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)

Financial Data and Key Metrics Changes - The company reported record quarterly sales of $5.8 billion, an increase of 9% from the prior year [7] - Segment margin improved to 9.1%, up 50 basis points from 2022 [7] - Earnings per share (EPS) reached $2.14, reflecting a 15% increase from adjusted EPS last year [7] - Gross margin was 34.9%, improving 30 basis points from the adjusted gross margin last year [34] - Net income was $304 million, up from $266 million in the previous year, marking a 15% increase [69] - Free cash flow was $109 million, with available liquidity of $2.1 billion [70] Business Line Data and Key Metrics Changes - Global Industrial segment sales were $2.3 billion, an increase of approximately $240 million or 11.9% [19] - Global Automotive segment sales were $3.5 billion, an increase of approximately $230 million or 7% [22] - Industrial segment profit was approximately $262 million, representing 11.6% of sales, a 230 basis point increase from the previous year [21] - Automotive segment profit was $264 million, flat compared to last year, with a segment operating margin of 7.5% [23] Market Data and Key Metrics Changes - In Canada, sales grew approximately 9% in local currency during the first quarter [27] - European automotive sales grew approximately 22% in local currency, with comparable sales growth of approximately 13% [61] - Asia-Pac automotive sales increased approximately 14% in local currency, with comparable sales growth of approximately 11% [63] Company Strategy and Development Direction - The company aims for double-digit EPS CAGR and double-digit EBITDA and segment profit margin by 2025 [14] - Strategic initiatives focus on talent and culture, sales effectiveness, technology, supply chain, and disciplined M&A strategy [18] - The company is expanding its NexDrive EV service shops to approximately 400 locations, up from 150 in 2022 [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic plans and ability to execute through a dynamic economic environment [72] - The company anticipates continued strong performance in the industrial segment and recovery in the US automotive business [100] - Management acknowledged cost pressures in the US automotive sector but expects improvements in the second half of the year [76][90] Other Important Information - The company invested $88 million in capital expenditures and $40 million in acquisitions during the first quarter [37] - The company raised its full-year guidance for diluted EPS to a range of $8.95 to $9.10, an increase of approximately 7% to 9% from 2022 [71] Q&A Session Summary Question: What exposure does the company have to California or the West? - Management indicated that there is no outsized exposure to any one region, with US automotive revenue being directionally correct and equally split across regions [41] Question: What actions are being taken to address sluggish performance in US Automotive? - Management noted that the team is focused on costs and has stepped up urgency in US Automotive, with plans to balance near-term cost actions with long-term investments [77][92] Question: What is the outlook for inflation and its impact on the business? - Inflation moderated slightly in Q1, with expectations for it to continue to decrease throughout the year [110] Question: How are the automotive and industrial segments performing in terms of margins? - The decline in automotive margins was primarily in the US business, while Europe and Asia Pacific segments saw margin increases [153] Question: Will the company consider acquiring underperforming competitors? - Management confirmed that they would consider acquisitions that create value and align with their strategy, regardless of the current performance of the target [126]

Other Information Appendix B | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |-----------------------------------------------------------------------------------------------------------------|-------|-------|-------|----------------------|-------|-------|-------|-------|-------|-------|-------|-----------| | (in thousands, except per share data) \nGAAP earnings per share $ 8.76 $ 2.14 $ 1.72 $ 2.62 $ 2.20 $ 1.77 | | TTM | | Q1 | Q1 | | | Q2 | | Q3 | | Q4 | | | | | | | | | | | ...

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 March 31, 2023 (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.) OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT ...

Genuine Parts Company (NYSE:GPC) Q4 2022 Earnings Conference Call February 23, 2023 11:00 AM ET Company Participants Sid Jones - SVP, IR Paul Donahue - Chairman and CEO Will Stengel - President and COO Bert Nappier - EVP and CFO Conference Call Participants Christopher Horvers - JPMorgan Kate McShane - Goldman Sachs Greg Melich - Evercore ISI Scot Ciccarelli - Truist Securities Liz Suzuki - Bank of America Merrill Lynch Bret Jordan - Jefferies Joe Enderlin - Stephens Inc. Seth Basham - Wedbush Operator Good ...

$22.1B NON-GAAP MEASURES: This presentation contains certain financial information not derived in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP"). These items include adjusted net income, adjusted diluted net income per common share and free cash flow. The company believes that the presentation of adjusted net income, adjusted diluted net income per common share and free cash flow, when considered together with the corresponding GAAP financial measures and the reconc ...

PART I [Business Overview](index=4&type=section&id=Item%201.%20Business) Genuine Parts Company (GPC) is a global distributor of automotive and industrial replacement parts, operating over 10,600 locations across North America, Europe, and Australasia - GPC's core purpose is 'We Keep the World Moving,' aiming to be an employer, supplier, customer, corporate citizen, and investment of choice[16](index=16&type=chunk) - The strategy focuses on profitable growth, operational efficiencies, and strong cash flow in its market-leading automotive and industrial businesses[16](index=16&type=chunk) - GPC is a global service organization distributing automotive and industrial replacement parts from over **10,600** locations across North America, Europe, and Australasia[14](index=14&type=chunk) - Strategic financial objectives include revenue growth exceeding market growth, improved operating margins, a strong balance sheet and cash flows, and effective capital allocation[18](index=18&type=chunk) - The company is committed to sustainable and efficient operations, reducing its environmental footprint, and promoting a diverse, equitable, and inclusive workplace[48](index=48&type=chunk)[51](index=51&type=chunk)[57](index=57&type=chunk) [Our Purpose & Strategy](index=4&type=section&id=OUR%20PURPOSE%20%26%20STRATEGY) GPC's strategy focuses on profitable growth, operational efficiencies, and strong cash flow within its market-leading segments - GPC's core purpose is 'We Keep the World Moving,' aiming to be an employer, supplier, customer, corporate citizen, and investment of choice[16](index=16&type=chunk) - The strategy focuses on profitable growth, operational efficiencies, and strong cash flow in its market-leading automotive and industrial businesses[16](index=16&type=chunk) [Our Segments](index=4&type=section&id=OUR%20SEGMENTS) In 2022, the Automotive segment accounted for 62% of total revenues, and the Industrial segment accounted for 38% - In 2022, the Automotive segment accounted for **62%** of total revenues, and the Industrial segment accounted for **38%**[120](index=120&type=chunk) [Automotive Parts Group ("Automotive")](index=4&type=section&id=AUTOMOTIVE%20PARTS%20GROUP%20%28%22Automotive%22%29) The Automotive segment serves commercial and retail customers, expanding its network through strategic acquisitions and key brands like NAPA - The Automotive segment serves commercial 'do-it-for-me' (DIFM) customers, accounting for approximately **80%** of total sales, and retail 'do-it-yourself' (DIY) customers, accounting for approximately **20%** of total sales[21](index=21&type=chunk) - In 2022, the Automotive network grew through strategic acquisitions in Europe (Spain, Portugal, Eastern Germany) and Australasia[22](index=22&type=chunk) - Key brands include NAPA (North America, Australasia) and various banners in Europe such as Groupauto, Precisium Group, and Pièces Auto[20](index=20&type=chunk)[27](index=27&type=chunk) [Store Network](index=4&type=section&id=Store%20Network) The Automotive network expanded with 138 net new stores during 2022, reaching 9,801 total locations Automotive Distribution Network (as of December 31, 2022) | | North America | Europe | Australasia | Total | | :--- | :--- | :--- | :--- | :--- | | Distribution centers | 77 | 78 | 14 | 169 | | Company-owned stores | 1,682 | 742 | 529 | 2,953 | | Independently-owned stores | 5,037 | 1,642 | — | 6,679 | | Total locations | 6,796 | 2,462 | 543 | 9,801 | - The Automotive network expanded with the addition of **138** net new stores during 2022[26](index=26&type=chunk) [Products](index=5&type=section&id=Products) The automotive distribution network provides a wide range of replacement parts for various vehicle types, with 46% of 2022 inventories from 10 major suppliers - The automotive distribution network provides access to hundreds of thousands of different replacement parts for substantially all motor vehicle makes and models, including hybrid and electric vehicles, trucks, SUVs, buses, motorcycles, recreational vehicles, and farm vehicles[27](index=27&type=chunk) - Approximately **46%** of 2022 automotive parts inventories were purchased from **10** major suppliers[27](index=27&type=chunk) [Service to NAPA AUTO PARTS Stores](index=5&type=section&id=Service%20to%20NAPA%20AUTO%20PARTS%20Stores) Services include up-to-date parts cataloging and stock adjustments through a continuously reviewed inventory classification system - Services include up-to-date parts cataloging (including electronic NAPA AUTO PARTS catalogs) and stock adjustments through a continuing parts classification system[30](index=30&type=chunk) - An inventory classification system, continuously reviewed, determines optimum distribution center and auto parts store inventory levels based on automotive registrations, usage rates, production statistics, and predictive analytics[31](index=31&type=chunk) [NAPA](index=5&type=section&id=NAPA) GPC is the sole member of NAPA, a trade association that develops marketing concepts and programs, and funds its national advertising - GPC is the sole member of the National Automotive Parts Association, LLC (NAPA), a trade association that develops marketing concepts and programs[32](index=32&type=chunk)[33](index=33&type=chunk) - GPC uses the federally registered trademark NAPA as part of the trade name for its distribution centers and parts stores and funds NAPA's national advertising program[34](index=34&type=chunk) [Competition](index=6&type=section&id=Competition) The automotive aftermarket is highly competitive, with GPC competing on product availability, service, brand recognition, and price against key players - The automotive aftermarket is highly competitive, with GPC competing primarily on availability of product offering, service, brand recognition, and price[35](index=35&type=chunk) - Key competitors include AutoZone, Inc., O-Reilly Auto Parts, Inc., Advance Auto Parts, Inc., LKQ Corporation, Bapcor, and Uni-Select[35](index=35&type=chunk) [Industrial Parts Group ("Industrial")](index=6&type=section&id=INDUSTRIAL%20PARTS%20GROUP%20%28%22Industrial%22%29) The Industrial segment operates through Motion Industries and Motion Asia Pacific, serving over 200,000 customers and significantly enhancing market leadership with the KDG acquisition - The Industrial segment operates through Motion Industries, Inc. in North America and Motion Asia Pacific in Australasia, serving over **200,000** OEM and MRO customers[36](index=36&type=chunk)[37](index=37&type=chunk) - In 2022, the segment established a new electric vehicle battery category and acquired Kaman Distribution Group (KDG) on January 3, 2022, significantly enhancing its market leadership[37](index=37&type=chunk)[43](index=43&type=chunk) [Distribution Network](index=6&type=section&id=Distribution%20Network) The Industrial business operates 801 locations globally, stocking over 19 million items from 49,000+ suppliers in North America Industrial Distribution Network (as of December 31, 2022) | | North America | Australasia | Total | | :--- | :--- | :--- | :--- | | Distribution centers | 19 | 16 | 35 | | Branches | 549 | 148 | 697 | | Service Centers | 67 | 2 | 69 | | Total locations | 635 | 166 | 801 | - In North America, the Industrial business stocks or distributes more than **19 million** different items purchased from over **49,000** suppliers[41](index=41&type=chunk) [Products](index=7&type=section&id=Products) Industrial distributes a wide variety of parts and products, with most orders filled immediately from stock and delivered within 24 hours - Industrial distributes a wide variety of parts and products, including hoses, belts, bearings, pulleys, pumps, valves, electric motors, and industrial automation products[45](index=45&type=chunk) - Most orders are filled immediately from existing stock, with deliveries normally made within **24 hours** of order receipt[45](index=45&type=chunk) [Supplier Agreements](index=7&type=section&id=Supplier%20Agreements) Non-exclusive distributor agreements are typically in effect with most Industrial suppliers, continuing until breached or terminated by mutual consent - Non-exclusive distributor agreements are in effect with most Industrial suppliers, typically continuing until breached or terminated by mutual consent[46](index=46&type=chunk) [Competition](index=7&type=section&id=Competition) The industrial distribution business is highly competitive and fragmented, with GPC competing on product breadth, quality service, and competitive pricing - The industrial distribution business is highly competitive and fragmented, with GPC competing primarily on the breadth of product offerings, quality service, and competitive pricing[47](index=47&type=chunk) - Key competitors include Applied Industrial Technologies, Inc., Fastenal Company, and W.W. Grainger, Inc[47](index=47&type=chunk) [Environmental, Social and Governance](index=7&type=section&id=ENVIRONMENTAL%2C%20SOCIAL%20AND%20GOVERNANCE) The Nominating and ESG Committee oversees GPC's sustainability initiatives, including greenhouse gas footprint calculation, energy efficiency, and EV preparation - The Nominating and ESG Committee of the Board of Directors oversees GPC's sustainability initiatives[49](index=49&type=chunk) - Environmental initiatives include calculating a global greenhouse gas footprint, expanding LED lighting and smart HVAC systems, implementing fleet management practices, and preparing for electric vehicles (EVs)[51](index=51&type=chunk) [Human Capital Management](index=8&type=section&id=HUMAN%20CAPITAL%20MANAGEMENT) GPC aims to attract, retain, and develop high-quality talent, employing approximately 58,000 people worldwide across 17 countries as of December 31, 2022 - GPC's key human capital management objectives are to attract, retain, and develop the highest quality talent[53](index=53&type=chunk) - As of December 31, 2022, GPC employed approximately **58,000** people worldwide and operated within **17** countries[54](index=54&type=chunk) [Employee Retention and Professional Development](index=8&type=section&id=Employee%20Retention%20and%20Professional%20Development) GPC offers diverse benefit programs for employee well-being and provides extensive development opportunities, including programs for high-potential employees and internships - GPC offers diverse benefit offerings designed to meet the varied and evolving needs of its workforce, including programs for physical, emotional, financial, and social well-being[54](index=54&type=chunk) - The company provides a range of development programs, resources, and opportunities, including a significant program for high-potential employees and various internship and rotational programs[56](index=56&type=chunk) [Diversity, Equity and Inclusion ("DEI")](index=8&type=section&id=Diversity%2C%20Equity%20and%20Inclusion%20%28%22DEI%22%29) GPC promotes a diverse and inclusive culture through a DEI Council, scholarships, collaborations with women's organizations, and Business Resource Groups - GPC promotes a diverse, inclusive, and innovative culture, with a Diversity, Equity, and Inclusion Council led by senior leadership[57](index=57&type=chunk)[59](index=59&type=chunk) - Initiatives include providing scholarships (e.g., for HBCU students), collaborating with organizations supporting women (Women in Technology, Women in Auto Care), and launching four Business Resource Groups (BRGs) for corporate teammates in the U.S[59](index=59&type=chunk)[60](index=60&type=chunk) [Additional Information](index=9&type=section&id=Additional%20Information) GPC's website provides free access to SEC filings, news releases, analyst presentations, financial information, corporate governance guidelines, and codes of conduct - GPC's website (www.genpt.com) provides free access to SEC filings (10-K, 10-Q, 8-K, proxy statements), news releases, analyst presentations, financial information, corporate governance guidelines, and codes of conduct[62](index=62&type=chunk) [Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various risks that could materially and adversely affect GPC's business, financial condition, and results of operations - The report contains forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially from those indicated[64](index=64&type=chunk) - Key risk categories include Strategic and Operational Risks, Macroeconomic, Industry and Financial Risks, Legal and Regulatory Risks, and General Risks[66](index=66&type=chunk) [Forward-Looking Statements](index=9&type=section&id=FORWARD-LOOKING%20STATEMENTS) Forward-looking statements relate to future operations, strategies, financial condition, economic