What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-22 compared with 2023-02-23 · 237 added, 252 removed, 928 unchanged (35% of the section changed)

27 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

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 .

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.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Loss Contingencies Related to Product Liabilities

Description of the Matter As disclosed in Notes 1 and 15 to the consolidated financial statements, the Company is subject to pending product liability lawsuits primarily resulting from its national distribution of automotive parts and supplies.

Description of the Matter As disclosed in Notes 1 and 16 to the consolidated financial statements, the Company is subject to pending product liability lawsuits resulting from its national distribution of automotive parts and supplies.

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.

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We compared the Company's estimated loss contingencies related to product liabilities to the range developed by our actuarial specialists.

We also assessed the adequacy of the Company’s disclosures, included in Notes 1 and 15 to the consolidated financial statements, in relation to these matters.

We also assessed the adequacy of the Company’s disclosures, included in Notes 1 and 16 to the consolidated financial statements, in relation to this matter.

/s/ Ernst & Young LLP

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Other intangible assets, net 1,792,913 1,812,510

Property, plant and equipment, net 1,616,785 1,326,014

Operating lease assets 1,268,742 1,104,678

Other assets 949,481 847,325

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

Total assets $ 17,968,454 $ 16,495,379

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Provision for doubtful accounts 25,947 19,791 17,739

Restructuring costs — — 50,019

Goodwill impairment charge — — 506,721

Total operating expenses 6,543,619 6,125,905 5,471,216

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Income taxes 425,824 389,901 301,556

Net income from continuing operations 1,182,701 898,790 163,395

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

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

Basic earnings (loss) per share:

Continuing operations $ 8.36 $ 6.27 $ 1.13

Discontinued operations — — ( 1.33 )

Basic earnings (loss) per share $ 8.36 $ 6.27 $ ( 0.20 )

Diluted earnings (loss) per share:

Continuing operations $ 8.31 $ 6.23 $ 1.13

Discontinued operations — — ( 1.33 )

Diluted earnings (loss) per share $ 8.31 $ 6.23 $ ( 0.20 )

Weighted average common shares outstanding 141,468 143,435 144,474

Dilutive effect of stock options and non-vested restricted stock awards 854 786 641

Weighted average common shares outstanding — assuming dilution 142,322 144,221 145,115

Net income $ 1,316,524 $ 1,182,701 $ 898,790

See accompanying notes.

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2023 2022 2021

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

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

Net income $ 1,316,524 $ 1,182,701 $ 898,790

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

Foreign currency translation adjustments 64,429 ( 143,890 ) ( 65,843 )

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( 11,331 ) ( 43,383 ) 229,641

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

Other comprehensive income (loss), net of tax 55,670 ( 174,803 ) 178,763

Comprehensive income $ 1,372,194 $ 1,007,898 $ 1,077,553

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Balance at January 1, 2021 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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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 dividends 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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Net income — — — — 1,316,524 1,316,524 — 1,316,524

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

Other comprehensive income, net of tax — — — 55,670 — 55,670 — 55,670

Cash dividend declared, $ 3.80 per share

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Operating activities:

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

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

Net income from continuing operations 1,182,701 898,790 163,395

Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:

Net income $ 1,316,524 $ 1,182,701 $ 898,790

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 350,529 347,819 290,971

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

Goodwill impairment charge — — 506,721

Other operating activities ( 41,626 ) 18,377 22,575

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Other assets and liabilities ( 254,036 ) ( 71,016 ) ( 200,411 )

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

Net cash provided by operating activities 1,435,610 1,466,971 1,258,285

Investing activities:

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Proceeds from divestitures of businesses 10,754 33,604 17,738

Proceeds from sale of investment 80,482 — —

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

Acquisitions and other investing activities ( 309,452 ) ( 1,681,660 ) ( 284,315 )

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

Net cash used in investing activities ( 705,792 ) ( 1,684,240 ) ( 506,164 )

Financing activities:

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Payments on debt ( 3,237,959 ) ( 4,147,773 ) ( 1,053,423 )

Share-based awards exercised ( 17,377 ) ( 22,346 ) ( 4,120 )

Shares issued from employee incentive plans ( 24,145 ) ( 17,377 ) ( 22,346 )

Dividends paid ( 526,674 ) ( 495,917 ) ( 465,649 )

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Other financing activities ( 11,042 ) ( 19,747 ) ( 7,209 )

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

Cash flows from discontinued operations:

Net cash flows provided by operating activities from discontinued operations — — 5,039

Net cash used in investing activities from discontinued operations — — ( 11,131 )

Net cash provided by financing activities from discontinued operations — — —

Net cash (used in) provided by discontinued operations — — ( 6,092 )

Net cash (used in) provided by financing activities ( 292,161 ) 205,101 ( 989,532 )

Effect of exchange rate changes on cash and cash equivalents 10,887 ( 49,070 ) ( 38,054 )

Net (decrease) increase in cash and cash equivalents ( 61,238 ) ( 275,465 ) 713,174

Net increase (decrease) in cash and cash equivalents 448,544 ( 61,238 ) ( 275,465 )

Cash and cash equivalents at beginning of year 653,463 714,701 990,166

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Summary of Significant Accounting Policies

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

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.

Genuine Parts Company is a distributor of automotive replacement parts and industrial parts and materials.

We serve a diverse customer base through a network of more than 10,700 locations throughout North America, Europe, and Australasia 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.

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

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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.

While management believes we will continue to receive consideration from vendors in 2024 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, debt securities, and income and other taxes receivable.

Prepaid expenses and other current assets consist primarily of consideration receivable from vendors, prepaid expenses, income taxes and other miscellaneous receivables.

The following table provides a reconciliation of prepaid expenses and other current assets reported within the consolidated balance sheets at December 31:

(in thousands) 2023 2022

Prepaid expenses $ 110,863 $ 113,522

Consideration receivable from vendors 928,499 847,341

Other current assets 564,366 571,896

Total prepaid expenses and other current assets $ 1,603,728 $ 1,532,759

Consideration receivable from vendors include rebates receivable for various vendor funding programs.

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

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

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

There were no impairment losses in 2023.

In 2022 and 2021, we recognized losses related to impairments and disposals of $ 17 million and $ 61 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.

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machinery and equipment, 5 to 15 years;

software, 3 to 5 years;

and the shorter of lease term or useful life for leasehold improvements.

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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.

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 our workers’ compensation program.

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Advertising costs are expensed as incurred and totaled $ 234 million, $ 236 million, and $ 211 million in the years ended December 31, 2023, 2022, and 2021, 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

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Deferred tax assets and liabilities are recorded net as noncurrent deferred income taxes.

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

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

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

Basic net income from continuing operations per common share is computed by dividing net income from continuing operations by the weighted average number of common shares outstanding during the year.

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 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.

Net Income per Common Share

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the year.

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

Options to purchase approximately 3 thousand, 4 thousand, and 186 thousand shares of common stock ranging from $ 72 - $ 179 per share were outstanding at December 31, 2023, 2022, and 2021, respectively.

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

The following table summarizes basic and diluted shares outstanding for the year ended December 31:

(in thousands, except per share data) 2023 2022 2021

Net income $ 1,316,524 $ 1,182,701 $ 898,790

Weighted average common shares outstanding 140,367 141,468 143,435

Dilutive effect of stock options and non-vested restricted stock awards 667 854 786

Weighted average common shares outstanding – assuming dilution 141,034 142,322 144,221

Basic earnings per share $ 9.38 $ 8.36 $ 6.27

Diluted earnings per share $ 9.33 $ 8.31 $ 6.23

Recent Accounting Pronouncements

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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”).

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)

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments .

Among other things, the ASU and its amendments replace the incurred loss impairment model for receivables and loan guarantees with a current expected credit loss model.

The new model measures impairment based on expected credit losses over the remaining contractual life of an asset, considering available information about the collectability of cash flows, past events, current conditions, and reasonable and supportable forecasts.

Additional quantitative and qualitative disclosures are required.

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.

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.

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.

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

This standard removes certain exceptions for performing intraperiod tax allocations, requires recognition of deferred taxes for investments, and requires 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 million.

We 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.

Disclosure of Supplier Finance Program Obligations

In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations.

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.

The guidance was effective in the first quarter of 2023, except for the rollforward, which is effective for our Quarterly Report on Form 10-Q for the period ended March 31, 2024.

We adopted ASU 2022-04, including the early adoption of the rollforward, during the year ended December 31, 2023.

For additional information, refer to the Supply Chain Finance Programs Footnote.

Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

This standard requires disclosures of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss, an amount and description of other segment items by reportable segment, and all annual disclosures

currently required by Topic 280 to be included in interim periods.

The guidance is effective for our Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent interim periods, with early adoption permitted.

We are currently evaluating the impact of adopting this standard on our financial statements and disclosures.

Income Taxes (Topic 740):

Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

The standard requires disclosure of specific categories in the rate reconciliation and additional information for reconciling items, income before tax expense disaggregated between domestic and foreign, income tax expense disaggregated by federal, state and foreign, as well as further information on income taxes paid.

The guidance is effective for our Annual Report on Form 10-K for the year ended December 31, 2025, with early adoption permitted.

The guidance should be applied on a prospective basis, with retrospective application permitted.

We are currently evaluating the impact of adopting this standard on our financial statements and disclosures.

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

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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.

Approximately $ 577 million, $ 472 million, and $ 438 million of income before income taxes were generated in jurisdictions outside the U.S.

for the years ended December 31, 2023, 2022, and 2021, respectively.

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 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 our reportable segment financial information from continuing operations:

2022 2021 2020

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

(in thousands) 2023 2022 2021

Automotive $ 14,246,783 $ 13,666,634 $ 12,544,131

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Other unallocated costs — ( 5,021 ) ( 128,048 )

Income before income taxes from continuing operations $ 1,572,602 $ 1,200,346 $ 379,368

Income before income taxes $ 1,742,348 $ 1,572,602 $ 1,200,346

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

2022 2021 2020

(in thousands) 2023 2022 2021

Other unallocated costs:

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

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

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

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

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

Transaction and other costs (7) — ( 80,601 ) ( 3,655 )

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(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.

(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.

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

(7) 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.

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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.

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

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

(in thousands) 2023 2022

Automotive $ 9,845,644 $ 8,755,363

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Total assets $ 17,968,454 $ 16,495,379

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

2022 2021 2020

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

(in thousands) 2023 2022 2021

Depreciation and amortization:

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

2022 2021 2020

(in thousands) 2023 2022 2021

North America:

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The changes in the carrying amount of goodwill during the years ended December 31, 2023 and 2022 by reportable segment, as well as other identifiable intangible assets, are summarized as follows:

Automotive Industrial Total Other Intangible Assets, Net

(in thousands) Automotive Industrial Total Other Intangible Assets, Net

Balance as of January 1, 2022 $ 1,507,462 $ 407,845 $ 1,915,307 $ 1,406,401

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Amortization — — — ( 157,437 )

Impairments — — — ( 17,461 )

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

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Amortization — — — ( 147,178 )

Impairments — — — ( 17,461 )

Foreign currency translation 26,068 623 26,691 28,929

Balance as of December 31, 2023 $ 1,717,433 $ 1,017,248 $ 2,734,681 $ 1,792,913

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.

We completed our annual goodwill impairment testing as of October 1, 2023.

We assess the value of our goodwill under either a quantitative or qualitative assessment 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.

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Based on these assessments, we did not recognize any goodwill impairments during 2023 or 2022.

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.

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The gross carrying amounts and accumulated amortization relating to other intangible assets at December 31, 2023 and 2022 are as follows:

Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net

(in thousands) Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net

Customer relationships $ 2,252,553 $ ( 695,934 ) $ 1,556,619 $ 2,121,171 $ ( 566,111 ) $ 1,555,060

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Amortization expense for other intangible assets totaled $ 147 million, $ 157 million, and $ 103 million for the years ended December 31, 2023, 2022, and 2021, respectively.

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

Estimated other intangible assets amortization expense for the succeeding five years is as follows (in thousands):

2024 $ 131,365

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Property, plant and equipment as of December 31, 2023 and December 31, 2022, consisted of the following:

(in thousands) 2023 2022

Land $ 95,865 $ 115,845

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Property, plant and equipment, net $ 1,616,785 $ 1,326,014

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

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.

We have an A/R sales agreement to sell short-term receivables from certain customer trade accounts to the unaffiliated financial institutions on a revolving basis.

The A/R Sales Agreement has a 3 year term, which we intend to renew.

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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 assets of the SPE would be first available to satisfy the creditor claims of the unaffiliated financial institutions.

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.

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

We account for transactions with the unaffiliated financial institutions 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, 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 amount of receivables pledged as collateral as of December 31, 2023 and December 31, 2022 is approximately $ 1.2 billion and $ 1.1 billion, respectively.

We continue to be involved with the receivables transferred by the SPE to the unaffiliated financial institutions 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 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).

