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Item 1. Financial Statements

2023-07-20 compared with 2023-04-20 · 93 added, 58 removed, 286 unchanged (35% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data) March 31, 2023 December 31, 2022

(in thousands, except share and per share data) June 30, 2023 December 31, 2022

Current assets:

43 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended March 31,

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

(in thousands, except per share data) 2023 2022 2023 2022

20 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31,

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

(in thousands) 2023 2022 2023 2022

Net income $ 344,494 $ 372,529 $ 648,451 $ 618,367

Other comprehensive income, net of income taxes:

Foreign currency translation adjustments, net of income taxes in 2023 — $ 5,255 ;

2022 — $ 8,411

23,827 42,132

Cash flow hedge adjustments, net of income taxes in 2023 — $ 0 ;

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

Foreign currency translation adjustments ( 9,540 ) ( 159,078 ) 14,287 ( 116,946 )

Cash flow hedge adjustments, net of income taxes in 2023 — $ 951 and $ 951 ;

2022 — $ 1,383 and $ 2,767 , respectively

2,572 3,741 2,572 7,482

Pension and postretirement benefit adjustments, net of income taxes in 2023 — $ 703 ;

Pension and postretirement benefit adjustments, net of income taxes in 2023 — $ 702 and $ 1,405 ;

2022 — $ 2,580 and $ 5,160 , respectively

1,912 6,986 3,826 13,975

Other comprehensive income, net of income taxes 25,741 52,862

Other comprehensive income (loss), net of income taxes ( 5,056 ) ( 148,351 ) 20,685 ( 95,489 )

Comprehensive income $ 339,438 $ 224,178 $ 669,136 $ 522,878

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

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

April 1, 2023 140,545,475 $ 140,545 $ 147,690 $ ( 1,006,801 ) $ 4,644,770 $ 3,926,204 $ 13,432 $ 3,939,636

Net income — — — — 344,494 344,494 — 344,494

Other comprehensive loss, net of tax — — — ( 5,056 ) — ( 5,056 ) — ( 5,056 )

Cash dividend declared, $ 0.9500 per share

— — — — ( 133,492 ) ( 133,492 ) — ( 133,492 )

Shares issued from employee incentive plans 351,648 351 ( 22,241 ) — — ( 21,890 ) — ( 21,890 )

Share-based compensation — — 28,299 — — 28,299 — 28,299

Purchase of stock ( 429,573 ) ( 428 ) — — ( 66,920 ) ( 67,348 ) — ( 67,348 )

Noncontrolling interest activities — — — — — — 1,151 1,151

June 30, 2023 140,467,550 $ 140,468 $ 153,748 $ ( 1,011,857 ) $ 4,788,852 $ 4,071,211 $ 14,583 $ 4,085,794

Six Months Ended June 30, 2023

January 1, 2023 140,941,649 $ 140,941 $ 140,324 $ ( 1,032,542 ) $ 4,541,640 $ 3,790,363 $ 14,084 $ 3,804,447

7 unchanged sentences

Noncontrolling interest activities — — — — — — 499 499

March 31, 2023 140,545,475 $ 140,545 $ 147,690 $ ( 1,006,801 ) $ 4,644,770 $ 3,926,204 $ 13,432 $ 3,939,636

Three Months Ended March 31, 2022

June 30, 2023 140,467,550 $ 140,468 $ 153,748 $ ( 1,011,857 ) $ 4,788,852 $ 4,071,211 $ 14,583 $ 4,085,794

Three Months Ended June 30, 2022

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

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

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

Cash dividend declared, $ 0.8950 per share

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

Shares issued from employee incentive plans 30,588 30 ( 13,387 ) — — ( 13,357 ) — ( 13,357 )

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

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

Noncontrolling interest activities — — — — — — 871 871

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

Six Months Ended June 30, 2022

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

Net income — — — — 618,367 618,367 — 618,367

Other comprehensive income, net of tax — — — 52,862 — 52,862 — 52,862

Other comprehensive loss, net of tax — — — ( 95,489 ) — ( 95,489 ) — ( 95,489 )

Cash dividend declared, $ 1.7900 per share

4 unchanged sentences

Noncontrolling interest activities — — — — — — 459 459

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

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

See accompanying Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2023 2022

5 unchanged sentences

Excess tax benefits from share-based compensation ( 6,431 ) ( 3,137 )

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

Changes in operating assets and liabilities ( 400,050 ) 87,417

13 unchanged sentences

Other financing activities ( 6,436 ) ( 13,901 )

Net cash (used in) provided by financing activities ( 157,813 ) 913,964

Net cash provided by (used in) financing activities ( 357,750 ) 584,511

Effect of exchange rate changes on cash and cash equivalents 3,509 ( 27,613 )

9 unchanged sentences

Accordingly, the unaudited Condensed Consolidated Financial Statements and related disclosures herein should be read in conjunction with our 2022 Annual Report on Form 10-K.

There were no significant changes to our accounting policies from those disclosed in the Summary of Significant Accounting Policies Footnote in the Notes to Consolidated Financial Statements in our 2022 Annual Report on Form 10-K.

The preparation of interim financial statements requires management to make estimates and assumptions that affect the amounts reported in the unaudited Condensed Consolidated Financial Statements.

6 unchanged sentences

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

The results of operations for the three months ended March 31, 2023 are not necessarily indicative of results for the year ended December 31, 2023.

The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of results for the year ended December 31, 2023.

We have evaluated subsequent events through the date the unaudited Condensed Consolidated Financial Statements covered by this quarterly report were issued.

15 unchanged sentences

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Instrument Balance Sheet Location Notional Balance Notional Balance

3 unchanged sentences

Foreign currency debt Long-term debt € 700,000 $ 760,480 € 700,000 $ 749,280

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

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

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

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

(in thousands) 2023 2022 2023 2022

Three Months Ended March 31,

Three Months Ended June 30,

Net investment hedges:

2 unchanged sentences

Total $ ( 6,272 ) $ 117,176 $ 3,158 $ 7,565

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

(in thousands) 2023 2022 2023 2022

Six Months Ended June 30,

Net investment hedges:

Forward contracts $ ( 14,536 ) $ 86,380 $ 6,317 $ 15,130

Foreign currency debt ( 11,200 ) 61,950 — —

Total $ ( 25,736 ) $ 148,330 $ 6,317 $ 15,130

Fair Value of Financial Instruments

As of March 31, 2023 the fair value of our senior unsecured notes was approximately $ 3.0 billion, which are designated as Level 2 in the fair value hierarchy.

As of June 30, 2023 the fair value of our senior unsecured notes was approximately $ 3.0 billion, which are designated as Level 2 in the fair value hierarchy.

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

1 unchanged sentence

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

At March 31, 2023, we were in compliance with all such covenants.

As of March 31, 2023, the total borrowings of the independents and affiliates subject to guarantee by us were approximately $ 940 million.

At June 30, 2023, we were in compliance with all such covenants.

As of June 30, 2023, the total borrowings of the independents and affiliates subject to guarantee by us were approximately $ 956 million.

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

2 unchanged sentences

We recognize a liability equal to current expected credit losses over the lives of the loans in the guaranteed loan portfolio, based on a consideration of historical experience, current conditions, the nature and expected value of any collateral, and reasonable and supportable forecasts.

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

As of March 31, 2023, there are no material guaranteed loans for which the borrower is experiencing financial difficulty and recovery is expected to be provided substantially through the operation or sale of the collateral.

As of March 31, 2023, we have recognized certain assets and liabilities amounting to $ 69 million each for the guarantees related to the independents’ and affiliates’ borrowings.

To date, we have not had significant losses in connection with guarantees of independents’ and affiliates’ borrowings and the

current expected credit loss reserve is not material.

As of June 30, 2023, there are no material guaranteed loans for which the borrower is experiencing financial difficulty and recovery is expected to be provided substantially through the operation or sale of the collateral.

As of June 30, 2023, we have recognized certain assets and liabilities amounting to $ 68 million each for the guarantees related to the independents’ and affiliates’ borrowings.

These assets and liabilities are included in other assets and other long-term liabilities in the Condensed Consolidated Balance Sheets.

12 unchanged sentences

All activity related to amounts due to suppliers that elected to participate in the SCF program is reflected in cash flows from operating activities in our consolidated statement of cash flows.

As of March 31, 2023 and December 31, 2022, the outstanding payment obligations to the financial institutions are $ 3.0 billion and $ 3.1 billion, respectively.

The amount settled through the SCF program was $ 1.0 billion and $ 855 million for the three months ended March 31, 2023 and March 31, 2022, respectively.

As of June 30, 2023 and December 31, 2022, the outstanding payment obligations to the financial institutions are $ 2.9 billion and $ 3.1 billion, respectively.

The amount settled through the SCF program was $ 2.1 billion and $ 1.8 billion for the six months ended June 30, 2023 and June 30, 2022 respectively.

Earnings Per Share

3 unchanged sentences

The following table summarizes basic and diluted shares outstanding:

Three Months Ended March 31,

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

(in thousands, except per share data) 2023 2022 2023 2022

7 unchanged sentences

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

Three Months Ended March 31,

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

(in thousands) 2023 2022 2023 2022

9 unchanged sentences

Corporate expense ( 101,550 ) ( 73,312 ) ( 167,565 ) ( 115,063 )

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

Other unallocated income, net (1) — 76,732 — 50,817

Income before income taxes $ 454,089 $ 491,567 $ 858,495 $ 817,283

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

Three Months Ended March 31,

(1) The following table presents a summary of the other unallocated income, net:

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

(in thousands) 2023 2022 2023 2022

Other unallocated costs:

Other unallocated income, net:

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

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

Transaction and other costs (4) — ( 26,944 ) — ( 53,493 )

Total other unallocated costs $ — $ ( 25,915 )

Total other unallocated income, net $ — $ 76,732 $ — $ 50,817

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

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

1 unchanged sentence

Beginning in 2023, certain functions, including cybersecurity and the management of our product liability litigation, were transferred to corporate to be streamlined and centrally managed.

