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Item 1. Financial Statements

2023-10-19 compared with 2023-07-20 · 68 added, 59 removed, 320 unchanged (28% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

Current assets:

43 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

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

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

20 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

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

(in thousands) 2023 2022 2023 2022

13 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended June 30, 2023

Three Months Ended September 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

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

Net income — — — — 351,198 351,198 — 351,198

6 unchanged sentences

Noncontrolling interest activities — — — — — — 579 579

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

September 30, 2023 140,234,786 $ 140,235 $ 163,602 $ ( 1,087,262 ) $ 4,969,538 $ 4,186,113 $ 15,162 $ 4,201,275

Nine Months Ended September 30, 2023

1 unchanged sentence

Net income — — — — 999,649 999,649 — 999,649

Other comprehensive income, net of tax — — — 20,685 — 20,685 — 20,685

Other comprehensive loss, net of tax — — — ( 54,720 ) — ( 54,720 ) — ( 54,720 )

Cash dividend declared, $ 2.8500 per share

4 unchanged sentences

Noncontrolling interest activities — — — — — — 1,078 1,078

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

September 30, 2023 140,234,786 $ 140,235 $ 163,602 $ ( 1,087,262 ) $ 4,969,538 $ 4,186,113 $ 15,162 $ 4,201,275

Three Months Ended September 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

July 1, 2022 141,280,841 $ 141,281 $ 123,388 $ ( 953,228 ) $ 4,329,115 $ 3,640,556 $ 13,007 $ 3,653,563

Net income — — — — 312,358 312,358 — 312,358

6 unchanged sentences

Noncontrolling interest activities — — — — — — 734 734

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

September 30, 2022 140,962,009 $ 140,962 $ 132,240 $ ( 1,074,316 ) $ 4,465,565 $ 3,664,451 $ 13,741 $ 3,678,192

Nine Months Ended September 30, 2022

8 unchanged sentences

Noncontrolling interest activities — — — — — — 1,193 1,193

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

September 30, 2022 140,962,009 $ 140,962 $ 132,240 $ ( 1,074,316 ) $ 4,465,565 $ 3,664,451 $ 13,741 $ 3,678,192

See accompanying Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2023 2022

23 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 8,824 ) ( 59,166 )

Net decrease in cash and cash equivalents ( 123,358 ) ( 195,570 )

Net increase (decrease) in cash and cash equivalents 1,174 ( 85,503 )

Cash and cash equivalents at beginning of period 653,463 714,701

15 unchanged sentences

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

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.

The results of operations for the three and nine months ended September 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.

6 unchanged sentences

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

The guidance is effective in the first quarter of 2023, except for the rollforward, which is effective in the first quarter of 2024.

The guidance was effective in the first quarter of 2023, except for the rollforward, which becomes effective in the first quarter of 2024.

For additional information, please refer to the supply chain finance programs section herein.

Prepaid Expenses and Other Current Assets

The following table provides a detail of prepaid expenses and other current assets reported within the Condensed Consolidated Balance Sheets as of:

(in thousands) September 30, 2023 December 31, 2022

Prepaid expenses $ 117,310 $ 113,522

Consideration receivable from vendors 825,347 847,341

Other current assets 555,020 571,896

Total prepaid expenses and other current assets $ 1,497,677 $ 1,532,759

Derivatives and Hedging

5 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):

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Instrument Balance Sheet Location Notional Balance Notional Balance

4 unchanged sentences

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

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

(in thousands) 2023 2022 2023 2022

Three Months Ended June 30,

Three Months Ended September 30,

Net investment hedges:

2 unchanged sentences

Total $ 39,517 $ 125,344 $ 3,158 $ 7,965

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

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

(in thousands) 2023 2022 2023 2022

Six Months Ended June 30,

Nine Months Ended September 30,

Net investment hedges:

3 unchanged sentences

Fair Value of Financial Instruments

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.

As of September 30, 2023 the fair value of our senior unsecured notes was approximately $ 2.9 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 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.

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

As of September 30, 2023, the total borrowings of the independents and affiliates subject to guarantee by us were approximately $ 991 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 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.

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 September 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 September 30, 2023, we have recognized certain assets and liabilities amounting to $ 63 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.

10 unchanged sentences

We have no economic interest in a supplier’s decision to participate in the SCF program, and we have no direct financial relationship with the financial institutions, as it relates to the SCF program.

Accordingly, amounts due to our suppliers that elected to participate in the SCF program are included in the line item accounts payable in our consolidated balance sheets.

Accordingly, amounts due to our suppliers that elected to participate in the SCF program are included in the line item accounts payable in our Condensed Consolidated Balance Sheets.

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 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.

As of September 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 $ 3.1 billion and $ 2.7 billion for the nine months ended September 30, 2023 and 2022 respectively.

Earnings Per Share

We calculate basic earnings per share by dividing net income by the weighted average number of common shares outstanding.

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

Certain outstanding options are not included in the diluted earnings per share calculation

because their inclusion would have been anti-dilutive.

Antidilutive common stock equivalents excluded from the diluted earnings per share calculation are not material.

The following table summarizes basic and diluted shares outstanding:

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

Three Months Ended September 30, Nine Months Ended September 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 June 30, Six Months Ended June 30,

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

(in thousands) 2023 2022 2023 2022

9 unchanged sentences

Corporate expense ( 90,257 ) ( 72,820 ) ( 257,822 ) ( 187,883 )

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

Other unallocated (loss) income, net (1) — ( 3,462 ) — 47,355

Income before income taxes $ 465,060 $ 417,936 $ 1,323,555 $ 1,235,219

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

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

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

(in thousands) 2023 2022 2023 2022

3 unchanged sentences

Transaction and other costs (4) — ( 3,462 ) — ( 56,955 )

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

Total other unallocated (loss) income, net $ — $ ( 3,462 ) $ — $ 47,355

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

2 unchanged sentences

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 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.

These costs totaled $ 15 million and $ 44 million for the three and nine months ended September 30, 2022, of which $ 9 million and $ 27 million were allocated to Automotive and $ 6 million and $ 17 million were allocated to Industrial based on several factors, including sales volumes and headcount.

Beginning in 2023, these costs, which totaled $ 30 million and $ 49 million for the three and nine months ended September 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 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 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 total principal amount outstanding of receivables sold is approximately $ 1.0 billion as of both September 30, 2023 and December 31, 2022.

The amount of receivables pledged as collateral as of September 30, 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 for the:

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

Three Months Ended September 30, Nine Months Ended September 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 $ 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.

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 June 30, 2023 and December 31, 2022 is not material.

Those fees, which totaled $ 15 million and $ 8 million for the three months ended and $ 44 million and $ 14 million for the nine months ended September 30, 2023 and 2022, respectively, are recorded within other non-operating expense (income) in the Condensed Consolidated Statements of Income.

The reserve recognized for this recourse obligation as of September 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.

1 unchanged sentence

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,

Three Months Ended September 30, Nine Months Ended September 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 $ 116 million and $ 1.6 billion, net of cash acquired, during the six months ended June 30, 2023 and 2022, respectively.

We acquired several businesses for approximately $ 232 million and $ 1.6 billion, net of cash acquired, during the nine months ended September 30, 2023 and 2022, respectively.

During the nine months ended September 30, 2023, we recognized approximately $ 290 million and $ 38 million of revenue, net of store closures, related to our current year Automotive and Industrial acquisitions, respectively.

We recorded approximately $ 172 million of goodwill and other intangible assets associated with these acquisitions.

Other intangible assets acquired of $ 77 million consisted of customer relationships with a weighted average amortization lives of 20 years.

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 six months ended June 30:

The following tables present the changes in AOCL by component for the nine months ended September 30:

Changes in Accumulated Other

2 unchanged sentences

Beginning balance, January 1, 2023 $ ( 506,610 ) $ ( 2,572 ) $ ( 523,360 ) $ ( 1,032,542 )

Other comprehensive income before reclassifications — 2,765 14,287 17,052

Other comprehensive income (loss) before reclassifications — 2,765 ( 63,027 ) ( 60,262 )

Amounts reclassified from accumulated other comprehensive loss 5,735 ( 193 ) — 5,542

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

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

Other comprehensive income (loss), net of income taxes 5,735 2,572 ( 63,027 ) ( 54,720 )

Ending balance, September 30, 2023 $ ( 500,875 ) $ — $ ( 586,387 ) $ ( 1,087,262 )

Changes in Accumulated Other

5 unchanged sentences

Other comprehensive income (loss), net of income taxes 20,957 11,223 ( 248,757 ) ( 216,577 )

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

Ending balance, September 30, 2022 $ ( 442,270 ) $ ( 3,819 ) $ ( 628,227 ) $ ( 1,074,316 )

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 $ 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 $ 266 million and $ 285 million as of June 30, 2023 and December 31, 2022, respectively.

The amount accrued for pending and future claims was $ 225 million as of September 30, 2023, which represented our best estimate of the liability within our calculated range of $ 199 million to $ 283 million, discounted using a discount rate of 4.59 %.

The amount accrued for pending and future claims was $ 220 million as of December 31, 2022, which represented 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 $ 297 million and $ 285 million as of September 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