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 $ 1.0 billion and $ 800 million as of December 31, 2022 and December 31, 2021, respectively.

Total principal amount outstanding of receivables sold is approximately $ 1.0 billion and $ 1.0 billion as of December 31, 2023 and December 31, 2022, respectively.

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

December 31, 2022 December 31, 2021

Receivables sold to the financial institution and derecognized $ 8,946,730 $ 7,520,474

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

Receivables sold to the financial institutions and derecognized $ 8,673,477 $ 8,946,730

Cash collected on sold receivables $ 8,673,472 $ 8,746,740

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

Those fees, which totaled $ 60 million, $ 27 million, and $ 11 million in 2023, 2022, and 2021,

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

3 unchanged sentences

At December 31, 2023, 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.

Due to the workers’ compensation and insurance reserve requirements in certain states, we also had unused letters of credit of approximately $ 71 million outstanding at December 31, 2023 and 2022.

On November 1, 2023, we issued $ 425 million of unsecured 6.50 % Senior Notes due 2028.

Simultaneously, we issued $ 375 million of unsecured 6.88 % Senior Notes due 2033.

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

For both offerings, interest is payable semi-annually on November 1 and May 1 of each year, beginning May 1, 2024.

We utilized the proceeds from these offerings to repay the Series F Private Placement Notes and outstanding indebtedness under the Unsecured Revolving Credit Facility and for other general corporate purposes.

On November 29, 2023, we established a commercial paper program that allows us to issue unsecured commercial paper notes up to $ 1.5 billion outstanding.

The maturities of the commercial paper notes vary but may not exceed 364 days from the date of issuance.

The commercial paper notes are sold under customary terms in the commercial paper market and will rank pari passu with unsecured and unsubordinated indebtedness.

The notes are issued at par less a discount representing an interest factor or, if interest bearing, at par.

The net proceeds of issuances of the commercial paper notes are expected to be used for general corporate purposes.

As of December 31, 2023, we had no borrowings outstanding under our commercial paper program.

The following table summarizes our debt as of December 31, 2023 and December 31, 2022:

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

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

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

250,000 250,000

June 30, 2019, Series A Senior Unsecured Notes, A$ 155,000 , 3.10 % fixed, due June 30, 2024

2 unchanged sentences

248,355 240,840

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

500,000 500,000

June 30, 2019, Series B Senior Unsecured Notes, A$ 155,000 , 3.43 % fixed, due June 30, 2026

6 unchanged sentences

120,000 120,000

November 1, 2023 Senior Unsecured Notes, $ 425,000 , 6.50 % fixed, due November 1, 2028

May 31, 2019, Series A Senior Unsecured Notes, € 50,000 , 1.55 % fixed, due May 31, 2029

2 unchanged sentences

137,975 133,800

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

500,000 500,000

May 31, 2019, Series B Senior Unsecured Notes, € 100,000 , 1.74 % fixed, due May 31, 2031

110,380 107,040

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

500,000 500,000

October 30, 2017, Series M Senior Unsecured Notes, € 100,000 , 2.32 % fixed, due October 30, 2032

110,380 107,040

November 1, 2023 Senior Unsecured Notes, $ 375,000 , 6.88 % fixed, due November 1, 2033

May 31, 2019, Series C Senior Unsecured Notes, € 100,000 , 1.95 % fixed, due May 31, 2034

2 unchanged sentences

Total unsecured debt 3,934,374 3,351,185

Unamortized debt issuance costs ( 12,236 ) ( 8,041 )

Unamortized discounts ( 10,126 ) ( 4,156 )

Unamortized discount and debt issuance cost ( 28,146 ) ( 22,362 )

Total debt 3,906,228 3,328,823

1 unchanged sentence

Long-term debt, excluding current portion $ 3,550,930 $ 3,076,794

Approximate maturities under our credit facilities are as follows:

The following table summarizes scheduled maturities of our debt for the years succeeding December 31, 2023 (in thousands):

2024 $ 355,298

Thereafter 1,899,306

Supply Chain Finance Programs

Several global financial institutions offer voluntary supply chain finance (“SCF”) programs which enable our suppliers (generally those that grant extended terms), at their sole discretion, to sell their receivables from us to these financial institutions on a non-recourse basis at a rate that takes advantage of our credit rating and may be beneficial to them.

We and our suppliers agree on commercial terms for the goods and services we procure, including prices, quantities and payment terms, regardless of whether the supplier elects to participate in the SCF program.

Our current payment terms with the majority of our suppliers range from 30 to 360 days.

The suppliers sell goods or services, as applicable, to us and they issue the associated invoices to us based on the agreed-upon contractual terms.

Then, if they are participating in the SCF program, our suppliers, at their sole discretion, determine which invoices, if any, they want to sell to the financial institutions.

In turn, we direct payment to the financial institutions, rather than the suppliers, for the invoices sold to the financial institutions.

No guarantees are provided by us or any of our subsidiaries on third-party performance under the SCF program;

however, we guarantee the payment by our subsidiaries to the financial institutions participating in the SCF program for the applicable invoices.

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.

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.

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

Obligations outstanding at the beginning of the year $ 3,106,713 $ 2,678,205

Invoices confirmed during the year 3,987,656 4,079,259

Confirmed invoices paid during the year ( 4,060,279 ) ( 3,650,751 )

Confirmed obligations outstanding at the end of the year $ 3,034,090 $ 3,106,713

Derivatives and Hedging

5 unchanged sentences

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:

December 31, 2023 December 31, 2022

2 unchanged sentences

Forward contracts Prepaid expenses and other current assets $ 606,950 $ 37,676 $ 606,950 $ 46,670

Forward contracts Other current liabilities $ 106,800 $ 3,064 $ 235,180 $ 2,935

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

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

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

2022 2021 2020 2022 2021 2020

Year Ended December 31,

Cash Flow Hedges:

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

Forward contract Other current liabilities $ 106,800 $ 4,383 $ 106,800 $ 3,064

Foreign currency debt Current portion of debt and long-term debt € 700,000 $ 772,660 € 700,000 $ 749,280

The table below presents pre-tax gains and losses related to net investment hedges for the year ended December 31:

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

(in thousands) 2023 2022 2021 2023 2022 2021

Net Investment Hedges:

11 unchanged sentences

The table below presents the locations of the operating lease assets and liabilities on the consolidated balance sheets:

Balance Sheet Line Item December 31, 2022 December 31, 2021

(in thousands) Balance Sheet Line Item December 31, 2023 December 31, 2022

Operating lease assets Operating lease assets $ 1,268,742 $ 1,104,678

11 unchanged sentences

Weighted average discount rate 3.67 % 2.51 %

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized on the consolidated balance sheets as of December 31, 2022:

2024 $ 348,947

5 unchanged sentences

Future minimum lease payments exclude $ 77 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.

These leases are expected to commence in 2024 with lease terms of 3 to 15 years.

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

2022 2021 2020

(in thousands) 2023 2022 2021

Operating lease costs $ 380,730 $ 350,025 $ 336,228

7 unchanged sentences

The plan covering U.S.

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

qualified defined benefit plan as of December 31, 2013.

employees is noncontributory, and our U.S.

qualified defined benefit plan was frozen as of December 31, 2013.

No further benefits were provided after this date for additional credited service or earnings, and all participants became fully vested as of December 31, 2013.

18 unchanged sentences

Changes in benefit obligations for the years ended December 31, 2023 and 2022 were:

(in thousands) 2023 2022

Changes in benefit obligation

3 unchanged sentences

Plan participants’ contributions 1,765 1,892

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

Actuarial loss (gain) 76,072 ( 546,266 )

Foreign currency exchange rate changes 5,580 ( 15,744 )

Gross benefits paid ( 137,742 ) ( 135,907 )

Curtailments — ( 80 )

Plan amendments 2,464 —

Settlements — ( 276 )

4 unchanged sentences

The total accumulated benefit obligation for our defined benefit pension plans in the U.S., Canada, and Europe was approximately $ 2.0 billion and $ 1.9 billion at December 31, 2023 and 2022, 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.

pension plan, there was a net actuarial liability loss of $ 50 million and an asset gain of $ 47 million.

The liability loss was comprised primarily from a decrease in the discount rate.

supplemental retirement plan, there was a net actuarial liability loss of $ 20 million.

The liability loss is the result of a $ 5 million loss associated with a decrease in the discount rate, an $ 11.2 million demographic loss related to new entrants, and an $ 8.5 million loss associated with higher than expected incentive payouts.These losses were offset by updates that were made to other assumptions, including termination rates, retirement rates, percent married, spouse age difference, and benefit payment form elected based on the results of an experience study performed during 2023.

The net impact of these updates is a gain of $ 4.8 million.

The assumptions used to measure the pension benefit obligations for the plans at December 31, 2023 and 2022, were:

2 unchanged sentences

Changes in plan assets for the years ended December 31, 2023 and 2022 were:

(in thousands) 2023 2022

Changes in plan assets

10 unchanged sentences

For the years ended December 31, 2023 and 2022, 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:

(in thousands) 2023 2022

Aggregate projected benefit obligation $ 231,741 $ 208,939

1 unchanged sentence

For the years ended December 31, 2023 and 2022, the aggregate accumulated benefit obligation and aggregate fair value of plan assets for plans with accumulated benefit obligations in excess of plan assets were as follows:

(in thousands) 2023 2022

Aggregate accumulated benefit obligation $ 215,380 $ 192,421

14 unchanged sentences

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.

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.

Our investment strategy with respect to pension plan assets is to generate a return in excess of the passive portfolio benchmark ( 38 % U.S.

Large-cap stocks, 4 % U.S.

Mid-cap stocks, 5 % U.S.

Small-cap stocks, 10 % International stocks, 3 % Emerging Market stocks and 40 % Barclays U.S.

Gov/Credit Index).

11 unchanged sentences

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

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

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

(Level 2) Significant Unobservable Inputs

14 unchanged sentences

Total $ 2,233,079 $ 53,876 $ 1,282,756 $ 896,446 $ 1

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

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

(Level 2) Significant Unobservable Inputs

9 unchanged sentences

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

Convertible securities 1,159 — — 1,159 —

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

Municipal bonds 14,442 — — 14,442 —

Cash surrender value of life insurance policies 167 — 167 — —

Options and Futures 35 — 35 — —

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

5 unchanged sentences

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

(in thousands) 2023 2022

Other long-term asset $ 483,037 $ 414,834

2 unchanged sentences

$ 250,354 $ 204,418

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

Amounts recognized in accumulated other comprehensive loss consist of:

(in thousands) 2023 2022

Net actuarial loss $ 697,794 $ 682,884

4 unchanged sentences

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

Information about the expected cash flows for the pension plans follows:

Information about the expected cash flows for the pension plans follows (in thousands):

Employer contribution

8 unchanged sentences

Net periodic benefit income included the following components:

2022 2021 2020

(in thousands) 2023 2022 2021

Service cost $ 5,991 $ 10,204 $ 12,218

6 unchanged sentences

Pension benefits also include amounts related to supplemental retirement plans.

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

2022 2021 2020

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

(in thousands) 2023 2022 2021

Current year actuarial loss (gain) $ 23,289 $ 97,412 $ ( 264,547 )

1 unchanged sentence

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

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

Recognition of curtailment loss — — ( 5 )

Other 2,464 68 ( 29 )

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 )

Total recognized in other comprehensive income (loss) $ 15,700 $ 59,724 $ ( 315,168 )

Total recognized in net periodic benefit income and other comprehensive income (loss) $ ( 28,750 ) $ 32,614 $ ( 334,492 )

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

7 unchanged sentences

Total plan expense was approximately $ 77 million in 2023, $ 69 million in 2022, and $ 60 million in 2021.

Acquisitions, Divestitures and Discontinued Operations

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 $ 322 million, net of cash acquired, during the year ended December 31, 2023.

Approximately $ 300 million was related to our Automotive segment and $ 22 million was related to Industrial.

During the year we recognized approximately $ 389 million and $ 48 million of sales, net of store closures, related to our 2023 Automotive and Industrial acquisitions, respectively.

We recognized approximately $ 219 million of goodwill and other intangible assets associated with these acquisitions.

Other intangible assets acquired of $ 99 million 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, 2023.

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.

We recognized approximately $ 562 million of sales, 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.

5 unchanged sentences

As of January 3, 2022

Initial Balance Measurement Period Adjustments As Adjusted

(in thousands) Initial Balance Measurement Period Adjustments As Adjusted

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

29 unchanged sentences

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.

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

We recognized 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, 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), 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,

2022 2021 2020

Net sales $ — $ — $ 846,944

Cost of goods sold — — 632,007

Gross profit — — 214,937

Operating and non-operating expenses — — 179,461

Loss on disposal — — 223,928

Loss before income taxes — — ( 188,452 )

Income taxes — — 4,045

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.

