What changed in this filing

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Item 1. Financial Statements

2021-04-22 compared with 2020-10-22 · 144 added, 365 removed, 295 unchanged (63% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data) September 30, 2020 December 31, 2019

(in thousands, except share and per share data) March 31, 2021 December 31, 2020

Current assets:

5 unchanged sentences

Prepaid expenses and other current assets 1,149,877 1,060,360

Current assets of discontinued operations — 714,251

Total current assets 7,678,160 7,113,763

7 unchanged sentences

Other assets 663,333 644,140

Noncurrent assets of discontinued operations — 248,771

Total assets $ 13,943,543 $ 13,440,215

9 unchanged sentences

1,578,866 1,491,426

Current liabilities of discontinued operations — 218,117

Total current liabilities

9 unchanged sentences

562,968 543,623

Noncurrent liabilities of discontinued operations — 68,906

Preferred stock, par value – $ 1 per share;

6 unchanged sentences

Additional paid-in capital 117,867 117,165

113,249 98,777

Retained earnings

3,923,113 4,571,860

Accumulated other comprehensive loss ( 1,023,760 ) ( 1,036,502 )

( 1,166,572 ) ( 1,141,308 )

Retained earnings 4,085,998 3,979,779

Total parent equity

2 unchanged sentences

3,336,109 3,218,003

3,034,773 3,695,500

Total liabilities and equity

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except per share data) 2021 2020

5 unchanged sentences

Selling, administrative and other expenses 1,195,164 1,142,697

1,140,156 1,175,699 3,254,442 3,414,414

Depreciation and amortization 72,296 67,254

69,097 65,667 203,084 186,968

Provision for doubtful accounts 4,909 6,519

5,633 1,192 23,452 10,430

Restructuring costs — 2,982

Goodwill impairment charge — — 506,721 —

Total operating expenses

1,272,369 1,219,452

Non-operating expenses (income):

Non-operating (income) expense:

Interest expense 19,062 20,965

25,788 26,451 72,218 73,567

( 21,241 ) ( 47,655 ) ( 46,017 ) ( 62,737 )

Total non-operating expenses (income) 4,547 ( 21,204 ) 26,201 10,830

Other ( 36,475 ) ( 12,832 )

Total non-operating (income) expense ( 17,413 ) 8,133

Income before income taxes 285,859 160,593

68,149 38,247

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

Net income from continuing operations 217,710 122,346

Net income from discontinued operations — 14,189

Net income $ 217,710 $ 136,535

Dividends declared per common share

$ 0.8150 $ 0.7900

Basic earnings (loss) per share:

Basic earnings per share:

Continuing operations $ 1.51 $ 0.84

Discontinued operations — 0.10

Basic earnings (loss) per share $ 1.58 $ 1.56 $ ( 1.39 ) $ 4.20

Diluted earnings (loss) per share:

Basic earnings per share $ 1.51 $ 0.94

Diluted earnings per share:

Continuing operations $ 1.50 $ 0.84

Discontinued operations — 0.10

Diluted earnings (loss) per share $ 1.57 $ 1.56 $ ( 1.39 ) $ 4.18

Diluted earnings per share $ 1.50 $ 0.94

Weighted average common shares outstanding

1 unchanged sentence

Dilutive effect of stock options and non-vested restricted stock awards

762 617 — 654

Weighted average common shares outstanding – assuming dilution

2 unchanged sentences

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended September 30, Nine Months Ended September 30,

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended March 31,

(in thousands, except per share data) 2021 2020

Net income (loss) $ 227,531 $ 227,487 $ ( 200,306 ) $ 612,167

Net income $ 217,710 $ 136,535

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

Foreign currency translation adjustments, net of income taxes in 2021 — $ 21,185 ;

2020 — $ 15,560

Cash flow hedge adjustments, net of income taxes in 2020 — $ 1,313 and $ 4,731 ;

2019 — $ 787 and $ 6,413 , respectively

( 295 ) ( 182,613 )

Pension and postretirement benefit adjustments, net of income taxes in 2020 — $ 2,998 and $ 9,023 ;

2019 — $ 2,592 and $ 6,166 , respectively

Cash flow hedge adjustments, net of income taxes in 2021 — $ 1,384 ;

2020 — $ 6,604

3,741 ( 17,856 )

Pension and postretirement benefit adjustments, net of income taxes in 2021 — $ 3,421 ;

2020 — $ 3,017

Other comprehensive income (loss), net of income taxes

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended September 30, 2020

Three Months Ended March 31, 2021

(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

January 1, 2021 144,354,335 $ 144,354 $ 117,165 $ ( 1,036,502 ) $ 3,979,779 $ 3,204,796 $ 13,207 $ 3,218,003

Net income — — — — 217,710 217,710 — 217,710

5 unchanged sentences

Share-based compensation — — 6,235 — — 6,235 — 6,235

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

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 2019-12 (1) — — — — 6,223 6,223 — 6,223

— — — — ( 11,432 ) ( 11,432 ) — ( 11,432 )

Noncontrolling interest activities — — — — — — ( 1,661 ) ( 1,661 )

September 30, 2020 144,289,653 $ 144,290 $ 113,249 $ ( 1,166,572 ) $ 3,923,113 $ 3,014,080 $ 20,693 $ 3,034,773

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)

Three Months Ended September 30, 2019

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

March 31, 2021 144,458,057 $ 144,458 $ 117,867 $ ( 1,023,760 ) $ 4,085,998 $ 3,324,563 $ 11,546 $ 3,336,109

Three Months Ended March 31, 2020

9 unchanged sentences

Cumulative effect from adoption of ASU 2016-13 (2) — — — — ( 11,432 ) ( 11,432 ) — ( 11,432 )

— — — ( 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 — — — — — — ( 464 ) ( 464 )

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.

March 31, 2020 144,249,343 $ 144,249 $ 103,878 $ ( 1,333,329 ) $ 4,487,904 $ 3,402,702 $ 20,329 $ 3,423,031

(1) The Company adopted Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes , during the first quarter of 2021.

(2) The Company adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments, during the first quarter of 2020.

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2021 2020

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:

Net income $ 217,710 $ 136,535

Net income from discontinued operations — 14,189

Net income from continuing operations 217,710 122,346

Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:

Depreciation and amortization 72,296 67,254

1 unchanged sentence

Excess tax benefits from share-based compensation ( 1,764 ) ( 221 )

Realized currency losses on divestitures 11,356 30,848

Goodwill impairment charge 506,721 —

Changes in operating assets and liabilities 6,465 ( 166,014 )

6 unchanged sentences

Acquisitions of businesses and other investing activities ( 19,489 ) ( 3,833 )

Net cash provided by (used in) investing activities from continuing operations

229,922 ( 385,393 )

Net cash used in investing activities from continuing operations ( 40,672 ) ( 28,978 )

Financing activities:

5 unchanged sentences

Other financing activities ( 1,354 ) ( 871 )

Net cash used in financing activities from continuing operations ( 1,029,208 ) ( 229,446 )

Net cash (used in) provided by financing activities from continuing operations ( 115,994 ) 53,456

Cash flows from discontinued operations:

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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.

Net 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, 2020.

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.

Accordingly, the unaudited condensed consolidated financial statements and related disclosures herein should be read in conjunction with the Company’s 2020 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 unaudited condensed consolidated financial statements.

Specifically, the Company makes estimates and assumptions in its unaudited 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.

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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 results of operations for the three months ended March 31, 2021 are not necessarily indicative of results for the year ended December 31, 2021.

The Company's results of operations improved in the first quarter of 2021 relative to the first quarter of 2020 as a result of several positive trends caused by the global response to the coronavirus (“COVID-19”) outbreak, which was declared a pandemic in March 2020.

In particular, as widespread vaccine distribution continued, we have seen economic recovery in many of the markets where we operate and a significant uptick in consumer mobility.

However, the Company's operations remain vulnerable to reversal of these trends or other continuing negative effects caused by COVID-19.

The extent to which the 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 additional waves or spikes in infection rates;

the duration of the outbreak;

governmental, business or other actions taken in response to the pandemic;

governmental, business or other actions taken in response to the pandemic and the efficacy of these actions, including partial or complete shut downs, travel restrictions, and shelter-in-place orders among other actions;

the effectiveness and distribution of COVID-19 vaccines;

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.

The Company has evaluated subsequent events through the date the unaudited condensed consolidated financial statements covered by this quarterly report were issued.

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

$ 2,960,379 $ 2,792,453 $ 8,038,863 $ 8,192,369

1,409,707 1,732,831 4,246,976 5,049,975

Three Months Ended March 31,

Automotive $ 2,953,165 $ 2,582,685

Industrial 1,511,549 1,509,841

Total net sales $ 4,464,714 $ 4,092,526

$ 4,370,086 $ 4,525,284 $ 12,285,839 $ 13,242,344

Segment profit:

$ 266,124 $ 222,561 $ 627,608 $ 630,865

125,620 137,525 348,481 394,887

Automotive $ 235,678 $ 142,578

Industrial 125,292 113,933

Total segment profit 360,970 256,511

$ 391,744 $ 360,086 $ 976,089 $ 1,025,752

Interest expense, net

7 unchanged sentences

(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

Three Months Ended March 31,

Other unallocated costs:

Goodwill impairment charge (2) $ — $ — $ ( 506,721 ) $ —

Restructuring costs (2) $ — $ ( 2,982 )

Realized currency loss on divestitures (4) — ( 7,664 ) ( 11,356 ) ( 34,701 )

Gain on insurance proceeds related to SPR Fire (3) — 12,282

Gain on equity investment (6) — 38,663 — 38,663

Transaction and other costs (4) — ( 7,549 )

Total other unallocated costs $ — $ 1,751

(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.

(2) Adjustment reflects restructuring costs related to the execution of the 2019 Cost Savings Plan.

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.

(3) 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.

(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.

(4) Adjustment reflects $ 6,000 of incremental costs associated with COVID-19 for the three months ended March 31, 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

Three Months Ended March 31,

North America:

$ 1,934,503 $ 1,944,768 $ 5,381,566 $ 5,724,899

1,295,717 1,624,303 3,937,640 4,941,447

Automotive $ 1,862,805 $ 1,731,496

Industrial 1,399,399 1,410,715

Total North America $ 3,262,204 $ 3,142,211

$ 3,230,220 $ 3,569,071 $ 9,319,206 $ 10,666,346

$ 355,874 $ 295,424 $ 911,595 $ 866,694

113,990 108,528 309,336 108,528

Automotive $ 367,869 $ 272,924

Industrial 112,150 99,126

Total Australasia $ 480,019 $ 372,050

$ 469,864 $ 403,952 $ 1,220,931 $ 975,222

Europe – Automotive

3 unchanged sentences

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:

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

Changes in Accumulated Other

3 unchanged sentences

Other comprehensive loss before reclassifications — — ( 295 ) ( 295 )

— ( 21,248 ) ( 48,307 ) ( 69,555 )

Amounts reclassified from accumulated other comprehensive loss 9,296 3,741 — 13,037

24,479 8,456 11,356 44,291

Other comprehensive income (loss), net of income taxes 9,296 3,741 ( 295 ) 12,742

24,479 ( 12,792 ) ( 36,951 ) ( 25,264 )

Ending balance, September 30, 2020 $ ( 679,936 ) $ ( 33,463 ) $ ( 453,173 ) $ ( 1,166,572 )

Ending balance, March 31, 2021 $ ( 683,572 ) $ ( 26,266 ) $ ( 313,922 ) $ ( 1,023,760 )

Changes in Accumulated Other

4 unchanged sentences

Amounts reclassified from accumulated other comprehensive loss 8,448 1,444 — 9,892

16,689 1,154 34,701 52,544

Other comprehensive income (loss), net of income taxes 8,448 ( 17,856 ) ( 182,613 ) ( 192,021 )

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.

Ending balance, March 31, 2020 $ ( 695,967 ) $ ( 38,527 ) $ ( 598,835 ) $ ( 1,333,329 )

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.

Generally, tax effects in AOCL are established at the currently enacted tax rate and reclassified to net income in the same period that the related pre-tax AOCL reclassifications are recognized.

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.

GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASU”) to the FASB Accounting Standards Codification (“ASC”).

The Company considers the applicability and impact of all ASUs and has determined that any recently adopted accounting pronouncements did not have a material impact on the Company's condensed consolidated financial statements and all recent accounting pronouncements not yet adopted are not applicable or are expected to have an immaterial impact on the Company's condensed consolidated financial statements.

Employee Benefit Plans

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

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

Pension Benefits

2 unchanged sentences

Expected return on plan assets ( 38,732 ) ( 38,523 )

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

$ 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 prior service cost 172 173

Amortization of actuarial loss 12,456 11,122

33,340 23,247

Net periodic benefit income $ ( 5,157 ) $ ( 3,321 )

$ ( 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.

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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 .

At March 31, 2021, the Company was in compliance with all such covenants.

As of March 31, 2021, the total borrowings of the independents and affiliates subject to guarantee by the Company were approximately $ 911,865 .

These loans generally mature over periods from one to six years .

2 unchanged sentences

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

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.

To date, the Company has had no significant losses in connection with guarantees of independents’ and affiliates’ borrowings and the current expected credit loss reserve is not material.

As of March 31, 2021, 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 March 31, 2021, the Company has recognized certain assets and liabilities amounting to $ 82,000 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.

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.

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.

In 2020, the Company entered into an accounts receivable sales agreement (the “A/R Sales Agreement”) to sell short-term receivables from certain customer trade accounts to an unaffiliated financial institution on a revolving basis.

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.

subsidiaries to a separate bankruptcy-remote special purpose entity (“SPE”).

The assets of the SPE would be first available to satisfy the creditor claims of the unaffiliated financial institution.

The Company controls and therefore consolidates the SPE in its condensed consolidated financial statements.

The SPE transferred ownership and control of certain 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 remaining receivables held by the SPE were pledged to secure the collectability of the sold receivables.

The amount of receivables pledged as collateral as of March 31, 2021 and December 31, 2020 is approximately $ 957,000 and $ 771,000 , respectively.

The Company continues to be involved with the receivables transferred by the SPE to the unaffiliated financial institution by providing collection services.

As cash is collected on sold receivables, the SPE 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 $ 800,000 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

obligation as of September 30, 2020 is not material.

Total principal amount outstanding of receivables sold is approximately $ 800,000 as of March 31, 2021 and December 31, 2020, respectively.

The following table summarizes the activity and amounts outstanding under the A/R Sales Agreement as of:

Three Months Ended March 31,

Receivables sold to the financial institution and derecognized $ 1,927,931 $ —

Cash collected on sold receivables $ 1,927,928 $ —

Upon entry into the A/R Sales Agreement, the Company received an initial benefit from cash from operations of approximately $ 800,000 in the year ended December 31, 2020.

Continuous cash activity related to the A/R Sales Agreement is reflected in cash from operating activities in the condensed consolidated statement of cash flows.

The SPE 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) expense in the condensed consolidated statements of income.

The SPE 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 obligation as of March 31, 2021 and December 31, 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.

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.

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.

Additionally, ASC 820, Fair Value Measurements , defines levels within a hierarchy based upon observable and non-observable inputs.

Observable inputs such as quoted prices in active markets;

Inputs, other than quoted prices in active markets, that are observable either directly or indirectly;

Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions

As of March 31, 2021 the fair value of the Company's senior unsecured notes was approximately $ 2,617,989 , which are designated as Level 2 in the fair value hierarchy.

Our valuation technique is based primarily on prices and other relevant information generated by observable transactions involving identical or comparable assets or liabilities.

Derivative instruments are recognized in the 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.

Refer to the Derivatives and Hedging footnote for further information.

Fair value measurements of non-financial assets and non-financial liabilities are primarily used in the impairment analyses of goodwill, other intangible assets, and long-lived assets.

These involve fair value measurements on a nonrecurring basis using Level 3 inputs as defined in the fair value hierarchy.

The carrying amounts reflected in the consolidated balance sheets for cash and cash equivalents, trade accounts receivable, trade accounts payable, and borrowings under the line of credit approximate their respective fair values based on the short-term nature of these instruments.

Derivatives and Hedging

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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.

This process includes linking cash flow hedges to specific forecasted transactions or variability of cash flows 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

Balance Sheet Location

Notional Balance Notional Balance

Cash Flow Hedges

Interest rate swaps Other current liabilities

$ 800,000 $ 512 $ 800,000 $ 24,792

In 2020, the Company terminated its interest rate swaps and settled the outstanding balances through cash payments totaling $ 41,000 .

The remaining amount in AOCL is being amortized to interest expense on a straight-line basis over the remaining life of the previously hedged instrument.

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

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.

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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 ) $ — $ —

March 31, 2021 December 31, 2020

Balance Sheet Location

Notional Balance Notional Balance

Net investment hedges:

Forward contracts

Forward contracts Prepaid expenses and other current assets

$ 925,810 $ 43,870 $ 800,000 $ 7,668

Foreign currency debt

Forward contracts Other current liabilities $ 235,180 $ 11,556 $ 360,990 $ 19,442

Foreign currency debt Long-term debt

€ 700,000 $ 820,120 € 700,000 $ 861,070

Total $ ( 85,077 ) $ 62,060 $ 6,574 $ 5,596

(Loss) Gain Recognized in AOCL Before Reclassifications Gain Recognized in Interest Expense For Excluded Components

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

Gain (Loss) Recognized in AOCL before Reclassifications Gain Recognized in Interest Expense for Excluded Components

2021 2020 2021 2020

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flow hedges:

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Net investment hedges:

Cross-currency swap — 2,936 — 2,294

Forward contracts

37,515 46,848 6,574 6,522

Foreign currency debt

40,950 10,780 — —

Total $ 78,465 $ 33,167 $ 6,574 $ 6,522

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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.

As more fully discussed in the Company's notes to the consolidated financial statements in its 2020 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.

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.

On July 7, 2020, the Washington Supreme Court indicated that it would consider a further appeal on this matter, and oral arguments occurred on November 10, 2020.

A ruling from Washington Supreme Court is expected in 2021.

At the time of the filing of these financial statements, based upon the Company’s legal defenses and insurance coverage, the Company does not believe this matter will have a material impact to the condensed consolidated financial statements.

Acquisitions, Divestitures and Discontinued Operations

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.

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.

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.

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.

The Company acquired several businesses for approximately $ 20,340 and $ 20,874 , net of cash acquired, during the three months ended March 31, 2021 and March 31, 2020, respectively.

The measurement period is still open for certain businesses acquired in prior periods, but there have been no significant measurement period adjustments from finalizing acquisition accounting during the three months ended March 31, 2021.

The Company received cash proceeds from divestitures of businesses totaling $ 10,345 and $ 10,442 for the three months ended March 31, 2021 and March 31, 2020, respectively.

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.

During 2020, the Company completed the divestiture of its Business Products Group as part of its 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.

This divestiture represented a single plan to exit the Business Products Group segment and was considered a strategic shift that had 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 retains an investment in S.P.

Richard's (“SPR”), a business that previously belonged to the Business Products Group, with a carrying value of $ 70,883 , which is included within other assets on the condensed consolidated balance sheets, as of March 31, 2021.

The Company maintains an allowance equal to the current expected credit loss based on a consideration of

historical experience, current market conditions and reasonable and supportable forecasts related to this investment and other related assets of $ 17,000 .

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.

The Company has concluded that SPR is a variable interest entity, but the Company is not the primary beneficiary and therefore the entity is not consolidated.

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.

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 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

Three Months Ended March 31, 2020

Net sales $ 467,006

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Loss on divestiture 4,185

(Loss) income before income taxes ( 3,165 ) 20,654 ( 188,007 ) 60,081

Income before income taxes 18,352

Income taxes 4,163

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.

The Company’s assets and liabilities for discontinued operations, by major class, were:

December 31, 2019

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

Trade accounts payable $ 158,163

Other current liabilities 59,954

Long-term liabilities

Total liabilities of discontinued operations $ 287,023

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:

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.

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.

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.

Net income from discontinued operations $ 14,189

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 2020 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.

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:

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.

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

Certain outstanding options to purchase are not included in the diluted earnings per share calculation because their inclusion would have been anti-dilutive.

There were no anti-dilutive shares outstanding for the three months ended March 31, 2021, as compared to approximately 1,410 for the three months ended March 31, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements