What changed in this filing

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Item 1. Financial Statements

2022-07-27 compared with 2022-04-21 · 141 added, 100 removed, 259 unchanged (48% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data) March 31, 2022 December 31, 2021

(in thousands, except share and per share data) June 30, 2022 December 31, 2021

Current assets:

43 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands, except per share data) 2022 2021 2022 2021

23 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

Net income $ 372,529 $ 196,496 $ 618,367 $ 414,206

Other comprehensive income, net of income taxes:

Foreign currency translation adjustments, net of income taxes in 2022 — $ 8,411 ;

2021 — $ 21,185

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

Foreign currency translation adjustments, net of income taxes in 2022 — $ 31,638 and $ 40,049 ;

2021 — $ 7,019 and $ 14,166 , respectively

( 159,078 ) 7,131 ( 116,946 ) 6,836

Cash flow hedge adjustments, net of income taxes in 2022 — $ 1,384 ;

Cash flow hedge adjustments, net of income taxes in 2022 — $ 1,383 and $ 2,767 ;

2021 — $ 1,383 and $ 2,767 , respectively

3,741 3,741 7,482 7,482

Pension and postretirement benefit adjustments, net of income taxes in 2022 — $ 2,580 ;

Pension and postretirement benefit adjustments, net of income taxes in 2022 — $ 2,580 and $ 5,160 ;

2021 — $ 3,434 and $ 6,855 , respectively

6,986 9,334 13,975 18,630

Other comprehensive income, net of income taxes 52,862 12,742

Other comprehensive (loss) income, net of income taxes ( 148,351 ) 20,206 ( 95,489 ) 32,948

Comprehensive income $ 224,178 $ 216,702 $ 522,878 $ 447,154

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

(in thousands, except share and per share data) Common Stock Shares Common Stock Amount Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Total Parent Equity Non-controlling Interests in Subsidiaries Total Equity

April 1, 2022 141,627,749 $ 141,628 $ 126,064 $ ( 804,877 ) $ 4,132,925 $ 3,595,740 $ 12,136 $ 3,607,876

Net income — — — — 372,529 372,529 — 372,529

Other comprehensive income, net of tax — — — ( 148,351 ) — ( 148,351 ) — ( 148,351 )

Cash dividend declared, $ 0.895 per share

— — — — ( 126,716 ) ( 126,716 ) — ( 126,716 )

Share-based awards exercised, including tax benefit of $ 2,423

30,588 30 ( 13,387 ) — — ( 13,357 ) — ( 13,357 )

Share-based compensation — — 10,711 — — 10,711 — 10,711

Purchase of stock ( 377,496 ) ( 377 ) — — ( 49,623 ) ( 50,000 ) — ( 50,000 )

Noncontrolling interest activities — — — — — — 871 871

June 30, 2022 141,280,841 $ 141,281 $ 123,388 $ ( 953,228 ) $ 4,329,115 $ 3,640,556 $ 13,007 $ 3,653,563

Six Months Ended June 30, 2022

January 1, 2022 142,180,683 $ 142,181 $ 119,975 $ ( 857,739 ) $ 4,086,325 $ 3,490,742 $ 12,548 $ 3,503,290

8 unchanged sentences

Noncontrolling interest activities — — — — — — 459 459

March 31, 2022 141,627,749 $ 141,628 $ 126,064 $ ( 804,877 ) $ 4,132,925 $ 3,595,740 $ 12,136 $ 3,607,876

Three Months Ended March 31, 2021

June 30, 2022 141,280,841 $ 141,281 $ 123,388 $ ( 953,228 ) $ 4,329,115 $ 3,640,556 $ 13,007 $ 3,653,563

Three Months Ended June 30, 2021

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

Net income — — — — 196,496 196,496 — 196,496

Other comprehensive income, net of tax — — — 20,206 — 20,206 — 20,206

Cash dividend declared, $ 0.815 per share

— — — — ( 117,406 ) ( 117,406 ) — ( 117,406 )

Share-based awards exercised, including tax benefit of $ 4,863

279,441 280 ( 14,181 ) — — ( 13,901 ) — ( 13,901 )

Share-based compensation — — 8,286 — — 8,286 — 8,286

Purchase of stock ( 1,435,825 ) ( 1,436 ) — — ( 182,929 ) ( 184,365 ) — ( 184,365 )

Noncontrolling interest activities — — — — — — ( 280 ) ( 280 )

June 30, 2021 143,301,673 $ 143,302 $ 111,972 $ ( 1,003,554 ) $ 3,982,159 $ 3,233,879 $ 11,266 $ 3,245,145

Six Months Ended June 30, 2021

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

6 unchanged sentences

Share-based compensation — — 14,521 — — 14,521 — 14,521

Purchase of stock ( 1,435,825 ) ( 1,436 ) — — ( 182,929 ) ( 184,365 ) — ( 184,365 )

Cumulative effect from adoption of ASU 2019-12 (1) — — — — 6,223 6,223 — 6,223

Noncontrolling interest activities — — — — — — ( 1,941 ) ( 1,941 )

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

June 30, 2021 143,301,673 $ 143,302 $ 111,972 $ ( 1,003,554 ) $ 3,982,159 $ 3,233,879 $ 11,266 $ 3,245,145

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2022 2021

4 unchanged sentences

Share-based compensation 17,882 14,521

Gain on sale of real estate ( 102,803 ) —

Intangible asset impairment 17,061 —

Excess tax benefits from share-based compensation ( 3,137 ) ( 6,627 )

16 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 27,613 ) ( 7,639 )

Net (decrease) increase in cash and cash equivalents ( 103,925 ) 127,822

Net decrease in cash and cash equivalents ( 195,570 ) ( 2,777 )

Cash and cash equivalents at beginning of period 714,701 990,166

7 unchanged sentences

Accordingly, the unaudited condensed consolidated financial statements and related disclosures herein should be read in conjunction with our 2021 Annual Report on Form 10-K.

Significant accounting policies and other disclosures normally provided have been omitted since they are disclosed in our Annual Report and have not changed.

The preparation of interim financial statements requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements.

6 unchanged sentences

We have reclassified certain prior period amounts to conform to the current period presentation.

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of results for the year ended December 31, 2022.

The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of results for the year ended December 31, 2022.

We have evaluated subsequent events through the date the unaudited condensed consolidated financial statements covered by this quarterly report were issued.

3 unchanged sentences

We consider the applicability and impact of all ASUs and have determined that any recently adopted accounting pronouncements did not have a material impact on our condensed consolidated financial statements and all recent accounting pronouncements not yet adopted are not applicable or are expected to have an immaterial impact on our condensed consolidated financial statements.

1.750 % and 2.750 % Senior Notes Offering

On January 6, 2022, we issued $ 500 million of unsecured 1.750 % Senior Notes due 2025.

Simultaneously, we issued $ 500 million of unsecured 2.750 % Senior Notes due 2032.

For both offerings, interest is payable semi-annually on February 1 and August 1 of each year, beginning August 1, 2022.

We utilized the proceeds from these offerings to repay borrowings under our Revolving Credit Facility, which were incurred to finance a significant portion of the Kaman Distribution Group ("KDG") acquisition.

Derivatives and Hedging

The following table summarizes the classification and carrying amounts of derivative instruments and the foreign currency denominated debt, a non-derivative financial instrument, that are designated and qualify as part of hedging relationships (in thousands):

June 30, 2022 December 31, 2021

Instrument Balance Sheet Classification Notional Balance Notional Balance

Net investment hedges:

Forward contracts Prepaid expenses and other current assets $ 1,406,950 $ 172,393 $ 925,810 $ 73,819

Forward contract Other current liabilities $ — $ — $ 235,180 $ 2,935

Foreign currency debt Long-term debt € 700,000 $ 730,870 € 700,000 $ 792,820

The tables below present gains and losses related to designated net investment hedges:

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

(in thousands) 2022 2021 2022 2021

Three Months Ended June 30,

Forward contracts $ 66,986 $ ( 13,329 ) $ 7,565 $ 6,574

Foreign currency debt 50,190 ( 12,670 ) — —

Total $ 117,176 $ ( 25,999 ) $ 7,565 $ 6,574

Gain Recognized in AOCL before Reclassifications Gain Recognized in Interest Expense for Excluded Components

(in thousands) 2022 2021 2022 2021

Six Months Ended June 30,

Forward contracts $ 86,380 $ 24,186 $ 15,130 $ 13,148

Foreign currency debt 61,950 28,280 — —

Total $ 148,330 $ 52,466 $ 15,130 $ 13,148

Fair Value of Financial Instruments

As of June 30, 2022 the fair value of our senior unsecured notes was approximately $ 3 billion, which are designated as Level 2 in the fair value hierarchy.

We guarantee the borrowings of certain independently controlled automotive parts stores and businesses (“independents”) and certain other affiliates in which we have a noncontrolling equity ownership interest (“affiliates”).

While such borrowings of the independents and affiliates are outstanding, we are required to maintain compliance with certain covenants.

At June 30, 2022, we were in compliance with all such covenants.

As of June 30, 2022, the total borrowings of the independents and affiliates subject to guarantee by us were approximately $ 902 million.

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

We regularly monitor 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 we are required to make payments in connection with these guarantees, we 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.

We recognize 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, we have not had significant losses in connection with guarantees of independents’ and affiliates’ borrowings and the current expected credit loss reserve is not material.

As of June 30, 2022, there are no material guaranteed loans for

which the borrower is experiencing financial difficulty and recovery is expected to be provided substantially through the operation or sale of the collateral.

As of June 30, 2022, we have recognized certain assets and liabilities amounting to $ 71 million each for the guarantees related to the independents’ and affiliates’ borrowings.

These assets and liabilities are included in other assets and other long-term liabilities in the condensed consolidated balance sheets.

The liabilities relate to our noncontingent obligation to stand ready to perform under the guarantee programs and they are distinct from our current expected credit loss reserve.

Earnings Per Share

We maintain various long-term incentive plans, which provide for the granting of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance awards, dividend equivalents and other share-based awards.

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

The following table summarizes anti-dilutive shares outstanding:

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Anti-dilutive shares outstanding 456 186 748 99

Segment Information

The following table presents a summary of our reportable segment financial information:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

9 unchanged sentences

Corporate expense ( 73,312 ) ( 51,397 ) ( 115,063 ) ( 82,640 )

Other unallocated costs (1) ( 25,915 ) —

Other unallocated income (expenses) (1) 76,732 ( 77,421 ) 50,817 ( 77,421 )

Income before income taxes $ 491,567 $ 269,607 $ 817,283 $ 555,466

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

Three Months Ended March 31,

(1) The following table presents a summary of the other unallocated income and expenses:

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

Other unallocated costs:

Gain on sale of real estate (2) $ 102,803 $ — $ 102,803 $ —

Gain on insurance proceeds (3) $ 873 $ — $ 1,507 $ —

Product liability damages award (4) — ( 77,421 ) — ( 77,421 )

Transaction and other costs (5) ( 26,944 ) — ( 53,493 ) —

Total other unallocated costs $ 76,732 $ ( 77,421 ) $ 50,817 $ ( 77,421 )

(2) Adjustment reflects a gain on the sale of real estate that had been leased to S.P.

(3) Adjustment reflects insurance recoveries in excess of losses incurred on inventory, property, plant and equipment and other fire-related costs.

(3) Adjustment primarily reflects costs associated with the January 3, 2022 acquisition of Kaman Distribution Group.

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

(5) Adjustment primarily reflects legal and professional, restructuring, lease termination and other costs associated with the January 3, 2022 acquisition and subsequent integration of KDG.

These costs also include a $ 17 million impairment charge driven by a decision to retire certain legacy trade names, classified as other intangible assets, prior to the end of their estimated useful lives as part of executing our KDG integration and rebranding strategy.

Refer to the acquisition footnote for more information regarding the acquisition.

1 unchanged sentence

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

14 unchanged sentences

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 $ 1 billion at any point in time (which is the maximum amount allowed under the agreement as amended on January 3, 2022).

Total principal amount outstanding of receivables sold is approximately $ 1.0 billion and $ 800.0 million as of March 31, 2022 and December 31, 2021, respectively.

The amount of receivables pledged as collateral as of March 31, 2022 and December 31, 2021 is approximately $ 1.1 billion and $ 973.0 million, respectively.

Total principal amount outstanding of receivables sold is approximately $ 1 billion and $ 800 million as of June 30, 2022 and December 31, 2021, respectively.

The amount of receivables pledged as collateral as of June 30, 2022 and December 31, 2021 is approximately $ 1.1 billion and $ 973 million, respectively.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

5 unchanged sentences

The SPE has a recourse obligation to repurchase from the unaffiliated financial institution any previously sold receivables that are not collected due to the occurrence of certain events, including credit quality deterioration and customer sales returns.

The reserve recognized for this recourse obligation as of March 31, 2022 and December 31, 2021 is not material.

The reserve recognized for this recourse obligation as of June 30, 2022 and December 31, 2021 is not material.

The servicing liability related to our collection services also is not material, given the high quality of the customers underlying the receivables and the anticipated short collection period.

1.750 % and 2.750 % Senior Notes Offering

On January 6, 2022, we issued $ 500.0 million of unsecured 1.750 % Senior Notes due 2025.

Simultaneously, we issued $ 500.0 million of unsecured 2.750 % Senior Notes due 2032.

For both offerings, interest is payable semi-annually on February 1 and August 1 of each year, beginning August 1, 2022.

We utilized the proceeds from these offerings to repay the borrowings under our Revolving Credit Facility, which were incurred to finance a significant portion of the Kaman Distribution Group ("KDG") acquisition.

Derivatives and Hedging

We are exposed to various risks arising from business operations and market conditions, including fluctuations in interest rates and certain foreign currencies.

When deemed appropriate, we use 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 our earnings and cash flows associated with changes in these rates.

Derivative financial instruments are not used for trading or other speculative purposes.

We have not historically incurred, and do not expect to incur in the future, any losses as a result of counterparty default related to derivative instruments.

We formally document our relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions.

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

We also formally assess, 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.

Net Investment Hedges

We have designated certain derivative instruments and a portion of our foreign currency denominated debt, a non-derivative financial instrument, as hedges of the foreign currency exchange rate exposure of our Euro-denominated net investment in a European subsidiary.

We apply the spot method to assess the hedge effectiveness of the derivative instruments and this assessment for each instrument excludes the initial value related to the difference at contract inception between the foreign exchange spot rate and the forward rate (i.e., the forward points).

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

All other changes in value for the net investment hedges are included in accumulated other comprehensive loss (“AOCL”) within foreign currency translation and would only be reclassified to earnings if the European subsidiary were liquidated, or otherwise disposed.

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 (in thousands):

March 31, 2022 December 31, 2021

Instrument Balance Sheet Location Notional Balance Notional Balance

Net investment hedges:

Forward contracts Prepaid expenses and other current assets $ 1,406,950 $ 97,842 $ 925,810 $ 73,819

Forward contracts Other current liabilities $ — $ — $ 235,180 $ 2,935

Foreign currency debt Long-term debt € 700,000 $ 781,060 € 700,000 $ 792,820

The tables below presents gains related to designated net investment hedges:

Gain Recognized in AOCL before Reclassifications Gain Recognized in Interest Expense for Excluded Components

(in thousands) 2022 2021 2022 2021

Three Months Ended March 31,

Net investment hedges:

Forward contracts $ 19,393 $ 37,515 $ 7,565 $ 6,574

Foreign currency debt 11,760 40,950 — —

Total $ 31,153 $ 78,465 $ 7,565 $ 6,574

Fair Value of Financial Instruments

As of March 31, 2022 the fair value of our senior unsecured notes was approximately $ 3.3 billion, which are designated as Level 2 in the fair value hierarchy.

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

Employee Benefit Plans

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

Pension Benefits

Net periodic benefit income from our pension plans included the following components for our pension benefits:

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

7 unchanged sentences

Pension benefits also include amounts related to supplemental retirement plans.

We acquired several businesses for approximately $ 1.4 billion and $ 20.3 million, net of cash acquired, during the three months ended March 31, 2022 and March 31, 2021, respectively.

For each acquisition, we allocate the purchase price to the assets acquired and the liabilities assumed based on their fair values as of their respective acquisition dates.

We acquired several businesses, including KDG, for approximately $ 1.6 billion, net of cash acquired, during the six months ended June 30, 2022.

For the six months ended June 30, 2021, acquisitions totaled $ 98 million, net of cash acquired.

During the six months ended June 30, 2022, we recognized approximately $ 238 million and $ 550 million of revenue, net of store closures, related to our Automotive and Industrial acquisitions, respectively.

The results of operations for acquired businesses are included in our condensed consolidated statements of income beginning on their respective acquisition dates.

For each acquisition, we allocate the purchase price to the assets acquired and the liabilities assumed based on their fair values as of their respective acquisition dates.

Excluding KDG, for the six months ended June 30, 2022 and June 30, 2021, we recorded approximately $ 185 million and $ 70 million of goodwill and other intangible assets associated with acquisitions.

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

KDG Acquisition

5 unchanged sentences

The KDG acquisition was financed using a combination of borrowings under the existing unsecured revolving credit facility, proceeds of $ 200 million from the selling of additional receivables under our amended A/R Sales Agreement and $ 109 million of cash.

The following table summarizes the preliminary, estimated fair values of the assets acquired and liabilities assumed at the acquisition date.

The following table summarizes the preliminary, estimated fair values of the assets acquired and liabilities assumed at the acquisition date as well as adjustments made to the acquisition accounting during the six months ended June

30, 2022 (referred to as the "measurement period adjustments").

The measurement period adjustments primarily resulted from revisions to the valuation of certain tangible and intangible assets.

The fair value of the acquired identifiable intangible assets is provisional pending completion of the final valuations for these assets.

1 unchanged sentence

Additional adjustments may be made to the acquisition accounting during the measurement period primarily related to intangible asset revaluations, tax accounting and leases.

(in thousands) As of January 3, 2022

As of January 3, 2022

(in thousands) Initial Balance Measurement Period Adjustments As Adjusted

Trade accounts receivable $ 156,000 $ — $ 156,000

4 unchanged sentences

Other assets 1,000 — 1,000

Total identifiable assets acquired (excluding other intangible assets and goodwill) 437,000

Other intangible assets 592,000 4,000 596,000

Goodwill 574,000 ( 6,000 ) 568,000

Total assets acquired 1,603,000 ( 12,000 ) 1,591,000

Trade accounts payable 85,000 — 85,000

4 unchanged sentences

Total liabilities assumed 294,000 ( 15,000 ) 279,000

Net identifiable assets acquired (excluding other intangible assets and goodwill) 143,000

Other intangible assets and goodwill 1,166,000

Net assets acquired $ 1,309,000 $ 3,000 $ 1,312,000

The other intangible assets acquired included $ 527 million of customer relationship intangibles and a $ 41 million favorable trade name licensing agreement, with amortization lives of 17 and 1.5 years, respectively.

The other intangible assets have a total weighted amortization life of 16 years.

The goodwill was assigned to the Industrial segment and is attributable primarily to expected synergies and the assembled workforce.

Approximately $ 261 million of the estimated goodwill recognized as part of the KDG acquisition is expected to be tax deductible.

For the three months ended March 31, 2022, approximately $ 5.0 million of inventory amortization step-up costs related to this acquisition were included in cost of goods sold and approximately $ 21.5 million of transaction and other costs were included in selling, administrative and other expenses in the condensed consolidated statement of income.

For the six months ended June 30, 2022, approximately $ 5 million of inventory amortization step-up cost related to this acquisition was included in cost of goods sold.

Further, $ 47 million of transaction and other one-time costs, inclusive of the impairment charge described below, were included in selling, administrative, and other expenses in the condensed consolidated statements of income.

In June 2022, we incurred a $ 17 million non-cash impairment charge related to our decision to retire certain legacy Industrial trade names, classified as other intangible assets, prior to the end of their estimated useful lives as part of the KDG integration and rebranding strategy.

We evaluate other intangible assets for potential impairment indicators annually or more frequently if circumstances change.

Accumulated Other Comprehensive Loss

The following tables present the changes in AOCL by component for the three months ended March 31:

The following tables present the changes in AOCL by component for the six months ended June 30:

Changes in Accumulated Other

2 unchanged sentences

Beginning balance, January 1, 2022 $ ( 463,227 ) $ ( 15,042 ) $ ( 379,470 ) $ ( 857,739 )

Other comprehensive income before reclassifications — — 42,132 42,132

Other comprehensive loss before reclassifications — — ( 116,946 ) ( 116,946 )

Amounts reclassified from accumulated other comprehensive loss 13,975 7,482 — 21,457

Other comprehensive income, net of income taxes 6,989 3,741 42,132 52,862

Ending balance, March 31, 2022 $ ( 456,238 ) $ ( 11,301 ) $ ( 337,338 ) $ ( 804,877 )

Other comprehensive income (loss), net of income taxes 13,975 7,482 ( 116,946 ) ( 95,489 )

Ending balance, June 30, 2022 $ ( 449,252 ) $ ( 7,560 ) $ ( 496,416 ) $ ( 953,228 )

Changes in Accumulated Other

2 unchanged sentences

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

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

Other comprehensive income before reclassifications — — 6,836 6,836

Amounts reclassified from accumulated other comprehensive loss 18,630 7,482 — 26,112

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

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

Other comprehensive income, net of income taxes 18,630 7,482 6,836 32,948

Ending balance, June 30, 2021 $ ( 674,238 ) $ ( 22,525 ) $ ( 306,791 ) $ ( 1,003,554 )

The AOCL components related to the pension benefits are included in the computation of net periodic benefit income in the employee benefit plans 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.

While such borrowings of the independents and affiliates are outstanding, we are required to maintain compliance with certain covenants.

At March 31, 2022, we were in compliance with all such covenants.

As of March 31, 2022, the total borrowings of the independents and affiliates subject to guarantee by us were approximately $ 949.7 million.

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

To date, we have not had significant losses in connection with guarantees of independents’ and affiliates’ borrowings and the current expected credit loss reserve is not material.

As of March 31, 2022, there are no material guaranteed loans for which the borrower is experiencing financial difficulty and recovery is expected to be provided substantially through the operation or sale of the collateral.

As of March 31, 2022, we have recognized certain assets and liabilities amounting to $ 80.0 million each for the guarantees related to the independents’ and affiliates’ borrowings.

These assets and liabilities are included in other assets and other long-term liabilities in the condensed consolidated balance sheets.

The liabilities relate to our noncontingent obligation to stand ready to perform under the guarantee programs and they are distinct from our current expected credit loss reserve.

Commitments and Contingencies

6 unchanged sentences

Applying this threshold, there are no environmental matters to disclose for this period.

Earnings Per Share

As more fully discussed in the share-based compensation footnote of our notes to the consolidated financial statements in our 2021 Annual Report on Form 10-K, we maintain various long-term incentive plans, which provide for the granting of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance awards, dividend equivalents and other share-based awards.

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

The following table summarizes anti-dilutive shares outstanding:

Three Months Ended March 31,

Anti-dilutive shares outstanding 1,341 —

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

What changed 10-Q

Item 1. Financial Statements