What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-23 compared with 2022-02-17 · 409 added, 623 removed, 771 unchanged (57% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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

Report of Independent Registered Public Accounting Firm (PCAOB ID :

Consolidated Balance Sheets as of December 31, 202 2 and 2021

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate .

Valuation of Goodwill

Description of the Matter As of December 31, 2021, the Company’s goodwill was $ 1,915,307,000 .

As disclosed in Note 1 to the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level.

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.

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 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 a reporting unit that would result from changes in the assumptions.

Fair Value of Customer Relationships Acquired in the Kaman Distribution Group Business Combination

Description of the Matter As disclosed in Note 10 to the consolidated financial statements, the Company completed the acquisition of Kaman Distribution Group (KDG) during 2022 for an aggregate net purchase price of $1.3 billion.

This acquisition was accounted for under the acquisition method of accounting for business combinations.

The Company allocated the net purchase price to the assets acquired and the liabilities assumed based on their respective fair values as of the date of acquisition, including other intangible assets of $568 million.

Of the other intangible assets acquired, the largest was customer relationships of $527 million.

Auditing the Company's valuation of customer relationships was complex and required significant auditor judgment due to the significant estimation uncertainty in evaluating certain assumptions required to estimate the fair value.

The significant estimation uncertainty was primarily due to the sensitivity of the respective fair value of the customer relationships to assumptions about the future cash flows that the Company expects to generate from the acquired business.

The Company used the multi-period excess earnings method under the income approach to measure the customer relationships.

The fair value measure was sensitive to underlying assumptions including discount rates and certain assumptions that form the basis of the forecasted results (e.g., future revenue growth rates and EBITDA margins).

The significant assumptions are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of relevant controls over the Company’s process for estimating the fair value of customer relationships, including controls over management's review of the significant assumptions, including the future revenue growth rates and EBITDA margins, used in the valuation of this this intangible asset and review of the valuation model.

To test the estimated fair value of the customer relationships, we performed audit procedures that included, among others, evaluating the Company's valuation methodologies and evaluating the significant assumptions used by the Company.

We involved our valuation specialists to assist with our evaluation of the methodology used by the Company and significant assumptions included in the fair value estimates.

Our testing also included comparing the significant assumptions used to the historical results of the acquired business and to other guideline companies within the same industry.

We also performed sensitivity analyses of the significant assumptions to evaluate the change in the fair value of the intangible assets resulting from changes in the assumptions.

Loss Contingencies Related to Product Liabilities

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The Company accrues for loss contingencies related to product liabilities if it is probable that the Company will incur a loss and the loss can be reasonably estimated.

The amount accrued for product liabilities as of December 31, 2021 was $ 180,746,000 .

The amount accrued for product liabilities as of December 31, 2022 was $220 million.

Auditing the Company’s loss contingencies related to product liabilities was complex due to the significant measurement uncertainty associated with the estimate, management’s application of significant judgment and the use of valuation techniques.

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Other intangible assets, net 1,812,510 1,406,401

Deferred tax assets 829 65,658

Operating lease assets 1,104,678 1,053,689

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Total operating expenses 6,125,905 5,471,216 5,239,898

Non-operating (income) expenses:

Non-operating expenses (income):

Interest expense, net 73,887 62,150 91,048

Other ( 32,290 ) ( 99,576 ) ( 55,473 )

Special termination costs — — 42,757

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

Total non-operating expenses (income) 41,597 ( 37,426 ) 35,575

Income before income taxes 1,572,602 1,200,346 379,368

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Net income (loss) $ 1,182,701 $ 898,790 $ ( 29,102 )

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

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

Foreign currency translation adjustments ( 143,890 ) ( 65,843 ) 102,595

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( 43,383 ) 229,641 11,547

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

Other comprehensive (loss) income, net of tax ( 174,803 ) 178,763 104,806

Comprehensive income $ 1,007,898 $ 1,077,553 $ 75,704

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Balance at January 1, 2020 145,378,158 $ 145,378 $ 98,777 $ ( 1,141,308 ) $ 4,571,860 $ 3,674,707 $ 20,793 $ 3,695,500

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

Other comprehensive loss, net of tax — — — 96,296 — 96,296 — 96,296

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

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

Cash dividends declared, $ 3.16 per share

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2016-13 — — — — ( 11,432 ) ( 11,432 ) — ( 11,432 )

Cumulative effect from adoption of ASU No.

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

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

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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 )

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Net income — — — — 1,182,701 1,182,701 — 1,182,701

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

Other comprehensive loss, net of tax — — — ( 174,803 ) — ( 174,803 ) — ( 174,803 )

Cash dividend declared, $ 3.58 per share

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Purchase of stock ( 1,572,219 ) ( 1,572 ) — — ( 221,154 ) ( 222,726 ) — ( 222,726 )

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

Noncontrolling interest activities — — — — — — 1,536 1,536

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Depreciation and amortization 347,819 290,971 272,842

Excess tax benefit from share-based compensation ( 7,076 ) ( 677 ) ( 4,920 )

Deferred income taxes 2,220 31,676 ( 27,722 )

Share-based compensation 38,058 25,597 22,621

Loss on software disposal 61,063 — —

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

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

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

Goodwill impairment charge — — 506,721

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Trade accounts payable 676,406 777,318 89,350

Other short-term assets and liabilities ( 148,089 ) ( 109,812 ) 11,740

Other long-term assets and liabilities ( 52,322 ) 57,903 76,937

Other assets and liabilities ( 71,016 ) ( 200,411 ) ( 51,909 )

Net cash provided by operating activities from continuing operations 1,466,971 1,258,285 2,014,522

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Proceeds from divestitures of businesses 33,604 17,738 387,379

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

Proceeds from settlement of net investment hedge 158,441 — —

Acquisitions and other investing activities ( 1,681,660 ) ( 284,315 ) ( 69,173 )

Net cash (used in) provided by investing activities from continuing operations ( 1,684,240 ) ( 506,164 ) 182,768

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Other financing activities ( 19,747 ) ( 7,209 ) ( 65,150 )

Net cash used in financing activities from continuing operations ( 989,532 ) ( 1,513,765 ) ( 385,962 )

Net cash provided by (used in) financing activities from continuing operations 205,101 ( 989,532 ) ( 1,513,765 )

Cash flows from discontinued operations:

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December 31, 2022

(in thousands, except per share data)

Summary of Significant Accounting Policies

Genuine Parts Company (the "company") is a distributor of automotive replacement parts and industrial parts and materials.

The Company serves a diverse customer base through a network of more than 10,300 locations throughout North America, Australasia, and Europe and, therefore, has limited exposure from credit losses to any particular customer, region, or industry segment.

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

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.

On June 30, 2020, the Company completed the divestiture of its Business Products Group.

We serve a diverse customer base through a network of more than 10,600 locations throughout North America, Australasia, and Europe and, therefore, have limited exposure from credit losses to any particular customer, region, or industry segment.

We perform periodic credit evaluations of our customers’ financial condition and generally do not require collateral.

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

We have evaluated subsequent events through the date the financial statements were issued.

On June 30, 2020, we completed the divestiture of our Business Products Group.

Refer to the Acquisitions, Divestitures and Discontinued Operations Footnote for more information.

The Company's results of operations for the Business Products Group are reported as discontinued operations and all information related to the discontinued operations has been excluded from the Notes to the Consolidated Financial Statements for all periods presented.

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.

Our 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 from discontinued operations includes all costs that are directly attributable to these businesses and excludes certain corporate overhead costs that were previously allocated.

Principles of Consolidation

The consolidated financial statements include all of the accounts of the Company.

The net income attributable to noncontrolling interests is not material to the Company’s consolidated net income.

The consolidated financial statements include all of our accounts.

The net income attributable to noncontrolling interests is not material to our consolidated net income.

Intercompany accounts and transactions have been eliminated in consolidation.

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Actual results may differ from those estimates and the differences could be material.

If the pandemic persists or worsens, the estimates and assumptions management made as of December 31, 2021 could change, and it is reasonably possible such changes could be significant.

Revenue Recognition

The Company primarily recognizes revenue at the point the customer obtains control of the products or services and at an amount that reflects the consideration expected to be received for those products or services.

Contracts with customers may include multiple performance obligations.

For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price and recognizes revenue upon delivery or as services are rendered.

We primarily recognize revenue at the point the customer obtains control of the products or services and at an amount that reflects the consideration expected to be received for those products or services.

Revenue is recognized net of allowances for returns, variable consideration and any taxes collected from customers that will be remitted to governmental authorities.

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Payment terms with customers vary by the type and location of the customer and the products or services offered.

The Company does not adjust the promised amount of consideration for the effects of significant financing components based on the expectation that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

We do not adjust the promised amount of consideration for the effects of significant financing components based on the expectation that the period between when we transfer a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

Arrangements with customers that include payment terms extending beyond one year are not significant.

Liabilities for customer incentives, discounts, or rebates are included in other current liabilities in the consolidated balance sheets.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Product Distribution Revenues

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

We generate 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 wholesale customer.

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Shipping and handling activities are performed prior to the customer obtaining control of the products.

Costs associated with shipping and handling are considered costs to fulfill a contract and are included in selling, administrative and other expenses in the period they are incurred.

Costs associated with shipping and handling to our customers are considered costs to fulfill a contract and are included in selling, administrative and other expenses in the period they are incurred.

Other Revenues

The Company offers software support, product cataloging, marketing, training and other membership program and support services to certain customers.

We offer software support, product cataloging, marketing, training and other membership program and support services to certain customers.

This revenue is recognized as services are performed.

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Variable Consideration

The Company’s products are generally sold with a right of return and may include variable consideration in the form of incentives, discounts, credits or rebates.

The Company estimates variable consideration based on historical experience to determine the expected amount to which the Company will be entitled in exchange for transferring the promised goods or services to a customer.

The Company recognizes estimated variable consideration as an adjustment to the transaction price when control of the related product or service is transferred.

Our products are generally sold with a right of return and may include variable consideration in the form of incentives, discounts, credits or rebates.

We estimate variable consideration based on historical experience to determine the expected amount to which we will be entitled in exchange for transferring the promised goods or services to a customer.

We recognize estimated variable consideration as an adjustment to the transaction price when control of the related product or service is transferred.

The realization of variable consideration occurs within a short period of time from product delivery;

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Foreign Currency Translation

The consolidated balance sheets and statements of income of the Company’s foreign subsidiaries have been translated into U.S.

The consolidated balance sheets and statements of income of our foreign subsidiaries have been translated into U.S.

dollars at the current and average exchange rates, respectively.

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Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

We consider all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

Trade Accounts Receivable and the Allowance for Doubtful Accounts

The Company evaluates the collectability of trade accounts receivable based on a combination of factors.

The Company estimates an allowance for doubtful accounts as a percentage of net sales based on various factors, including historical experience, current economic conditions and future expected credit losses and collectability trends.

The Company will periodically adjust this estimate when the Company becomes aware of a specific customer’s inability to meet its financial obligations (e.g., bankruptcy filing) or as a result of changes in the overall aging of accounts receivable.

While the Company has a large customer base that is geographically dispersed, a general economic downturn in any of the industry segments in which the Company operates could result in higher than expected defaults and, therefore, the need to revise estimates for bad debts.

For the years ended December 31, 2021, 2020, and 2019, the Company recorded provisions for doubtful accounts of approximately $ 17,739 , $ 23,577 , and $ 13,876 , respectively.

At December 31, 2021 and 2020, the allowance for doubtful accounts was approximately $ 44,425 and $ 36,622 , respectively.

We evaluate the collectability of trade accounts receivable based on a combination of factors.

We estimate an allowance for doubtful accounts as a percentage of net sales based on various factors, including historical experience, current economic conditions and future expected credit losses and collectability trends.

We will periodically adjust this estimate when we become aware of a specific customer’s inability to meet its financial obligations (e.g., bankruptcy filing) or as a result of changes in the overall aging of accounts receivable.

While we have a large customer base that is geographically dispersed, a general economic downturn in any of the industry segments in which we operate could result in higher than expected defaults and, therefore, the need to revise estimates for bad debts.

For the years ended December 31, 2022, 2021, and 2020, we recorded provisions for doubtful accounts of approximately $ 20 million, $ 18 million, and $ 24 million, respectively.

At December 31, 2022 and 2021, the allowance for doubtful accounts was approximately $ 54 million and $ 44 million, respectively.

Merchandise Inventories, Including Consideration Received From Vendors

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and certain other inventories.

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

Notes to Consolidated Financial Statements

December 31, 2021

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.

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

Generally, the Company earns inventory purchase incentives upon achieving specified volume purchasing levels or other criteria.

The Company accrues for the receipt of these incentives as part of its inventory cost based on cumulative purchases of inventory to date and projected inventory purchases through the end of the year.

While management believes the Company will continue to receive consideration from vendors in 2022 and beyond, there can be no assurance that vendors will continue to provide comparable amounts of incentives in the future.

If the FIFO method had been used in place of LIFO, cost would have been approximately $ 835 million and $ 628 million higher than reported at December 31, 2022 and 2021, respectively.

Reductions in certain industrial parts inventories resulted in liquidations of LIFO inventory layers, which reduced cost of goods sold by immaterial amounts in 2021 and 2020.

There were no liquidations of LIFO inventory layers in 2022.

We identify slow moving or obsolete inventories and estimate appropriate provisions related thereto.

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

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

We enter into agreements at the beginning of each year with many of our vendors that provide for inventory purchase incentives.

Generally, we earn inventory purchase incentives upon achieving specified volume purchasing levels or other criteria.

We accrue for the receipt of these incentives as part of our inventory cost based on cumulative purchases of inventory to date and projected inventory purchases through the end of the year.

management believes we will continue to receive consideration from vendors in 2023 and beyond, there can be no assurance that vendors will continue to provide comparable amounts of incentives in the future.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist primarily of amounts due from vendors, prepaid expenses, and income and other taxes receivable.

The Company reviews its goodwill annually for impairment in the fourth quarter, or sooner if circumstances indicate that the carrying amount may exceed fair value.

The Company tests goodwill for impairment at the reporting unit level, which is an operating segment or a level below an operating segment (a component).

Prepaid expenses and other current assets consist primarily of amounts due from vendors, prepaid expenses, debt securities, and income and other taxes receivable.

We review our goodwill annually for impairment in the fourth quarter, or sooner if circumstances indicate that the carrying amount may exceed fair value.

We test goodwill for impairment at the reporting unit level, which is an operating segment or a level below an operating segment (a component).

A component is a reporting unit if the component constitutes a business for which discrete financial information and operating results are available and management regularly reviews that information.

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 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.

However, we 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, we generally elect 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.

If the Company elects not to perform a qualitative assessment or concludes from its assessment of qualitative factors that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the Company must perform a quantitative test to evaluate goodwill impairment.

To perform a quantitative test, the Company calculates the fair value of the reporting unit and compares that amount to the reporting unit's carrying value.

The Company typically calculates the fair value by using a combination of a market approach and an income approach that is based on a discounted cash flow model.

The assumptions used in the market approach generally include benchmark company market multiples and the assumptions used in the income approach generally include the projected cash flows of the reporting unit, which are based on projected revenue growth rates and operating margins, and the estimated weighted average cost of capital, working capital and terminal value.

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

The Company recognizes goodwill impairment (if any) 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.

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

If we elect not to perform a qualitative assessment or conclude from our assessment of qualitative factors that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, we must perform a quantitative test to evaluate goodwill impairment.

To perform a quantitative test, we calculate the fair value of the reporting unit and compare that amount to the reporting unit's carrying value.

We typically calculate the fair value by using a combination of a market approach and an income approach that is based on a discounted cash flow model.

The assumptions used in the market approach generally include benchmark company market multiples and the assumptions used in the income approach generally include the projected cash flows of the reporting unit, which are based on projected revenue growth rates and EBITDA margins, the estimated weighted average cost of capital, working capital and terminal value.

We use inputs and assumptions we believe are consistent with those a hypothetical marketplace participant would use.

We recognize goodwill impairment (if any) 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.

Refer to the Goodwill and Other Intangible Assets Footnote for further information on the results of our annual goodwill impairment testing.

Long-Lived Assets Other Than Goodwill

The Company assesses its long-lived assets other than goodwill for impairment whenever facts and circumstances indicate that the carrying amount may not be fully recoverable.

To analyze recoverability, the Company projects undiscounted net future cash flows over the remaining life of such assets.

We assess our long-lived assets other than goodwill for impairment whenever facts and circumstances indicate that the carrying amount may not be fully recoverable.

To analyze recoverability, we project undiscounted net future cash flows over the remaining life of such assets.

If these projected cash flows are less than the carrying amount, an impairment would be recognized, resulting in a write-down of assets with a corresponding charge to earnings.

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

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.

For the years ended December 31, 2022, 2021, and 2020 we recognized losses related to impairments and disposals of $ 17 million, $ 61 million, and $ 6 million, respectively.

(Refer to the Goodwill and Other Intangible Assets Footnote and the Property, Plant and Equipment Footnote for more information on the losses that occurred in 2022 and 2021, respectively).

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

Property, Plant and Equipment

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Other Current Liabilities

Other current liabilities consist primarily of current lease obligations, reserves for sales returns expected within the next year, accrued compensation, accrued income and other taxes, and other reserves for expenses incurred.

Other current liabilities consist primarily of current lease obligations, allowances for sales returns expected within the next year, accrued compensation, accrued income and other taxes, and other reserves for expenses incurred.

Other Long-term Liabilities

Other long-term liabilities consist primarily of reserves for sales returns expected after the next year, guarantee obligations, accrued taxes and other non-current obligations.

Other long-term liabilities consist primarily of allowances for sales returns expected after the next year, guarantee obligations, accrued taxes and other non-current obligations.

Self-Insurance

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.

We are self-insured for the majority of our group health insurance costs.

A reserve for claims incurred but not reported is developed by analyzing historical claims data provided by our claims administrators.

These reserves are included in accrued expenses in the accompanying consolidated balance sheets as the expenses are expected to be paid within one year.

Long-term insurance liabilities consist primarily of reserves for the Company's workers’ compensation program.

In addition, the Company carries various large risk deductible workers’ compensation policies for the majority of workers’ compensation liabilities.

The Company records the workers’ compensation reserves based on an analysis performed by an independent actuary.

The analysis calculates development factors, which are applied to total reserves as provided by the various insurance companies who underwrite the program.

While the Company believes that the assumptions used to calculate these liabilities are appropriate, significant differences in actual experience or significant changes in these assumptions may materially affect workers’ compensation costs.

Long-term insurance liabilities consist primarily of reserves for our workers’ compensation program.

We carry high deductible policies for a majority of these liabilities.

We record our reserves based on an analysis performed by an independent actuary.

The analysis involves calculating loss development factors and applying them to reserves supplied by our insurance providers.

While we believe the assumptions used in these calculations are appropriate, significant changes in actual experience or our assumptions could materially affect the worker’s compensation costs and reserves recorded.

Business Combinations

When the Company acquires businesses, it applies the acquisition method of accounting and recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests in an acquiree at their fair values on the acquisition date, which requires significant estimates and assumptions.

When we acquire businesses, we apply the acquisition method of accounting and recognize the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests in an acquiree at their fair values on the acquisition date, which requires significant estimates and assumptions.

Goodwill is measured as the excess of the fair value of the consideration transferred over the net of the acquisition date fair values of the identifiable assets acquired and liabilities assumed.

The acquisition method requires the Company to record provisional amounts for any items for which the accounting is not complete at the end of a reporting period.

The Company must complete the accounting during the measurement period, which cannot exceed one year.

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.

Significant estimates and assumptions used in this approach include discount rates and certain assumptions that form the basis of the forecasted cash flows expected to be generated from the asset (e.g., future revenue growth rates, operating margins and attrition rates).

If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, the Company could record impairment charges.

In addition, the Company has estimated the economic lives of certain acquired tangible and intangible assets and these lives are used to calculate depreciation and amortization expense.

If the Company's estimates of the economic lives change, depreciation or amortization expenses could be increased or decreased, or the acquired asset could be impaired.

The acquisition method requires us to record provisional amounts for any items for which the accounting is not complete at the end of a reporting period.

We must complete the accounting during the measurement period, which cannot exceed one year.

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

We typically measure customer relationships and other intangible assets using an income approach.

In addition, we have estimated the economic lives of certain acquired tangible and intangible assets and these lives are used to calculate depreciation and amortization expense.

If our estimates of the economic lives change, depreciation or amortization expenses could be increased or decreased, or the acquired asset could be impaired.

Legal and Product Liabilities

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.

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

To calculate the liability, the Company estimates potential losses relating to pending claims and also estimates the likelihood of additional, similar claims being filed against the Company in the future.

To estimate potential losses on claims that could be filed in the future, the Company considers claims pending against the Company, claim filing rates, the number of codefendants and the extent to which they share in settlements, and the amount of loss by claim type.

We accrue 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 we will incur a loss and the amount of the loss can be reasonably estimated.

The product liability amount reflects our reasonable estimate of losses based upon currently known facts.

To calculate the liability, we estimate potential losses relating to pending claims and also estimates the likelihood of additional, similar claims being filed against us in the future.

To estimate potential losses on claims that could be filed in the future, we consider claims pending against us, claim filing rates, the number of codefendants and the extent to which they share in settlements, and the amount of loss by claim type.

The estimated losses for pending and potential future claims are calculated on a discounted basis using risk-free interest rates derived from market data about monetary assets with maturities comparable to those of the projected product liabilities.

The Company uses an actuarial specialist to assist with measuring its product liabilities.

We use an actuarial specialist to assist with measuring our product liabilities.

Fair Value Measurements

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

Observable inputs such as quoted prices in active markets;

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

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

At December 31, 2021 and 2020, the fair value of the Company's senior unsecured notes was approximately $ 2,457,497 and $ 2,680,545 , respectively, which are designated as Level 2 in the fair value hierarchy.

• Level 1- Observable inputs such as quoted prices in active markets;

• Level 2- Inputs, other than quoted prices in active markets, that are observable either directly or indirectly;

• Level 3- Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions

At December 31, 2022 and 2021, the fair value of our senior unsecured notes was approximately $ 2.9 billion and $ 2.5 billion, respectively, 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.

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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

Fair value measurement using unobservable inputs is inherently uncertain, and the use of different methodologies or assumptions to determine the fair value instruments could result in a different fair value measurement at the reporting date.

There have been no changes in the methodologies used since December 31, 2021.

Derivatives and Hedging

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

When deemed appropriate, the Company uses derivative and non-derivative instruments as risk management tools to mitigate the potential impact of interest rate and foreign exchange rate risks.

The objective of using these tools is to reduce fluctuations in the Company’s earnings, cash flows and net investments in certain foreign subsidiaries associated with changes in these rates.

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, cash flows and net investments in certain foreign subsidiaries 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.

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

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

The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the designated derivative and non-derivative instruments that are used in hedging transactions are highly effective in offsetting changes in the cash flows of the hedged items.

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.

Shipping and Handling Costs

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.

Shipping and handling costs are classified as selling, administrative and other expenses in the accompanying consolidated statements of income and totaled approximately $ 407 million, $ 350 million, and $ 302 million, for the years ended December 31, 2022, 2021, and 2020, respectively.

Advertising Costs

Advertising costs are expensed as incurred and totaled $ 211,169 , $ 193,900 , and $ 201,600 in the years ended December 31, 2021, 2020, and 2019, respectively.

Advertising costs are expensed as incurred and totaled $ 236 million, $ 211 million, and $ 194 million in the years ended December 31, 2022, 2021, and 2020, respectively.

Restructuring Costs

In October 2019, we approved certain restructuring actions (the "2019 Cost Savings Plan") across our subsidiaries primarily targeted at simplifying organizational structures and distribution networks.

Among other things, the 2019 Cost Savings Plan resulted in workforce reductions and facility closures and consolidations.

We executed a voluntary retirement program for our U.S.

and Canadian subsidiaries in the fourth quarter of 2019 in connection with this plan.

We incurred $ 50 million in costs for the plan in the year ended December 31, 2020.

No further material costs have been incurred.

Accounting for Legal Costs

The Company’s legal costs expected to be incurred in connection with loss contingencies are expensed as such costs are incurred.

We expense legal costs related to loss contingencies as they are incurred.

Share-Based Compensation

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

SARs represent a right to receive upon exercise an amount, payable in shares of common stock, equal to the excess, if any, of the fair market value of the Company’s common stock on the date of exercise over the base value of the grant.

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.

SARs represent a right to receive upon exercise an amount, payable in shares of common stock, equal to the excess, if any, of the fair market value of our common stock on the date of exercise over the base value of the grant.

The terms of such SARs require net settlement in shares of common stock and do not provide for cash settlement.

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

RSUs represent a contingent right to receive one share of our common stock at a future date.

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.

The Company issues new shares upon exercise or conversion of awards under these plans.

The Company accounts for income taxes under the asset and liability method.

We issue new shares upon exercise or conversion of awards under these plans.

We account for income taxes under the asset and liability method.

Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amount and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

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In addition, valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.

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.

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

We recognize 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.

Net Income from Continuing Operations per Common Share

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The computation of diluted net income from continuing operations per common share includes the dilutive effect of stock options, stock appreciation rights and nonvested restricted stock awards options.

Options to purchase approximately 186 , 1,602 , and 210 shares of common stock ranging from $ 72 - $ 135 per share were outstanding at December 31, 2021, 2020, and 2019, respectively.

Options to purchase approximately 4 thousand, 186 thousand, and 1.6 million shares of common stock ranging from $ 72 - $ 179 per share were outstanding at December 31, 2022, 2021, and 2020, respectively.

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.

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

The Company considers the applicability and impact of all ASUs and any not listed below were assessed and determined to be not applicable or are expected to have a minimal impact on the Company's 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 .

We consider 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 our consolidated financial statements.

Credit Losses (Topic 326)

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Additional quantitative and qualitative disclosures are required.

The Company adopted ASU 2016-13 and its amendments as of January 1, 2020, which included recognizing a cumulative-effect adjustment to reduce opening retained earnings by $ 11,432 , net of taxes.

Compensation - Retirement Benefits (Topic 715)

In August 2018, the FASB issued ASU 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans .

The updated accounting guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing, adding and clarifying certain disclosures.

The Company adopted this new accounting standard on January 1, 2020 on a retrospective basis.

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

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

Notes to Consolidated Financial Statements

December 31, 2021

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.

We adopted ASU 2016-13 and its amendments as of January 1, 2020, which included recognizing a cumulative-effect adjustment to reduce opening retained earnings by $ 11 million, net of taxes.

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

Liabilities—Supplier Finance Programs (Subtopic 405-50)

In September 2022, the FASB issued ASU 2022-04, Liabilities-Supplier Finance Programs.

This standard requires disclosure of the key terms of outstanding supply chain finance programs and a rollforward of the related amounts due to vendors participating in these programs.

The new standard does not affect the recognition, measurement or financial statement presentation of any amounts due.

The ASU becomes effective January 1, 2023, except for the rollforward requirement, which becomes effective January 1, 2024.

Our reportable segments consist of the Automotive Parts Group ("Automotive") and Industrial Parts Group ("Industrial").

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

Our Automotive segment distributes replacement parts (other than body parts) for substantially all makes and models of automobiles, trucks, and other vehicles.

Our 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.

Segment profit for each industry segment is calculated as net sales less costs of goods sold, operating expenses, and certain non-operating expenses attributable to the segment (e.g., foreign currency), excluding general corporate expenses, net interest expense, intangible asset amortization, and other unallocated amounts that are primarily driven by corporate initiatives..

Approximately $ 472 million and $ 438 million of income before income taxes were generated in jurisdictions outside the U.S.

for the years ended December 31, 2022, and 2021, respectively.

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

Approximately $ 327 million 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.

Net sales and net property, plant and equipment by country relate directly to our 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:

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

2022 2021 2020

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Other unallocated costs:

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

Gain on sales of real estate (1) $ 102,803 $ — $ —

Gain on insurance proceeds (2) 1,507 3,862 13,448

Product liability adjustment (3) ( 28,730 ) — —

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

Loss on software disposal (5) — ( 61,063 ) —

Gain on equity investment (6) — 10,229 —

Goodwill impairment charge (7) — — ( 506,721 )

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

Restructuring costs and special termination costs (8) — — ( 50,019 )

Realized currency and other divestiture losses (9) — — ( 11,356 )

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

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

Inventory adjustment (10) — — ( 40,000 )

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Total other unallocated costs $ ( 5,021 ) $ ( 128,048 ) $ ( 634,465 )

(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

Notes to Consolidated Financial Statements

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.

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

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

(3) Amount to remeasure product liability for a revised estimate of the number of claims to be incurred in future periods, among other assumptions.

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

(5) Amount 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.

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

(7) Amount reflects a goodwill impairment charge related to our European reporting unit.

(8) Amount 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.

(9) Amount reflects realized currency losses related to divestitures.

(10) Amount 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.

(11) Amount for 2022 primarily includes costs of $ 67 million associated with the January 3, 2022 acquisition and integration of KDG which includes a $ 17 million impairment charge.

The impairment charge was 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.

Separately, this adjustment includes an $ 11 million loss related to an investment.

Amount for 2021 include transaction and other costs related to acquisitions.

For 2020, amount 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

The following table presents a summary of our reportable segment total assets:

Automotive $ 8,755,363 $ 8,508,487

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Goodwill and other intangible assets 4,400,623 3,321,708

Discontinued operations — — 963,022

Total assets $ 16,495,379 $ 14,352,102

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

The following table presents a summary of select financial information by reportable segment from continuing operations:

2022 2021 2020

Depreciation and amortization:

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Total net property, plant and equipment $ 1,326,014 $ 1,234,399 $ 1,162,043

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.

Net sales are disaggregated by geographical region for each of our reportable segments, as we deem 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:

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Total net sales $ 22,095,973 $ 18,870,510 $ 16,537,433

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Goodwill and Other Intangible Assets

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Amortization — — — ( 103,273 )

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

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

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Amortization — — — ( 157,437 )

Impairments — — — ( 17,461 )

Foreign currency translation ( 77,824 ) ( 9,158 ) ( 86,982 ) ( 82,070 )

Balance as of December 31, 2022 $ 1,579,534 $ 1,008,579 $ 2,588,113 $ 1,812,510

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 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).

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 weighted-average cost of capital used in the income approach was adjusted to reflect the specific risks and uncertainties associated with the COVID-19 pandemic in developing the cash flow projections.

The assumptions used in the market approach include benchmark company market multiples.

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

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

We completed our annual goodwill impairment testing as of October 1, 2022 using a mixture of quantitative and qualitative assessments for our various reporting units.

To complete a qualitative assessment, we evaluate historical revenue and operating profit growth trends, market conditions and other factors to determine whether it is more likely than not that the reporting unit's goodwill is impaired.

We complete quantitative assessments for reporting units that fail our qualitative assessments, or otherwise on a periodic basis.

To complete a quantitative assessment, we calculate a reporting unit's fair value using a combination of income and market approaches, which involve significant unobservable inputs (Level 3).

In the income approach, we primarily use these assumptions:

projected revenue growth rates, EBITDA margins, the estimated weighted average cost of capital, and terminal value.

In the market approach, we primarily use benchmark company market multiples.

We believe the inputs and assumptions we use are consistent with those a hypothetical marketplace participant would use.

Once calculated, we verify whether the reporting unit's fair value is higher than its carrying amount.

If the fair value is lower, we recognize an impairment, generally for the difference.

Based on these assessments, we did not recognize any goodwill impairments during 2022 or 2021.

Due to several factors that coalesced in the second quarter of 2020, we performed an interim impairment test as of May 31, 2020 for our European reporting unit and recorded a goodwill impairment charge of $ 507 million.

If there are sustained declines in macroeconomic or business conditions in future periods affecting the projected earnings and cash flows at our reporting units, among other things, there can be no assurance that goodwill at one or more reporting units may not be impaired.

In June 2022, we recognized 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.

Other Intangible Assets

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$ 2,468,882 $ ( 656,372 ) $ 1,812,510 $ 1,933,965 $ ( 527,564 ) $ 1,406,401

Amortization expense for other intangible assets totaled $ 103,273 , $ 94,962 , and $ 92,206 for the years ended December 31, 2021, 2020, and 2019, respectively.

Amortization expense for other intangible assets totaled $ 157 million, $ 103 million, and $ 95 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Estimated other intangible assets amortization expense for the succeeding five years is as follows:

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Property, plant and equipment, net $ 1,326,014 $ 1,234,399

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.

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

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

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

During the second quarter of 2022, we recognized a $ 103 million gain on the sale of real estate that had been leased to S.P.

Richards Company ("SPR").

Refer to the discontinued operations section of the Acquisitions, Divestitures and Discontinued Operations Footnote for additional information regarding the divestiture of our business products group.

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.

We have an 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 we intend to renew.

As part of the A/R Sales Agreement, we routinely sell 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

We control and therefore consolidate the SPE in our consolidated financial statements.

The SPE transferred ownership and control of certain receivables that met certain qualifying conditions to the unaffiliated financial institution in exchange for cash.

The Company accounts for transactions with the unaffiliated financial institution as sales of financial assets, with the associated receivables derecognized from the Company's consolidated balance sheet.

We account for transactions with the unaffiliated financial institution as sales of financial assets, with the associated receivables derecognized from our 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 amount of receivables pledged as collateral as of December 31, 2022 and December 31, 2021 is approximately $ 1.1 billion and $ 973 million, respectively.

We continue 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 $ 1.0 billion 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.

Total principal amount outstanding of receivables sold is approximately $ 1.0 billion and $ 800 million as of December 31, 2022 and December 31, 2021, respectively.

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

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Cash collected on sold receivables $ 8,746,740 $ 7,520,465

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.

We received a benefit to cash from operations of approximately $ 200 million from increasing the amount of receivables sold under the A/R Sales Agreement in the year ended December 31, 2022.

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.

Those fees, which totaled $ 27 million, $ 11 million, and $ 6 million in 2022, 2021, and 2020, respectively, 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, 2022 and December 31, 2021 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 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 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

Notes to Consolidated Financial Statements

December 31, 2021

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

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.

The weighted average interest rate on our outstanding borrowings was approximately 2.33 % and 2.35 % at December 31, 2022 and 2021, respectively.

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

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

Due to the workers’ compensation and insurance reserve requirements in certain states, we also had unused letters of credit of approximately $ 71 million and $ 73 million outstanding at December 31, 2022 and 2021, respectively.

On January 6, 2022, we issued $ 500 million of unsecured 1.75 % Senior Notes due 2025.

Simultaneously, we issued $ 500 million of unsecured 2.75 % 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.

Amounts outstanding under our credit facilities, net of debt issuance costs consist of the following:

December 31, 2022 December 31, 2021

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

January 6, 2022, Senior Unsecured Notes, $ 500,000 , 1.75 % fixed, due February 1, 2025

January 6, 2022, Senior Unsecured Notes, $ 500,000 , 2.75 % fixed, due February 1, 2032

October 27, 2020, Senior Unsecured Notes, $ 500,000 , 1.88 % fixed, due November 1, 2030

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

29 unchanged sentences

Long-term debt, excluding current portion $ 3,076,794 $ 2,409,363

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

Approximate maturities under our credit facilities are as follows:

2023 $ 252,029

Thereafter 1,508,440

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Derivatives and Hedging

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

When deemed appropriate, the Company uses derivative and non-derivative instruments as risk management tools to mitigate the potential impact of interest rate and foreign exchange rate risks.

The objective of using these tools is to reduce fluctuations in the Company’s earnings and cash flows associated with changes in these rates.

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

The Company has not historically incurred, and does not expect to incur in the future, any losses as a result of counterparty default related to derivative instruments.

The Company formally documents relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions.

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

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

The Company has designated certain derivative instruments and a portion of its foreign currency denominated debt, a non-derivative financial instrument, as hedges of the foreign currency exchange rate exposure of the Company's Euro-denominated net investment in a European subsidiary.

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

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 AOCL within foreign currency translation and would only be reclassified to earnings if the European subsidiary were liquidated, or otherwise disposed.

Upon settlement, the cash paid or received generally is reflected in investing activities in the statement of cash flows.

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:

5 unchanged sentences

Foreign currency debt Long-term debt € 700,000 $ 749,280 € 700,000 $ 792,820

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

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

5 unchanged sentences

Net Investment Hedges:

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

Forward contracts 103,240 56,362 ( 85,390 ) 27,923 26,295 27,146

2 unchanged sentences

Leased Properties

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

The Company also leases equipment (primarily vehicles).

We primarily lease real estate for retail stores, branches, distribution centers, office space and land.

We also lease equipment (primarily vehicles).

Most real estate leases include one or more options to renew, with renewal terms that generally can extend the lease term from one to 20 years or more.

The exercise of lease renewal options is at the Company's discretion.

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.

The exercise of lease renewal options is at our discretion.

We evaluate renewal options at lease inception and on an ongoing basis, and include renewal options that we are reasonably certain to exercise in the expected lease terms when classifying leases and measuring lease liabilities.

We elected a policy of not recording leases on the consolidated balance sheets when the leases have a term of 12 months or less and we are 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.

7 unchanged sentences

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

The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities.

The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment.

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:

Our leases generally do not provide an implicit rate, and therefore we use our incremental borrowing rate as the discount rate when measuring operating lease liabilities.

The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment.

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

Our weighted average remaining lease term and weighted average discount rate for operating leases are:

December 31, 2022 December 31, 2021

7 unchanged sentences

Total operating lease liabilities $ 1,122,732

Future minimum lease payments include $ 42,852 related to options to extend lease terms that are reasonably certain of being exercised.

Future minimum lease payments include $ 53 million related to options to extend lease terms that are reasonably certain of being exercised.

Future minimum lease payments exclude $ 165 million related to operating leases that have not yet commenced.

These leases are expected to commence in 2023 and 2024 with lease terms of 3 to 25 years.

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

7 unchanged sentences

Employee Benefit Plans

The Company’s defined benefit pension plans cover employees in the U.S., Canada, and Europe who meet eligibility requirements.

Our defined benefit pension plans cover employees in the U.S., Canada, and Europe who meet eligibility requirements.

The plan covering U.S.

employees is noncontributory, and the Company implemented a hard freeze for the U.S.

employees is noncontributory, and we implemented a hard freeze for the U.S.

qualified defined benefit plan as of December 31, 2013.

1 unchanged sentence

The Canadian plan is contributory, and benefits are based on career average compensation.

The Company’s funding policy is to contribute an amount equal to the minimum required contribution under applicable pension legislation.

Our funding policy is to contribute an amount equal to the minimum required contribution under applicable pension legislation.

For the plans in the U.S.

and Canada, the Company may increase its contribution above the minimum, if appropriate to its tax and cash position and the plans’ funded position.

and Canada, we may increase our contribution above the minimum, if appropriate to our tax and cash position and the plans’ funded position.

The European plans are funded in accordance with local regulations.

The Company also sponsors supplemental retirement plans covering employees in the U.S.

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

We also sponsor supplemental retirement plans covering employees in the U.S.

We use a measurement date of December 31 for our pension and supplemental retirement plans.

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

15 unchanged sentences

Plan participants’ contributions 1,892 1,908

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

Actuarial gain ( 546,266 ) ( 87,966 )

Foreign currency exchange rate changes ( 15,744 ) ( 1,184 )

4 unchanged sentences

Benefit obligation at end of year $ 1,923,163 $ 2,532,973

The benefit obligations for the Company’s U.S.

pension plans included in the above were $ 2,245,669 and $ 2,373,884 at December 31, 2021 and 2020, respectively.

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 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.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

The benefit obligations for our U.S.

pension plans included in the above were $ 1.7 billion and $ 2.2 billion at December 31, 2022 and 2021, respectively.

The total accumulated benefit obligation for our defined benefit pension plans in the U.S., Canada, and Europe was approximately $ 1.9 billion and $ 2.5 billion at December 31, 2022 and 2021, respectively.

pension plan, there was a net actuarial liability gain of $ 442 million and an asset loss of $ 581 million.

The liability gain was comprised primarily of a $ 466 million gain due to discount rate changes.

supplemental retirement plan, there was a net actuarial liability gain of $ 61 million comprised primarily of a $ 63 million gain due to discount rate changes.

The assumptions used to measure the pension benefit obligations for the plans at December 31, 2022 and 2021, were:

11 unchanged sentences

Fair value of plan assets at end of year $ 2,129,058 $ 2,756,803

The fair values of plan assets for the Company’s U.S.

pension plans included in the above were $ 2,457,907 and $ 2,258,246 at December 31, 2021 and 2020, respectively.

The fair values of plan assets for our U.S.

pension plans included in the above were $ 1.9 billion and $ 2.5 billion at December 31, 2022 and 2021, respectively.

For the years ended December 31, 2022 and 2021, the aggregate projected benefit obligation and aggregate fair value of plan assets for plans with projected benefit obligations in excess of plan assets were as follows:

4 unchanged sentences

Aggregate fair value of plan assets $ — $ —

The asset allocations for the Company’s funded pension plans at December 31, 2021 and 2020, and the target allocation for 2022, by asset category were:

The asset allocations for our funded pension plans at December 31, 2022 and 2021, and the target allocation for 2023, by asset category were:

Target Allocation Percentage of Plan Assets at December 31

3 unchanged sentences

Debt securities 41 % 41 % 43 %

Other 1 % — % — %

100 % 100 % 100 %

The Company’s benefit plan committees in the U.S.

Our benefit plan committees in the U.S.

and Canada establish investment policies and strategies and regularly monitor the performance of the funds.

The plans in Europe are unfunded and, therefore, there are no plan assets.

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

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

as fiduciary standards.

The pension plan strategy implemented by our 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 ( 38 % US Large-cap stocks, 9 % US Mid-cap stocks, 10 % International stocks, 3 % Emerging Market stocks and 40 % Barclays U.S.

Our 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, 2022 and 2021, by asset category, are shown in the tables below.

Various inputs are considered when determining the value of the Company’s pension plan assets.

Various inputs are considered when determining the value of our pension plan assets.

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in these securities.

1 unchanged sentence

Level 2 represents other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.).

Level 3 represents significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments).

Level 3 represents significant unobservable inputs (including our own assumptions in determining the fair value of investments).

Certain investments are measured at fair value using the net asset value ("NAV") per share as a practical expedient and have not been classified in the fair value hierarchy.

The valuation methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.

Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Furthermore, while we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Equity securities are valued at the closing price reported on the active market on which the individual securities are traded on the last day of the calendar plan year.

1 unchanged sentence

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.

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

10 unchanged sentences

Asset-backed and mortgage-backed securities 9,925 — — 9,925 —

Convertible Securities 1,159 — — 1,159 —

Other-international 37,304 — 37,304 — —

2 unchanged sentences

Total $ 2,129,058 $ 48,521 $ 1,297,739 $ 782,798 $ —

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

14 unchanged sentences

Total $ 2,756,803 $ 64,669 $ 1,625,164 $ 1,066,970 $ —

Equity securities include Genuine Parts Company common stock in the amounts of $ 210,510 ( 8 % of total plan assets) and $ 202,711 ( 8 % of total plan assets) at December 31, 2021 and 2020, respectively.

Dividend payments received by the plan on Company stock totaled approximately $ 4,895 and $ 6,378 in 2021 and 2020, respectively.

Equity securities include Genuine Parts Company common stock in the amounts of $ 262 million ( 12 % of total plan assets) and $ 211 million ( 8 % of total plan assets) at December 31, 2022 and 2021, respectively.

Dividend payments received by the plan on company stock totaled approximately $ 5 million and $ 5 million in 2022 and 2021, respectively.

Fees paid during the year for services rendered by parties in interest were based on customary and reasonable rates for such services.

The changes in the fair value measurement of plan assets using significant unobservable inputs (Level 3) during 2021 and 2020 were not material.

Based on the investment policy for the pension plans, as well as an asset study that was performed based on the Company’s asset allocations and future expectations, the Company’s expected rate of return on plan assets for measuring 2022 pension income is 6.34 % for the plans.

The asset study forecasted expected rates of return for the approximate duration of the Company’s benefit obligations, using capital market data and historical relationships.

Based on the investment policy for the pension plans, as well as an asset study that was performed based on our asset allocations and future expectations, our expected rate of return on plan assets for measuring 2023 pension income is 7.09 % for the plans.

The asset study forecasted expected rates of return for the approximate duration of our benefit obligations, using capital market data and historical relationships.

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets at December 31:

3 unchanged sentences

$ 205,895 $ 223,830

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Amounts recognized in accumulated other comprehensive loss consist of:

Amounts recognized in accumulated other comprehensive (loss) income consist of:

Net actuarial loss $ 682,884 $ 625,339

1 unchanged sentence

$ 690,157 $ 633,297

The following table reflects the total benefits expected to be paid from the pension plans’ or the Company’s assets.

Of the pension benefits expected to be paid in 2022, approximately $ 12,548 is expected to be paid from employer assets.

The following table reflects the total benefits expected to be paid from the pension plans’ or our assets.

Of the pension benefits expected to be paid in 2023, approximately $ 13 million is expected to be paid from employer assets.

Expected employer contributions below reflect amounts expected to be contributed to funded plans.

14 unchanged sentences

Expected return on plan assets ( 150,318 ) ( 153,822 ) ( 154,111 )

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

Amortization of prior service cost 691 690 692

Amortization of actuarial loss 37,065 49,897 39,613

Net periodic benefit income $ ( 27,110 ) $ ( 19,324 ) $ ( 17,969 )

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 (income) expenses.

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

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

Pension benefits also include amounts related to supplemental retirement plans.

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:

2022 2021 2020

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

Current year actuarial loss (gain) $ 97,412 $ ( 264,547 ) $ 24,613

Recognition of actuarial loss ( 37,065 ) ( 49,897 ) ( 39,613 )

Current year prior service cost — — 3,327

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

Recognition of prior service cost ( 691 ) ( 690 ) ( 692 )

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

Other 68 ( 29 ) —

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

Total recognized in other comprehensive (loss) income $ 59,724 $ ( 315,168 ) $ ( 15,257 )

Total recognized in net periodic benefit income and other comprehensive (loss) income $ 32,614 $ ( 334,492 ) $ ( 33,226 )

4 unchanged sentences

Expected long-term rate of return on plan assets 6.34 % 6.88 % 7.11 %

The Company has one defined contribution plan in the U.S.

that covers substantially all of its domestic employees.

Employees receive a matching contribution of 100 % of the first 5 % of the employees’ salary.

Total plan expense was approximately $ 59,545 in 2021, $ 54,885 in 2020, and $ 64,990 in 2019.

The Company has a defined contribution plan that covers full-time Canadian employees after six months of employment and part-time employees upon meeting provincial minimum standards.

We have one defined contribution plan in the U.S.

that covers substantially all of our domestic employees.

Employees receive a matching contribution of 100 % of the first 5 % of the employees’ salary.

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

Total plan expense was approximately $ 69 million in 2022, $ 60 million in 2021, and $ 55 million in 2020.

Acquisitions, Divestitures and Discontinued Operations

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

The results of operations for acquired businesses are included in the Company’s consolidated statements of income beginning on their respective acquisition dates.

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.

In the Automotive Parts Group, the acquired businesses included all of its equity interests in Hennig Fahrzeugteile Group ("Hennig") in January 2019 and of PartsPoint Group in June 2019, which together generate estimated annual revenues of approximately $ 520,000 , as well as several bolt-on acquisitions.

In the Industrial Parts Group, the Company acquired all of the equity interests in Axis New England and Axis New York ("Axis") in March 2019, which generate estimated annual revenue of approximately $ 55,000 , and the remaining 65 % equity investment in Inenco Group Pty Ltd (now referred to as Motion Asia Pacific) in July 2019.

Motion Asia Pacific is one of Australasia's leading industrial distributors of key product categories such as bearings, power transmission and seals and it generates estimated annual revenues of approximately $ 400,000 .

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

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 (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.

The Company received proceeds from divestitures of businesses totaling 434,609 during the year ended December 31, 2019.

The divestitures are not considered strategic shifts that will have a major effect on the Company’s operations or financial results;

therefore, they are not reported as discontinued operations.

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 (income) expenses on the consolidated statement of income for the year ended December 31, 2019.

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.

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

We acquired several businesses for approximately $ 1.6 billion, net of cash acquired, during the year ended December 31, 2022.

Approximately $ 1.3 billion was related to our Industrial segment, primarily the acquisition of KDG discussed further below, and $ 300 million was related to Automotive.

We recognized approximately $ 562 million of revenue, net of store closures, and $ 239 million of goodwill and other intangible assets related to our Automotive acquisitions during the year ended December 31, 2022.

The other intangible assets acquired consisted of customer relationships of $ 76 million, trademarks of $ 9 million, and other intangibles of $ 4 million with weighted average amortization lives of 18 , 15 , and 3 years, respectively.

On January 3, 2022, the company, through its wholly-owned subsidiary, Motion Industries, Inc., acquired all of the equity interests in KDG for a purchase price of approximately $ 1.3 billion in cash, net of cash acquired of approximately $ 30 million.

KDG contributed approximately 5 % of net sales included in our consolidated statement of income from January 3, 2022 to December 31, 2022.

The KDG acquisition was financed using a combination of borrowing 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 fair values of the assets acquired and liabilities assumed at the acquisition date for the KDG acquisition as well as adjustments made when finalizing the acquisition accounting during the year ended December 31, 2022 (referred to as the "measurement period adjustments").

The measurement period adjustments primarily resulted from revisions to the valuation of inventory and intangible assets, deferred taxes, and long-term liabilities.

As of January 3, 2022

Initial Balance Measurement Period Adjustments As Adjusted

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

Merchandise inventories 166,000 ( 14,000 ) 152,000

Prepaid expenses and other current assets 39,000 ( 1,000 ) 38,000

Property, plant and equipment 26,000 ( 2,000 ) 24,000

Operating lease assets 49,000 ( 5,000 ) 44,000

Other assets 1,000 — 1,000

Other intangible assets 574,000 ( 6,000 ) 568,000

Goodwill 592,000 9,000 601,000

Total assets acquired 1,603,000 ( 19,000 ) 1,584,000

Trade accounts payable 85,000 — 85,000

Other current liabilities 32,000 — 32,000

Operating lease liabilities 17,000 ( 1,000 ) 16,000

Deferred tax liabilities 121,000 ( 13,000 ) 108,000

Other long-term liabilities 39,000 ( 8,000 ) 31,000

Total liabilities assumed 294,000 ( 22,000 ) 272,000

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.

We used the multi-period excess earnings method under the income approach to measure KDG's customer relationships, which is sensitive to certain assumptions including discount rates and certain assumptions that form the basis for the forecasted results (e.g., future revenue growth rates and EBITDA margins).

These assumptions are forward-looking in nature and are dependent on the future performance of the acquired business and could be affected by future economic and market conditions.

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

Approximately $ 261 million of the goodwill recognized as part of the acquisition was tax deductible.

For the twelve months ended December 31, 2022, approximately $ 5 million of inventory amortization step-up cost related to this acquisition was included in cost of goods sold.

Further, $ 62 million of transaction and other one-time costs, inclusive of an impairment charge, were included in selling, administrative, and other expenses in the consolidated statements of income.

Refer to the Goodwill and Other Intangible Assets Footnote for more information on the impairment charge.

If the KDG acquisition had occurred on January 1, 2021 and if its results of operations had been included in our consolidated results since that date, our unaudited pro forma consolidated statements of income would have reflected net sales of approximately $ 22.1 billion and $ 19.9 billion and net income on a per share diluted basis of $ 8.47 and $ 6.02 for the years ended December 31, 2022 and 2021, respectively .

The pro forma information is not necessarily indicative of the results of operations that we would have reported had the transaction actually occurred at the beginning of this period, nor is it necessarily indicative of future results.

The adjustments to the pro forma amounts include, but are not limited to, applying our accounting policies, amortization related to fair value adjustments to intangible assets, one-time acquisition accounting adjustments, interest expense on acquisition related debt and debt not assumed, and any associated tax effects.

The pro forma results do not include any cost savings or other synergies that may result from the acquisition.

Earnings related to KDG included in our consolidated statement of income from January 3, 2022 to December 31, 2022 are impracticable to provide due to KDG’s ongoing integration into Motion, which commenced shortly after the acquisition date.

We acquired several businesses for approximately $ 282 million, net of cash acquired, during the year ended December 31, 2021.

During the year ended December 31, 2021, we recognized approximately $ 220 million and $ 25 million of revenue, net of store closures, related to our 2021 Automotive and Industrial acquisitions, respectively.

We recorded approximately $ 160 million of goodwill and other intangible assets associated with the 2021 acquisitions.

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

We did not recognize any significant measurement period adjustments related to finalizing acquisition accounting during the year ended December 31, 2021.

We acquired several businesses for approximately $ 86 million, net of cash acquired, during the year ended December 31, 2020.

We received proceeds from divestitures of businesses totaling $ 34 million, $ 18 million and $ 387 million during the years ended December 31, 2022, 2021 and 2020, respectively.

Discontinued Operations

Business Products Group

Effective June 30, 2020, the Company completed the divestiture of its Business Products Group by selling Supply Source Enterprises, Inc.

("SSE") and S.P.

Richards Company ("SPR") in separate transactions.

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.

Effective June 30, 2020, we completed the divestiture of our Business Products Group by selling Supply Source Enterprises, Inc.

("SSE") and SPR in separate transactions.

These divestitures were part of our long-term strategic initiative to streamline our operations and optimize our portfolio so that we can drive shareholder value by focusing on our global Automotive and Industrial businesses.

The Business Products Group was previously a reportable segment of the company.

These divestitures, together with prior period divestitures of Garland C.

Norris (effective December 13, 2019), SPR Canada (effective January 1, 2020) and Safety Zone Canada (effective March 2, 2020), represent a single plan to exit the Business Products Group segment and are considered a strategic shift that will have a major effect on the Company’s operations and financial results.

Therefore, the results of operations, financial position and cash flows for the Business Products Group are reported as discontinued operations for all periods presented.

The Company maintains an 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

Notes to Consolidated Financial Statements

December 31, 2021

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:

Norris (effective December 13, 2019), SPR Canada (effective January 1, 2020) and Safety Zone Canada (effective March 2, 2020), represented a single plan to exit the Business Products Group segment and was considered a strategic shift that had a major effect on our operations and financial results.

Therefore, the results of operations, financial position and cash flows for the Business Products Group were reported as discontinued operations for all periods presented.

Our results of operations for discontinued operations were:

Year Ended December 31,

8 unchanged sentences

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

In December 2022, we came to an agreement to sell our remaining investment in SPR in connection with a pending acquisition of SPR by a third party.

The acquisition closed and we sold our investment in SPR on January 31, 2023.

Any remaining transition services will cease by June 30, 2023.

As of December 31, 2022, we reduced the net carrying value of our SPR investment by $ 3 million to $ 55 million, which was reclassed from other assets to current

assets on the consolidated balance sheet, and recognized a charge within non-operating expenses (income) on the consolidated statement of income for the three months ended December 31, 2022.

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 .

Share-based compensation costs of $ 38 million, $ 26 million, and $ 23 million, were recorded for the years ended December 31, 2022, 2021, and 2020, respectively.

The total income tax benefits recognized in the consolidated statements of income for share-based compensation arrangements were approximately $ 10 million, $ 7 million, and $ 6 million for 2022, 2021, and 2020, respectively.

At December 31, 2022, total compensation cost related to nonvested awards not yet recognized was approximately $ 64 million.

There have been no modifications to valuation methodologies or methods during the years ended December 31, 2022, 2021, or 2020.

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:

As of December 31, 2022, there were 6.9 million shares of common stock available for issuance pursuant to future equity-based compensation awards.

A summary of our 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

4 unchanged sentences

Nonvested at end of year 994 $ 110.45 1.4 $ 172,409

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

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

A summary of our 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

5 unchanged sentences

Exercisable at end of year 317 $ 92.65 2.4 $ 25,607

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 aggregate intrinsic value of SARs exercised and RSUs vested during the years ended December 31, 2022, 2021, and 2020 was $ 62 million, $ 73 million, and $ 14 million, respectively.

The fair value of RSUs is based on the price of our stock on the date of grant for the years ended December 31, 2022 and 2021.

The fair value of RSUs is based on the 60-day average price of our 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.

We ceased issuing SARs in 2017.

The total fair value of SARs and RSUs vested during the years ended December 31, 2022, 2021, and 2020 were $ 29 million, $ 25 million, and $ 10 million, respectively.

Accumulated Other Comprehensive Loss

4 unchanged sentences

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

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

Other comprehensive (loss) before reclassifications ( 71,258 ) — ( 143,890 ) ( 215,148 )

Amounts reclassified from accumulated other comprehensive loss 27,875 12,470 — 40,345

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

Net current period other comprehensive (loss) ( 43,383 ) 12,470 ( 143,890 ) ( 174,803 )

Ending balance, December 31, 2022 $ ( 506,610 ) $ ( 2,572 ) $ ( 523,360 ) $ ( 1,032,542 )

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Changes in Accumulated Other

2 unchanged sentences

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

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

Other comprehensive income 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) 11,547 ( 9,336 ) 102,595 104,806

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

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

2 unchanged sentences

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:

Significant components of our deferred tax assets and liabilities are as follows:

Deferred tax assets related to:

16 unchanged sentences

Total net deferred tax liability $ ( 390,135 ) $ ( 279,949 )

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

Notes to Consolidated Financial Statements

December 31, 2021

We currently hold approximately $ 183 million in gross net operating losses, of which approximately $ 108 million will carry forward indefinitely.

The remaining net operating losses of approximately $ 75 million will begin to expire in 2024.

The components of income before income taxes are as follows:

17 unchanged sentences

Taxation of foreign operations, net (2) 3,347 2,299 ( 9,072 )

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

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

5 unchanged sentences

2022, 2021 and 2020 at 21%.

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

(2) Our 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.

We account for Global Intangible Low Taxed income in the year the tax is incurred as a period cost.

We, or one of our subsidiaries, file income tax returns in the U.S., various states, and foreign jurisdictions.

With few exceptions, we are no longer subject to federal, state and local tax examinations by tax authorities for years before 2019 or subject to foreign income tax examinations for years ended prior to 2013.

We are currently under audit in some of our state and 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

however, we do 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:

7 unchanged sentences

Balance at end of year $ 19,621 $ 19,501 $ 23,237

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.

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

The amount of gross unrecognized tax benefits, including interest and penalties, as of December 31, 2022 and 2021 was approximately $ 21 million and $ 20 million, respectively, of which approximately $ 19 million and $ 19 million, respectively, if recognized, would affect the effective tax rate.

During the tax years ended December 31, 2022, 2021 and 2020, we paid, received refunds, or accrued insignificant interest and penalties.

We recognize potential interest and penalties related to unrecognized tax benefits as a component of income tax expense.

As of December 31, 2022, we estimate that we have an outside basis difference in certain foreign subsidiaries of approximately $ 928 million, which includes the cumulative undistributed earnings from our foreign subsidiaries.

We continue 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.

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”).

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.

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”).

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.

We have no voting interest or equity conversion rights in any of the independents.

We do not control the independents or the affiliates but receive a fee for the guarantees.

We have concluded that the independents are variable interest entities, but that we are 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.

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

At December 31, 2021, the total borrowings of the independents and affiliates subject to guarantee by the Company were approximately $ 917,461 .

Separately, we concluded that the affiliates are not variable interest entities.

Our maximum exposure to loss as a result of its involvement with these independents and affiliates is generally equal to the total borrowings subject to our guarantees.

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

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

At December 31, 2022, the total borrowings of the independents and affiliates subject to guarantee by us were approximately $ 916 million.

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

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

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.

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 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, 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.

The Company has recognized certain assets and liabilities amounting to $ 81,000 and $ 81,000 for the guarantees related to the independents’ and affiliates’ borrowings at December 31, 2021 and 2020, respectively.

We have recognized certain assets and liabilities amounting to $ 67 million and $ 81 million for the guarantees related to the independents’ and affiliates’ borrowings at December 31, 2022 and 2021, 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.

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

Legal Matters

The Company is subject to various legal proceedings, many involving routine litigation incidental to the businesses, including approximately 2,018 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, 2021 and 2020 was $ 180,746 and $ 169,461 , 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.

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.

We are subject to various legal proceedings, many involving routine litigation incidental to the businesses, including approximately 2,228 pending product liability lawsuits resulting from our national distribution of automotive parts and supplies.

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

During the fourth quarter of 2022, we revised our estimate of the number of claims to be incurred in future periods, among other assumptions, and recognized $ 29 million of expense included in selling, administrative and other expenses in the consolidated statements of income.

The amount accrued for pending and future claims as of December 31, 2022 was $ 220 million, the central estimate within our range of $ 190 million to $ 270 million, discounted using a discount rate of 3.83 %.

The undiscounted product liability as of December 31, 2022 was $ 285 million.

The amount accrued for pending and future claims as of December 31, 2021 was $ 181 million.

The amounts recorded are based on the best available information and assumptions that we believe are reasonable.

While litigation of any type contains an element of uncertainty, we believe that our insurance coverage and our defense, and ultimate resolution of pending and reasonably anticipated claims will continue to occur within

the ordinary course of our business and that resolution of these claims will not have a material adverse effect on our business, results of operations or financial condition.

On April 17, 2017, a jury awarded damages against the company of $ 82 million in a litigated automotive product liability dispute.

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

We believed the verdict was not supported by the facts or the law and was contrary to our role in the automotive parts industry.

We 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.

1 unchanged sentence

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.

On July 8, 2021, the Washington Supreme Court overturned the order of the Washington Court of Appeals and reinstated the trial court's damage award of $ 77,100 against the Company.

The Company recorded an adjustment to increase selling, general and other expenses by approximately $ 77,421 , inclusive of statutory interest and insurance coverage, in the consolidated statement of income for the year ended December 31, 2021.

On July 8, 2021, the Washington Supreme Court overturned the order of the Washington Court of Appeals and reinstated the trial court's damage award of $ 77 million against the company.

We recorded an adjustment to increase selling, administrative and other expenses by approximately $ 77 million, inclusive of statutory interest and insurance coverage, in the consolidated statements of income for the year ended December 31, 2021.

The damage award and statutory interest was fully paid as of December 31, 2021.

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 $ 3,862 and $ 13,448 during the years ended December 31, 2021 and 2020, respectively, 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 (income) expenses on the consolidated statements of income.

Environmental Liabilities

Item 103 of SEC Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Company reasonably believes will exceed an applied threshold not to exceed $1,000.

Item 103 of SEC Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that we reasonably believe will exceed an applied threshold not to exceed $1 million.

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

Restructuring

In October of 2019, the Company approved certain restructuring actions (the "2019 Cost Savings Plan") across its subsidiaries primarily targeted at simplifying organizational structures and distribution networks.

Among other things,

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

the 2019 Cost Savings Plan resulted in workforce reductions and facility closures and consolidations.

The Company executed a VRP for its U.S.

and Canadian subsidiaries in the fourth quarter of 2019 in connection with this plan.

The table below summarizes costs incurred for the 2019 Cost Savings Plan:

2021 2020 2019

Restructuring costs $ — $ 50,019 $ 100,023

Special termination costs — — 42,757

Total costs incurred $ — $ 50,019 $ 142,780

The 2019 Cost Savings Plan was approved and funded by the Company's corporate office and therefore these costs are not allocated to the Company's segments.

See the segment data footnote for more information.

No material further costs are expected to be incurred for the 2019 Cost Savings Plan.

The table below summarizes the activity related to the restructuring costs discussed above.

As of December 31, 2021, the remaining restructuring liability is included in other current liabilities on the consolidated balance sheets and is immaterial.

Severance and other employee costs Facility and closure costs Accelerated operating lease costs Asset impairments Total

Liability as of January 1, 2021 $ 21,394 $ 10,133 $ — $ — $ 31,527

Restructuring adjustments (1) ( 1,776 ) ( 457 ) ( 929 ) — ( 3,162 )

Cash payments ( 18,890 ) ( 9,355 ) — — ( 28,245 )

Non-cash charges — — 929 — 929

Translation ( 437 ) ( 197 ) — — ( 634 )

Liability as of December 31, 2021 $ 291 $ 124 $ — $ — $ 415

Severance and other employee costs Facility and closure costs Accelerated operating lease costs Asset impairments Total

Liability as of January 1, 2020 $ 72,192 $ 6,639 $ — $ — $ 78,831

Restructuring costs 20,631 16,421 6,724 6,243 50,019

Cash payments ( 72,365 ) ( 13,245 ) — — ( 85,610 )

Non-cash charges — — ( 6,724 ) ( 6,243 ) ( 12,967 )

Translation 936 318 — 1,254

Liability as of December 31, 2020 $ 21,394 $ 10,133 $ — $ — $ 31,527

(1) The 2021 restructuring adjustments are included within selling, administrative and other expenses on the consolidated statements of income.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Quarterly Financial Data (Unaudited)

The following is a summary of the quarterly results of operations for the years ended December 31, 2021 and 2020:

Three Months Ended

(In thousands, except per share data) March 31, 2021 June 30, 2021 Sept.

30, 2021 Dec.

Net sales $ 4,464,714 $ 4,783,738 $ 4,818,849 $ 4,803,209

Gross profit $ 1,540,815 $ 1,689,105 $ 1,710,767 $ 1,693,449

Net income from continuing operations $ 217,710 $ 196,496 $ 228,585 $ 255,999

Net income $ 217,710 $ 196,496 $ 228,585 $ 255,999

Earnings per share from continuing operations:

Basic $ 1.51 $ 1.36 $ 1.60 $ 1.80

Diluted $ 1.50 $ 1.36 $ 1.59 $ 1.79

Earnings per share:

Basic $ 1.51 $ 1.36 $ 1.60 $ 1.80

Diluted $ 1.50 $ 1.36 $ 1.59 $ 1.79

Three Months Ended

(In thousands, except per share data) March 31, 2020 June 30, 2020 Sept.

30, 2020 Dec.

Net sales $ 4,092,526 $ 3,823,227 $ 4,370,086 $ 4,251,594

Gross profit $ 1,388,178 $ 1,290,487 $ 1,528,066 $ 1,448,110

Net income (loss) from continuing operations $ 122,346 $ ( 363,501 ) $ 232,918 $ 171,632

Net income (loss) $ 136,535 $ ( 564,372 ) $ 227,531 $ 171,204

Earnings per share from continuing operations:

Basic $ 0.84 $ ( 2.52 ) $ 1.61 $ 1.19

Diluted $ 0.84 $ ( 2.52 ) $ 1.61 $ 1.18

Earnings per share:

Basic $ 0.94 $ ( 3.91 ) $ 1.58 $ 1.19

Diluted $ 0.94 $ ( 3.91 ) $ 1.57 $ 1.18

We recorded the quarterly earnings per share amounts as if each quarter was a discrete period.

As a result, the sum of the basic and diluted earnings per share will not necessarily total the annual basic and diluted earnings per share.

Certain of the quarterly results identified in the table above include material, unusual or infrequently occurring items as follows on a pre-tax basis.

In the second quarter of 2020, the Company recorded a goodwill impairment charge of $ 506,721 .

Refer to the goodwill and other intangible assets footnote within the Notes to the Consolidated Financial Statements for additional information.

During the fourth quarter of 2020, the Company determined that inventory was overstated because certain consideration received from vendors was not properly recognized as a reduction to carrying amount of inventory in the years ending December 31, 2019 and prior.

The Company corrected this misstatement and recorded an adjustment to decrease inventory and increase cost of goods sold by $ 40,000 during the quarter ended December 31, 2020.

In accordance with Staff Accounting Bulletin (“SAB”) No.

99, Materiality , and SAB No.

108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements , the Company concluded that this misstatement was not material to the Company's previously issued annual and interim financial statements.

The Company also concluded the correction of this misstatement during the quarter ended December 31, 2020 was not material to the 2020 consolidated financial statements.

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

Subsequent Events

Accounts Receivable Sales Agreement Amendment

On January 3, 2022, the Company amended its A/R Sales Agreement to increase the facility limit by an additional $ 200,000 bringing the total to $ 1,000,000 .

The terms of the A/R Sales Agreement limit the balance of receivables sold to approximately $ 1,000,000 at any point in time.

Refer to the Accounts Receivable Sales Agreement footnote in the Notes to the Consolidated Financial Statements for more information.

Kaman Distribution Group Acquisition

On January 3, 2022, the Company, through its wholly-owned subsidiary, Motion Industries, Inc., acquired all of the equity interests in Kaman Distribution Group ("KDG") for a purchase price of approximately $ 1,309,000 in cash.

KDG, which is headquartered in Bloomfield, Connecticut, is a power transmission, automation and fluid power industrial distributor and solutions provider with operations throughout the United States, providing electro-mechanical products, bearings, power transmission, motion control and electrical and fluid power components to MRO and OEM customers.

KDG has approximately 1,700 employees with approximately 220 locations across the United States and Puerto Rico.

KDG has estimated annual revenues of approximately $ 1,100,000 .

The net cash consideration transferred of approximately $ 1,309,000 is net of the estimated cash acquired of approximately $ 30,000 .

The acquisition was financed using a combination of borrowings under the existing unsecured revolving credit facility, proceeds of $ 200,000 from the amendment of our A/R Sales Agreement and $ 109,000 of cash.

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

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

The Company is in the process of analyzing the estimated values of all assets acquired and liabilities assumed as of the acquisition date, including, among other things, obtaining valuations of certain tangible and intangible assets, as well as the fair value of certain contracts and the determination of certain tax balances.

Due to the limited time since the acquisition date, the allocation of the purchase price is still in review as of the date these financial statements were issued and therefore is preliminary and could materially change.

As of January 3, 2022

Trade accounts receivable $ 156,000

Merchandise inventories 166,000

Prepaid expenses and other current assets 39,000

Property, plant and equipment 26,000

Operating lease assets 49,000

Other assets 1,000

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

Trade accounts payable 85,000

Other current liabilities 32,000

Operating lease liabilities 17,000

Deferred tax liabilities 121,000

Other long-term liabilities 39,000

Total liabilities assumed 294,000

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

Genuine Parts Company and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2021

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

Approximately $ 261,000 of the estimated goodwill recognized as part of the acquisition is expected to be tax deductible.

Approximately $ 7,000 in acquisition costs related to this acquisition were included in the line item "other" within non-operating (income) expenses on the consolidated statement of income for the year ended December 31, 2021.

If the KDG acquisition had occurred on January 1, 2021 and if its results of operations had been included in the consolidated results of the Company since that date, the unaudited pro forma consolidated statement of income of the Company would have reflected approximately $ 19,918,700 in net sales and net income on a per share diluted basis of $ 6.01 for the year ended December 31, 2021 .

The pro forma information is not necessarily indicative of the results of operations that the Company would have reported had the transaction actually occurred at the beginning of this period, nor is it necessarily indicative of future results.

The adjustments to the pro forma amounts include, but are not limited to, applying the Company’s accounting policies, amortization related to fair value adjustments to intangible assets, one-time acquisition accounting adjustments, interest expense on acquisition related debt and debt not assumed, and any associated tax effects.

The pro forma results do not include any cost savings or other synergies that may result from the acquisition.

1.750 % and 2.750 % Senior Note Offering

On January 6, 2022, the Company issued $ 500,000 aggregate principal amount of unsecured 1.750 % Senior Notes due 2025 at a price to the public of 99.721 % of their face value with U.S.

Bank National Association as trustee.

Interest on the 1.750 % Senior Notes due 2025 is payable semi-annually on February 1 and August 1 of each year, beginning on August 1, 2022, and is computed on the basis of a 360-day year.

Simultaneously, on January 6, 2022, the Company issued $ 500,000 aggregate principal amount of unsecured 2.750 % Senior Notes due 2032 at a price to the public of 98.810 % of their face value with U.S.

Bank National Association as trustee.

Interest on the 2.750 % Senior Notes due 2032 is payable semi-annually on February 1 and August 1 of each year, beginning on August 1, 2022, and is computed on the basis of a 360-day year.

The Company utilized the proceeds from this offering to repay a portion of the borrowings under the Revolving Credit Facility incurred to finance a significant portion of the KDG Acquisition.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE .

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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-K

Item 8. Financial Statements and Supplementary Data