These costs totaled $ 15 million for the three months ended March 31, 2022, of which $ 9 million were allocated to Automotive and $ 6 million were allocated to Industrial based on several factors, including sales volumes and headcount.

Beginning in 2023, these costs, which totaled $ 11 million for the three months ended March 31, 2023, are no longer allocated to our segments when measuring their operating performance.

These costs totaled $ 15 million and $ 29 million for the three and six months ended June 30, 2022, of which $ 9 million and $ 18 million were allocated to Automotive and $ 6 million and $ 11 million were allocated to Industrial based on several factors, including sales volumes and headcount.

Beginning in 2023, these costs, which totaled $ 8 million and $ 18 million for the three and six months ended June 30, 2023, are no longer allocated to our segments when measuring their operating performance.

We have not restated the 2022 comparative segment financial information.

1 unchanged sentence

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

Three Months Ended March 31,

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

(in thousands) 2023 2022 2023 2022

14 unchanged sentences

As cash is collected on sold receivables, the SPE continuously transfers ownership and control of new qualifying receivables to the unaffiliated financial institutions 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 as amended on January 3, 2022).

The total principal amount outstanding of receivables sold is approximately $ 1.0 billion as of both March 31, 2023 and December 31, 2022.

The amount of receivables pledged as collateral as of March 31, 2023 and December 31, 2022 is approximately $ 1.3 billion and $ 1.1 billion, respectively.

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

Three Months Ended March 31,

The total principal amount outstanding of receivables sold is approximately $ 1.0 billion as of both June 30, 2023 and December 31, 2022.

The amount of receivables pledged as collateral as of June 30, 2023 and December 31, 2022 is approximately $ 1.4 billion and $ 1.1 billion, respectively.

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

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

(in thousands) 2023 2022 2023 2022

3 unchanged sentences

The SPE incurs fees due to the unaffiliated financial institutions related to the accounts receivable sales transactions.

Those fees, which totaled $ 14 million and $ 2 million for the three months ended March 31, 2023 and 2022, respectively, are recorded within other non-operating expense (income) in the Condensed Consolidated Statements of Income.

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

The reserve recognized for this recourse obligation as of March 31, 2023 and December 31, 2022 is not material.

Those fees, which totaled $ 15 million and $ 4 million for the three months ended and $ 29 million and $ 7 million for the six months ended June 30, 2023 and 2022, respectively, are recorded within other non-operating expense (income) in the Condensed Consolidated Statements of Income.

quality deterioration and customer sales returns.

The reserve recognized for this recourse obligation as of June 30, 2023 and December 31, 2022 is not material.

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

Employee Benefit Plans

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

Pension Benefits

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

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

(in thousands) 2023 2022 2023 2022

7 unchanged sentences

Pension benefits also include amounts related to supplemental retirement plans.

We acquired several businesses for approximately $ 40 million and $ 1.4 billion, net of cash acquired, during the three months ended March 31, 2023 and March 31, 2022, respectively.

We acquired several businesses for approximately $ 116 million and $ 1.6 billion, net of cash acquired, during the six months ended June 30, 2023 and 2022, respectively.

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

4 unchanged sentences

Accumulated Other Comprehensive Loss

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

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

Changes in Accumulated Other

5 unchanged sentences

Other comprehensive income, net of income taxes 3,826 2,572 14,287 20,685

Ending balance, March 31, 2023 $ ( 504,696 ) $ ( 2,572 ) $ ( 499,533 ) $ ( 1,006,801 )

Ending balance, June 30, 2023 $ ( 502,784 ) $ — $ ( 509,073 ) $ ( 1,011,857 )

Changes in Accumulated Other

2 unchanged sentences

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

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

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

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

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

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

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

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

The AOCL components related to the pension benefits are included in the computation of net periodic benefit income in the Employee Benefit Plans Footnote.

4 unchanged sentences

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

The amount accrued for pending and future claims was $ 216 million as of March 31, 2023, which represents our best estimate of the liability within our calculated range of $ 195 million to $ 275 million, discounted using a discount rate of 3.48 %.

The amount accrued for pending and future claims was $ 208 million as of June 30, 2023, which represents our best estimate of the liability within our calculated range of $ 182 million to $ 257 million, discounted using a discount rate of 3.81 %.

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

Our undiscounted product liability was $ 276 million and $ 285 million as of March 31, 2023 and December 31, 2022, respectively.

Our undiscounted product liability was $ 266 million and $ 285 million as of June 30, 2023 and December 31, 2022, respectively.

There have been no significant developments to the information presented in our 2022 Annual Report on Form 10-K with respect to litigation or commitments and contingencies.

3 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements