GENUINE PARTS CO 10-Q

Item 1. Financial Statements GENUINE PARTS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share and per share data) September 30, 2020 December 31, 2019 Assets Current assets: Cash and cash equivalents $ 900,123 $ 276,992 Trade accounts receivable, less allowance for doubtful accounts (2020 – $ 46,885 ; 2019 – $ 35,047 ) 1,952,225 2,440,252 Merchandise inventories, net 3,419,383 3,443,876 Prepaid expenses and other current assets 1,103,554 1,063,245 Current assets of discontinued operations — 714,251 Total current assets 7,375,285 7,938,616 Goodwill 1,829,946 2,293,519 Other intangible assets, less accumulated amortization 1,449,446 1,492,097 Deferred tax assets 67,594 45,921 Property, plant and equipment, less accumulated depreciation (2020 – $ 1,357,013 ; 2019 – $ 1,200,688 ) 1,141,419 1,173,688 Operating lease assets 1,024,453 995,667 Other assets 587,318 457,350 Noncurrent assets of discontinued operations — 248,771 Total assets $ 13,475,461 $ 14,645,629 Liabilities and equity Current liabilities: Trade accounts payable $ 4,030,319 $ 3,948,000 Current portion of debt 206,335 624,043 Dividends payable 113,983 110,851 Other current liabilities 1,626,061 1,493,109 Current liabilities of discontinued operations — 218,117 Total current liabilities 5,976,698 6,394,120 Long-term debt 2,700,616 2,802,056 Operating lease liabilities 779,468 756,519 Pension and other post–retirement benefit liabilities 248,488 249,832 Deferred tax liabilities 214,738 233,044 Other long-term liabilities 520,680 445,652 Noncurrent liabilities of discontinued operations — 68,906 Equity: Preferred stock, par value – $ 1 per share; authorized – 10,000,000 shares; none issued — — Common stock, par value – $ 1 per share; authorized – 450,000,000 shares; issued and outstanding – 2020 – 144,289,653 shares; 2019 – 145,378,158 shares 144,290 145,378 Additional paid-in capital 113,249 98,777 Retained earnings 3,923,113 4,571,860 Accumulated other comprehensive loss ( 1,166,572 ) ( 1,141,308 ) Total parent equity 3,014,080 3,674,707 Noncontrolling interests in subsidiaries 20,693 20,793 Total equity 3,034,773 3,695,500 Total liabilities and equity $ 13,475,461 $ 14,645,629 See accompanying notes to condensed consolidated financial statements. 2 Table of Contents GENUINE PARTS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share data) 2020 2019 2020 2019 Net sales $ 4,370,086 $ 4,525,284 $ 12,285,839 $ 13,242,344 Cost of goods sold 2,842,020 3,020,051 8,079,108 8,861,609 Gross profit 1,528,066 1,505,233 4,206,731 4,380,735 Operating expenses: Selling, administrative and other expenses 1,140,156 1,175,699 3,254,442 3,414,414 Depreciation and amortization 69,097 65,667 203,084 186,968 Provision for doubtful accounts 5,633 1,192 23,452 10,430 Restructuring costs 10,968 — 39,009 — Goodwill impairment charge — — 506,721 — Total operating expenses 1,225,854 1,242,558 4,026,708 3,611,812 Non-operating expenses (income): Interest expense 25,788 26,451 72,218 73,567 Other ( 21,241 ) ( 47,655 ) ( 46,017 ) ( 62,737 ) Total non-operating expenses (income) 4,547 ( 21,204 ) 26,201 10,830 Income before income taxes 297,665 283,879 153,822 758,093 Income taxes 64,747 71,623 162,059 190,634 Net income (loss) from continuing operations 232,918 212,256 ( 8,237 ) 567,459 Net (loss) income from discontinued operations ( 5,387 ) 15,231 ( 192,069 ) 44,708 Net income (loss) $ 227,531 $ 227,487 $ ( 200,306 ) $ 612,167 Dividends declared per common share $ 0.7900 $ 0.7625 $ 2.3700 $ 2.2875 Basic earnings (loss) per share: Continuing operations $ 1.61 $ 1.46 $ ( 0.06 ) $ 3.89 Discontinued operations ( 0.03 ) 0.10 ( 1.33 ) 0.31 Basic earnings (loss) per share $ 1.58 $ 1.56 $ ( 1.39 ) $ 4.20 Diluted earnings (loss) per share: Continuing operations $ 1.61 $ 1.45 $ ( 0.06 ) $ 3.87 Discontinued operations ( 0.04 ) 0.11 ( 1.33 ) 0.31 Diluted earnings (loss) per share $ 1.57 $ 1.56 $ ( 1.39 ) $ 4.18 Weighted average common shares outstanding 144,273 145,572 144,528 145,875 Dilutive effect of stock options and non-vested restricted stock awards 762 617 — 654 Weighted average common shares outstanding – assuming dilution 145,035 146,189 144,528 146,529 See accompanying notes to condensed consolidated financial statements. 3 Table of Contents GENUINE PARTS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share data) 2020 2019 2020 2019 Net income (loss) $ 227,531 $ 227,487 $ ( 200,306 ) $ 612,167 Other comprehensive income (loss), net of income taxes: Foreign currency translation adjustments, net of income taxes in 2020 — $ 22,896 and $ 19,451 ; 2019 — $ 17,773 and $ 21,468 , respectively 34,063 ( 78,298 ) ( 36,951 ) ( 30,325 ) Cash flow hedge adjustments, net of income taxes in 2020 — $ 1,313 and $ 4,731 ; 2019 — $ 787 and $ 6,413 , respectively 3,550 ( 2,127 ) ( 12,792 ) ( 17,340 ) Pension and postretirement benefit adjustments, net of income taxes in 2020 — $ 2,998 and $ 9,023 ; 2019 — $ 2,592 and $ 6,166 , respectively 8,187 7,024 24,479 16,689 Other comprehensive income (loss), net of income taxes 45,800 ( 73,401 ) ( 25,264 ) ( 30,976 ) Comprehensive income (loss) $ 273,331 $ 154,086 $ ( 225,570 ) $ 581,191 See accompanying notes to condensed consolidated financial statements. 4 Table of Contents GENUINE PARTS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) Three Months Ended September 30, 2020 (in thousands, except share and per share data) Common Stock Shares Common Stock Amount Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Total Parent Equity Non-controlling Interests in Subsidiaries Total Equity July 1, 2020 144,264,189 $ 144,264 $ 107,819 $ ( 1,212,372 ) $ 3,809,564 $ 2,849,275 $ 21,613 $ 2,870,888 Net income — — — — 227,531 227,531 — 227,531 Other comprehensive income, net of tax — — — 45,800 — 45,800 — 45,800 Cash dividend declared, $ 0.7900 per share — — — — ( 113,982 ) ( 113,982 ) — ( 113,982 ) Share-based awards exercised, including tax benefit of $ 213 25,464 26 ( 990 ) — — ( 964 ) — ( 964 ) Share-based compensation — — 6,420 — — 6,420 — 6,420 Noncontrolling interest activities — — — — — — ( 920 ) ( 920 ) September 30, 2020 144,289,653 $ 144,290 $ 113,249 $ ( 1,166,572 ) $ 3,923,113 $ 3,014,080 $ 20,693 $ 3,034,773 Nine Months Ended September 30, 2020 (in thousands, except share and per share data) Common Stock Shares Common Stock Amount Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Total Parent Equity Non-controlling Interests in Subsidiaries Total Equity January 1, 2020 145,378,158 $ 145,378 $ 98,777 $ ( 1,141,308 ) $ 4,571,860 $ 3,674,707 $ 20,793 $ 3,695,500 Net loss — — — — ( 200,306 ) ( 200,306 ) — ( 200,306 ) Other comprehensive loss, net of tax — — — ( 25,264 ) — ( 25,264 ) — ( 25,264 ) Cash dividend declared, $ 2.3700 per share — — — — ( 342,426 ) ( 342,426 ) — ( 342,426 ) Share-based awards exercised, including tax benefit of $ 375 47,939 48 ( 1,802 ) — — ( 1,754 ) — ( 1,754 ) Share-based compensation — — 16,274 — — 16,274 — 16,274 Purchase of stock ( 1,136,444 ) ( 1,136 ) — — ( 94,583 ) ( 95,719 ) — ( 95,719 ) Cumulative effect from adoption of ASU 2016-13 (1) — — — — ( 11,432 ) ( 11,432 ) — ( 11,432 ) Noncontrolling interest activities — — — — — — ( 100 ) ( 100 ) September 30, 2020 144,289,653 $ 144,290 $ 113,249 $ ( 1,166,572 ) $ 3,923,113 $ 3,014,080 $ 20,693 $ 3,034,773 5 Table of Contents GENUINE PARTS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED) (UNAUDITED) Three Months Ended September 30, 2019 (in thousands, except share and per share data) Common Stock Shares Common Stock Amount Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Total Parent Equity Non-controlling Interests in Subsidiaries Total Equity July 1, 2019 146,078,369 $ 146,078 $ 83,949 $ ( 1,195,179 ) $ 4,630,480 $ 3,665,328 $ 22,647 $ 3,687,975 Net income — — — — 227,487 227,487 — 227,487 Other comprehensive loss, net of tax — — — ( 73,401 ) — ( 73,401 ) — ( 73,401 ) Cash dividend declared, $ 0.7625 per share — — — — ( 110,786 ) ( 110,786 ) — ( 110,786 ) Share-based awards exercised, including tax benefit of $ 68 2,953 4 ( 128 ) — — ( 124 ) — ( 124 ) Share-based compensation — — 6,739 — — 6,739 — 6,739 Purchase of stock ( 788,207 ) ( 789 ) — — ( 72,263 ) ( 73,052 ) — ( 73,052 ) Noncontrolling interest activities — — — — — — ( 101 ) ( 101 ) September 30, 2019 145,293,115 $ 145,293 $ 90,560 $ ( 1,268,580 ) $ 4,674,918 $ 3,642,191 $ 22,546 $ 3,664,737 Nine Months Ended September 30, 2019 (in thousands, except share and per share data) Common Stock Shares Common Stock Amount Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Total Parent Equity Non-controlling Interests in Subsidiaries Total Equity January 1, 2019 145,936,613 $ 145,937 $ 78,380 $ ( 1,115,078 ) $ 4,341,212 $ 3,450,451 $ 21,540 $ 3,471,991 Net income — — — — 612,167 612,167 — 612,167 Other comprehensive loss, net of tax — — — ( 30,976 ) — ( 30,976 ) — ( 30,976 ) Cash dividend declared, $ 2.2875 per share — — — — ( 333,521 ) ( 333,521 ) — ( 333,521 ) Share-based awards exercised, including tax benefit of $ 4,054 144,709 145 ( 7,640 ) — — ( 7,495 ) — ( 7,495 ) Share-based compensation — — 19,820 — — 19,820 — 19,820 Purchase of stock ( 788,207 ) ( 789 ) — — ( 72,263 ) ( 73,052 ) — ( 73,052 ) Cumulative effect from adoption of ASU 2018-02 (2) — — — ( 122,526 ) 122,526 — — — Cumulative effect from adoption of ASU 2016-02, net of tax (2) — — — — 4,797 4,797 — 4,797 Noncontrolling interest activities — — — — — — 1,006 1,006 September 30, 2019 145,293,115 $ 145,293 $ 90,560 $ ( 1,268,580 ) $ 4,674,918 $ 3,642,191 $ 22,546 $ 3,664,737 (1) The Company adopted Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments, during the first quarter of 2020. Refer to the recent accounting pronouncements footnote. (2) The Company adopted ASU 2016-02, Leases, and ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, during the first quarter of 2019. See accompanying notes to condensed consolidated financial statements. 6 Table of Contents GENUINE PARTS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, (in thousands) 2020 2019 Operating activities: Net (loss) income $ ( 200,306 ) $ 612,167 Net (loss) income from discontinued operations ( 192,069 ) 44,708 Net (loss) income from continuing operations ( 8,237 ) 567,459 Adjustments to reconcile net (loss) income from continuing operations to net cash provided by operating activities: Depreciation and amortization 203,084 186,968 Share-based compensation 16,274 17,310 Excess tax benefits from share-based compensation 375 ( 4,054 ) Realized currency losses on divestitures 11,356 30,848 Goodwill impairment charge 506,721 — Changes in operating assets and liabilities 697,611 ( 120,673 ) Net cash provided by operating activities from continuing operations 1,427,184 677,858 Investing activities: Purchases of property, plant and equipment ( 105,428 ) ( 176,321 ) Proceeds from sale of property, plant and equipment 11,675 10,281 Proceeds from divestitures of businesses 382,737 416,784 Acquisitions of businesses and other investing activities ( 59,062 ) ( 636,137 ) Net cash provided by (used in) investing activities from continuing operations 229,922 ( 385,393 ) Financing activities: Proceeds from debt 1,888,622 3,928,716 Payments on debt ( 2,466,031 ) ( 3,749,509 ) Share-based awards exercised ( 1,754 ) ( 7,495 ) Dividends paid ( 339,294 ) ( 328,106 ) Purchases of stock ( 95,719 ) ( 73,052 ) Other financing activities ( 15,032 ) — Net cash used in financing activities from continuing operations ( 1,029,208 ) ( 229,446 ) Cash flows from discontinued operations: Net cash provided by operating activities from discontinued operations 13,323 67,354 Net cash used in investing activities from discontinued operations ( 11,131 ) ( 6,000 ) Net cash provided by financing activities from discontinued operations — — Net cash provided by discontinued operations 2,192 61,354 Effect of exchange rate changes on cash and cash equivalents ( 6,959 ) ( 6,645 ) Net increase in cash and cash equivalents 623,131 117,728 Cash and cash equivalents at beginning of period 276,992 333,547 Cash and cash equivalents at end of period $ 900,123 $ 451,275 See accompanying notes to condensed consolidated financial statements. 7 Table of Contents NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share data) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes required by accounting principles generally accepted in the U.S. (“U.S. GAAP”) for complete financial statements. On June 30, 2020, the Company completed the divestiture of its Business Products Group. Refer to the acquisitions, divestitures and discontinued operations footnote for more information. The Company's results of operations for the Business Products Group are reported as discontinued operations and all information related to the discontinued operations has been excluded from the notes to the condensed consolidated financial statements for all periods presented. Net (loss) income from discontinued operations for each period includes all costs that are directly attributable to these businesses and excludes certain corporate overhead costs that were previously allocated. Additionally, revenue from freight services provided by the Automotive Parts Group are grossed up and recast in continuing operations in each period because those sales are continuing with the discontinued operations after the divestiture. Except as disclosed herein, there have been no material changes in the information disclosed in the notes to the consolidated financial statements included in the Annual Report on Form 10-K of Genuine Parts Company (the “Company,” “we,” “our,” “us,” or “its”) for the year ended December 31, 2019. Accordingly, the unaudited interim condensed consolidated financial statements and related disclosures herein should be read in conjunction with the Company’s 2019 Annual Report on Form 10-K. The preparation of interim financial statements requires management to make estimates and assumptions that affect the amounts reported in the interim condensed consolidated financial statements. Specifically, the Company makes estimates and assumptions in its interim condensed consolidated financial statements for inventory adjustments, the accrual of bad debts, credit losses on guaranteed loans, customer sales returns, and volume incentives earned, among others. Inventory adjustments (including adjustments for a majority of inventories that are valued under the last-in, first-out (“LIFO”) method) are accrued on an interim basis and adjusted in the fourth quarter based on the annual book to physical inventory adjustment and LIFO valuation. Reserves for bad debts, credit losses on guaranteed loans and customer sales returns are estimated and accrued on an interim basis based on a consideration of historical experience, current conditions, and reasonable and supportable forecasts. Volume incentives are estimated based upon cumulative and projected purchasing levels. In the opinion of management, all adjustments necessary for a fair presentation of the Company’s financial results for the interim periods have been made. These adjustments are of a normal recurring nature. The Company has reclassified certain prior period amounts to conform to the current period presentation. The results of operations for the nine months ended September 30, 2020 are not necessarily indicative of results for the entire year. The Company's operations are concentrated in North America, Europe and Australasia and are vulnerable to the reduced economic activity caused by the COVID-19 outbreak, which was declared a pandemic in March 2020. The extent to which the COVID-19 pandemic impacts the Company will depend on numerous factors and future developments that the Company cannot predict, including the severity of the virus; the occurrence of a “second wave” or additional spikes; the duration of the outbreak; governmental, business or other actions taken in response to the pandemic; and impacts on the Company's supply chain, its ability to keep operating locations open, and on customer demand. The Company benefited from various forms of government economic assistance including certain temporary subsidies that were received primarily in the second quarter of 2020, which have been classified as a reduction of selling, administrative and other expenses. If the pandemic persists or worsens, the estimates and assumptions management made as of September 30, 2020 could change upon final determination at year-end, and it is reasonably possible such changes could be significant. The Company has evaluated subsequent events through the date the condensed consolidated financial statements covered by this quarterly report were issued. The Company will continue to evaluate the nature and extent of these potential impacts to its business and consolidated financial statements. 8 Table of Contents 2. Segment Information The following table presents a summary of the Company's reportable segment financial information from continuing operations: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net sales: Automotive $ 2,960,379 $ 2,792,453 $ 8,038,863 $ 8,192,369 Industrial 1,409,707 1,732,831 4,246,976 5,049,975 Total net sales $ 4,370,086 $ 4,525,284 $ 12,285,839 $ 13,242,344 Segment profit: Automotive $ 266,124 $ 222,561 $ 627,608 $ 630,865 Industrial 125,620 137,525 348,481 394,887 Total segment profit $ 391,744 $ 360,086 $ 976,089 $ 1,025,752 Interest expense, net ( 25,221 ) ( 24,880 ) ( 69,965 ) ( 70,483 ) Intangible asset amortization ( 24,223 ) ( 24,910 ) ( 70,219 ) ( 68,785 ) Corporate expense ( 33,379 ) ( 38,830 ) ( 117,053 ) ( 103,582 ) Other unallocated costs (1) ( 11,256 ) 12,413 ( 565,030 ) ( 24,809 ) Income before income taxes from continuing operations $ 297,665 $ 283,879 $ 153,822 $ 758,093 (1) The following table presents a summary of the other unallocated costs: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Other unallocated costs: Goodwill impairment charge (2) $ — $ — $ ( 506,721 ) $ — Restructuring costs (3) ( 10,968 ) — ( 39,009 ) — Realized currency loss on divestitures (4) — ( 7,664 ) ( 11,356 ) ( 34,701 ) Gain on insurance proceeds related to SPR Fire (5) — — 13,448 — Gain on equity investment (6) — 38,663 — 38,663 Transaction and other costs (7) ( 288 ) ( 18,586 ) ( 21,392 ) ( 28,771 ) Total other unallocated costs $ ( 11,256 ) $ 12,413 $ ( 565,030 ) $ ( 24,809 ) (2) Adjustment reflects the second quarter goodwill impairment charge related to the Company's European reporting unit. Refer to the goodwill and other intangible assets footnote. (3) Adjustment reflects restructuring costs related to the ongoing execution of the 2019 Cost Savings Plan announced in the fourth quarter of 2019. The costs are primarily associated with severance and other employee costs, including a voluntary retirement program, and facility and closure costs related to the consolidation of operations. Refer to the restructuring footnote. (4) Adjustment reflects realized currency losses related to divestitures. Refer to the acquisitions, divestitures and discontinued operations footnote. (5) Adjustment reflects insurance recoveries in excess of losses incurred on inventory, property, plant and equipment and other fire-related costs related to the S.P. Richards Headquarters and Distribution Center. Refer to the commitments and contingencies footnote. (6) Adjustment relates to the gain recognized upon remeasuring the Company's preexisting 35 % equity investment to fair value upon acquiring the remaining equity of Inenco on July 1, 2019. Refer to the acquisitions, divestitures and discontinued operations footnote. 9 Table of Contents (7) Adjustment includes $ 8,490 of incremental costs associated with COVID-19 for the nine months ended September 30, 2020 and costs associated with certain divestitures. COVID-19 related costs include incremental costs incurred relating to fees to cancel marketing events and increased cleaning and sanitization materials, among other things. For the three and nine months ended September 30, 2019, adjustments also include transaction and other costs related to acquisitions and divestitures. Net sales are disaggregated by geographical region for each of the Company’s reportable segments, as the Company deems this presentation best depicts how the nature, amount, timing and uncertainty of net sales and cash flows are affected by economic factors. The following table presents disaggregated geographical net sales from contracts with customers by reportable segment: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 North America: Automotive $ 1,934,503 $ 1,944,768 $ 5,381,566 $ 5,724,899 Industrial 1,295,717 1,624,303 3,937,640 4,941,447 Total North America $ 3,230,220 $ 3,569,071 $ 9,319,206 $ 10,666,346 Australasia: Automotive $ 355,874 $ 295,424 $ 911,595 $ 866,694 Industrial 113,990 108,528 309,336 108,528 Total Australasia $ 469,864 $ 403,952 $ 1,220,931 $ 975,222 Europe – Automotive $ 670,002 $ 552,261 $ 1,745,702 $ 1,600,776 Total net sales $ 4,370,086 $ 4,525,284 $ 12,285,839 $ 13,242,344 3. Accumulated Other Comprehensive Loss The following tables present the changes in accumulated other comprehensive loss (“AOCL”) by component for the nine months ended September 30: Changes in Accumulated Other Comprehensive Loss by Component Pension and Other Post-Retirement Benefits Cash Flow Hedges Foreign Currency Translation Total Beginning balance, January 1, 2020 $ ( 704,415 ) $ ( 20,671 ) $ ( 416,222 ) $ ( 1,141,308 ) Other comprehensive loss before reclassifications — ( 21,248 ) ( 48,307 ) ( 69,555 ) Amounts reclassified from accumulated other comprehensive loss 24,479 8,456 11,356 44,291 Other comprehensive income (loss), net of income taxes 24,479 ( 12,792 ) ( 36,951 ) ( 25,264 ) Ending balance, September 30, 2020 $ ( 679,936 ) $ ( 33,463 ) $ ( 453,173 ) $ ( 1,166,572 ) 10 Table of Contents Changes in Accumulated Other Comprehensive Loss by Component Pension and Other Post-Retirement Benefits Cash Flow Hedges Foreign Currency Translation Total Beginning balance, January 1, 2019 $ ( 626,322 ) $ ( 4,631 ) $ ( 484,125 ) $ ( 1,115,078 ) Other comprehensive loss before reclassifications — ( 18,494 ) ( 65,026 ) ( 83,520 ) Amounts reclassified from accumulated other comprehensive loss (1) 16,689 1,154 34,701 52,544 Other comprehensive income (loss), net of income taxes 16,689 ( 17,340 ) ( 30,325 ) ( 30,976 ) Cumulative effect from adoption of ASU 2018-02 ( 122,526 ) — — ( 122,526 ) Ending balance, September 30, 2019 $ ( 732,159 ) $ ( 21,971 ) $ ( 514,450 ) $ ( 1,268,580 ) (1) Amount includes realized currency losses of $ 34,701 that were reclassified out of foreign currency translation into earnings in connection with the March 7, 2019 sale of Grupo Auto Todo and the September 30, 2019 sale of EIS. Refer to the acquisitions, divestitures and discontinued operations footnote for further details. The AOCL components related to the pension benefits are included in the computation of net periodic benefit income in the employee benefit plans footnote. The nature of the cash flow hedges are discussed in the derivatives and hedging footnote. Generally, tax effects in AOCL are established at the currently enacted tax rate and reclassified to net (loss) income in the same period that the related pre-tax AOCL reclassifications are recognized. 4. Recent Accounting Pronouncements Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of ASUs to the FASB Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs and any not listed below were assessed and determined to be not applicable or are expected to have a minimal impact on the Company's condensed consolidated financial statements. Financial Instruments - Credit Losses (Topic 326) In June 2016, the FASB issued ASU 2016-13 , Measurement of Credit Losses on Financial Instruments . Among other things, the ASU and its amendments replace the incurred loss impairment model for receivables and loan guarantees with a current expected credit loss model. The new model measures impairment based on expected credit losses over the remaining contractual life of an asset, considering available information about the collectability of cash flows, past events, current conditions, and reasonable and supportable forecasts. Additional quantitative and qualitative disclosures are required. The Company adopted ASU 2016-13 and its amendments as of January 1, 2020, which included recognizing a cumulative-effect adjustment to reduce opening retained earnings by $ 11,432 , net of taxes. Compensation - Retirement Benefits (Topic 715) In August 2018, the FASB issued ASU 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans . The updated accounting guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing, adding and clarifying certain disclosures. These provisions must be applied retrospectively. ASU 2018-14 is effective for periods beginning after December 15, 2020, with an option to adopt early. The adoption of ASU 2018-14 is not expected to have a significant impact on the Company’s financial position, results of operations or disclosures. The Company does not plan to early adopt the standard. 11 Table of Contents 5. Employee Benefit Plans Net periodic benefit income from the Company's pension plans included the following components for the three months ended September 30: Pension Benefits 2020 2019 Service cost $ 3,012 $ 2,395 Interest cost 20,942 24,362 Expected return on plan assets ( 38,550 ) ( 38,551 ) Amortization of prior service cost (credit) 173 ( 17 ) Amortization of actuarial loss 11,130 7,752 Net periodic benefit income $ ( 3,293 ) $ ( 4,059 ) Net periodic benefit income from the Company's pension plans included the following components for the nine months ended September 30: Pension Benefits 2020 2019 Service cost $ 8,919 $ 7,164 Interest cost 62,732 73,045 Expected return on plan assets ( 115,483 ) ( 115,585 ) Amortization of prior service cost (credit) 519 ( 51 ) Amortization of actuarial loss 33,340 23,247 Net periodic benefit income $ ( 9,973 ) $ ( 12,180 ) Service cost is recorded in selling, administrative and other expenses in the condensed consolidated statements of income while all other components are recorded within other non-operating expenses (income). Pension benefits also include amounts related to supplemental retirement plans. 6. Guarantees The Company guarantees the borrowings of certain independently controlled automotive parts stores and businesses (“independents”) and certain other affiliates in which the Company has a noncontrolling equity ownership interest (“affiliates”). Presently, the independents are generally consolidated by unaffiliated enterprises that have controlling financial interests through ownership of a majority voting interest in the independents. The Company has no voting interest or equity conversion rights in any of the independents. The Company does not control the independents or the affiliates but receives a fee for the guarantees. The Company has concluded that the independents are variable interest entities, but that the Company is not the primary beneficiary. Specifically, the equity holders of the independents have the power to direct the activities that most significantly impact the entities’ economic performance including, but not limited to, decisions about hiring and terminating personnel, local marketing and promotional initiatives, pricing and selling activities, credit decisions, monitoring and maintaining appropriate inventories, and store hours. Separately, the Company concluded that the affiliates are not variable interest entities. The Company’s maximum exposure to loss as a result of its involvement with these independents and affiliates is generally equal to the total borrowings subject to the Company’s guarantees. While such borrowings of the independents and affiliates are outstanding, the Company is required to maintain compliance with certain covenants, including a debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio and certain limitations on additional borrowings. At September 30, 2020, the Company was in compliance with all such covenants. As of September 30, 2020, the total borrowings of the independents and affiliates subject to guarantee by the Company were approximately $ 904,349 . These loans generally mature over periods from one to six years . The Company regularly monitors the performance of these loans and the ongoing operating results, financial condition and ratings from credit rating agencies of the independents and affiliates that participate in the guarantee programs. In the event that the Company is required to make payments in connection with these guarantees, the Company would obtain and liquidate certain collateral pledged by the independents or affiliates (e.g., accounts receivable and inventory) to recover all or a substantial portion of the amounts paid under the guarantees. The Company recognizes a liability equal to current expected credit losses over the lives of the loans in the guaranteed loan portfolio, based on a consideration of historical experience, current conditions, the nature and expected value of any collateral, and reasonable and supportable forecasts. To date, the Company has had no significant losses in 12 Table of Contents connection with guarantees of independents’ and affiliates’ borrowings and the current expected credit loss reserve is not material. As of September 30, 2020, there are no material guaranteed loans for which the borrower is experiencing financial difficulty and recovery is expected to be provided substantially through the operation or sale of the collateral. As of September 30, 2020, the Company has recognized certain assets and liabilities amounting to $ 85,000 each for the guarantees related to the independents’ and affiliates’ borrowings. These assets and liabilities are included in other assets and other long-term liabilities in the condensed consolidated balance sheets. The liabilities relate to the Company's noncontingent obligation to stand ready to perform under the guarantee programs and they are distinct from the Company's current expected credit loss reserve. 7. Credit Facilities On May 1, 2020, the Company entered into amendments to: (i) the Amended and Restated Syndicated Credit Facility Agreement, dated as of October 30, 2017 ("Credit Facility") and (ii) the Notes Purchase Agreement with certain investors governing the Series I, J, K, L and M senior notes, dated as of October 30, 2017 ("Notes Agreement"). The financial covenants in these agreements were amended to provide for the debt to EBITDA ratio to increase from 3.50 to 1.0 to 4.00 to 1.0 through December 31, 2020 (and then to revert to 3.50 to 1.0 after such date). With respect to the Credit Facility, the interest rates were amended to increase the applicable rate by 75 basis points (resulting in a rate of LIBOR + 225 basis points) and the LIBOR floor from 0.0 % to 1.0 %. With respect to the Notes Agreement, the interest rates were amended to increase the coupon applicable to each series of the Senior Notes by 50 basis points, effective immediately and applicable through March 31, 2021, and to increase the coupon applicable to each series of the Senior Notes by an additional 50 basis points, if and only if the debt to EBITDA ratio exceeds 3.50 to 1.0. 8. Accounts Receivable Sales Agreement On May 29, 2020 the Company entered into an agreement (the “A/R Sales Agreement”) to sell short-term receivables from certain customer trade accounts to an unaffiliated financial institution. The A/R Sales Agreement has a 364 day term, which the Company intends to renew each year. As part of the A/R Sales Agreement, the Company continuously sells designated pools of receivables as they are originated by it and certain U.S. subsidiaries to a separate bankruptcy-remote special purpose subsidiary. The assets of the special purpose subsidiary would be first available to satisfy the creditor claims of the unaffiliated financial institution. The Company controls and therefore consolidates the special purpose subsidiary in its condensed consolidated financial statements. At the inception of the A/R Sales Agreement, the special purpose subsidiary transferred ownership and control of approximately $ 500,000 in receivables that met certain qualifying conditions to the unaffiliated financial institution in exchange for cash. The Company accounts for transactions with the unaffiliated financial institution as sales of financial assets, with the associated receivables derecognized from the Company's condensed consolidated balance sheet. The remaining receivables held by the special purpose subsidiary were pledged to secure the collectability of the sold receivables. The amount of receivables pledged as collateral as of September 30, 2020 is approximately $ 1,100,000 . The Company continues to be involved with the receivables transferred by the special purpose subsidiary to the unaffiliated financial institution by providing collection services. As cash is collected on sold receivables, the special purpose subsidiary continuously transfers ownership and control of new qualifying receivables to the unaffiliated financial institution so that the total principal amount outstanding of receivables sold is approximately $ 500,000 at any point in time (which is the maximum amount allowed under the agreement). The future amount of receivables outstanding as sold could decrease, based on the level of activity and other factors. The following table summarizes the activity and amounts outstanding under the A/R Sales Agreement as of period end: September 30, 2020 Receivables sold to the financial institution and derecognized since inception $ 2,181,746 Cash collected on sold receivables since inception $ 1,681,732 Total principal amount outstanding of receivables sold at period end $ 500,014 Cash activity related to the A/R Sales Agreement is presented in cash from operating activities in the condensed consolidated statement of cash flows. The special purpose subsidiary incurs fees due to the unaffiliated financial institution related to the accounts receivable sales transactions. Those fees, which are immaterial, are recorded within other non-operating (income) expenses in the condensed consolidated statements of income. The special purpose subsidiary has a recourse obligation to repurchase from the unaffiliated financial institution any previously sold receivables that are not collected due to the occurrence of certain events, including credit quality deterioration and customer sales returns. The reserve recognized for this recourse 13 Table of Contents obligation as of September 30, 2020 is not material. The servicing liability related to the Company's collection services also is not material, given the high quality of the customers underlying the receivables and the anticipated short collection period. 9. Fair Value of Financial Instruments The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash equivalents, trade accounts receivable, trade accounts payable, and borrowings under the line of credit and term loan approximate their respective fair values based on the short-term nature of these instruments. As of September 30, 2020, the carrying amount, net of debt issuance costs, and the fair value of fixed rate debt were approximately $ 1,996,621 and $ 2,061,093 , respectively. The fair value of fixed rate debt is designated as Level 2 in the fair value hierarchy (i.e., significant observable inputs) and is based primarily on the discounted value of future cash flows using current market interest rates offered for debt of similar credit risk and maturity. The carrying amount, net of debt issuance costs, of fixed rate debt of $ 1,996,621 is included in long-term debt in the condensed consolidated balance sheet as of September 30, 2020. Refer to the derivatives and hedging footnote for information on the fair value of derivative instruments. 10. Derivatives and Hedging The Company is exposed to various risks arising from business operations and market conditions, including fluctuations in interest rates and certain foreign currencies. When deemed appropriate, the Company uses derivative and non-derivative instruments as risk management tools to mitigate the potential impact of interest rate and foreign exchange rate risks. The objective of using these tools is to reduce fluctuations in the Company’s earnings and cash flows associated with changes in these rates. Derivative financial instruments are not used for trading or other speculative purposes. The Company has not historically incurred, and does not expect to incur in the future, any losses as a result of counterparty default related to derivative instruments. The Company formally documents relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. This process includes linking cash flow hedges to specific forecasted transactions or variability of cash flow to be paid. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the designated derivative and non-derivative instruments that are used in hedging transactions are highly effective in offsetting changes in the cash flows of the hedged items. When a designated instrument is determined not to be highly effective as a hedge or the underlying hedged transaction is no longer probable, hedge accounting is discontinued prospectively. The following table summarizes the location and carrying amounts of the derivative instruments and the foreign currency denominated debt, a non-derivative financial instrument, that are designated and qualify as part of hedging relationships: September 30, 2020 December 31, 2019 Instrument Balance Sheet Location Notional Balance Notional Balance Cash flow hedges: Interest rate swaps Other current liabilities $ 800,000 $ 512 $ 800,000 $ 24,792 Net investment hedges: Forward contracts Prepaid expenses and other current assets $ 925,810 $ 42,181 $ 925,810 $ 39,965 Forward contract Other current liabilities $ 235,180 $ 9,098 $ — $ — Foreign currency debt Long-term debt € 700,000 $ 822,080 € 700,000 $ 784,000 The derivative instruments are recognized in the condensed consolidated balance sheets at fair value and are designated as Level 2 in the fair value hierarchy. They are valued using inputs other than quoted prices, such as foreign exchange rates and yield curves. Cash Flow Hedges The Company uses interest rate swaps to mitigate variability in forecasted interest payments on a portion of the Company’s U.S. dollar-denominated unsecured variable rate debt. The interest rate swaps effectively convert a portion of the floating rate interest payment into a fixed rate interest payment. The Company designates the interest rate swaps as qualifying hedging instruments and accounts for them as cash flow hedges. On May 1, 2020, the Company dedesignated its interest rate swaps and modified them to match the terms of its modified debt agreement and as a result the $ 48,492 payable as of that date was deemed a financing transaction. As of September 30, 2020, the amount payable was $ 41,803 . Subsequent cash flows to pay this amount over the remaining term of the agreement are reflected within financing activities in the condensed consolidated statement of cash flows. This payable is classified within other current liabilities on the condensed consolidated balance sheets. The corresponding amount in AOCL is being amortized to interest expense on a straight-line basis over the remaining life of the 14 Table of Contents hedged instrument. The Company redesignated the portion of the modified interest rate swap that is not related to the financing agreement as a qualifying hedging instrument. Gains and losses from fair value adjustments on the cash flow hedges are initially classified in AOCL and are reclassified to interest expense on the dates interest payments are accrued. Hedges of Net Investments in Foreign Operations The Company has designated certain derivative instruments and a portion of its foreign currency denominated debt, a non-derivative financial instrument, as hedges of the foreign currency exchange rate exposure of the Company's Euro-denominated net investment in a European subsidiary. The Company applies the spot method to assess the hedge effectiveness of the derivative instruments and this assessment for each instrument excludes the initial value related to the difference at contract inception between the foreign exchange spot rate and the forward rate (i.e., the forward points). The initial value of this excluded component is recognized as a reduction to interest expense in a systematic and rational manner over the term of the derivative instrument. All other changes in value for the net investment hedges are included in AOCL within foreign currency translation and would only be reclassified to earnings if the European subsidiary were liquidated, or otherwise disposed. The tables below presents gains and losses related to designated cash flow hedges and net investment hedges: (Loss) Gain Recognized in AOCL Before Reclassifications Gain Recognized in Interest Expense For Excluded Components 2020 2019 2020 2019 Three Months Ended September 30, Cash flow hedges: Interest rate contracts $ ( 277 ) $ ( 3,766 ) $ — $ — Net investment hedges: Forward contracts ( 49,660 ) 35,796 6,574 5,596 Foreign currency debt ( 35,140 ) 30,030 — — Total $ ( 85,077 ) $ 62,060 $ 6,574 $ 5,596 (Loss) Gain Recognized in AOCL Before Reclassifications Gain Recognized in Interest Expense For Excluded Components 2020 2019 2020 2019 Nine Months Ended September 30, Cash flow hedges: Interest rate contracts $ ( 29,107 ) $ ( 25,332 ) $ — $ — Net investment hedges: Cross-currency swap — 2,936 — 2,294 Forward contracts ( 33,959 ) 41,436 20,572 12,220 Foreign currency debt ( 38,080 ) 35,140 — — Total $ ( 101,146 ) $ 54,180 $ 20,572 $ 14,514 15 Table of Contents 11. Commitments and Contingencies Legal Matters As more fully discussed in the commitments and contingencies footnote of the Company's notes to the consolidated financial statements in its 2019 Annual Report on Form 10-K, a jury awarded damages against the Company in a litigated automotive product liability dispute. On February 19, 2020, the Washington Court of Appeals issued an order entirely reversing the jury’s finding on damages and ordering a new trial on damages. The plaintiffs subsequently appealed this order to the Washington Supreme Court. On July 7, 2020, the Washington Supreme Court indicated that it will consider a further appeal on this matter. At the time of the filing of these financial statements, based upon the Company’s legal defenses, insurance coverage, and reserves, the Company does not believe this matter will have a material impact to the condensed consolidated financial statements. Fire at S.P. Richards Headquarters and Distribution Center On July 19, 2019, a fire occurred at the S.P. Richards headquarters in Atlanta, Georgia. The building primarily held the S.P. Richards headquarters office and was connected to its Atlanta distribution center. The Company maintains property and casualty loss insurance coverage. The Company recognized a gain of $ 13,448 during the nine months ended September 30, 2020 for insurance recoveries in excess of losses it has incurred on inventory, property, plant and equipment and other fire-related costs. The gain is included within other non-operating expenses (income) on the condensed consolidated statements of income. No gains or losses were recognized during the three months ended September 30, 2020. 12. Acquisitions, Divestitures and Discontinued Operations Acquisitions The Company acquired several businesses for approximately $ 77,393 and $ 642,468 , net of cash acquired, during the nine months ended September 30, 2020 and September 30, 2019, respectively. The Company has not recognized any significant measurement period adjustments from finalizing acquisition accounting during the three and nine months ended September 30, 2020. Inenco The Company acquired the remaining 65 % equity investment in Inenco in July 2019. Inenco is one of Australasia's leading industrial distributors of key product categories such as bearings, power transmission and seals and it generates estimated annual revenues of approximately $ 400,000 . Prior to the 65 % acquisition, the Company accounted for its 35 % investment under the equity method of accounting. The acquisition-date fair value of the 35 % investment was $ 123,385 and is included in the measurement of the consideration transferred. The difference between the acquisition-date fair value and the carrying amount of the equity method investment resulted in the recognition of a gain of $ 38,663 on the acquisition date. The acquisition-date fair value was determined using a market and income approach with the assistance of a third party valuation firm. The gain is included within other non-operating expenses (income) on the condensed consolidated statement of income and comprehensive income for the three and nine months ended September 30, 2019. Divestitures The Company received cash proceeds from divestitures of businesses totaling $ 382,737 and $ 416,784 for the nine months ended September 30, 2020 and September 30, 2019, respectively. Grupo Auto Todo On March 7, 2019, the Company sold all of its equity in Grupo Auto Todo, a Mexican subsidiary within the Automotive Parts Group. Grupo Auto Todo contributed annual revenues of approximately $ 15,900 for the year ended December 31, 2019 . The Company incurred realized currency losses of $ 27,037 from this transaction during the nine months ended September 30, 2019. These losses are included within other non-operating expenses (income) on the condensed consolidated statements of income. EIS On September 30, 2019, the Company sold all of its equity in EIS, a wholly owned subsidiary within the Industrial Parts Group. EIS contributed $ 588,031 for the year ended December 31, 2019. The Company incurred realized currency losses of $ 7,664 from this transaction, which are included in the line item "other" within non-operating (income) expenses on the condensed consolidated statement of income for the three and nine months ended September 30, 2019. 16 Table of Contents Discontinued Operations Business Products Group Effective June 30, 2020, the Company completed the divestiture of its Business Products Group by selling Supply Source Enterprises, Inc. ("SSE") and S.P. Richards Company ("SPR") in separate transactions. The Company has recognized $ 3,165 during the three months ended September 30, 2020 of additional loss on divestiture, classified as discontinued operations, as part of customary post-transaction working capital adjustments, among other things. These divestitures are part of the Company's long-term strategic initiative to streamline its operations and optimize its portfolio so that it can drive shareholder value by focusing on its global Automotive and Industrial Parts Groups. The Business Products Group was previously a reportable segment of the Company. These divestitures, together with prior period divestitures of Garland C. Norris (effective December 13, 2019), SPR Canada (effective January 1, 2020) and Safety Zone Canada (effective March 2, 2020), represent a single plan to exit the Business Products Group segment and are considered a strategic shift that will have a major effect on the Company’s operations and financial results. Therefore, the results of operations, financial position and cash flows for the Business Products Group are reported as discontinued operations for all periods presented. The Company maintains an immaterial investment in SPR and has concluded that SPR is a variable interest entity. The Company also remains involved with SPR for a limited period of time through various lease, sublease, freight distribution and transition service agreements. The Company is not the primary beneficiary and therefore does not consolidate SPR. Among other things, the Company does not have any voting rights and does not have the power to direct the activities that most significantly affect SPR's economic performance. For a limited period of time as SPR completes its transition away from the Company’s shared services platform, the Company continues to pay certain payables on SPR’s behalf and at SPR’s direction with full, weekly reimbursement from SPR under the terms of a transition services agreement. The Company’s results of operations for discontinued operations were: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net sales $ — $ 489,739 $ 846,944 $ 1,443,772 Cost of goods sold — 370,546 632,007 1,093,332 Gross profit — 119,193 214,937 350,440 Operating and non-operating expenses — 98,539 179,461 289,359 Loss on divestiture 3,165 — 223,483 1,000 (Loss) income before income taxes ( 3,165 ) 20,654 ( 188,007 ) 60,081 Income taxes (1) 2,222 5,423 4,062 15,373 Net (loss) income from discontinued operations $ ( 5,387 ) $ 15,231 $ ( 192,069 ) $ 44,708 (1) The effective income tax rate was negative 2.2 % for the nine months ended September 30, 2020, compared to 25.6 % for the same period in 2019. The rate decrease for the nine months ended September 30, 2020 is primarily due to a non-deductible loss on divestiture. 17 Table of Contents The Company’s assets and liabilities for discontinued operations, by major class, were: December 31, 2019 Assets Trade accounts receivable, net $ 194,903 Merchandise inventories, net 387,307 Prepaid expenses and other current assets 132,041 Other intangible assets, less accumulated amortization 76,829 Operating lease assets 80,302 Other assets 91,640 Total assets of discontinued operations $ 963,022 Liabilities Trade accounts payable $ 158,163 Other current liabilities 59,954 Long-term liabilities 68,906 Total liabilities of discontinued operations $ 287,023 13. Goodwill and Other Intangible Assets Total consolidated goodwill as of September 30, 2020 is $ 1,829,946 , net of $ 506,721 of accumulated impairment loss. The changes in the carrying amount of goodwill during the periods ended September 30, 2020 and December 31, 2019 by reportable segment, as well as other identifiable intangible assets, are summarized as follows: Goodwill Automotive Industrial Total Other Intangible Assets, Net Balance as of December 31, 2019 $ 1,897,495 $ 396,024 $ 2,293,519 $ 1,492,097 Additions (1) 10,528 5,011 15,539 17,069 Amortization — — — ( 70,219 ) Impairments ( 506,721 ) — ( 506,721 ) — Foreign currency translation 27,932 ( 323 ) 27,609 10,499 Balance as of September 30, 2020 $ 1,429,234 $ 400,712 $ 1,829,946 $ 1,449,446 (1) Additions include measurement period adjustments related to prior year acquisitions. The Company reviews its goodwill annually for impairment in the fourth quarter, or sooner if circumstances indicate that the carrying amount may exceed fair value. The Company tests goodwill for impairment at the reporting unit level, which is an operating segment or a level below an operating segment (a component). If there are sustained declines in macroeconomic or business conditions in future periods, including as a result of the COVID-19 pandemic, affecting the projected earnings and cash flows at the Company's reporting units, among other things, there can be no assurance that goodwill at one or more reporting units may not be impaired. Based on the Company's interim impairment assessment as of September 30, 2020, which included reviewing the revenue and operating margin growth forecasts based on the current projections, the Company has determined that it is not more likely than not that the goodwill is impaired for all reporting units. Due to several factors that coalesced in the second quarter of 2020 the Company performed an interim impairment test as of May 31, 2020 for its European reporting unit and recorded a goodwill impairment charge of $ 506,721 . The factors primarily resulted from the ongoing market volatility and uncertainty caused by the COVID-19 pandemic, which extended into the second quarter and impacted several critical impairment testing assumptions including weighted average cost of capital and market multiples, and near-term revenue and operating margin projections for the reporting unit. During the second quarter, the Company also assessed the finite-lived, identifiable tangible and intangible assets at the European reporting unit for impairment under the undiscounted cash flows approach and concluded there was no impairment. 18 Table of Contents The European reporting unit’s fair value was calculated using a combination of both income and market approaches and involved significant unobservable inputs (Level 3 inputs). The assumptions used in the income approach include projected revenue growth rates, operating margins, the estimated weighted average costs of capital and terminal value. The weighted-average cost of capital used in the income approach was adjusted to reflect the specific risks and uncertainties associated with the COVID-19 pandemic in developing the cash flow projections. The assumptions used in the market approach include benchmark company market multiples. The Company used inputs and assumptions it believed are consistent with those a hypothetical marketplace participant would use. The interim impairment tests were prepared in accordance with the Company's accounting policies as described in the summary of significant accounting policies footnote in its consolidated financial statements included in its Annual Report on Form 10-K for 2019. Should actual results differ from certain key assumptions used in the interim impairment test, including revenue and operating margin growth rates, which are both impacted by economic conditions, or should other key assumptions change, including benchmark company market multiples, weighted average costs of capital and terminal value, in subsequent periods the Company could record additional impairment charges for this reporting unit. 14. Income Taxes The Company's effective income tax rate was 21.8 % for the three months ended September 30, 2020, compared to 25.2 % for the same three month period in 2019. The effective income tax rate was 105.4 % for the nine months ended September 30, 2020, compared to 25.1 % for the same period in 2019. The rate decrease during the third quarter is due primarily to the benefit of statute-related adjustments and income mix shifts. The rate increase for the nine months ended September 30, 2020 is primarily due to a non-deductible goodwill impairment charge and certain transaction and other costs incurred during the period. 15. Earnings Per Share As more fully discussed in the share-based compensation footnote of the Company’s notes to the consolidated financial statements in its 2019 Annual Report on Form 10-K, the Company maintains various long-term incentive plans, which provide for the granting of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance awards, dividend equivalents and other share-based awards. Options to purchase approximately 473 and 2,214 shares of common stock were outstanding but excluded from the computations of diluted earnings per share for the three and nine month period ended September 30, 2020, respectively, compared to approximately 544 and 223 for the three and nine month period ended September 30, 2019, respectively. These options were excluded because their inclusion would have been anti-dilutive. 16. Restructuring 2019 Cost Savings Plan As more fully discussed in the restructuring footnote of the Company's notes to the consolidated financial statements in its 2019 Annual Report on Form 10-K, the Company approved and began to implement certain restructuring actions (the “2019 Cost Savings Plan”) across its subsidiaries primarily targeted at simplifying organizational structures and distribution networks. The Company believes these actions will reduce costs in the future and allow it to more effectively and efficiently manage its businesses. The table below summarizes costs incurred in 2020 associated with the 2019 Cost Savings Plan: Total Restructuring costs $ 39,009 Remaining costs expected but not yet incurred 3,825 Total costs $ 42,834 The 2019 Cost Savings Plan was approved and funded by the Company's corporate office and therefore these costs are not allocated to the Company's segments. The cumulative amount of costs incurred as of September 30, 2020 since inception is $ 181,789 . The table below summarizes the activity related to the restructuring costs discussed above. As of September 30, 2020, the current portion of the restructuring liability is included in other current liabilities on the condensed consolidated balance sheet. 19 Table of Contents Severance and other employee costs Facility and closure costs Accelerated operating lease costs Asset impairments Total Liability as of January 1, 2020 $ 72,192 $ 6,639 $ — $ — $ 78,831 Restructuring costs 16,638 9,506 5,890 6,975 39,009 Cash payments ( 71,389 ) ( 8,091 ) — — ( 79,480 ) Non-cash charges — — ( 5,890 ) ( 6,975 ) ( 12,865 ) Translation 85 59 — — 144 Liability as of September 30, 2020 $ 17,526 $ 8,113 $ — $ — $ 25,639 20 Table of Contents