What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-17 compared with 2021-02-19 · 546 added, 578 removed, 848 unchanged (57% of the section changed)

2 unchanged sentences

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB I D :

Consolidated Balance Sheets as of December 31, 202 1 and 20 20

30 unchanged sentences

For a reporting unit in which the Company concludes, based on the qualitative assessment, that it is more likely than not that the fair value of the reporting unit is less than its carrying amount (or if the Company elects to skip the optional qualitative assessment), the Company is required to perform a quantitative impairment test, which includes measuring the fair value of the reporting unit and comparing it to the reporting unit’s carrying amount.

In the year ended December 31, 2020, the Company recorded a goodwill impairment charge of $506,721,000 related to its European reporting unit as disclosed in Note 3 to the consolidated financial statements.

Auditing management’s quantitative impairment test for goodwill was complex and judgmental due to the significant estimation required to determine the fair value of the reporting unit.

Auditing management’s quantitative impairment test for goodwill was complex and judgmental due to the significant estimation required to determine the fair value of a reporting unit.

In particular, the fair value estimate was sensitive to significant assumptions, such as changes in the weighted average cost of capital and market multiples, and near-term revenue and operating margin projections, which are affected by expectations about future market or economic conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process, including controls over management’s review of the significant assumptions described above.

To test the estimated fair value of the European reporting unit, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.

For example, we compared the significant assumptions of the reporting unit to current industry, market and economic trends, to the Company's historical results and those of other guideline companies in the same industry, and to other relevant factors.

To test the estimated fair value of a reporting unit where the quantitative impairment test was performed, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.

For example, we compared the significant assumptions of a reporting unit to current industry, market and economic trends, to the Company's historical results and those of other guideline companies in the same industry, and to other relevant factors.

We involved our valuation specialists to assist in our evaluation of the Company's valuation methodology and significant assumptions.

In addition, we assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting unit that would result from changes in the assumptions.

We also recalculated the resulting impairment charge recorded by the Company.

In addition, we assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of a reporting unit that would result from changes in the assumptions.

Loss Contingencies Related to Product Liabilities

24 unchanged sentences

Prepaid expenses and other current assets 1,353,847 1,060,360

Current assets of discontinued operations — 714,251

Total current assets 7,756,422 7,113,763

5 unchanged sentences

Property, plant and equipment, net 1,234,399 1,162,043

Noncurrent assets of discontinued operations — 248,771

Total assets $ 14,352,102 $ 13,440,215

5 unchanged sentences

Dividends payable 115,876 114,043

Current liabilities of discontinued operations — 218,117

Total current liabilities 6,581,583 5,894,084

4 unchanged sentences

Other long-term liabilities 522,779 543,623

Noncurrent liabilities of discontinued operations — 68,906

Preferred stock, par value $ 1 per share — authorized 10,000,000 shares;

25 unchanged sentences

Total operating expenses 5,471,216 5,239,898 4,948,772

Non-operating expenses (income):

Interest expense 93,713 95,583 101,796

Non-operating (income) expenses:

Interest expense, net 62,150 91,048 91,405

Other ( 99,576 ) ( 55,473 ) ( 82,534 )

Special termination costs — — 42,757

Total non-operating expenses (income) 35,575 51,628 40,401

Total non-operating (income) expenses ( 37,426 ) 35,575 51,628

Income before income taxes 1,200,346 379,368 859,283

1 unchanged sentence

Net income from continuing operations 898,790 163,395 646,475

Net (loss) income from discontinued operations ( 192,497 ) ( 25,390 ) 60,940

Net (loss) income $ ( 29,102 ) $ 621,085 $ 810,474

Basic (loss) earnings per share:

Net loss from discontinued operations — ( 192,497 ) ( 25,390 )

Net income (loss) $ 898,790 $ ( 29,102 ) $ 621,085

Basic earnings (loss) per share:

Continuing operations $ 6.27 $ 1.13 $ 4.44

Discontinued operations — ( 1.33 ) ( 0.18 )

Basic (loss) earnings per share $ ( 0.20 ) $ 4.26 $ 5.53

Diluted (loss) earnings per share:

Basic earnings (loss) per share $ 6.27 $ ( 0.20 ) $ 4.26

Diluted earnings (loss) per share:

Continuing operations $ 6.23 $ 1.13 $ 4.42

Discontinued operations — ( 1.33 ) ( 0.18 )

Diluted (loss) earnings per share $ ( 0.20 ) $ 4.24 $ 5.50

Diluted earnings (loss) per share $ 6.23 $ ( 0.20 ) $ 4.24

Weighted average common shares outstanding 143,435 144,474 145,736

1 unchanged sentence

Weighted average common shares outstanding — assuming dilution 144,221 145,115 146,417

145,115 146,417 147,241

See accompanying notes.

4 unchanged sentences

2021 2020 2019

Net (loss) income $ ( 29,102 ) $ 621,085 $ 810,474

Net income (loss) $ 898,790 $ ( 29,102 ) $ 621,085

Other comprehensive income (loss), net of income taxes:

4 unchanged sentences

229,641 11,547 44,433

Other comprehensive income (loss), net of tax 104,806 96,296 ( 262,486 )

Other comprehensive income, net of tax 178,763 104,806 96,296

Comprehensive income $ 1,077,553 $ 75,704 $ 717,381

20 unchanged sentences

Cumulative effect from adoption of ASU No.

2014-09 , net of tax

2018-02 — — — ( 122,526 ) 122,526 — — —

Cumulative effect from adoption of ASU No.

2016-02, net of tax — — — — 4,797 4,797 — 4,797

Noncontrolling interest activities — — — — — — ( 747 ) ( 747 )

Balance at December 31, 2019 145,378,158 145,378 98,777 ( 1,141,308 ) 4,571,860 3,674,707 20,793 3,695,500

Net income — — — — 621,085 621,085 — 621,085

Net loss — — — — ( 29,102 ) ( 29,102 ) — ( 29,102 )

Other comprehensive income, net of tax — — — 104,806 — 104,806 — 104,806

5 unchanged sentences

Purchase of stock ( 1,136,444 ) ( 1,137 ) — — ( 95,078 ) ( 96,215 ) — ( 96,215 )

Cumulative effect from adoption of ASU No.

2018-02 — — — ( 122,526 ) 122,526 — — —

Cumulative effect from adoption of ASU No.

2016-02, net of tax — — — — 4,797 4,797 — 4,797

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

Noncontrolling interest activities — — — — — — ( 7,586 ) ( 7,586 )

Balance at December 31, 2020 144,354,335 144,354 117,165 ( 1,036,502 ) 3,979,779 3,204,796 13,207 3,218,003

Net loss — — — — ( 29,102 ) ( 29,102 ) — ( 29,102 )

Net income — — — — 898,790 898,790 — 898,790

Other comprehensive income, net of tax — — — 178,763 — 178,763 — 178,763

5 unchanged sentences

Purchase of stock ( 2,614,319 ) ( 2,614 ) — — ( 330,985 ) ( 333,599 ) — ( 333,599 )

Cumulative effect from adoption of ASU 2016-13 , net of tax

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

Cumulative effect from adoption of ASU 2019-12 — — — — 6,223 6,223 — 6,223

Noncontrolling interest activities — — — — — — ( 659 ) ( 659 )

7 unchanged sentences

Operating activities:

Net (loss) income $ ( 29,102 ) $ 621,085 $ 810,474

Net (loss) income from discontinued operations ( 192,497 ) ( 25,390 ) 60,940

Net income (loss) $ 898,790 $ ( 29,102 ) $ 621,085

Net loss from discontinued operations — ( 192,497 ) ( 25,390 )

Net income from continuing operations 898,790 163,395 646,475

4 unchanged sentences

Share-based compensation 25,597 22,621 28,703

Loss on software disposal 61,063 — —

Realized currency and other divestiture losses — 11,356 34,701

Gain on equity investment — ( 38,663 ) —

Gain on equity investments ( 10,229 ) — ( 38,663 )

Goodwill impairment charge — 506,721 —

12 unchanged sentences

Acquisitions of businesses and other investing activities ( 284,315 ) ( 69,173 ) ( 724,718 )

Net cash provided by (used in) investing activities from continuing operations 182,768 ( 543,595 ) ( 469,938 )

Net cash (used in) provided by investing activities from continuing operations ( 506,164 ) 182,768 ( 543,595 )

Financing activities:

12 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 38,054 ) 35,741 603

Net increase (decrease) in cash and cash equivalents 713,174 ( 56,555 ) 18,648

Net (decrease) increase in cash and cash equivalents ( 275,465 ) 713,174 ( 56,555 )

Cash and cash equivalents at beginning of year 990,166 276,992 333,547

13 unchanged sentences

The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral.

The Company's operations 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 additional waves or spikes in infection rates;

the duration of the outbreak;

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 stay-at-home 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 in 2020, which have been classified as a reduction of selling, administrative and other expenses.

The COVID-19 pandemic continues to impact various aspects of our business, and the long-term impact to our business remains unknown.

The extent to which the COVID-19 pandemic impacts the Company will depend on numerous factors and future developments that we cannot predict, including partial or complete shut downs, travel restrictions, and stay-at-home orders, impacts on our supply chain and our ability to keep operating locations open.

The Company has reclassified certain prior period amounts to conform to the current period presentation.

The Company has evaluated subsequent events through the date the financial statements were issued.

2 unchanged sentences

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 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 loss 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.

Principles of Consolidation

22 unchanged sentences

The Company generates revenue primarily by distributing products through wholesale and retail channels.

For wholesale customers, revenue is recognized when title and control of the goods has passed to the customer.

For wholesale customers, revenue is recognized when title and control of the goods has passed to the wholesale customer.

Retail revenue is recognized at the point of sale when the goods are transferred to customers and consideration is received.

27 unchanged sentences

Cost is determined by the last-in, first-out ("LIFO") method for a majority of U.S.

automotive and industrial parts, and generally by the first-in, first-out ("FIFO") method for non-U.S.

automotive and industrial parts, and generally by the weighted average method for non-U.S.

and certain other inventories.

If the FIFO method had been used for all inventories, cost would have been approximately $ 524,400 and $ 531,800 higher than reported at December 31, 2020 and 2019, respectively.

During 2020 and 2019, reductions in industrial parts inventories resulted in liquidations of LIFO inventory layers, which reduced cost of goods sold by approximately $ 15,500 and $ 10,400 , respectively.

The Company identifies slow moving or obsolete inventories and estimates appropriate provisions related thereto.

Historically, these losses have not been significant as the vast majority of the Company’s inventories are not highly susceptible to obsolescence and are eligible for return under various vendor return programs.

While the Company has no reason to believe its inventory return privileges will be discontinued in the future, its risk of loss associated with obsolete or slow moving inventories would increase if such were to occur.

If the FIFO method had been used in place of LIFO, cost would have been approximately $ 628,000 and $ 524,400 higher than reported at December 31, 2021 and 2020, respectively.

During 2021 and 2020, reductions in certain industrial parts inventories resulted in liquidations of LIFO inventory layers, which reduced cost of goods sold by approximately $ 400 and $ 15,500 , respectively.

Genuine Parts Company and Subsidiaries

1 unchanged sentence

December 31, 2021

The Company identifies slow moving or obsolete inventories and estimates appropriate provisions related thereto.

The Company enters into agreements at the beginning of each year with many of its vendors that provide for inventory purchase incentives.

8 unchanged sentences

However, the Company may aggregate two or more components of an operating segment into a single reporting unit if the components have similar economic characteristics.

To review goodwill at a reporting unit for impairment, the Company generally elects to first assesses qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

To review goodwill at a reporting unit for impairment, the Company generally elects to first assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

Qualitative factors include adverse macroeconomic, industry or market conditions, cost factors, or financial performance.

6 unchanged sentences

Refer to the goodwill and other intangible assets footnote for further information on the results of the Company's annual goodwill impairment testing.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Long-Lived Assets Other Than Goodwill

3 unchanged sentences

Impairment losses, if any, are measured based upon the difference between the carrying amount and the fair value of the assets.

For the years ended December 31, 2020 and 2019, the Company recognized long-lived asset impairments of $ 6,243 and $ 5,408 , respectively, related to certain assets expected to be abandoned in connection with the 2019 Cost Savings Plan (refer to the restructuring footnote for more information).

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

For the year ended December 31, 2021, the Company recognized a loss of $ 61,063 related to the disposal of an internally developed software project (refer to the property, plant and equipment footnote for more information).

For the year ended December 31, 2020, the Company recognized long-lived asset impairments of $ 6,243 related to certain assets abandoned in connection with the 2019 Cost Savings Plan (refer to the restructuring footnote for more information).

Other assets consist primarily of cash surrender value of life insurance policies, debt securities, equity method and other investments, guarantee fees receivable, and deferred compensation benefits.

10 unchanged sentences

Self-Insurance

The Company is self-insured for the majority its group health insurance costs.

The Company is self-insured for the majority of its group health insurance costs.

A reserve for claims incurred but not reported is developed by analyzing historical claims data provided by the Company’s claims administrators.

11 unchanged sentences

Adjustments made during the measurement period could have a material impact on the Company's financial condition and results of operations.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

The Company typically measures customer relationship and other intangible assets using an income approach.

5 unchanged sentences

The Company accrues for potential losses related to legal disputes, litigation, product liabilities, and regulatory matters when it is probable (the future event or events are likely to occur) that the Company will incur a loss and the amount of the loss can be reasonably estimated.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

The amount of the product liability reflects the Company’s reasonable estimate of losses based upon currently known facts.

17 unchanged sentences

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.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Derivatives and Hedging

10 unchanged sentences

Shipping and handling costs are classified as selling, administrative and other expenses in the accompanying consolidated statements of income and totaled approximately $ 350,369 , $ 301,900 , and $ 303,900 , for the years ended December 31, 2021, 2020, and 2019, respectively.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

Advertising Costs

7 unchanged sentences

RSUs represent a contingent right to receive one share of the Company’s common stock at a future date.

The majority of awards previously granted vest on a pro-rata basis for periods ranging from one to five years and are expensed accordingly on a straight-line basis.

The majority of awards previously granted vest on a pro-rata basis for periods ranging from one to three years and are expensed accordingly on a straight-line basis.

Forfeitures are accounted for as they occur.

5 unchanged sentences

In making this determination, the Company considers all available positive and negative evidence including projected future taxable income, future reversals of existing temporary differences, recent financial operations and tax planning strategies.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

The Company recognizes a tax benefit from uncertain tax positions when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.

4 unchanged sentences

These options were excluded from the computation of diluted net income from continuing operations per common share because the options’ exercise prices were greater than the average market prices of common stock in each respective year.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

Recent Accounting Pronouncements

2 unchanged sentences

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 consolidated financial statements.

Income Taxes (Topic 740)

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes.

The updated accounting guidance removes certain exceptions for performing intraperiod tax allocations, recognizing deferred taxes for investments, and calculating income taxes in interim periods.

The guidance also simplifies the accounting for franchise taxes, transactions that result in a step-up in the tax basis of goodwill, and the effect of enacted changes in tax laws or rates in interim periods.

The Company adopted ASU 2019-12 as of January 1, 2021, and recognized a cumulative-effect adjustment to increase opening retained earnings by $ 6,223 .

Credit Losses (Topic 326)

9 unchanged sentences

The adoption of this ASU did not have an impact on the Company’s financial position, results of operations, or cash flows.

Income Statement - Reporting Comprehensive Income (Topic 220)

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income .

The ASU permits a company to make a one-time election to reclassify stranded tax effects caused by the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings.

The ASU also requires companies to disclose their accounting policies for releasing income tax effects from accumulated other comprehensive income.

ASU 2018-02 was effective for periods beginning after December 15, 2018, with an election to adopt early.

The Company adopted ASU 2018-02 as of January 1, 2019 and recognized an adjustment to increase retained earnings and to adjust accumulated other comprehensive loss by approximately $ 122,526 .

Intangibles - Goodwill and Other (Topic 350)

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment .

The ASU simplifies the subsequent measurement of goodwill by eliminating the second step from the goodwill impairment test.

ASU 2017-04 requires applying a one-step quantitative test and recording the amount of goodwill impairment as the excess of the reporting unit's carrying value over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

ASU 2017-04 does not amend the optional qualitative assessment of goodwill impairment.

The Company adopted ASU 2017-04 as of October 1, 2019 and performed its annual evaluation of goodwill in accordance with this standard.

Leases (Topic 842)

In February 2016, the FASB issued ASU 2016-02, Leases , which, among other things, requires an entity to recognize a right-of-use asset and a lease liability on the balance sheet for substantially all leases, including operating leases.

Expanded disclosures with additional qualitative and quantitative information are also required.

ASU 2016-02 and its amendments were effective for interim and annual reporting periods beginning after December 15, 2018 and early adoption was permitted.

The Company adopted ASU 2016-02 and its amendments as of January 1, 2019 using the modified retrospective method and utilized the optional transition method to apply the legacy guidance in ASC 840, Leases , including its disclosure requirements, in the comparative periods presented.

The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward its historical assessments of:

(1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs.

In addition, the Company did not elect the hindsight practical expedient to determine the reasonably certain lease term for existing leases.

The Company elected a policy of not recording leases on its consolidated balance sheets when the leases have a term of 12 months or less and the Company is not reasonably certain to elect

The Company’s reportable segments consist of automotive and industrial parts.

Within the reportable segments, certain of the Company’s operating segments are aggregated since they have similar economic characteristics, products and services, type and class of customers, and distribution methods.

The Company’s automotive segment distributes replacement parts (other than body parts) for substantially all makes and models of automobiles, trucks, and other vehicles.

Genuine Parts Company and Subsidiaries

1 unchanged sentence

December 31, 2021

an option to purchase the leased asset.

The Company recognizes payments on these leases within selling, administrative and other expenses on a straight-line basis over the lease term.

The Company's adoption of the standard resulted in a cumulative-effect adjustment to increase retained earnings by $ 4,797 , net of taxes, as of January 1, 2019.

The standard did not materially impact the Company's consolidated net income or liquidity.

The standard did not have an impact on debt-covenant compliance under the Company's current debt agreements.

Accumulated Other Comprehensive Loss

The following tables present the changes in accumulated other comprehensive loss (“AOCL”) by component:

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 income (loss) before reclassifications ( 17,343 ) ( 21,509 ) 91,239 52,387

Amounts reclassified from accumulated other comprehensive loss 28,890 12,173 11,356 52,419

Net current period other comprehensive income (loss) 11,547 ( 9,336 ) 102,595 104,806

Ending balance, December 31, 2020 $ ( 692,868 ) $ ( 30,007 ) $ ( 313,627 ) $ ( 1,036,502 )

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 ) $ ( 4,632 ) $ ( 484,124 ) $ ( 1,115,078 )

Other comprehensive income (loss) before reclassifications 22,120 ( 18,419 ) 33,201 36,902

Amounts reclassified from accumulated other comprehensive loss (1) 22,313 2,380 34,701 59,394

Net current period other comprehensive income (loss) 44,433 ( 16,039 ) 67,902 96,296

Cumulative effect from adoption of ASU 2018-02 ( 122,526 ) — — ( 122,526 )

Ending balance, December 31, 2019 $ ( 704,415 ) $ ( 20,671 ) $ ( 416,222 ) $ ( 1,141,308 )

(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.

The Company’s industrial segment distributes a wide variety of industrial bearings, mechanical and fluid power transmission equipment, including hydraulic and pneumatic products, material handling components and related parts and supplies.

Inter-segment sales are not significant.

Segment profit for each industry segment is calculated as net sales less operating expenses excluding general corporate expenses, interest expense, equity in income from investees, intangible asset amortization, income attributable to noncontrolling interests and other unallocated amounts that are driven by corporate initiatives.

Approximately $ 437,874 and $ 245,373 of income before income taxes were generated in jurisdictions outside the U.S.

for the years ended December 31, 2021, and 2019, respectively.

Approximately $ 327,226 of loss before income taxes was generated in jurisdictions outside the U.S.

for the year ended December 31, 2020.

Net sales and net property, plant and equipment by country relate directly to the Company’s operations in the respective country.

Corporate assets are principally cash and cash equivalents and headquarters’ facilities and equipment.

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

2021 2020 2019

Automotive $ 12,544,131 $ 10,860,695 $ 10,993,902

Industrial 6,326,379 5,676,738 6,528,332

Total net sales $ 18,870,510 $ 16,537,433 $ 17,522,234

Segment profit:

Automotive $ 1,073,427 $ 867,743 $ 831,951

Industrial 595,232 481,854 521,830

Total segment profit $ 1,668,659 $ 1,349,597 $ 1,353,781

Interest expense, net ( 62,150 ) ( 91,048 ) ( 91,405 )

Corporate expense ( 174,842 ) ( 149,754 ) ( 140,815 )

Intangible asset amortization ( 103,273 ) ( 94,962 ) ( 92,206 )

Other unallocated costs ( 128,048 ) ( 634,465 ) ( 170,072 )

Income before income taxes from continuing operations $ 1,200,346 $ 379,368 $ 859,283

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

2021 2020 2019

Other unallocated costs:

Loss on software disposal (1) $ ( 61,063 ) $ — $ —

Product liability damages award (2) ( 77,421 ) — —

Goodwill impairment charge (3) — ( 506,721 ) —

Restructuring and special termination costs (4) — ( 50,019 ) ( 142,780 )

Realized currency and other divestiture losses (5) — ( 11,356 ) ( 34,701 )

Gain on insurance proceeds related to SPR fire (6) 3,862 13,448 —

Gain on equity investments (7) 10,229 — 38,663

Inventory adjustment (8) — ( 40,000 ) —

Transaction and other costs (9) ( 3,655 ) ( 39,817 ) ( 31,254 )

Total other unallocated costs $ ( 128,048 ) $ ( 634,465 ) $ ( 170,072 )

(1) Adjustment reflects a loss on an internally developed software project that was disposed of due to a change in management strategy related to advances in alternative technologies.

Refer to the property, plant and equipment footnote to the consolidated financial statements for more information.

Genuine Parts Company and Subsidiaries

1 unchanged sentence

December 31, 2021

(2) Adjustment reflects damages reinstated by the Washington Supreme Court order on July 8, 2021 in connection with a 2017 automotive product liability claim.

Refer to the commitments and contingencies footnote to the consolidated financial statements for more information.

(3) Adjustment reflects a goodwill impairment charge related to our European reporting unit.

(4) Adjustment reflects restructuring and special termination costs related to 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.

(5) Adjustment reflects realized currency losses related to divestitures.

(6) 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.

(7) Adjustment relates to gains recognized upon remeasurement of certain equity investments to fair value upon acquiring the remaining equity of those entities.

(8) Adjustment reflects a $ 40 million increase to cost of goods sold due to the correction of an immaterial error related to the accounting in prior years for consideration received from vendors.

(9) Adjustment for 2021 include transaction and other costs related to acquisitions.

For 2020, adjustment includes a $ 17 million loss on investment, $ 10 million of incremental costs associated with COVID-19 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 2019, adjustment reflects transaction and other costs related to acquisitions and divestitures.

2021 2020 2019

Automotive $ 8,981,913 $ 8,258,334 $ 7,376,408

Industrial 1,909,053 1,511,520 1,993,457

Corporate 139,428 254,627 527,126

Goodwill and other intangible assets 3,321,708 3,415,734 3,785,616

Discontinued operations — — 963,022

Total assets $ 14,352,102 $ 13,440,215 $ 14,645,629

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Depreciation and amortization:

Automotive $ 143,052 $ 120,932 $ 122,905

Industrial 24,100 16,315 17,577

Corporate 20,546 40,633 24,575

Intangible asset amortization 103,273 94,962 92,206

Total depreciation and amortization $ 290,971 $ 272,842 $ 257,263

Capital expenditures:

Automotive $ 198,268 $ 133,523 $ 227,420

Industrial 35,626 19,287 39,003

Corporate 32,242 692 11,450

Total capital expenditures $ 266,136 $ 153,502 $ 277,873

United States $ 12,136,689 $ 10,863,348 $ 12,226,381

Europe 2,908,156 2,408,913 2,223,498

Canada 1,779,663 1,526,202 1,614,659

Australasia 2,002,188 1,691,190 1,369,361

Mexico 43,814 47,780 88,335

Total net sales $ 18,870,510 $ 16,537,433 $ 17,522,234

Net property, plant and equipment:

United States $ 750,267 $ 728,802 $ 763,746

Europe 179,001 164,268 153,357

Canada 102,484 102,409 103,320

Australasia 201,971 165,596 147,457

Mexico 676 968 5,808

Total net property, plant and equipment $ 1,234,399 $ 1,162,043 $ 1,173,688

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:

2021 2020 2019

North America:

Automotive $ 8,103,896 $ 7,177,543 $ 7,613,047

Industrial 5,856,270 5,259,787 6,316,328

Total North America $ 13,960,166 $ 12,437,330 $ 13,929,375

Automotive $ 1,532,079 $ 1,274,239 $ 1,157,357

Industrial 470,109 416,951 212,004

Total Australasia $ 2,002,188 $ 1,691,190 $ 1,369,361

Europe - Automotive $ 2,908,156 $ 2,408,913 $ 2,223,498

Total net sales $ 18,870,510 $ 16,537,433 $ 17,522,234

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill during the years ended December 31, 2021 and 2020 by reportable segment, as well as other identifiable intangible assets, are summarized as follows:

2 unchanged sentences

Additions 15,061 5,261 20,322 21,890

Divestitures ( 294 ) ( 115,437 ) ( 115,731 ) ( 89,030 )

Amortization — — — ( 94,962 )

4 unchanged sentences

Amortization — — — ( 103,273 )

Impairments ( 506,721 ) — ( 506,721 ) —

Foreign currency translation ( 83,243 ) ( 6,810 ) ( 90,053 ) ( 60,772 )

Balance as of December 31, 2021 $ 1,507,462 $ 407,845 $ 1,915,307 $ 1,406,401

2021 Goodwill Impairment Assessments

The Company completed its annual quantitative and qualitative goodwill assessments as of October 1, 2021.

Under the quantitative assessment, fair value was calculated using a combination of both income and market approaches, which involved significant unobservable inputs (Level 3 inputs), and compared to carrying value.

The assumptions used in the income approach include projected revenue growth rates, operating margins, the estimated weighted average cost of capital and terminal value.

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.

Under the Company's qualitative assessments, which included reviewing historical revenue and operating profit growth trends, the Company has determined that it is not more likely than not that the goodwill is impaired for all reporting units.

No goodwill impairments were recognized during 2021.

Should actual results differ from certain key assumptions used in the interim or annual impairment tests, including revenue and operating margin growth rates, which are both impacted by economic conditions, or should other key impairment testing assumptions change in subsequent periods, there can be no assurance that goodwill at one or more reporting units may not be impaired.

2020 Goodwill Impairment Assessments

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.

During the second quarter of 2020, 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).

3 unchanged sentences

The Company used inputs and assumptions it believed are consistent with those a hypothetical marketplace participant would use.

The Company completed its annual qualitative goodwill assessment as of October 1, 2020.

Based on the Company's assessment, which included reviewing historical revenue and operating profit growth trends and evaluating the inputs to a weighted average cost of capital, the Company has determined that it is not more likely than not that the goodwill is impaired for all reporting units.

Genuine Parts Company and Subsidiaries

1 unchanged sentence

December 31, 2021

Other Intangible Assets

The gross carrying amounts and accumulated amortization relating to other intangible assets at December 31, 2021 and 2020 are as follows:

15 unchanged sentences

Property, plant and equipment, net $ 1,234,399 $ 1,162,043

During the third quarter of 2021, the Company reconsidered its approach to an internally developed software project due to a change in management strategy related to advances in alternative technologies.

The Company decided to dispose of the software project as of September 30, 2021.

As a result, the Company recognized $ 61,063 of selling, administrative and other expense related to the disposal of this software.

Accounts Receivable Sales Agreement

The Company has 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 3 year term, which the Company intends to renew.

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 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 consolidated financial statements.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

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 consolidated balance sheet.

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 December 31, 2021 and December 31, 2020 is approximately $ 973,000 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.

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

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

December 31, 2021 December 31, 2020

Receivables sold to the financial institution and derecognized $ 7,520,474 $ 3,928,024

Cash collected on sold receivables $ 7,520,465 $ 3,128,023

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 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 expense (income) in the 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 December 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.

Refer to the subsequent event footnote for information regarding the January 3, 2022 A/R Sales Agreement amendment.

The principal amounts of the Company’s borrowings subject to variable rates (after consideration of hedging arrangements) totaled approximately $ 840 and $ 114,002 at December 31, 2021 and 2020, respectively.

The weighted average interest rate on the Company’s outstanding borrowings was approximately 2.35 % and 2.65 % at December 31, 2021 and 2020, respectively.

Certain borrowings require the Company to comply with a financial covenant with respect to a maximum debt to Adjusted EBITDA ratio.

Certain borrowings require the Company to comply with a financial covenant with respect to a maximum debt to EBITDA ratio.

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

Due to the workers’ compensation and insurance reserve requirements in certain states, the Company also had unused letters of credit of approximately $ 72,787 and $ 69,899 outstanding at December 31, 2021 and 2020, respectively.

On October 27, 2020, the Company issued $ 500,000 aggregate principal amount of 1.875 % Senior Unsecured Notes due 2030 at a price to the public of 99.069 % of their face value with U.S.

Bank National Association as trustee.

Interest on the 1.875 % Senior Unsecured Notes due 2030 is payable semi-annually on May 1 and November 1 of each year, which begins on May 1, 2021, and is computed on the basis of a 360-day year.

On September 30, 2021, the Company entered into the first amendment to the Syndicated Facility Agreement (the "Unsecured Revolving Credit Facility"), dated as of October 30, 2020.

The interest rates were amended to reduce the applicable rate by 12.5 basis points (resulting in a rate of LIBOR + 112.5 basis points) and the LIBOR floor from 0.5 % to 0.0 %.

The amendment also extended the maturity by one year to September 30, 2026.

Refer to the subsequent event footnote for information regarding the January 6, 2022 Senior Note Offering.

Genuine Parts Company and Subsidiaries

1 unchanged sentence

December 31, 2021

On October 30, 2020, the Company entered into a new $ 1.5 billion Syndicated Facility Agreement (the "October 30, 2020 Syndicated Facility").

Simultaneously with the entry into the October 30, 2020 Syndicated Facility, the Company terminated and paid in full all outstanding indebtedness under the previous October 30, 2017 Syndicated Facility and repaid the existing term loan A facility.

Amounts outstanding under the Company’s credit facilities, net of debt issuance costs consist of the following:

December 31, 2021 December 31, 2020

Unsecured Revolving Credit Facility, $ 1,500,000 , LIBOR plus 1.50 % variable, due October 30, 2025

Unsecured Revolving Credit Facility, $ 1,500,000 , LIBOR plus 1.50 % variable, due October 30, 2022 (Terminated as of October 30, 2020)

Unsecured Term Loan A, $ 1,100,000 , LIBOR plus 1.50 % variable, due October 30, 2022

Unsecured Revolving Credit Facility, $ 1,500,000 , LIBOR plus 1.13 % variable, due September 30, 2026

October 27, 2020, Senior Unsecured Notes, $ 500,000 , 1.875 % fixed, due November 1, 2030

July 29, 2016, Series G Senior Unsecured Notes, $ 50,000 , 3.14 % fixed, due July 29, 2021

500,000 500,000

July 29, 2016, Series G Senior Unsecured Notes, $ 50,000 , 2.64 % fixed, due July 29, 2021

December 2, 2013, Series F Senior Unsecured Notes, $ 250,000 , 3.24 % fixed, due December 2, 2023

23 unchanged sentences

Other unsecured debt 840 114,002

114,002 40,340

Total unsecured debt 2,421,560 2,690,863

2,690,863 3,431,557

Unamortized debt issuance costs ( 8,041 ) ( 9,136 )

Unamortized discounts ( 4,156 ) ( 4,582 )

2,677,145 3,426,099

Total debt 2,409,363 2,677,145

Less debt due within one year — 160,531

160,531 624,043

Long-term debt, excluding current portion $ 2,409,363 $ 2,516,614

$ 2,516,614 $ 2,802,056

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

Approximate maturities under the Company’s credit facilities are as follows:

2021 $ 162,429

Thereafter 1,441,135

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 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 consolidated financial statements.

At the inception of the A/R Sales Agreement, the SPE transferred ownership and control of approximately $ 500,000 in receivables that met certain qualifying conditions to the unaffiliated financial institution in exchange for cash.

On October 29, 2020 the Company transferred ownership and control of an additional $ 300,000 in receivables under the A/R Sales Agreement bringing the total to $ 800,000 .

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 December 31, 2020 is approximately $ 771,000 .

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

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:

December 31, 2020

Receivables sold to the financial institution and derecognized since inception $ 3,928,024

Cash collected on sold receivables since inception $ 3,128,023

Total principal amount outstanding of receivables sold at period end $ 800,001

Cash activity related to the A/R Sales Agreement is presented in cash from operating activities in the 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) expenses in the consolidated statements of income.

The reserve recognized for this recourse obligation as of December 31, 2020 is not material.

Genuine Parts Company and Subsidiaries

2 unchanged sentences

Derivatives and Hedging

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:

December 31, 2020 December 31, 2019

Balance sheet location

Notional Balance Notional Balance

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.

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.

Cash Flow Hedges

Interest rate swaps Other current liabilities

$ — $ — $ 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 Accumulated Other Comprehensive Loss ("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

$ 800,000 $ 7,668 $ 925,810 $ 39,965

Forward contracts

Other current liabilities

$ 360,990 $ 19,442 $ — $ —

Foreign currency debt

Long-term debt

€ 700,000 $ 861,070 € 700,000 $ 784,000

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.

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 qualifying hedging instruments are initially classified in AOCL and are reclassified to interest expense on the dates interest payments are accrued.

On October 30, 2020 the Company terminated its interest rate swaps and settled the outstanding balances through cash payments totaling $ 41,000 , which were primarily classified in financing activities on the Consolidated Statement of Cash Flows because they primarily related to the financing agreement.

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

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.

1 unchanged sentence

The initial value of this excluded component is recognized as a reduction to interest expense in a systematic and rational manner over the term of the derivative instrument.

All other changes in value for the net investment hedges are included in accumulated other comprehensive loss and would only be reclassified to earnings if the European subsidiary were liquidated, or otherwise disposed.

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.

December 31, 2021 December 31, 2020

Instrument Balance sheet location Notional Balance Notional Balance

Net investment hedges:

Forward contracts Prepaid expenses and other current assets $ 925,810 $ 73,819 $ 800,000 $ 7,668

Forward contracts Other current liabilities $ 235,180 $ ( 2,935 ) $ 360,990 $ 19,442

Foreign currency debt Long-term debt € 700,000 $ 792,820 € 700,000 $ 861,070

Genuine Parts Company and Subsidiaries

2 unchanged sentences

The table below presents pre-tax gains and losses related to cash flow hedges and net investment hedges:

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

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

2021 2020 2019 2021 2020 2019

2 unchanged sentences

Interest rate contract $ — $ ( 29,464 ) $ ( 21,972 ) $ — $ — $ —

$ ( 29,464 ) $ ( 21,972 ) $ ( 7,896 ) $ — $ — $ —

Net Investment Hedges:

Cross-currency swap — — 2,936 — — 2,294

— 2,936 6,006 — 2,294 6,740

Forward contracts 56,362 ( 85,390 ) 20,679 26,295 27,146 17,892

( 85,390 ) 20,679 — 27,146 17,892 —

Foreign currency debt 68,250 ( 77,070 ) 17,010 — — —

( 77,070 ) 17,010 38,850 — — —

Total $ 124,612 $ ( 191,924 ) $ 18,653 $ 26,295 $ 27,146 $ 20,186

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

Leased Properties

The Company primarily leases real estate for certain retail stores, distribution centers, office space and land.

The Company primarily leases real estate for certain retail stores, branches, distribution centers, office space and land.

The Company also leases equipment (primarily vehicles).

2 unchanged sentences

The Company evaluates renewal options at lease inception and on an ongoing basis, and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities.

The Company elected a policy of not recording leases on its consolidated balance sheets when the leases have a term of 12 months or less and the Company is not reasonably certain to elect an option to purchase the leased asset.

Lease agreements generally do not require material variable lease payments, residual value guarantees or restrictive covenants.

1 unchanged sentence

Balance Sheet Line Item December 31, 2021 December 31, 2020

Operating lease assets

Operating lease assets $ 1,038,877 $ 995,667

Operating lease liabilities:

Current operating lease liabilities

Other current liabilities

$ 270,739 $ 255,207

Noncurrent operating lease liabilities

Operating lease assets Operating lease assets $ 1,053,689 $ 1,038,877

Operating lease liabilities:

789,294 756,519

Current operating lease liabilities Other current liabilities $ 280,575 $ 270,739

Noncurrent operating lease liabilities Operating lease liabilities $ 789,175 789,294

Total operating lease liabilities $ 1,069,750 $ 1,060,033

$ 1,060,033 $ 1,011,726

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

2 unchanged sentences

The Company used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

The Company's weighted average remaining lease term and weighted average discount rate for operating leases are:

2 unchanged sentences

Weighted average discount rate 2.03 % 2.47 %

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized on the consolidated balance sheets as of December 31, 2021:

2022 $ 302,748

Thereafter 171,914

Total undiscounted future minimum lease payments 1,123,699

3 unchanged sentences

The table below presents operating lease costs and supplemental cash flow information related to leases:

2021 2020 2019

Operating lease costs $ 336,228 $ 313,315 $ 310,028

1 unchanged sentence

Operating lease assets obtained in exchange for new operating lease liabilities $ 358,393 $ 302,114 $ 330,103

Operating lease costs (as defined under ASU 2016-02) are included within selling, administrative and other expenses on the consolidated statements of income.

Operating lease costs are included within selling, administrative and other expenses on the consolidated statements of income.

Short-term lease costs, variable lease costs and sublease income were not material for the periods presented.

Rental expense for operating leases (as defined prior to the adoption of ASU 2016-02) was approximately $ 334,000 for the year ended December 31, 2018.

Cash paid for amounts included in the measurement of operating lease liabilities is included in operating activities in the condensed consolidated statements of cash flows.

Share-Based Compensation

Share-based compensation costs of $ 22,621 , $ 28,703 , and $ 17,737 , were recorded for the years ended December 31, 2020, 2019, and 2018, respectively.

The total income tax benefits recognized in the consolidated statements of income for share-based compensation arrangements were approximately $ 6,108 , $ 8,700 , and $ 5,600 for 2020, 2019, and 2018, respectively.

At December 31, 2020, total compensation cost related to nonvested awards not yet recognized was approximately $ 33,754 .

There have been no modifications to valuation methodologies or methods during the years ended December 31, 2020, 2019, or 2018.

As of December 31, 2020, there were 7,601 shares of common stock available for issuance pursuant to future equity-based compensation awards.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

A summary of the Company’s restricted stock units activity and related information is as follows:

Nonvested Share Awards (RSUs) Shares Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value

Nonvested at beginning of year 677 $ 95

Granted 426 $ 72

Vested ( 89 ) $ 89

Forfeited ( 160 ) $ 92

Nonvested at end of year 854 $ 85 1.9 $ 85,775

A summary of the Company’s stock appreciation rights activity and related information is as follows:

Stock Appreciation Rights (SARs) Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value

Outstanding at beginning of year 2,154 $ 88

Granted — $ —

Exercised ( 331 ) $ 80

Forfeited ( 36 ) $ 94

Outstanding at end of year 1,787 $ 89 3.5 $ 20,515

Exercisable at end of year 1,787 $ 89 3.5 $ 20,515

The aggregate intrinsic value of SARs and RSUs exercised during the years ended December 31, 2020, 2019, and 2018 was $ 14,417 , $ 36,200 and $ 32,600 , respectively.

The fair value of RSUs is based on the 60-day average price of the Company's stock on the date of grant for the year ended December 31, 2020.

The fair value of RSUs is based on the price of the Company’s stock on the date of grant for the years ended December 31, 2019 and 2018.

The fair value of SARs is estimated using a Black-Scholes option pricing model.

The Company ceased issuing SARs in 2017.

The total fair value of SARs and RSUs vested during the years ended December 31, 2020, 2019, and 2018 were $ 10,014 , $ 26,200 , and $ 20,800 , respectively.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

Significant components of the Company’s deferred tax assets and liabilities are as follows:

Deferred tax assets related to:

Expenses not yet deducted for tax purposes $ 343,308 $ 271,358

Operating lease liabilities 289,114 281,853

Pension liability not yet deducted for tax purposes 257,526 261,909

Capital loss 10,875 18,317

Net operating loss 56,028 43,932

956,851 877,369

Deferred tax liabilities related to:

Employee and retiree benefits 226,356 215,899

Inventory 90,213 92,577

Operating lease assets 282,486 274,630

Other intangible assets 365,825 343,649

Property, plant and equipment 73,333 63,518

Other 29,961 38,936

1,068,174 1,029,209

Net deferred tax liability before valuation allowance ( 111,323 ) ( 151,840 )

Valuation allowance ( 35,930 ) ( 35,282 )

Total net deferred tax liability $ ( 147,253 ) $ ( 187,122 )

The Company currently holds approximately $ 213,504 in net operating losses, of which approximately $ 156,144 will carry forward indefinitely.

The remaining net operating losses of approximately $ 57,360 will begin to expire in 2024.

The components of income before income taxes are as follows:

2020 2019 2018

United States $ 706,594 $ 613,910 $ 712,951

Foreign ( 327,226 ) 245,373 281,687

Income before income taxes $ 379,368 $ 859,283 $ 994,638

The components of income tax expense are as follows:

2020 2019 2018

Federal $ 130,680 $ 162,883 $ 130,144

State 35,474 45,488 36,457

Foreign 77,541 60,376 76,910

Federal 2,048 ( 21,617 ) 13,295

State 801 ( 11,273 ) 5,427

Foreign ( 30,571 ) ( 23,049 ) ( 17,129 )

$ 215,973 $ 212,808 $ 245,104

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

The reasons for the difference between total tax expense and the amount computed by applying the statutory Federal income tax rate to income before income taxes are as follows:

2020 2019 2018

Statutory rate applied to income (1) $ 79,667 $ 180,449 $ 208,874

Plus state income taxes, net of Federal tax benefit 28,658 27,030 33,088

Taxation of foreign operations, net (2) ( 9,072 ) ( 17,663 ) ( 7,862 )

tax reform - transition tax (3) — 4,492 4,875

tax reform - deferred tax remeasurement (3)

Non-deductible goodwill impairment tax effect 106,411 — —

Foreign rate change - deferred tax remeasurement 9,045 6,215 ( 1,461 )

Book tax basis difference in investment — — ( 11,944 )

Valuation allowance 1,995 4,503 20,505

Other ( 731 ) 7,782 ( 1,395 )

$ 215,973 $ 212,808 $ 245,104

statutory rates applied to income are as follows:

2020, 2019 and 2018 at 21%.

(2) The Company's effective tax rate reflects the net benefit of having operations outside of the U.S.

which are taxed at statutory rates different from the U.S.

statutory rate, with some income being fully or partially exempt from income taxes due to various operating and financing activities.

(3) Impact of the Tax Cuts and Jobs Act, enacted December 22, 2017.

The Company accounts for Global Intangible Low Taxed income in the year the tax is incurred as a period cost.

The Company, or one of its subsidiaries, files income tax returns in the U.S., various states, and foreign jurisdictions.

With few exceptions, the Company is no longer subject to federal, state and local tax examinations by tax authorities for years before 2017 or subject to non-United States income tax examinations for years ended prior to 2013.

The Company is currently under audit in the U.S.

and some of its foreign jurisdictions.

Some audits may conclude in the next 12 months and the unrecognized tax benefits recorded in relation to the audits may differ from actual settlement amounts.

It is not possible to estimate the effect, if any, of the amount of such change during the next 12 months to previously recorded uncertain tax positions in connection with the audits.

The Company does not anticipate that total unrecognized tax benefits will significantly change in the next 12 months.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

2020 2019 2018

Balance at beginning of year $ 21,461 $ 18,428 $ 14,697

Additions based on tax positions related to the current year 3,771 3,701 2,034

Additions for tax positions of prior years 3,480 620 4,787

Reductions for tax positions for prior years ( 1,382 ) ( 965 ) ( 725 )

Reduction for lapse in statute of limitations ( 3,765 ) — ( 2,338 )

Settlements ( 328 ) ( 323 ) ( 27 )

Balance at end of year $ 23,237 $ 21,461 $ 18,428

The amount of gross unrecognized tax benefits, including interest and penalties, as of December 31, 2020 and 2019 was approximately $ 25,870 and $ 24,347 , respectively, of which approximately $ 21,426 and $ 18,286 , respectively, if recognized, would affect the effective tax rate.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

During the years ended December 31, 2020, 2019, and 2018, the Company paid, received refunds, or accrued insignificant amounts of interest and penalties.

The Company recognizes potential interest and penalties related to unrecognized tax benefits as a component of income tax expense.

As of December 31, 2020, the Company estimates that it has an outside basis difference in certain foreign subsidiaries of approximately $ 520,000 , which includes the cumulative undistributed earnings from the Company's foreign subsidiaries.

The Company continues to be indefinitely reinvested in this outside basis difference.

Determining the amount of net unrecognized deferred tax liability related to any additional outside basis difference in these entities is not practicable.

This is due to the complexities associated with the calculation to determine residual taxes on the undistributed earnings, including the availability of foreign tax credits, applicability of any additional local withholding tax and other indirect tax consequences that may arise due to the distribution of these earnings.

Cash paid for amounts included in the measurement of operating lease liabilities is included in operating activities in the consolidated statements of cash flows.

Employee Benefit Plans

11 unchanged sentences

The Company uses a measurement date of December 31 for its pension and supplemental retirement plans.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Several assumptions are used to determine the benefit obligations, plan assets, and net periodic income.

9 unchanged sentences

These assumptions are updated at each annual measurement date.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

Changes in benefit obligations for the years ended December 31, 2021 and 2020 were:

4 unchanged sentences

Plan participants’ contributions 1,908 1,864

Actuarial loss 218,534 246,352

Actuarial (gain) loss ( 87,966 ) 218,534

Foreign currency exchange rate changes ( 1,184 ) 9,394

Gross benefits paid ( 142,327 ) ( 144,508 )

Plan amendments — 3,327

Curtailments ( 80 ) ( 472 )

Settlements ( 255 ) —

Special termination costs — 42,757

Acquired plans — 1,717

3 unchanged sentences

The total accumulated benefit obligation for the Company’s defined benefit pension plans in the U.S., Canada, and Europe was approximately $ 2,500,595 and $ 2,649,418 at December 31, 2021 and 2020, respectively.

pension plan, there was a net actuarial liability loss of $ 175,200 and an asset gain of $ 184,200 .

The liability loss was comprised primarily of a $ 173,000 loss due to discount rate changes.

supplemental retirement plan, there was a net actuarial liability loss of $ 20,300 comprised primarily of a $ 21,400 loss due to discount rate changes.

pension plan, there was a net actuarial liability gain of $ 73,200 and an asset gain of $ 173,300 .

The liability gain was comprised primarily of a $ 69,000 gain due to discount rate changes.

supplemental retirement plan, there was a net actuarial liability loss of $ 5,500 comprised primarily of a $ 14,000 loss for participant demographic experience offset by a $ 9,600 gain due to discount rate changes.

In 2019, the Company recorded $ 42,757 in special termination costs related to benefits provided through the Company's defined benefit plans to employees that accepted the voluntary retirement program (“VRP”) as part of the Company's 2019 Cost Savings Plan.

Refer to the restructuring footnote for more information.

The assumptions used to measure the pension benefit obligations for the plans at December 31, 2020 and 2019, were:

Weighted average discount rate 2.72 % 3.43 %

Rate of increase in future compensation levels 3.11 % 3.13 %

Genuine Parts Company and Subsidiaries

1 unchanged sentence

December 31, 2021

The assumptions used to measure the pension benefit obligations for the plans at December 31, 2021 and 2020, were:

Weighted average discount rate 3.04 % 2.72 %

Rate of increase in future compensation levels 3.13 % 3.11 %

Changes in plan assets for the years ended December 31, 2021 and 2020 were:

27 unchanged sentences

The pension plan strategy implemented by the Company’s management is to achieve long-term objectives and invest the pension assets in accordance with the applicable pension legislation in the U.S.

and Canada as well as fiduciary standards.

The long-term primary investment objectives for the pension plans are to provide for a reasonable amount of long-term growth of capital, without undue exposure to risk, protect the assets from erosion of purchasing power, and provide investment results that meet or exceed the pension plans’ actuarially assumed long-term rates of return.

The Company’s investment strategy with respect to pension plan assets is to generate a return in excess of the passive portfolio benchmark ( 47 % S&P 500 Index, 5 % Russell Midcap Index, 7 % Russell 2000 Index, 5 % MSCI EAFE Index, 5 % DJ Global Moderate Index, 3 % MSCI Emerging Market Net, and 28 % Barclays U.S.

Govt/Credit).

and Canada as well

Genuine Parts Company and Subsidiaries

1 unchanged sentence

December 31, 2021

as fiduciary standards.

The Company’s investment strategy with respect to pension plan assets is to generate a return in excess of the passive portfolio benchmark ( 38 % US Large-cap stocks, 9 % US Mid-cap stocks, 10 % International stocks, 3 % Emerging Market stocks and 40 % Barclays U.S.

Gov/Credit Index).

The fair values of the plan assets as of December 31, 2021 and 2020, by asset category, are shown in the tables below.

10 unchanged sentences

Government securities, and asset-backed securities are valued using price evaluations reflecting the bid and/or ask sides of the market for an investment as of the last day of the calendar plan year.

Total Assets Measured at NAV Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Total Assets Measured at NAV Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs

(Level 2) Significant Unobservable Inputs

Equity Securities

Common stocks — mutual funds — equity $ 388,591 $ 64,669 $ 323,922 $ — $ —

$ 586,196 $ 204,303 $ 381,893 $ — $ —

Genuine Parts Company common stock 210,510 — 210,510 — —

6 unchanged sentences

Asset-backed and mortgage-backed securities 12,894 — — 12,894 —

10,161 — — 10,161 —

Other-international 61,008 — 46,133 14,875 —

Municipal bonds 19,621 — — 19,621 —

Mutual funds—fixed income — — — — —

Cash surrender value of life insurance policies

2,269 — — — 2,269

Options and Futures 167 — 167 — —

Total $ 2,756,803 $ 64,669 $ 1,971,357 $ 720,777 $ —

2 unchanged sentences

December 31, 2021

Total Assets Measured at NAV Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

Total Assets Measured at NAV Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs

(Level 2) Significant Unobservable Inputs

Equity Securities

Common stocks — mutual funds — equity $ 586,196 $ 204,303 $ 381,893 $ — $ —

$ 527,151 $ 187,500 $ 339,651 $ — $ —

Genuine Parts Company common stock 202,711 — 202,711 — —

6 unchanged sentences

Asset-backed and mortgage-backed securities 10,161 — — 10,161 —

9,316 — — 9,316 —

Other-international 39,992 — 37,041 2,951 —

Municipal bonds 14,724 — — 14,724 —

Mutual funds—fixed income 89,298 89,298 — — —

Cash surrender value of life insurance policies 2,269 — — — 2,269

2,270 — — — 2,270

Total $ 2,545,359 $ 204,303 $ 1,852,568 $ 486,219 $ 2,269

38 unchanged sentences

Net periodic benefit income $ ( 19,324 ) $ ( 17,969 ) $ ( 16,205 )

Service cost is recorded in selling, administrative and other expenses in the consolidated statements of income while all other components except for special termination costs are recorded within other non-operating expenses (income).

The special termination costs incurred in connection with the 2019 Cost Savings Plan are presented on their own line within non-operating expenses (income).

The special termination costs incurred in connection with the 2019 Cost Savings Plan are presented on their own line within non-operating (income) expenses.

Pension benefits also include amounts related to supplemental retirement plans.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Other changes in plan assets and benefit obligations recognized in other comprehensive income are as follows:

2021 2020 2019

Current year actuarial loss (gain) $ 24,613 $ ( 33,677 ) $ 117,867

Current year actuarial (gain) loss $ ( 264,547 ) $ 24,613 $ ( 33,677 )

Recognition of actuarial loss ( 49,897 ) ( 39,613 ) ( 31,000 )

1 unchanged sentence

Recognition of prior service (cost) credit ( 690 ) ( 692 ) 67

Recognition of curtailment gain (loss) 435 ( 155 ) —

Recognition of curtailment (loss) gain ( 5 ) 435 ( 155 )

Other ( 29 ) — ( 50 )

Total recognized in other comprehensive (loss) income $ ( 15,257 ) $ ( 61,488 ) $ 78,293

Total recognized in other comprehensive loss $ ( 315,168 ) $ ( 15,257 ) $ ( 61,488 )

Total recognized in net periodic benefit income and other comprehensive (loss) income $ ( 334,492 ) $ ( 33,226 ) $ ( 77,693 )

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

The assumptions used in measuring the net periodic benefit income for the plans follow:

10 unchanged sentences

Total plan expense was approximately $ 5,196 in 2021 and $ 4,486 in 2020.

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 December 31, 2020, the Company was in compliance with all such covenants.

At December 31, 2020, the total borrowings of the independents and affiliates subject to guarantee by the Company were approximately $ 884,721 .

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 connection with guarantees of independents’ and affiliates’ borrowings and the current expected credit loss reserve is not material.

As of December 31, 2020, there are no material guaranteed loans for which the borrower is experiencing financial difficulty and recovery is expected to be provided substantially through the operation or sale of the collateral.

The Company has recognized certain assets and liabilities amounting to $ 81,000 and $ 90,000 for the guarantees related to the independents’ and affiliates’ borrowings at December 31, 2020 and 2019, respectively.

These assets and liabilities are included in other assets and other long-term liabilities in the 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.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

Commitments and Contingencies

Legal Matters

The Company is subject to various legal proceedings, many involving routine litigation incidental to the businesses, including approximately 1,819 pending product liability lawsuits resulting from its national distribution of automotive parts and supplies.

Many of these involve claims of personal injury allegedly resulting from the use of automotive parts distributed by the Company.

The amount accrued for pending and future claims as of December 31, 2020 and 2019 was $ 169,461 and $ 146,230 , respectively.

While litigation of any type contains an element of uncertainty, the Company believes that its insurance coverage and its defense, and ultimate resolution of pending and reasonably anticipated claims will continue to occur within the ordinary course of the Company’s business and that resolution of these claims will not have a material effect on the Company’s business, results of operations or financial condition.

Pending Claims

On April 17, 2017, a jury awarded damages against the Company of $ 81,500 in a litigated automotive product liability dispute.

Through post-trial motions and offsets from previous settlements, the initial verdict was reduced to $ 77,100 .

The Company believed the verdict was not supported by the facts or the law and was contrary to the Company’s role in the automotive parts industry.

The Company challenged the verdict through an appeal to a higher court.

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 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 consolidated financial statements.

Richards Headquarters and Distribution Center

On July 19, 2019, a fire occurred at a building owned by the Company in Atlanta, Georgia, which 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 year ended December 31, 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 consolidated statements of income.

Acquisitions, Divestitures and Discontinued Operations

2 unchanged sentences

The Company acquired several businesses for approximately $ 281,859 , net of cash acquired, during the year ended December 31, 2021.

During the year ended December 31, 2021, the Company recognized approximately $ 219,580 and $ 25,092 of revenue, net of store closures, related to its 2021 Automotive and Industrial acquisitions, respectively.

The Company recorded approximately $ 160,072 of goodwill and other intangible assets associated with the 2021 acquisitions.

Other intangible assets acquired consisted of customer relationships with a weighted average amortization lives of 20 years.

The Company has not recognized any significant measurement period adjustments related to finalizing acquisition accounting during the year ended December 31, 2021.

Refer to the subsequent event footnote for information regarding the January 3, 2022 acquisition of Kaman Distribution Group.

The Company acquired several businesses for approximately $ 86,384 , net of cash acquired, during the year ended December 31, 2020.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

The Company's cash used in acquisitions of businesses totaled $ 732,142 , net of cash acquired, during the year ended December 31, 2019.

3 unchanged sentences

Prior to the 65 % acquisition, the Company accounted for its 35 % investment in Motion Asia Pacific under the equity method of accounting.

Upon acquisition the Company recognized the

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

35 % investment at its acquisition-date fair value of $ 123,385 .

Upon acquisition the Company recognized the 35 % investment at its acquisition-date fair value of $ 123,385 .

The difference between the acquisition-date fair value and the carrying amount of the equity method investment resulted in the recognition of a gain of $ 38,663 on the acquisition date.

The acquisition-date fair value was determined using a market and income approach with the assistance of a third party valuation firm.

The gain is included in the line item "other" within non-operating expenses (income) on the consolidated statement of income for the year ended December 31, 2019.

The total acquisition date fair value of the consideration transferred for the businesses and of any previously held equity interests was $ 860,712 , net of cash acquired of $ 16,591 , and it consisted of the following:

December 31, 2019

Fair value of 35 % investment in Motion Asia Pacific held prior to business combination

Fair value of other investments held prior to business combination

The following table summarizes the final fair values of the assets acquired and liabilities assumed at the acquisition dates for the aggregate of these businesses.

As of Acquisition Dates

Trade accounts receivable

Merchandise inventories

Prepaid expenses and other current assets

Intangible assets

Deferred tax assets

Property, plant and equipment

Operating lease assets

Total identifiable assets acquired

Current liabilities

Long-term debt

Operating lease liabilities

Deferred tax liabilities

Other long-term liabilities

Total liabilities assumed

Net identifiable assets acquired

Noncontrolling interests in a subsidiary

Net assets acquired

The acquired intangible assets of approximately $ 340,799 were assigned to customer relationships of $ 304,302 , trademarks of $ 32,907 , and other intangibles of $ 3,590 with weighted average amortization lives of 16.6 , 21.7 , and 5.0 years, respectively, for a total weighted average amortization life of 17.0 years.

The goodwill recognized as part of the acquisitions is generally not tax deductible.

The goodwill is attributable primarily to the expected synergies and assembled workforces of the acquired businesses.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

For the year ended December 31, 2018, the Company acquired several businesses for approximately $ 262,510 , net of cash acquired.

The Company recorded approximately $ 167,000 of goodwill and other intangible assets associated with the 2018 acquisitions.

Other intangible assets acquired consisted of customer relationships of $ 76,000 with weighted average amortization lives of 15 years.

The gain is included in the line item "other" within non-operating (income) expenses on the consolidated statement of income for the year ended December 31, 2019.

The Company received proceeds from divestitures of businesses totaling $ 17,738 during the year ended December 31, 2021.

The Company received proceeds from divestitures of businesses totaling $ 387,379 during the year ended December 31, 2020.

Refer to the discontinued operations section below for additional information.

3 unchanged sentences

The Company recognized realized currency losses of $ 34,701 during the year ended December 31, 2019.

These losses are included in the line item "other" within non-operating expenses (income) on the consolidated statement of income for the year ended December 31, 2019.

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 revenues of $ 15,900 for the year ended December 31, 2019 and $ 93,000 for the year ended December 31, 2018.

During the third quarter of 2019, the Company approved a transaction to sell EIS, a wholly owned subsidiary within the Industrial Parts Group.

The transaction closed on September 30, 2019.

EIS contributed revenues of $ 588,031 for the year ended December 31, 2019 and $ 817,249 for the year ended December 31, 2018.

These losses are included in the line item "other" within non-operating (income) expenses on the consolidated statement of income for the year ended December 31, 2019.

Discontinued Operations

3 unchanged sentences

Richards Company ("SPR") in separate transactions.

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.

These divestitures were 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.

2 unchanged sentences

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 investment in SPR with a carrying value of $ 67,601 , which is included within other assets on the consolidated balance sheet, as of December 31, 2020.

During the three months ended December 31, 2020, the Company recognized an allowance on the investment and corresponding charge of $ 17,000 equal to the current expected credit losses based on a consideration of historical experience, current market conditions and reasonable and supportable forecasts related to this investment.

This charge is included within non-operating expenses (income) on the consolidated statement of income for the year ended December 31, 2020.

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 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

The Company maintains an investment in SPR with a net carrying value of $ 63,617 , which is included within other assets on the consolidated balance sheet, as of December 31, 2021.

As of December 31, 2021, the Company had an allowance on this investment of $ 17,384 equal to the current expected credit losses based on a consideration of

Genuine Parts Company and Subsidiaries

1 unchanged sentence

December 31, 2021

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.

historical experience, current market conditions and reasonable and supportable forecasts related to this investment.

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 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.

The Company’s results of operations for discontinued operations were:

6 unchanged sentences

Loss on disposal — 223,928 9,048

(Loss) income before income taxes ( 188,452 ) ( 28,983 ) 80,974

Loss before income taxes — ( 188,452 ) ( 28,983 )

Income taxes — 4,045 ( 3,593 )

Net (loss) income from discontinued operations $ ( 192,497 ) $ ( 25,390 ) $ 60,940

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

Net loss from discontinued operations $ — $ ( 192,497 ) $ ( 25,390 )

Share-Based Compensation

Share-based compensation costs of $ 25,597 , $ 22,621 , and $ 28,703 , were recorded for the years ended December 31, 2021, 2020, and 2019, respectively.

The total income tax benefits recognized in the consolidated statements of income for share-based compensation arrangements were approximately $ 6,911 , $ 6,108 , and $ 8,700 for 2021, 2020, and 2019, respectively.

At December 31, 2021, total compensation cost related to nonvested awards not yet recognized was approximately $ 41,300 .

There have been no modifications to valuation methodologies or methods during the years ended December 31, 2021, 2020, or 2019.

As of December 31, 2021, there were 7,363 shares of common stock available for issuance pursuant to future equity-based compensation awards.

A summary of the Company’s restricted stock units activity and related information is as follows:

Nonvested Share Awards (RSUs) Shares Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value

Nonvested at beginning of year 854 $ 84.91

Granted 317 $ 127.21

Vested ( 268 ) $ 92.82

Forfeited ( 74 ) $ 91.47

Nonvested at end of year 829 $ 98.25 2.0 $ 116,171

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Trade accounts receivable, net $ 194,903

Merchandise inventories, net 387,307

Prepaid expenses and other current assets 132,041

Other intangible assets, net 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 68,906

Total liabilities of discontinued operations $ 287,023

The Company’s reportable segments consist of automotive and industrial parts.

The Company’s automotive segment distributes replacement parts (other than body parts) for substantially all makes and models of automobiles, trucks, and other vehicles.

Inter-segment sales are not significant.

A summary of the Company’s stock appreciation rights activity and related information is as follows:

Stock Appreciation Rights (SARs) Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value

Outstanding at beginning of year 1,787 $ 88.95

Granted — $ —

Exercised ( 1,144 ) $ 87.86

Forfeited ( 9 ) $ 87.88

Outstanding at end of year 634 $ 90.93 3.0 $ 31,235

Exercisable at end of year 634 $ 90.93 3.0 $ 31,235

The aggregate intrinsic value of SARs exercised and RSUs vested during the years ended December 31, 2021, 2020, and 2019 was $ 72,484 , $ 14,417 and $ 36,200 , respectively.

The fair value of RSUs is based on the price of the Company’s stock on the date of grant for the years ended December 31, 2021 and 2019.

The fair value of RSUs is based on the 60-day average price of the Company's stock on the date of grant for the year ended December 31, 2020.

The fair value of SARs is estimated using a Black-Scholes option pricing model.

The Company ceased issuing SARs in 2017.

The total fair value of SARs and RSUs vested during the years ended December 31, 2021, 2020, and 2019 were $ 24,537 , $ 10,014 , and $ 26,200 , respectively.

Accumulated Other Comprehensive Loss

The following tables present the changes in AOCL by component:

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, 2021 $ ( 692,868 ) $ ( 30,007 ) $ ( 313,627 ) $ ( 1,036,502 )

Other comprehensive income (loss) before reclassifications 192,382 — ( 65,843 ) 126,539

Amounts reclassified from accumulated other comprehensive loss 37,259 14,965 — 52,224

Net current period other comprehensive income (loss) 229,641 14,965 ( 65,843 ) 178,763

Ending balance, December 31, 2021 $ ( 463,227 ) $ ( 15,042 ) $ ( 379,470 ) $ ( 857,739 )

Genuine Parts Company and Subsidiaries

1 unchanged sentence

December 31, 2021

Approximately $ 327,226 of loss before income taxes for the year ended December 31, 2020 and approximately $ 245,373 and $ 281,687 of income before income taxes was generated in jurisdictions outside the U.S.

for the years ended 2019, and 2018, respectively.

Net sales and net property, plant and equipment by country relate directly to the Company’s operations in the respective country.

Corporate assets are principally cash and cash equivalents and headquarters’ facilities and equipment.

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) income before reclassifications ( 17,343 ) ( 21,509 ) 91,239 52,387

Amounts reclassified from accumulated other comprehensive loss 28,890 12,173 11,356 52,419

Net current period other comprehensive income (loss) 11,547 ( 9,336 ) 102,595 104,806

Ending balance, December 31, 2020 $ ( 692,868 ) $ ( 30,007 ) $ ( 313,627 ) $ ( 1,036,502 )

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 income in the same period that the related pre-tax AOCL reclassifications are recognized.

Significant components of the Company’s deferred tax assets and liabilities are as follows:

Deferred tax assets related to:

Expenses not yet deducted for tax purposes $ 301,302 $ 343,308

Operating lease liabilities 300,705 289,114

Pension liability not yet deducted for tax purposes 171,256 257,526

Capital loss 7,333 10,875

Net operating loss 48,865 56,028

829,461 956,851

Automotive $ 10,860,695 $ 10,993,902 $ 10,533,021

Industrial 5,676,738 6,528,332 6,298,584

Total net sales $ 16,537,433 $ 17,522,234 $ 16,831,605

Segment profit:

Automotive $ 867,743 $ 831,951 $ 856,014

Industrial 481,854 521,830 487,360

Total segment profit $ 1,349,597 $ 1,353,781 $ 1,343,374

Interest expense, net ( 91,048 ) ( 91,405 ) ( 93,281 )

Corporate expense ( 149,754 ) ( 140,815 ) ( 137,036 )

Intangible asset amortization ( 94,962 ) ( 92,206 ) ( 83,489 )

Other unallocated costs ( 634,465 ) ( 170,072 ) ( 34,930 )

Income before income taxes from continuing operations $ 379,368 $ 859,283 $ 994,638

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

Deferred tax liabilities related to:

Employee and retiree benefits 235,847 226,356

Inventory 87,062 90,213

Operating lease assets 295,801 282,486

Other intangible assets 365,557 365,825

Property, plant and equipment 72,740 73,333

Other 18,176 29,961

1,075,183 1,068,174

Other unallocated costs:

Goodwill impairment charge (1) $ ( 506,721 ) $ — $ —

Restructuring costs (2) ( 50,019 ) ( 100,023 ) —

Special termination costs (2) — ( 42,757 ) —

Realized currency and other divestiture losses (3) ( 11,356 ) ( 34,701 ) —

Gain on insurance proceeds related to SPR fire (4) 13,448 — —

Gain on equity investment (5) — 38,663 —

Inventory adjustment (6) ( 40,000 ) — —

Transaction and other costs (7) ( 39,817 ) ( 31,254 ) ( 34,930 )

Total other unallocated costs $ ( 634,465 ) $ ( 170,072 ) $ ( 34,930 )

(1) Adjustment reflects a second quarter goodwill impairment charge related to our European reporting unit.

(2) Adjustment reflects restructuring and special termination costs related to the 2019 Cost Savings Plan announced in the fourth quarter of 2019.

The costs are primarily associated with severance and other employee costs, including a voluntary retirement program, and facility and closure costs related to the consolidation of operations.

(3) Adjustment reflects realized currency losses related to divestitures.

(4) 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.

(5) Adjustment relates to the gain recognized upon remeasuring the Company's preexisting 35 % equity investment to fair value upon acquiring the remaining equity of Motion Asia Pacific on July 1, 2019.

(6) Adjustment reflects a $ 40 million increase to cost of goods sold recorded during the quarter ended December 31, 2020 due to the correction of an immaterial error related to the accounting in prior years for consideration received from vendors.

Net deferred tax liability before valuation allowance ( 245,722 ) ( 111,323 )

Valuation allowance ( 34,227 ) ( 35,930 )

Total net deferred tax liability $ ( 279,949 ) $ ( 147,253 )

The Company currently holds approximately $ 183,852 in gross net operating losses, of which approximately $ 121,792 will carry forward indefinitely.

The remaining net operating losses of approximately $ 62,060 will begin to expire in 2024.

Genuine Parts Company and Subsidiaries

1 unchanged sentence

December 31, 2021

(7) Adjustment includes a $ 17 million loss on investment, $ 10 million of incremental costs associated with COVID-19 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 twelve months ended December 31, 2019, adjustment reflects transaction and other costs related to acquisitions and divestitures.

The components of income before income taxes are as follows:

2021 2020 2019

Automotive $ 7,858,334 $ 7,376,408 $ 6,248,117

Industrial 1,911,520 1,993,457 1,792,662

Corporate 254,627 527,126 297,282

Goodwill and other intangible assets 3,415,734 3,785,616 3,374,718

Discontinued operations — 963,022 970,261

Total assets $ 13,440,215 $ 14,645,629 $ 12,683,040

Depreciation and amortization:

Automotive $ 120,932 $ 122,905 $ 105,238

Industrial 16,315 17,577 14,518

Corporate 40,633 24,575 24,339

Intangible asset amortization 94,962 92,206 83,489

Total depreciation and amortization $ 272,842 $ 257,263 $ 227,584

Capital expenditures:

Automotive $ 133,523 $ 227,420 $ 198,910

Industrial 19,287 39,003 21,783

Corporate 692 11,450 5,813

Total capital expenditures $ 153,502 $ 277,873 $ 226,506

United States $ 762,472 $ 706,594 $ 613,910

Europe 2,408,913 2,223,498 1,860,912

Canada 1,526,202 1,614,659 1,565,393

Australasia 1,691,190 1,369,361 1,193,148

Mexico 47,780 88,335 129,032

Total net sales $ 16,537,433 $ 17,522,234 $ 16,831,605

Net property, plant and equipment:

United States $ 728,802 $ 763,746 $ 693,683

Europe 164,268 153,357 110,184

Canada 102,409 103,320 91,195

Australasia 165,596 147,457 95,578

Mexico 968 5,808 4,014

Total net property, plant and equipment $ 1,162,043 $ 1,173,688 $ 994,654

The following table presents disaggregated geographical net sales from contracts with customers by reportable segment.

The Company believes this presentation best depicts how the nature, amount, timing and uncertainty of net sales and cash flows are affected by economic factors:

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2020

Foreign 437,874 ( 327,226 ) 245,373

Income before income taxes $ 1,200,346 $ 379,368 $ 859,283

The components of income tax expense are as follows:

2021 2020 2019

North America:

Federal $ 116,425 $ 130,680 $ 162,883

State 34,311 35,474 45,488

Foreign 119,144 77,541 60,376

Federal 24,233 2,048 ( 21,617 )

State 9,485 801 ( 11,273 )

Foreign ( 2,042 ) ( 30,571 ) ( 23,049 )

$ 301,556 $ 215,973 $ 212,808

The reasons for the difference between total tax expense and the amount computed by applying the statutory Federal income tax rate to income before income taxes are as follows:

2021 2020 2019

Total North America $ 12,437,330 $ 13,929,375 $ 13,777,545

Statutory rate applied to income (1) $ 252,073 $ 79,667 $ 180,449

Plus state income taxes, net of Federal tax benefit 34,599 28,658 27,030

Taxation of foreign operations, net (2) 2,299 ( 9,072 ) ( 17,663 )

tax reform - transition tax (3) — — 4,492

Non-deductible goodwill impairment tax effect — 106,411 —

Foreign rate change - deferred tax remeasurement 17,032 9,045 6,215

Valuation allowance ( 2,486 ) 1,995 4,503

Other ( 1,961 ) ( 731 ) 7,782

$ 301,556 $ 215,973 $ 212,808

statutory rates applied to income are as follows:

2021, 2020 and 2019 at 21%.

(2) The Company's effective tax rate reflects the impact of having operations outside of the U.S.

which are taxed at statutory rates different from the U.S.

statutory rate, with some income being fully or partially exempt from income taxes due to various operating and financing activities.

(3) Impact of the Tax Cuts and Jobs Act, enacted December 22, 2017.

The Company accounts for Global Intangible Low Taxed income in the year the tax is incurred as a period cost.

The Company, or one of its subsidiaries, files income tax returns in the U.S., various states, and foreign jurisdictions.

With few exceptions, the Company is no longer subject to federal, state and local tax examinations by tax authorities for years before 2018 or subject to non-United States income tax examinations for years ended prior to 2013.

The Company is currently under audit in the U.S.

and some of its foreign jurisdictions.

Some audits may conclude in the next 12 months and the unrecognized tax benefits recorded in relation to the audits may differ from actual settlement amounts.

It is not possible to estimate the effect, if any, of the amount of such change during the next 12 months to previously recorded uncertain tax positions in connection with the audits;

however, the Company does not anticipate that total unrecognized tax benefits will significantly change in the next 12 months.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

2021 2020 2019

Total Australasia $ 1,691,190 $ 1,369,361 $ 1,193,148

Europe - Automotive $ 2,408,913 $ 2,223,498 $ 1,860,912

Total net sales $ 16,537,433 $ 17,522,234 $ 16,831,605

Balance at beginning of year $ 23,237 $ 21,461 $ 18,428

Additions based on tax positions related to the current year 2,196 3,771 3,701

Additions for tax positions of prior years 156 3,480 620

Reductions for tax positions for prior years ( 733 ) ( 1,382 ) ( 965 )

Reduction for lapse in statute of limitations ( 2,843 ) ( 3,765 ) —

Settlements ( 2,512 ) ( 328 ) ( 323 )

Balance at end of year $ 19,501 $ 23,237 $ 21,461

The amount of gross unrecognized tax benefits, including interest and penalties, as of December 31, 2021 and 2020 was approximately $ 20,406 and $ 25,870 , respectively, of which approximately $ 18,595 and $ 21,426 , respectively, if recognized, would affect the effective tax rate.

During the tax years ended December 31, 2021, 2020 and 2019, the Company paid, received refunds, or accrued insignificant interest and penalties.

The Company recognizes potential interest and penalties related to unrecognized tax benefits as a component of income tax expense.

As of December 31, 2021, the Company estimates that it has an outside basis difference in certain foreign subsidiaries of approximately $ 731,000 , which includes the cumulative undistributed earnings from the Company's foreign subsidiaries.