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

Share-Based Compensation

20 unchanged sentences

The aggregate intrinsic value of SARs exercised and RSUs vested during the years ended December 31, 2023, 2022, and 2021 was $ 89 million, $ 62 million, and $ 73 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 RSUs is based on the price of our stock on the date of grant.

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

5 unchanged sentences

Comprehensive Loss by Component

Pension and Other Post-Retirement Benefits Cash Flow Hedges Foreign Currency Translation Total

(in thousands) Pension and Other Post-Retirement Benefits Cash Flow Hedges Foreign Currency Translation Total

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

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

Other comprehensive (loss) income before reclassifications ( 18,965 ) 2,765 64,429 48,229

Amounts reclassified from accumulated other comprehensive loss 7,634 ( 193 ) — 7,441

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

Net current period other comprehensive (loss) income ( 11,331 ) 2,572 64,429 55,670

Ending balance, December 31, 2023 $ ( 517,941 ) $ — $ ( 458,931 ) $ ( 976,872 )

1 unchanged sentence

Comprehensive Loss by Component

Pension and Other Post-Retirement Benefits Cash Flow Hedges Foreign Currency Translation Total

(in thousands) Pension and Other Post-Retirement Benefits Cash Flow Hedges Foreign Currency Translation Total

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

Other comprehensive income 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 229,641 14,965 ( 65,843 ) 178,763

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

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

3 unchanged sentences

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

(in thousands) 2023 2022

Deferred tax assets related to:

2 unchanged sentences

Pension liability not yet deducted for tax purposes 175,643 168,925

Capital loss — 7,333

Net operating loss 49,270 49,787

14 unchanged sentences

The components of income before income taxes are as follows:

2022 2021 2020

(in thousands) 2023 2022 2021

United States $ 1,164,914 $ 1,100,584 $ 762,472

2 unchanged sentences

The components of income tax expense are as follows:

2022 2021 2020

(in thousands) 2023 2022 2021

Federal $ 201,929 $ 196,634 $ 116,425

6 unchanged sentences

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

2022 2021 2020

(in thousands) 2023 2022 2021

Statutory rate applied to income (1) $ 365,892 $ 330,246 $ 252,073

1 unchanged sentence

Taxation of foreign operations, net (2) 4,666 3,347 2,299

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

Foreign rate change - deferred tax remeasurement — — 17,032

11 unchanged sentences

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;

Some audits may conclude in the next 12 months and the unrecognized tax benefits recognized 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 recognized uncertain tax positions in connection with the audits;

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:

2022 2021 2020

(in thousands) 2023 2022 2021

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

8 unchanged sentences

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.

As of December 31, 2023, we estimate that we have an outside basis difference in certain foreign subsidiaries of approximately $ 1.2 billion, 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.

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.

In 2023, certain countries have enacted legislation and implemented policies resulting from the Organization for Economic Co-operation and Development’s (“OECD”) Anti-Base Erosion and Profit Shifting project under Pillar Two, which establishes a global 15% per-country minimum tax.

The rules are applicable for fiscal years starting on or

after December 31, 2023.

We estimate an immaterial impact to the tax provision related to the Pillar Two legislation in 2024 and will continue to monitor implementation in the countries in which we operate.

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”).

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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.

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.

The amount accrued for pending and future claims was $ 244 million as of December 31, 2023, which represented our best estimate of the liability within our calculated range of $ 196 million to $ 277 million, discounted using a discount rate of 3.88 %.

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 $ 308 million and $ 285 million as of December 31, 2023 and December 31, 2022, respectively.

The amounts recognized 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.

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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.

On February 19, 2020, the

Washington Court of Appeals issued an order entirely reversing the jury's finding on damages and ordering a new trial on damages.

The plaintiffs subsequently appealed this order to the Washington Supreme Court.

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

Subsequent Events

In February 2024, we approved and announced a global restructuring designed to better align our assets and further improve the efficiency of the business.

This initiative includes an announced voluntary retirement offer in the U.S., along with a rationalization and optimization of certain distribution centers, stores and other facilities.

We expect to incur costs of between $ 100 million and $ 200 million related to the restructuring efforts in 2024.

We expect to substantially complete the initiative by the end of 2025.

The estimated charges that we expect to incur are subject to a number of assumptions, and actual amounts may differ materially from such estimates.

We may also incur additional charges not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of these initiatives.

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