performance, industry conditions, and demand for products and services - Forward-looking statements relate to future operations, strategies, financial condition, economic performance, industry conditions, and demand for products and services[64](index=64&type=chunk) - Readers are cautioned not to place undue reliance on these statements due to inherent risks and uncertainties that could cause actual results to differ materially[64](index=64&type=chunk) [Strategic and Operational Risks](index=10&type=section&id=STRATEGIC%20AND%20OPERATIONAL%20RISKS) GPC faces risks from demand fluctuations, supply chain disruptions, intense competition, IT system failures, and challenges in integrating acquisitions - Demand for Automotive products depends on factors like miles driven, vehicle fleet age, EV adoption, gas prices, and the general economy[67](index=67&type=chunk) - Demand for Industrial products depends on industrial production levels, manufacturing capacity utilization, the Purchasing Managers Index, customer consolidation, and trade policies[67](index=67&type=chunk)[68](index=68&type=chunk) - Risks include supply chain disruptions (raw material shortages, labor strikes, tariffs, pandemics, geopolitical conflicts), intense competition (including e-commerce), IT system failures/cyber-attacks, loss of key personnel, and challenges in integrating strategic acquisitions or executing transformation plans[69](index=69&type=chunk)[71](index=71&type=chunk)[75](index=75&type=chunk)[81](index=81&type=chunk)[83](index=83&type=chunk) [Macroeconomic, Industry and Financial Risks](index=14&type=section&id=MACROECONOMIC%2C%20INDUSTRY%20AND%20FINANCIAL%20RISKS) GPC's business is vulnerable to global economic conditions, foreign currency fluctuations, and high debt levels, which could impact financial performance - GPC's business is vulnerable to uncertain global economic conditions, including inflation/deflation, employment rates, tax policy changes (e.g., Inflation Reduction Act of 2022), energy costs, and volatile exchange rates[88](index=88&type=chunk) - Fluctuations in foreign currency exchange rates have adversely affected and could continue to adversely affect operating results, despite the use of derivative instruments to hedge risk[91](index=91&type=chunk)[92](index=92&type=chunk) - High debt levels could make it difficult to satisfy financial obligations, increase vulnerability to adverse conditions, limit financial flexibility, and expose the company to interest rate fluctuations[93](index=93&type=chunk) [Legal and Regulatory Risks](index=15&type=section&id=LEGAL%20AND%20REGULATORY%20RISKS) GPC may be affected by climate change regulations, ongoing litigation (including product liability lawsuits), and changes in tax or international trade policies - GPC may be affected by global climate change regulations (e.g., GHG emissions, EV adoption) and compliance with new or more stringent laws, which could impact product demand and require additional expenditures[96](index=96&type=chunk) - The company is involved in litigation, including product liability lawsuits; a **$77 million** damage award was reinstated against GPC in 2021[97](index=97&type=chunk)[371](index=371&type=chunk) - Changes in legislation or government regulations, particularly those relating to taxation and international trade (e.g., tariffs), could have a significant impact on results of operations[99](index=99&type=chunk)[100](index=100&type=chunk) [General Risks](index=16&type=section&id=GENERAL%20RISKS) GPC is subject to risks related to corporate social responsibility and reputation, and its stock price is subject to fluctuations based on various external factors - GPC is subject to risks related to corporate social responsibility and reputation, where failure to act responsibly in ESG areas could impact employee engagement, retention, and business relationships[101](index=101&type=chunk)[102](index=102&type=chunk) - The company's stock price is subject to fluctuations based on external economic, market, geopolitical, and industry factors, potentially leading to a decline in investment value[103](index=103&type=chunk) [Unresolved Staff Comments](index=17&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This item is not applicable, indicating no unresolved comments from the SEC staff - There are no unresolved staff comments[104](index=104&type=chunk) [Properties](index=17&type=section&id=Item%202.%20Properties) As of December 31, 2022, GPC's global network included 204 distribution centers and 3,719 other locations, with most distribution centers owned and other facilities leased Company-Owned and Operated Facilities (as of December 31, 2022) | | Distribution Centers | Other Locations | | :--- | :--- | :--- | | Automotive: | 169 | 2,953 | | Industrial: | 35 | 766 | | **Total** | **204** | **3,719** | - GPC generally owns distribution centers and leases retail stores and branches[105](index=105&type=chunk) [Legal Proceedings](index=17&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from the Commitments and Contingencies Footnote in the Notes to Consolidated Financial Statements - Information with respect to legal proceedings is found in the Commitments and Contingencies Footnote in the Notes to Consolidated Financial Statements in Item 8 of Part II[106](index=106&type=chunk) [Mine Safety Disclosures](index=17&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable, indicating no mine safety disclosures - There are no mine safety disclosures[107](index=107&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=18&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 under "GPC," with a long history of increasing annual cash dividends and active share repurchases - GPC's common stock is traded on the New York Stock Exchange under the ticker symbol "**GPC**"[110](index=110&type=chunk) - The company has paid a cash dividend to shareholders every year since going public in **1948** and increased the annual dividend for **66** consecutive years through **2022**[110](index=110&type=chunk) [Market Information Regarding Common Stock](index=18&type=section&id=Market%20Information%20Regarding%20Common%20Stock) GPC's common stock is traded on the New York Stock Exchange under the ticker symbol "GPC" - GPC's common stock is traded on the New York Stock Exchange under the ticker symbol "**GPC**"[110](index=110&type=chunk) [Dividend Information](index=18&type=section&id=Dividend%20Information) GPC has paid a cash dividend to shareholders every year since 1948, increasing the annual dividend for 66 consecutive years through 2022 - GPC has paid a cash dividend to shareholders every year since going public in **1948** and increased the annual dividend for **66** consecutive years through **2022**[110](index=110&type=chunk) [Stock Performance Graph](index=18&type=section&id=Stock%20Performance%20Graph) GPC's cumulative total shareholder return outperformed both the S&P 500 and a peer index over the five years ending December 31, 2022 Cumulative Total Shareholder Return (2017-2022) | Year End | Genuine Parts Company ($) | S&P 500 Stock Index ($) | Peer Index ($) | | :--- | :--- | :--- | :--- | | 2017 | $100.00 | $100.00 | $100.00 | | 2018 | $104.11 | $95.62 | $83.10 | | 2019 | $118.74 | $125.73 | $106.58 | | 2020 | $116.13 | $148.87 | $127.14 | | 2021 | $166.52 | $191.60 | $156.34 | | 2022 | $211.19 | $156.90 | $125.91 | [Holders](index=19&type=section&id=Holders) As of December 31, 2022, there were 6,892 holders of record of the company's common stock - As of December 31, 2022, there were **6,892** holders of record of the company's common stock[115](index=115&type=chunk) [Issuer Purchases of Equity Securities](index=19&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) GPC repurchased 43,217 shares in Q4 2022 at an average price of $176.04, with approximately 10.3 million shares remaining authorized for repurchase Issuer Purchases of Equity Securities (Q4 2022) | Period | Total Number of Shares Purchased(1) | Average Price Paid per Share ($) | 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 | | :--- | :--- | :--- | :--- | :--- | | October 1, 2022 through October 31, 2022 | 18,142 | $173.00 | 124,004 | 10,458,662 | | November 1, 2022 through November 30, 2022 | 22,892 | $178.92 | 109,115 | 10,349,547 | | December 1, 2022 through December 31, 2022 | 2,183 | $171.00 | 56,549 | 10,292,998 | | **Total** | **43,217** | **$176.04** | **289,668** | **10,292,998** | - Approximately **10.3 million** shares authorized remain available to be repurchased by the company as of December 31, 2022[116](index=116&type=chunk) [Reserved](index=19&type=section&id=Item%206.%20%28Reserved%29) This item is reserved and contains no information - Item 6 is reserved[117](index=117&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of GPC's financial performance, condition, and results of operations for 2022, highlighting strong revenue growth, improved segment margins, and robust cash flow - In 2022, GPC experienced **17.1%** revenue growth over 2021, a **60 basis point** improvement in segment margin, and generated **$1.5 billion** in cash from operations (a **16.6%** increase from 2021)[132](index=132&type=chunk) Consolidated Results of Operations Summary (Years Ended December 31, in thousands) | Metric | 2022 (in thousands) | 2021 (in thousands) | $ Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Net sales | $22,095,973 | $18,870,510 | $3,225,463 | 17.1% | | Gross profit | $7,740,104 | $6,634,136 | $1,105,968 | 16.7% | | Net income | $1,182,701 | $898,790 | $283,911 | 31.6% | | Diluted EPS | $8.31 | $6.23 | $2.08 | 33.4% | | Adjusted EBITDA | $1,999,329 | $1,681,515 | $317,814 | 18.9% | [Overview](index=20&type=section&id=OVERVIEW) Genuine Parts Company is a global service organization distributing automotive and industrial replacement parts from over 10,600 locations, with Automotive accounting for 62% and Industrial for 38% of 2022 revenues - Genuine Parts Company is a global service organization engaged in the distribution of automotive and industrial replacement parts, operating from more than **10,600** locations in North America, Europe, and Australasia in 2022[119](index=119&type=chunk)[120](index=120&type=chunk) - In 2022, the Automotive business accounted for **62%** of total revenues, and the Industrial business accounted for **38%**[120](index=120&type=chunk) [Key Performance Indicators](index=20&type=section&id=KEY%20PERFORMANCE%20INDICATORS) Key performance indicators include comparable sales, gross profit, SG&A, segment profit, net income, and EBITDA, with adjusted measures used for enhanced comparability - Key performance indicators include comparable sales (excluding acquisitions, divestitures, foreign currency), gross profit and gross margin, selling, administrative and other expenses (SG&A), segment profit and segment margin, and net income and EBITDA (including adjusted measures)[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk)[129](index=129&type=chunk) - Adjusted measures of EBITDA and net income eliminate certain non-recurring charges and other items not reflective of ongoing business performance to enhance comparability[130](index=130&type=chunk) [Consolidated Results of Operations](index=21&type=section&id=CONSOLIDATED%20RESULTS%20OF%20OPERATIONS) GPC achieved strong financial results in 2022, with significant increases in net sales, gross profit, net income, and adjusted EBITDA Consolidated Results of Operations Summary (Years Ended December 31, in thousands) | Metric | 2022 (in thousands) | 2021 (in thousands) | $ Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Net sales | $22,095,973 | $18,870,510 | $3,225,463 | 17.1% | | Gross profit | $7,740,104 | $6,634,136 | $1,105,968 | 16.7% | | Net income | $1,182,701 | $898,790 | $283,911 | 31.6% | | Diluted EPS | $8.31 | $6.23 | $2.08 | 33.4% | | Adjusted EBITDA | $1,999,329 | $1,681,515 | $317,814 | 18.9% | [Net Sales](index=22&type=section&id=Net%20Sales) Net sales increased by **17.1%** in 2022, driven by **11.8%** comparable sales growth and **8.6%** from acquisitions, partially offset by **3.3%** unfavorable foreign currency impact - Net sales increased **17.1%** in 2022, driven by an **11.8%** comparable sales increase and an **8.6%** positive impact from acquisitions, partially offset by a **3.3%** unfavorable impact from foreign currency[135](index=135&type=chunk) - Strong customer demand and a favorable pricing environment, used to offset elevated inflationary pressure, were primary drivers of comparable sales growth[136](index=136&type=chunk) [Automotive](index=22&type=section&id=Automotive) Automotive net sales reached **$13.7 billion** in 2022, an **8.9%** increase, fueled by **9.0%** comparable sales growth, acquisitions, and a strong pricing environment - Automotive net sales were **$13.7 billion** in 2022, an **8.9%** increase from 2021, including **9.0%** comparable sales growth and a **4.5%** contribution from acquisitions, partially offset by a **4.6%** unfavorable foreign currency impact[137](index=137&type=chunk) - Sales growth was driven by solid demand for automotive parts, a strong pricing environment due to elevated product costs, and footprint expansion through acquisitions[138](index=138&type=chunk) [Industrial](index=22&type=section&id=Industrial) Industrial net sales surged to **$8.4 billion** in 2022, a **33.2%** increase, with **17.3%** comparable sales growth and **16.8%** from acquisitions, notably Kaman Distribution Group - Industrial net sales were **$8.4 billion** in 2022, a **33.2%** increase from 2021, including **17.3%** comparable sales growth and a **16.8%** contribution from acquisitions, primarily Kaman Distribution Group (KDG)[139](index=139&type=chunk) - The segment experienced double-digit sales growth across all **14** customer sectors, with the largest increases in oil and gas, mining, and aggregate and cement[140](index=140&type=chunk) [Gross Profit & Gross Margin](index=22&type=section&id=Gross%20Profit%20%26%20Gross%20Margin) Gross profit increased by **$1.1 billion** (16.7%) in 2022, but gross margin slightly decreased to **35.0%** due to lower supplier incentives, Industrial segment growth, and unfavorable foreign currency - Gross profit increased by **$1.1 billion** (**16.7%**) in 2022, but gross margin slightly decreased to **35.0%** from **35.2%** in 2021[141](index=141&type=chunk) - The slight decrease in gross margin was due to lower supplier incentives as a percentage of sales, the relative sales growth of the lower-margin Industrial segment, and unfavorable foreign currency, offsetting positive contributions from pricing and sourcing initiatives[141](index=141&type=chunk) [Operating Expenses](index=22&type=section&id=Operating%20Expenses) Selling, administrative and other expenses (SG&A) decreased to **26.1%** of net sales in 2022, driven by sales leverage, cost reduction, and a **$103 million** gain on real estate sale - Selling, administrative and other expenses (SG&A) decreased to **26.1%** of net sales in 2022 from **27.4%** in 2021, driven by leveraging strong core sales growth, cost reduction, and a **$103 million** gain on real estate sale[142](index=142&type=chunk)[143](index=143&type=chunk) - These benefits were partially offset by higher personnel and freight costs, **$67 million** in KDG acquisition and integration costs (including a **$17 million** impairment), and a **$29 million** product liability remeasurement[143](index=143&type=chunk) - Depreciation and amortization expense increased by **$57 million** due to higher amortization from KDG intangible assets and increased capital investments[144](index=144&type=chunk) [Non-Operating Expenses and Income](index=23&type=section&id=Non-Operating%20Expenses%20and%20Income) GPC incurred **$42 million** in net non-operating expenses in 2022, a **$79 million** change from net non-operating income in 2021, primarily due to increased interest expense, lower investment income, and foreign currency losses - GPC incurred **$42 million** in net non-operating expenses in 2022, a **$79 million** change from **$37 million** in net non-operating income in 2021[145](index=145&type=chunk) - This change was primarily due to a **$12 million** increase in net interest expense (funding KDG acquisition), a **$32 million** decline in investment income, a **$17 million** increase in A/R Sales Agreement fees, and a **$12 million** net change from foreign currency gains to losses[145](index=145&type=chunk) [Segment Profit](index=23&type=section&id=Segment%20Profit) Automotive segment profit increased **11.0%** with a **10 basis point** margin improvement, while Industrial segment profit increased **49.0%** with a **110 basis point** margin improvement - Automotive segment profit increased **11.0%** with a **10 basis point** margin improvement, driven by strong sales growth, favorable pricing, and strategic supply chain initiatives[146](index=146&type=chunk) - Industrial segment profit increased **49.0%** with a **110 basis point** margin improvement, reflecting expense leverage from double-digit core sales growth, the KDG acquisition, and strategic operating initiatives[147](index=147&type=chunk) [Income Taxes](index=23&type=section&id=Income%20Taxes) The effective income tax rate was **24.8%** in 2022, slightly lower than 2021, with no material impacts expected from the Inflation Reduction Act of 2022 - The effective income tax rate was **24.8%** as of December 31, 2022, compared to **25.1%** in 2021, primarily due to the prior year's impact of a United Kingdom rate change[148](index=148&type=chunk) - The Inflation Reduction Act of 2022 (IRA), effective January 1, 2023, is not expected to have material impacts on GPC's financial statements[149](index=149&type=chunk) [Net Income](index=23&type=section&id=Net%20Income) Net income increased by **31.6%** to **$1.2 billion** in 2022, with diluted EPS of **$8.31**, and adjusted figures also showing strong growth - Net income was **$1.2 billion** in 2022 (up **31.6%** YoY), with diluted EPS of **$8.31** (up **33.4%** YoY)[150](index=150&type=chunk) - Adjusted net income was **$1.2 billion** (up **19.1%** YoY), and adjusted diluted EPS was **$8.34** (up **20.7%** YoY)[150](index=150&type=chunk) - EBITDA was **$2.0 billion** (up **28.4%** YoY), and Adjusted EBITDA was **$2.0 billion** (up **18.9%** YoY)[150](index=150&type=chunk) [Non-GAAP Financial Measures](index=24&type=section&id=Non-GAAP%20Financial%20Measures) GPC provides adjusted net income, adjusted diluted EPS, and adjusted EBITDA as non-GAAP measures to offer supplemental information indicative of core operations - GPC provides adjusted net income, adjusted diluted EPS, and adjusted EBITDA as non-GAAP measures to offer meaningful supplemental information indicative of core operations[153](index=153&type=chunk) Adjusted Net Income Reconciliation (Years Ended December 31, in thousands) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | GAAP net income | $1,182,701 | $898,790 | | Total adjustments | 5,021 | 128,048 | | Tax impact of adjustments | (137) | (29,828) | | **Adjusted net income** | **$1,187,585** | **$997,010** | Adjusted EBITDA Reconciliation (Years Ended December 31, in thousands) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | GAAP net income | $1,182,701 | $898,790 | | Depreciation and amortization | 347,819 | 290,971 | | Interest expense, net | 73,887 | 62,150 | | Income taxes | 389,901 | 301,556 | | EBITDA | 1,994,308 | 1,553,467 | | Total adjustments (8) | 5,021 | 128,048 | | **Adjusted EBITDA** | **$1,999,329** | **$1,681,515** | [Outlook](index=25&type=section&id=OUTLOOK) GPC anticipates continued revenue and earnings growth in 2023, supported by positive trends in both Automotive and Industrial businesses, with strategic initiatives mitigating inflationary pressures - GPC expects continued revenue and earnings growth in 2023, supported by positive trends in the Automotive business (miles driven, aging vehicles, limited new car inventory) and strong performance in the Industrial business[158](index=158&type=chunk) - Strategic pricing and sourcing initiatives are expected to mitigate inflationary cost pressures and drive improvement in gross margins and earnings[159](index=159&type=chunk) [Financial Condition](index=26&type=section&id=FINANCIAL%20CONDITION) GPC's financial position at year-end 2022 shows increased total debt, primarily due to the Kaman Distribution Group acquisition, and higher accounts receivable and inventories Key Financial Position Metrics (as of December 31, in millions) | Metric | 2022 (in millions) | 2021 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Cash balance | $653 | $715 | $(62) | | Accounts receivable | $2,189 | $1,798 | $391 | | Merchandise inventories | $4,442 | $3,890 | $552 | | Trade accounts payable | $5,457 | $4,805 | $652 | | Total debt | $3,329 | $2,409 | $920 | - Total debt increased by **$919 million**, primarily due to the Senior Notes offering to fund the acquisition of Kaman Distribution Group (KDG)[160](index=160&type=chunk) [Supply Chain Finance Programs](index=26&type=section&id=Supply%20Chain%20Finance%20Programs) GPC utilizes supply chain finance programs, allowing suppliers to sell **$3.1 billion** of receivables to financial institutions on a non-recourse basis as of December 31, 2022 - GPC utilizes supply chain finance (SCF) programs, allowing suppliers to sell their receivables from GPC to financial institutions on a non-recourse basis[161](index=161&type=chunk) - As of December 31, 2022, suppliers elected to sell **$3.1 billion** of GPC's outstanding payment obligations to financial institutions, with **$3.7 billion** settled through the program during the year[161](index=161&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) GPC's capital sources primarily include cash flows from operations, supplemented by debt issuances and bank borrowings, which are deemed sufficient to fund future operations and strategic initiatives - GPC's sources of capital primarily consist of cash flows from operations, supplemented by private and public issuances of debt and bank borrowings[162](index=162&type=chunk) - The company believes its cash on hand and available short-term and long-term capital sources are sufficient to fund operations, including working capital, strategic acquisitions, dividends, share repurchases, and capital expenditures[162](index=162&type=chunk) - Total debt outstanding at December 31, 2022, increased by **$919 million** from December 31, 2021, primarily to fund the KDG acquisition[163](index=163&type=chunk) [Sources and Uses of Cash](index=27&type=section&id=Sources%20and%20Uses%20of%20Cash) Cash flows from operating activities increased by **16.6%** in 2022, while investing activities saw a **232.7%** increase in cash usage, and financing activities provided **$205.1 million** Consolidated Statements of Cash Flows Summary (Years Ended December 31, in thousands) | Activity | 2022 (in thousands) | 2021 (in thousands) | $ Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Operating activities | $1,466,971 | $1,258,285 | $208,686 | 16.6% | | Investing activities | $(1,684,240) | $(506,164) | $(1,178,076) | 232.7% | | Financing activities | $205,101 | $(989,532) | $1,194,633 | (120.7)% | [Operating Activities](index=27&type=section&id=Operating%20Activities) Cash provided by operating activities increased by **$208.7 million** (16.6%) in 2022, driven by higher earnings and effective working capital management, including a **$200 million** benefit from receivables sold - Cash provided by operating activities increased by **$208.7 million** (**16.6%**) in 2022, primarily driven by higher earnings and effective working capital management, including a **$200 million** benefit from increasing receivables sold under the A/R Sales Agreement[165](index=165&type=chunk) [Investing Activities](index=27&type=section&id=Investing%20Activities) Net cash used in investing activities was **$1.68 billion** in 2022, a **232.7%** increase, mainly due to **$1.7 billion** for acquisitions (primarily KDG) and **$340 million** in capital expenditures - Net cash used in investing activities was **$1.68 billion** in 2022, a **232.7%** increase from 2021, mainly due to **$1.7 billion** used for acquisitions (primarily KDG) and **$340 million** in capital expenditures[166](index=166&type=chunk) - These outflows were partially offset by **$145 million** in proceeds from the sale of property, plant and equipment and **$34 million** in proceeds from divestitures[166](index=166&type=chunk) [Financing Activities](index=27&type=section&id=Financing%20Activities) Cash provided by financing activities was **$205.1 million** in 2022, reflecting **$919 million** of net debt proceeds, partially offset by **$496 million** in dividends and **$223 million** in share repurchases - Cash provided by financing activities was **$205.1 million** in 2022, reflecting **$919 million** of net proceeds from debt (primarily Senior Notes), partially offset by **$496 million** in dividends paid and **$223 million** in common stock repurchases[167](index=167&type=chunk) - In 2022, GPC announced a **10%** increase in its regular quarterly cash dividend[167](index=167&type=chunk) [Notes and Other Borrowings](index=28&type=section&id=Notes%20and%20Other%20Borrowings) In January 2022, GPC issued **$1 billion** in Senior Notes to fund the KDG acquisition, increasing its A/R Sales Agreement limit to **$1 billion**, and maintaining **$2.2 billion** in total liquidity - In January 2022, GPC issued **$500 million** of unsecured **1.750%** Senior Notes due 2025 and **$500 million** of unsecured **2.750%** Senior Notes due 2032 to repay borrowings used for the KDG acquisition[169](index=169&type=chunk)[307](index=307&type=chunk) - The A/R Sales Agreement facility limit was increased by an additional **$200 million**, bringing the total to **$1 billion**[168](index=168&type=chunk) - As of December 31, 2022, GPC had **$3.4 billion** of unsecured Senior Notes outstanding and **$2.2 billion** of total liquidity (comprising **$1.5 billion** availability on the revolving credit facility and **$653 million** of cash and cash equivalents)[170](index=170&type=chunk)[171](index=171&type=chunk) [Contractual and Other Obligations](index=28&type=section&id=Contractual%20and%20Other%20Obligations) GPC's total material cash requirements were **$4.59 billion** as of December 31, 2022, including **$3.35 billion** for credit facilities and **$1.24 billion** for operating leases Material Cash Requirements (as of December 31, 2022, in thousands) | | Total (in thousands) | Less Than 1 Year (in thousands) | 1-3 Years (in thousands) | 3-5 Years (in thousands) | Over 5 Years (in thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | Credit facilities | $3,351,185 | $252,029 | $847,452 | $743,264 | $1,508,440 | | Operating leases | $1,243,248 | $325,370 | $467,485 | $234,308 | $216,085 | | **Total material cash requirements** | **$4,594,433** | **$577,399** | **$1,314,937** | **$977,572** | **$1,724,525** | - GPC guarantees approximately **$916 million** in borrowings of certain independently owned automotive parts stores and affiliates, with approximately **$401 million** of commitment expiring in 2023[174](index=174&type=chunk) [Share Repurchases](index=29&type=section&id=Share%20Repurchases) In 2022, GPC repurchased approximately **1.6 million** shares for **$223 million**, with **10.3 million** shares remaining authorized for purchase - In 2022, GPC repurchased approximately **1.6 million** shares of its common stock for an aggregate of **$223 million**[175](index=175&type=chunk) - As of December 31, 2022, the company had remaining authority to purchase approximately **10.3 million** shares of common stock[175](index=175&type=chunk) [Critical Accounting Policies](index=29&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) Critical accounting policies, including vendor consideration, goodwill impairment, employee benefits, business combinations, legal liabilities, and self-insurance, require significant estimates and judgments that could materially impact financial statements - Critical accounting policies include consideration received from vendors, impairment of goodwill and other intangible assets, employee benefit plans, business combinations, legal and product liabilities, and self-insurance[177](index=177&type=chunk) - These policies require significant estimates, assumptions, and judgments, and different estimates could materially impact the consolidated financial statements[176](index=176&type=chunk)[177](index=177&type=chunk) [Consideration Received from Vendors](index=29&type=section&id=Consideration%20Received%20from%20Vendors) GPC accrues for inventory purchase incentives from vendors based on achieving specified volume purchasing levels, with management expecting these incentives to continue - GPC accrues for inventory purchase incentives from vendors based on achieving specified volume purchasing levels or other criteria[178](index=178&type=chunk) - Management believes these incentives will continue, but there is no assurance of comparable amounts or achieving specified volumes in the future[178](index=178&type=chunk) [Impairment of Goodwill and Other Intangible Assets](index=29&type=section&id=Impairment%20of%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill and other intangible assets are annually evaluated for impairment using qualitative and quantitative assessments, with a **$17 million** impairment charge recognized in 2022 for legacy Industrial trade names - Goodwill and other intangible assets are evaluated annually for impairment, or sooner if circumstances indicate, using qualitative and quantitative assessments[179](index=179&type=chunk)[249](index=249&type=chunk) - Quantitative assessments involve calculating fair value using a combination of market and income approaches, based on projected cash flows, revenue growth rates, EBITDA margins, and discount rates[251](index=251&type=chunk) - A **$17 million** non-cash impairment charge was recognized in 2022 related to legacy Industrial trade names as part of the KDG integration and rebranding strategy[295](index=295&type=chunk) [Employee Benefit Plans](index=29&type=section&id=Employee%20Benefit%20Plans) GPC sponsors defined benefit pension plans in the U.S., Canada, and Europe, with the U.S. plan being **127%** funded at year-end 2022 - GPC sponsors defined benefit pension plans in the U.S., Canada, and Europe, and supplemental retirement plans[180](index=180&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk) - The U.S. pension plan was well-funded with a fund status of **127%** at December 31, 2022[180](index=180&type=chunk) - Key assumptions for measuring 2023 pension income include an expected rate of return on plan assets of **7.09%** and a weighted average discount rate of **5.61%** at December 31, 2022[183](index=183&type=chunk)[184](index=184&type=chunk) [Business Combinations](index=31&type=section&id=Business%20Combinations) GPC applies the acquisition method of accounting for business combinations, recognizing identifiable assets and liabilities at fair value, which requires significant estimates for goodwill and intangible assets - GPC applies the acquisition method of accounting, recognizing identifiable assets acquired and liabilities assumed at their fair values on the acquisition date, which requires significant estimates and assumptions[187](index=187&type=chunk) - Goodwill is measured as the excess of the fair value of consideration transferred over the net fair values of acquired assets and assumed liabilities[187](index=187&type=chunk) - Customer relationships and other intangible assets are typically measured using an income approach, with significant estimates for discount rates, future revenue growth rates, and EBITDA margins[188](index=188&type=chunk) [Legal and Product Liabilities](index=31&type=section&id=Legal%20and%20Product%20Liabilities) GPC accrues for probable losses from legal disputes and product liabilities, with an accrued product liability of **$220 million** at year-end 2022, and a **$29 million** expense recognized due to revised estimates - GPC accrues for potential losses related to legal disputes, litigation, and product liabilities when it is probable that a loss will be incurred and the amount can be reasonably estimated[189](index=189&type=chunk) - The accrued product liability as of December 31, 2022, was **$220 million** (central estimate within a range of **$190 million** to **$270 million**), discounted using a **3.83%** rate, with an undiscounted amount of **$285 million**[368](index=368&type=chunk) - A **$29 million** expense was recognized in 2022 due to a revised estimate of the number of claims to be incurred in future periods[368](index=368&type=chunk) [Self Insurance](index=32&type=section&id=Self%20Insurance) GPC is self-insured for most group health insurance costs, with reserves based on historical claims data, and long-term insurance liabilities determined by independent actuarial analysis - GPC is self-insured for the majority of its group health insurance costs, with reserves for claims incurred but not reported developed by analyzing historical claims data[192](index=192&type=chunk) - Long-term insurance liabilities, primarily for workers' compensation, are recorded based on an analysis performed by an independent actuary, using high deductible policies[193](index=193&type=chunk) [Recently Issued Accounting Pronouncements](index=32&type=section&id=RECENTLY%20ISSUED%20ACCOUNTING%20PRONOUNCEMENTS) GPC adopted ASU 2016-13 (Credit Losses) and ASU 2019-12 (Income Taxes) in prior years, and ASU 2022-04 (Supplier Finance Programs) will require disclosure of key terms without affecting recognition or measurement - GPC adopted ASU 2016-13 (Credit Losses) on January 1, 2020, resulting in an **$11 million** reduction to opening retained earnings[281](index=281&type=chunk) - ASU 2019-12 (Income Taxes) was adopted on January 1, 2021, leading to a **$6 million** increase to opening retained earnings[282](index=282&type=chunk) - ASU 2022-04 (Liabilities—Supplier Finance Programs), effective January 1, 2023 (rollforward requirement effective January 1, 2024), requires disclosure of key terms but does not affect recognition or measurement[283](index=283&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) GPC is exposed to market risks from changes in interest rates and foreign currency rates, which it manages using derivative instruments, and addresses inflationary pressures through pricing and productivity - GPC is exposed to changes in interest rates and foreign currency rates with respect to foreign currency denominated operating revenues and expenses[195](index=195&type=chunk) - The company monitors its foreign currency and interest rate exposures and uses currency forward contracts and interest rate swap agreements to manage these risks[196](index=196&type=chunk)[198](index=198&type=chunk) - In fiscal year 2022, GPC experienced inflationary pressures across various parts of its business, which it aims to minimize through pricing strategies, productivity improvements, and cost reductions[199](index=199&type=chunk) [Foreign Currency](index=32&type=section&id=Foreign%20Currency) GPC's primary foreign currency exposures are the Euro, Canadian dollar, and Australian dollar, with a **10%** shift in exchange rates potentially impacting 2022 net sales by approximately **$723 million** - GPC's principal foreign currency exchange exposures are the Euro, the Canadian dollar, and the Australian dollar[196](index=196&type=chunk) - A **10%** shift in exchange rates between those foreign functional currencies and the U.S. dollar would have impacted translated net sales by approximately **$723 million** in 2022[197](index=197&type=chunk) [Interest Rates](index=32&type=section&id=Interest%20Rates) GPC is subject to interest rate volatility on debt and the A/R Sales Agreement, where a **100 basis point** increase would increase A/R Sales Agreement fees by **$10 million** - GPC is subject to interest rate volatility with regard to existing and future debt issuances and the A/R Sales Agreement, for which fees are linked to interest