diluted EPS 2023 | Adjusted Diluted EPS 2022 | % Change (YoY) | | :-------------------- | :----------------------- | :----------------------- | :------------- | :------------------------ | :------------------------ | :------------- | | Three Months Ended June 30, | $344,494 | $313,088 | 10.0% | $2.44 | $2.20 | 10.9% | | Six Months Ended June 30, | $648,451 | $578,737 | 12.0% | $4.58 | $4.06 | 12.8% | Adjusted EBITDA (in thousands) | Period | 2023 | 2022 | % Change (YoY) | | :-------------------- | :----------- | :----------- | :------------- | | Three Months Ended June 30, | $561,417 | $520,973 | 7.8% | | Six Months Ended June 30, | $1,069,902 | $979,823 | 9.2% | [Non-GAAP Financial Measures](index=20&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like adjusted net income, adjusted diluted EPS, and adjusted EBITDA to provide supplemental information on core operations, enhance comparability, and distinguish ongoing results from infrequent items. Reconciliations to GAAP measures are provided, showing adjustments for gains on real estate sales, insurance proceeds, and acquisition-related costs - Adjusted net income, adjusted diluted EPS, and adjusted EBITDA are non-GAAP measures used to provide transparency into core operations and enhance comparability[87](index=87&type=chunk)[88](index=88&type=chunk) Reconciliation of GAAP Net Income to Adjusted Net Income (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | GAAP net income | $344,494 | $372,529 | $648,451 | $618,367 | | Total adjustments | — | $(76,732) | — | $(50,817) | | Tax impact of adjustments | — | $17,291 | — | $11,187 | | Adjusted net income | $344,494 | $313,088 | $648,451 | $578,737 | Reconciliation of GAAP Diluted EPS to Adjusted Diluted EPS | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | GAAP diluted earnings per share | $2.44 | $2.62 | $4.58 | $4.34 | | Total adjustments | — | $(0.54) | — | $(0.36) | | Tax impact of adjustments | — | $0.12 | — | $0.08 | | Adjusted diluted earnings per share | $2.44 | $2.20 | $4.58 | $4.06 | Reconciliation of GAAP Net Income to Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | GAAP net income | $344,494 | $372,529 | $648,451 | $618,367 | | Depreciation and amortization | $90,873 | $85,890 | $178,088 | $173,259 | | Interest expense, net | $16,455 | $20,248 | $33,319 | $40,098 | | Income taxes | $109,595 | $119,038 | $210,044 | $198,916 | | EBITDA | $561,417 | $597,705 | $1,069,902 | $1,030,640 | | Total adjustments | — | $(76,732) | — | $(50,817) | | Adjusted EBITDA | $561,417 | $520,973 | $1,069,902 | $979,823 | [Financial Condition](index=23&type=section&id=Financial%20Condition) The company's cash balance decreased by $123 million to $530 million as of June 30, 2023. Operating cash flow decreased by $334 million compared to the prior year, partly due to an increase in day sales outstanding. Total debt increased by $75 million to $3.4 billion - Cash balance was **$530 million** as of June 30, 2023, a decrease of **$123 million** from December 31, 2022[94](index=94&type=chunk) - Net cash provided by operating activities decreased by **$334 million** for the six months ended June 30, 2023, compared to the prior year, partly due to a **$200 million** benefit in 2022 from an increased A/R Sales Agreement facility limit and an increase in day sales outstanding[95](index=95&type=chunk) - Total debt increased by **$75 million (2.3%)** to **$3.4 billion** at June 30, 2023, from December 31, 2022[96](index=96&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $2.0 billion available as of June 30, 2023, comprising $1.4 billion from its revolving credit facility and $530 million in cash. It expects existing liquidity and operating cash flows to fund ongoing activities, capital expenditures, acquisitions, debt obligations, and dividends. The company increased its quarterly cash dividend by 6% in February 2023, marking its 67th consecutive year of increased dividends - Total liquidity was **$2.0 billion** as of June 30, 2023, consisting of **$1.4 billion** availability on the revolving credit facility and **$530 million** in cash and cash equivalents[97](index=97&type=chunk) - The company announced a **6% increase** in the regular quarterly cash dividend for 2023, raising the annual rate to **$3.80 per share**, marking the **67th consecutive year** of increased dividends[101](index=101&type=chunk) - The total average cost of debt was **2.39%** at June 30, 2023, and the company remains in compliance with all debt covenants[99](index=99&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's exposure to market risk has not materially changed since December 31, 2022, as referenced in its 2022 Annual Report on Form 10-K - The company's exposure to market risk has not materially changed since December 31, 2022[102](index=102&type=chunk) [Item 4. Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2023. There have been no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were effective as of June 30, 2023, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[103](index=103&type=chunk)[104](index=104&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023[105](index=105&type=chunk) PART II – OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, other information, and exhibits [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from the Commitments and Contingencies Footnote in Item 1 of Part I - Legal proceedings information is referenced from the Commitments and Contingencies Footnote in Item 1 of Part I[107](index=107&type=chunk) [Item 1A. Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) Readers should consider the risk factors discussed in the company's 2022 Annual Report on Form 10-K, as no new material risks have been identified - Risk factors are discussed in the 2022 Annual Report on Form 10-K, with no additional material risks identified in this report[108](index=108&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the three months ended June 30, 2023, the company repurchased 568,921 shares of common stock at an average price of $159.92 per share. Approximately 9.5 million shares remain available under the existing repurchase authorization Issuer Purchases of Equity Securities (Three Months Ended June 30, 2023) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs | | :-------------------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :----------------------------------------------------------------------------- | | April 1, 2023 through April 30, 2023 | 86,072 | $165.86 | 82,652 | 9,799,340 | | May 1, 2023 through May 31, 2023 | 427,874 | $159.30 | 295,677 | 9,503,663 | | June 1, 2023 through June 30, 2023 | 54,975 | $155.40 | 51,244 | 9,452,419 | | Totals | 568,921 | $159.92 | 429,573 | 9,452,419 | - Approximately **9.5 million shares** remain available for repurchase under the authorization announced on August 21, 2017[111](index=111&type=chunk) [Item 5. Other Information](index=25&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading plans during the fiscal quarter ended June 30, 2023 - No Rule 10b5-1 trading plans were adopted, modified, or terminated by directors or executive officers during the quarter ended June 30, 2023[112](index=112&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed or furnished as part of the report, including organizational documents, certifications (CEO, CFO), XBRL instance documents, and the cover page - Exhibits include Amended and Restated Articles of Incorporation, By-Laws, CEO and CFO certifications (pursuant to SEC Rule 13a-14(a) and 18 U.S.C. Section 1350), XBRL taxonomy documents, and the Inline XBRL formatted cover page[113](index=113&type=chunk) [SIGNATURES](index=27&type=section&id=SIGNATURES) The report was duly signed on behalf of Genuine Parts Company by Bert Nappier, Executive Vice President and Chief Financial Officer, on July 20, 2023 - The report was signed by Bert Nappier, Executive Vice President and Chief Financial Officer, on **July 20, 2023**[115](index=115&type=chunk)

Genuine Parts Company (NYSE:GPC) Q1 2023 Earnings Conference Call April 20, 2023 11:00 AM ET Company Participants Sid Jones - Senior Vice President, Investor Relations Paul Donahue - Chairman & Chief Executive Officer Will Stengel - President & Chief Operating Officer Bert Nappier - Executive Vice President & Chief Financial Officer Conference Call Participants Kate McShane - Goldman Sachs Bret Jordan - Jefferies Josh Young - Truist Securities Christopher Horvers - JPMorgan Liz Suzuki - Bank of America Greg ...