rate changes[198](index=198&type=chunk) - As of December 31, 2022, a **100 basis point** increase in interest rates would have an immaterial impact on debt but would increase the fees on the A/R Sales Agreement by **$10 million**[198](index=198&type=chunk) [Inflation](index=32&type=section&id=Inflation) In fiscal year 2022, GPC experienced inflationary pressures across product costs, overhead, and supply chain, which it manages through pricing strategies, productivity, and cost reductions - In fiscal year 2022, GPC experienced inflationary pressures across product costs, overhead costs, and supply chain[199](index=199&type=chunk) - The company monitors inflation to minimize its effects through pricing strategies, productivity improvements, and cost reductions[199](index=199&type=chunk) [Financial Statements and Supplementary Data](index=34&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item presents GPC's audited consolidated financial statements for 2022, 2021, and 2020, including balance sheets, statements of income, comprehensive income, equity, and cash flows, with an unqualified opinion from Ernst & Young LLP - The consolidated financial statements include Balance Sheets, Statements of Income, Comprehensive Income, Equity, and Cash Flows for the years ended December 31, 2022, 2021, and 2020[202](index=202&type=chunk) - Ernst & Young LLP, the independent registered public accounting firm, expressed an unqualified opinion on the consolidated financial statements[204](index=204&type=chunk) [Report of Independent Registered Public Accounting Firm](index=35&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Ernst & Young LLP provided an unqualified opinion on GPC's consolidated financial statements and internal control over financial reporting, highlighting critical audit matters related to KDG acquisition and product liabilities - Ernst & Young LLP provided an unqualified opinion on GPC's consolidated financial statements and the effectiveness of its internal control over financial reporting as of December 31, 2022[204](index=204&type=chunk)[205](index=205&type=chunk) - Critical audit matters included the fair value of customer relationships acquired in the Kaman Distribution Group (KDG) business combination and loss contingencies related to product liabilities, both involving significant estimation uncertainty and auditor judgment[209](index=209&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk) [Consolidated Balance Sheets](index=38&type=section&id=Consolidated%20Balance%20Sheets) GPC's consolidated balance sheets show total assets of **$16.5 billion** and total liabilities and equity of **$16.5 billion** as of December 31, 2022, with significant increases in goodwill and other intangible assets Consolidated Balance Sheets (as of December 31, in thousands) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $653,463 | $714,701 | | Trade accounts receivable, net | $2,188,868 | $1,797,955 | | Merchandise inventories, net | $4,441,649 | $3,889,919 | | Total current assets | $8,816,739 | $7,756,422 | | Goodwill | $2,588,113 | $1,915,307 | | Other intangible assets, net | $1,812,510 | $1,406,401 | | Property, plant and equipment, net | $1,326,014 | $1,234,399 | | **Total assets** | **$16,495,379** | **$14,352,102** | | Trade accounts payable | $5,456,550 | $4,804,939 | | Current portion of debt | $252,029 | — | | Long-term debt | $3,076,794 | $2,409,363 | | **Total liabilities and equity** | **$16,495,379** | **$14,352,102** | [Consolidated Statements of Income](index=39&type=section&id=Consolidated%20Statements%20of%20Income) GPC's consolidated statements of income show net sales of **$22.1 billion** in 2022, with net income of **$1.18 billion** and diluted EPS of **$8.31** Consolidated Statements of Income (Years Ended December 31, in thousands) | Metric | 2022 (in thousands) | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | :--- | | Net sales | $22,095,973 | $18,870,510 | $16,537,433 | | Gross profit | $7,740,104 | $6,634,136 | $5,654,841 | | Total operating expenses | $6,125,905 | $5,471,216 | $5,239,898 | | Income before income taxes | $1,572,602 | $1,200,346 | $379,368 | | Net income (loss) | $1,182,701 | $898,790 | $(29,102) | | Diluted earnings (loss) per share | $8.31 | $6.23 | $(0.20) | [Consolidated Statements of Comprehensive Income](index=40&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) GPC's comprehensive income was **$1.01 billion** in 2022, reflecting net income partially offset by foreign currency translation adjustments and pension benefit adjustments Consolidated Statements of Comprehensive Income (Years Ended December 31, in thousands) | Metric | 2022 (in thousands) | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | :--- | | Net income (loss) | $1,182,701 | $898,790 | $(29,102) | | Foreign currency translation adjustments | $(143,890) | $(65,843) | $102,595 | | Cash flow hedge adjustments, net of income taxes | $12,470 | $14,965 | $(9,336) | | Pension and postretirement benefit adjustments, net of income taxes | $(43,383) | $229,641 | $11,547 | | **Comprehensive income** | **$1,007,898** | **$1,077,553** | **$75,704** | [Consolidated Statements of Equity](index=41&type=section&id=Consolidated%20Statements%20of%20Equity) Total parent equity increased to **$3.79 billion** at December 31, 2022, driven by net income, partially offset by other comprehensive loss, dividends, and stock repurchases - Total parent equity increased to **$3.79 billion** at December 31, 2022, from **$3.49 billion** in 2021[218](index=218&type=chunk) - Key changes in 2022 included net income of **$1.18 billion**, offset by other comprehensive loss of **$174.8 million**, cash dividends declared of **$506.2 million**, and stock repurchases of **$222.7 million**[226](index=226&type=chunk) [Consolidated Statements of Cash Flows](index=42&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was **$1.47 billion** in 2022, while investing activities used **$1.68 billion**, and financing activities provided **$205.1 million** Consolidated Statements of Cash Flows (Years Ended December 31, in thousands) | Activity | 2022 (in thousands) | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities from continuing operations | $1,466,971 | $1,258,285 | $2,014,522 | | Net cash (used in) provided by investing activities from continuing operations | $(1,684,240) | $(506,164) | $182,768 | | Net cash provided by (used in) financing activities from continuing operations | $205,101 | $(989,532) | $(1,513,765) | | Net (decrease) increase in cash and cash equivalents | $(61,238) | $(275,465) | $713,174 | | Cash and cash equivalents at end of year | $653,463 | $714,701 | $990,166 | - Cash paid for income taxes was **$362.9 million** in 2022, and cash paid for interest was **$73.4 million**[229](index=229&type=chunk) [Notes to Consolidated Financial Statements](index=43&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on GPC's accounting policies, segment data, goodwill and intangible assets, property, plant and equipment, accounts receivable sales agreement, debt, derivatives and hedging, leased properties, employee benefit plans, acquisitions, divestitures and discontinued operations, share-based compensation, accumulated other comprehensive loss, income taxes, guarantees, and commitments and contingencies - This section provides detailed disclosures on GPC's accounting policies, segment data, goodwill and intangible assets, property, plant and equipment, accounts receivable sales agreement, debt, derivatives and hedging, leased properties, employee benefit plans, acquisitions, divestitures and discontinued operations, share-based compensation, accumulated other comprehensive loss, income taxes, guarantees, and commitments and contingencies[230](index=230&type=chunk) [1. Summary of Significant Accounting Policies](index=43&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) Revenue is primarily recognized when customers obtain control of products or services, and merchandise inventories are valued at the lower of cost or net realizable value, with LIFO used for most U.S. automotive and industrial parts - Revenue is primarily recognized when the customer obtains control of products or services, net of allowances for returns and variable consideration[236](index=236&type=chunk)[237](index=237&type=chunk) - Merchandise inventories are valued at the lower of cost or net realizable value, with the LIFO method used for a majority of U.S. automotive and industrial parts[244](index=244&type=chunk) - If the FIFO method had been used, inventory cost would have been approximately **$835 million** higher than reported at December 31, 2022[244](index=244&type=chunk) [2. Segment Data](index=49&type=section&id=2.%20Segment%20Data) GPC's reportable segments are the Automotive Parts Group and Industrial Parts Group, with North America contributing the largest share of net sales - GPC's reportable segments are the Automotive Parts Group and Industrial Parts Group[284](index=284&type=chunk)[285](index=285&type=chunk) Reportable Segment Financial Information (2022, in thousands) | Metric | Automotive (in thousands) | Industrial (in thousands) | Total (in thousands) | | :--- | :--- | :--- | :--- | | Net sales | $13,666,634 | $8,429,339 | $22,095,973 | | Segment profit | $1,191,674 | $886,636 | $2,078,310 | Net Sales by Geographical Region (2022, in thousands) | Region | Automotive (in thousands) | Industrial (in thousands) | Total (in thousands) | | :--- | :--- | :--- | :--- | | North America | $9,015,501 | $7,964,076 | $16,979,577 | | Australasia | $1,579,169 | $465,263 | $2,044,432 | | Europe | $3,071,964 | — | $3,071,964 | | **Total net sales** | **$13,666,634** | **$8,429,339** | **$22,095,973** | [3. Goodwill and Other Intangible Assets](index=53&type=section&id=3.%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill increased to **$2.59 billion** and other intangible assets to **$1.81 billion** at year-end 2022, primarily due to acquisitions, with a **$17 million** impairment charge recognized for legacy Industrial trade names - Goodwill increased to **$2.59 billion** at December 31, 2022, primarily due to **$759.8 million** in additions from acquisitions[292](index=292&type=chunk) - Other intangible assets, net, increased to **$1.81 billion**, with **$663.1 million** in additions during 2022[292](index=292&type=chunk) - A **$17 million** non-cash impairment charge was recognized in 2022 related to legacy Industrial trade names as part of the KDG integration and rebranding strategy[295](index=295&type=chunk) [4. Property, Plant and Equipment](index=54&type=section&id=4.%20Property%2C%20Plant%20and%20Equipment) Net property, plant and equipment increased to **$1.33 billion** at December 31, 2022, and GPC recognized a **$103 million** gain on the sale of real estate in 2022 Property, Plant and Equipment, Net (as of December 31, in thousands) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Property, plant and equipment, at cost | $2,761,691 | $2,574,105 | | Less: accumulated depreciation | $1,435,677 | $1,339,706 | | **Property, plant and equipment, net** | **$1,326,014** | **$1,234,399** | - In 2022, GPC recognized a **$103 million** gain on the sale of real estate that had been previously leased to S.P. Richards Company[298](index=298&type=chunk) [5. Accounts Receivable Sales Agreement](index=54&type=section&id=5.%20Accounts%20Receivable%20Sales%20Agreement) GPC utilizes an A/R Sales Agreement to sell short-term receivables, with approximately **$1.0 billion** sold and derecognized at year-end 2022, providing a **$200 million** cash benefit - GPC has an A/R Sales Agreement to sell short-term receivables to an unaffiliated financial institution on a revolving basis, with a facility limit of approximately **$1 billion**[299](index=299&type=chunk)[302](index=302&type=chunk) - As of December 31, 2022, approximately **$1.0 billion** of receivables were sold and derecognized, and approximately **$1.1 billion** were pledged as collateral[301](index=301&type=chunk)[302](index=302&type=chunk) - The agreement provided a benefit to cash from operations of approximately **$200 million** in 2022, and fees incurred were **$27 million**[303](index=303&type=chunk)[304](index=304&type=chunk) [6. Debt](index=55&type=section&id=6.%20Debt) Total debt outstanding was **$3.33 billion** at December 31, 2022, with a weighted average interest rate of **2.33%**, following the issuance of **$1 billion** in Senior Notes in January 2022 - Total debt outstanding was **$3.33 billion** at December 31, 2022, with a weighted average interest rate of **2.33%**[305](index=305&type=chunk)[308](index=308&type=chunk) - In January 2022, GPC issued **$1 billion** in unsecured Senior Notes (**$500 million** due 2025 at **1.75%**, **$500 million** due 2032 at **2.75%**) to fund the KDG acquisition[307](index=307&type=chunk) Approximate Debt Maturities (in thousands) | Year | Amount (in thousands) | | :--- | :--- | | 2023 | $252,029 | | 2024 | $347,452 | | 2025 | $500,000 | | 2026 | $355,664 | | 2027 | $387,600 | | Thereafter | $1,508,440 | | **Total** | **$3,351,185** | [7. Derivatives and Hedging](index=57&type=section&id=7.%20Derivatives%20and%20Hedging) GPC uses derivative instruments and foreign currency denominated debt as net investment hedges for its Euro-denominated European subsidiary to mitigate foreign currency exchange rate exposure - GPC uses derivative instruments (forward contracts) and foreign currency denominated debt as net investment hedges for its Euro-denominated European subsidiary to mitigate foreign currency exchange rate exposure[310](index=310&type=chunk)[311](index=311&type=chunk) Pre-Tax Gains and Losses Related to Net Investment Hedges (2022, in thousands) | Hedge Type | Gain (Loss) Recognized in AOCL Before Reclassifications (in thousands) | Gain Recognized in Interest Expense For Excluded

Q3 2022 Earnings Presentation October 20, 2022 Genuine Parts Company Snapshot Founded 1928 Headquarters Atlanta, GA Countries Served 17 Locations ~10,585 • Warehouses ~800 • Distribution Facilities ~200 • Retail (Owned/Independent) ~9,585 Employees ~53,000 Market Capitalization ~$21.0B Revenue $21.4B • Automotive 63% • Industrial 37% Segment Profit Margin2 9.2% Free Cash Flow3 ~$1.1B Dividend Yield4 2.4% TTM Financial Highlights1 TTM 2022 Revenue by Region Key Statistics 1 1 Global Footprint 76% North Ameri ...

Financial Data and Key Metrics Changes - Total sales reached $5.7 billion, an increase of 18% year-over-year, with adjusted earnings per share of $2.23, up 19% from the previous year [9][36] - Gross margin was 34.9%, a decrease of 60 basis points compared to the same quarter last year, impacted by moderating supplier incentives, foreign currency effects, and a shift in sales mix [38][40] - Segment profit was $552 million, up 24%, with a segment profit margin of 9.7%, reflecting a 40 basis point increase from last year [40] Performance by Business Segment - Global Automotive sales were $3.5 billion, an increase of approximately 8.9% year-over-year, with segment profit of $309 million and an operating margin of 8.9% [18][20] - Global Industrial segment sales at Motion were $2.2 billion, a 35.3% increase, with a segment profit of $243 million and an operating margin of 11.1%, marking a record for the segment [26][27] Market Data and Key Metrics Changes - U.S. automotive sales grew approximately 11% during the quarter, with strong performance across product categories such as brakes, filters, fluids, and batteries [21] - In Canada, automotive sales increased approximately 15% in local currency, while in Europe, sales rose about 20% in local currency [23][24] - The Asia-Pacific automotive business saw a 16% increase in sales in local currency [25] Company Strategy and Industry Competition - The company is focused on strategic initiatives to drive market share gains and enhance operational efficiencies, leveraging its size and scale to navigate inflation and supply chain challenges [11][14] - The ongoing integration of KDG is expected to create significant value, with the company pursuing both organic and acquisitive growth opportunities [10][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic plans for long-term sales and earnings growth, despite a dynamic macroeconomic environment [14][48] - The company raised its full-year guidance for adjusted diluted earnings per share to a range of $8.05 to $8.15, reflecting a 16% to 18% increase from the previous year [46][48] Other Important Information - The company published its 2022 Sustainability Report, focusing on diversity, equity, inclusion, carbon emissions reduction, and enhanced ESG governance [15][16] - The company continues to generate strong cash flow, with $454 million in cash from operations for the third quarter and $1.2 billion for the first nine months of the year [43][45] Q&A Session Summary Question: Insights on gross margin performance by segment - Management noted a consolidated gross margin decrease of 60 basis points, with specific impacts from supplier incentives, currency, and industrial performance [51][53] Question: Concerns about organic growth deceleration - Management acknowledged the challenges in forecasting due to macroeconomic factors but expressed confidence in their guidance and performance [56][57] Question: Sentiment in industrial customer segments - Management reported strong optimism and growth across customer segments, with no signs of caution observed [66][67] Question: Potential for segment margins to reach double digits - Management indicated ongoing initiatives to improve margins but did not provide specific targets at this time [68][69] Question: Growth in automotive categories and discretionary spending - Management confirmed strong growth across all categories, including discretionary items, with no significant changes in transaction versus ticket trends [76][77] Question: Impact of new vehicle supply and used car prices - Management believes that while used car prices are declining, the average age of vehicles and miles driven will continue to support their business [94][96]