What changed in this filing

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Item 1. Financial Statements

2024-07-23 compared with 2024-04-18 · 99 added, 57 removed, 317 unchanged (33% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data) March 31, 2024 December 31, 2023

(in thousands, except share and per share data) June 30, 2024 December 31, 2023

Current assets:

43 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended March 31,

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

(in thousands, except per share data) 2024 2023 2024 2023

21 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31,

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

(in thousands) 2024 2023 2024 2023

Net income $ 295,544 $ 344,494 $ 544,438 $ 648,451

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

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

Foreign currency translation adjustments 15,278 ( 9,540 ) ( 64,642 ) 14,287

Pension and postretirement benefit adjustments, net of income taxes in 2024 — $ 1,063 ;

Other comprehensive (loss) income, net of income taxes ( 77,032 ) 25,741

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

— 2,572 — 2,572

Pension and postretirement benefit adjustments, net of income taxes in 2024 — $ 1,063 and $ 2,126 ;

2023 — $ 702 and $ 1,405 respectively

2,887 1,912 5,775 3,826

Other comprehensive income (loss), net of income taxes 18,165 ( 5,056 ) ( 58,867 ) 20,685

Comprehensive income $ 313,709 $ 339,438 $ 485,571 $ 669,136

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

(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, 2024 139,335,342 $ 139,335 $ 179,349 $ ( 1,053,904 ) $ 5,137,597 $ 4,402,377 $ 14,799 $ 4,417,176

Net income — — — — 295,544 295,544 — 295,544

Other comprehensive income, net of tax — — — 18,165 — 18,165 — 18,165

Cash dividend declared, $ 1.0000 per share

— — — — ( 139,376 ) ( 139,376 ) — ( 139,376 )

Shares issued from employee incentive plans 259,702 259 ( 16,828 ) — — ( 16,569 ) — ( 16,569 )

Share-based compensation — — 18,006 — — 18,006 — 18,006

Purchase of stock ( 249,026 ) ( 248 ) — — ( 37,251 ) ( 37,499 ) — ( 37,499 )

Noncontrolling interest activities — — — — — — 676 676

June 30, 2024 139,346,018 $ 139,346 $ 180,527 $ ( 1,035,739 ) $ 5,256,514 $ 4,540,648 $ 15,475 $ 4,556,123

Six Months Ended June 30, 2024

January 1, 2024 139,567,071 $ 139,567 $ 173,025 $ ( 976,872 ) $ 5,065,327 $ 4,401,047 $ 15,938 $ 4,416,985

7 unchanged sentences

Noncontrolling interest activities — — — — — — ( 463 ) ( 463 )

March 31, 2024 139,335,342 $ 139,335 $ 179,349 $ ( 1,053,904 ) $ 5,137,597 $ 4,402,377 $ 14,799 $ 4,417,176

Three Months Ended March 31, 2023

June 30, 2024 139,346,018 $ 139,346 $ 180,527 $ ( 1,035,739 ) $ 5,256,514 $ 4,540,648 $ 15,475 $ 4,556,123

Three Months Ended June 30, 2023

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

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

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

Cash dividend declared, $ 0.9500 per share

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

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

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

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

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

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

Six Months Ended June 30, 2023

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

7 unchanged sentences

Noncontrolling interest activities — — — — — — 499 499

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

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

See accompanying Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2024 2023

40 unchanged sentences

These adjustments are of a normal recurring nature.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of results for the year ended December 31, 2024.

The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of results for the year ended December 31, 2024.

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

20 unchanged sentences

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

(in thousands) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

Prepaid expenses $ 151,407 $ 110,863

9 unchanged sentences

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Instrument Balance Sheet Location Notional Balance Notional Balance

6 unchanged sentences

(in thousands) 2024 2023 2024 2023

Three Months Ended March 31,

Three Months Ended June 30,

Net investment hedges:

2 unchanged sentences

Total $ 12,664 $ ( 6,272 ) $ 4,651 $ 3,158

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

(in thousands) 2024 2023 2024 2023

Six Months Ended June 30,

Net investment hedges:

Forward contracts $ 20,256 $ ( 14,536 ) $ 9,020 $ 6,317

Foreign currency debt 22,750 ( 11,200 ) — —

Total $ 43,006 $ ( 25,736 ) $ 9,020 $ 6,317

Fair Value of Financial Instruments

As of March 31, 2024, the fair value of our senior unsecured notes was approximately $ 3.7 billion, which are designated as Level 2 in the fair value hierarchy.

As of June 30, 2024, the fair value of our senior unsecured notes was approximately $ 3.6 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.

As of March 31, 2024, we were in compliance with all such covenants.

As of March 31, 2024, the total borrowings of the independents and affiliates subject to guarantee by us were approximately $ 934 million.

As of June 30, 2024, we were in compliance with all such covenants.

As of June 30, 2024, the total borrowings of the independents and affiliates subject to guarantee by us were approximately $ 757 million.

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

We regularly monitor the performance of these loans and the ongoing operating results, financial condition and ratings from credit rating agencies of the independents and affiliates that participate in the guarantee programs.

In the event that we are required to make payments in connection with these guarantees, we would obtain and liquidate certain collateral

pledged by the independents or affiliates (e.g., accounts receivable and inventory) to recover all or a substantial portion of the amounts paid under the guarantees.

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

In the event that we are required to make payments in connection with these guarantees, we would obtain and liquidate certain collateral pledged by the independents or affiliates (e.g., accounts receivable and inventory) to recover all or a substantial portion of the amounts paid under the guarantees.

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

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

As of March 31, 2024, there are no material guaranteed loans for which the borrower is experiencing financial difficulty and recovery is expected to be provided substantially through the operation or sale of the collateral.

As of March 31, 2024, we have recognized certain assets and liabilities amounting to $ 55 million each for the guarantees related to the independents’ and affiliates’ borrowings.

As of June 30, 2024, 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, 2024, we have recognized $ 52 million of certain assets and liabilities for the guarantees related to the independents’ and affiliates’ borrowings.

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

12 unchanged sentences

All activity related to amounts due to suppliers that elected to participate in the SCF program is reflected in cash flows from operating activities in our Condensed Consolidated Statement of Cash Flows.

As of March 31, 2024 and December 31, 2023, the outstanding payment obligations to the financial institutions are $ 3.0 billion and $ 3.0 billion, respectively.

The amount settled through the SCF program was $ 1.0 billion and $ 1.0 billion for the three months ended March 31, 2024 and March 31, 2023, respectively.

(in thousands) March 31, 2024

As of June 30, 2024 and December 31, 2023, the outstanding payment obligations to the financial institutions are $ 3.1 billion and $ 3.0 billion, respectively.

(in thousands) June 30, 2024

Obligations outstanding at the beginning of the year $ 3,041,187

1 unchanged sentence

Confirmed invoices paid during the year ( 1,967,840 )

Confirmed obligations outstanding at the end of the year $ 3,034,602

Confirmed obligations outstanding at the end of period $ 3,131,931

Earnings Per Share

4 unchanged sentences

The following table summarizes basic and diluted shares outstanding:

Three Months Ended March 31,

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

(in thousands, except per share data) 2024 2023 2024 2023

1 unchanged sentence

Weighted average common shares outstanding 139,358 140,574 139,394 140,688

Dilutive effect of stock options and non-vested restricted stock awards 667 921

Dilutive effect of non-vested restricted stock awards 471 673 567 808

Weighted average common shares outstanding – assuming dilution 139,829 141,247 139,961 141,496

3 unchanged sentences

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

Three Months Ended March 31,

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

(in thousands) 2024 2023 2024 2023

12 unchanged sentences

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

Three Months Ended March 31,

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

(in thousands) 2024 2023 2024 2023

1 unchanged sentence

Restructuring and other costs (2) $ ( 37,247 ) $ — $ ( 120,289 ) $ —

Acquisition and integration related costs and other (3) ( 24,778 ) — ( 24,778 ) —

Total other unallocated costs $ ( 62,025 ) $ — $ ( 145,067 ) $ —

(2) Please refer to the Restructuring Footnote in the Notes to Condensed Consolidated Financial Statements for more information.

Net sales are disaggregated by geographical region for each of our reportable segments, as we deem this presentation best depicts how the nature, amount, timing and uncertainty of net sales and cash flows are affected

by economic factors.

(2) Amount reflects costs related to the global restructuring initiative which includes a voluntary retirement offer in the U.S., inventory liquidation costs, and rationalization and optimization of certain distribution centers, stores and other facilities.

(3) Amount primarily reflects integration costs related to the completion of the acquisition of Motor Parts and Equipment Corporation ("MPEC") in April 2024, including professional services costs, personnel costs, and lease and other exit costs.

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

Three Months Ended March 31,

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

(in thousands) 2024 2023 2024 2023

14 unchanged sentences

As cash is collected on sold receivables, the SPE continuously transfers ownership and control of new qualifying receivables to the unaffiliated financial institutions so that the total principal amount outstanding of receivables sold is approximately $ 1.0 billion at any point in time (which is the maximum amount allowed under the agreement as amended on January 3, 2022).

The total principal amount outstanding of receivables sold is approximately $ 1.0 billion as of both March 31, 2024 and December 31, 2023.

The amount of receivables pledged as collateral as of March 31, 2024 and December 31, 2023 is approximately $ 1.4 billion and $ 1.2 billion, respectively.

The total principal amount outstanding of receivables sold is approximately $ 1.0 billion as of both June 30, 2024 and December 31, 2023.

The amount of receivables pledged as collateral as of June 30, 2024 and December 31, 2023 is approximately $ 1.5 billion and $ 1.2 billion, respectively.

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

Three Months Ended March 31,

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

(in thousands) 2024 2023 2024 2023

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 $ 14 million for the three months ended March 31, 2024 and 2023, respectively, are recorded within other non-operating expense (income) in the Condensed Consolidated Statements of Income.

Those fees, which totaled $ 31 million and $ 29 million for the six months ended June 30, 2024 and 2023, respectively, are recorded within other non-operating (income) expense in the Condensed Consolidated Statements of Income.

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

The reserve recognized for this recourse obligation as of March 31, 2024 and December 31, 2023 is not material.

The reserve recognized for this recourse obligation as of June 30, 2024 and December 31, 2023 is not material.

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

Employee Benefit Plans

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

Pension Benefits

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

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

(in thousands) 2024 2023 2024 2023

7 unchanged sentences

Pension benefits also include amounts related to supplemental retirement plans.

We acquired several businesses for approximately $ 132 million and $ 40 million, net of cash acquired, during the three months ended March 31, 2024 and March 31, 2023, respectively.

During the three months ended March 31, 2024, we recognized approximately $ 99 million and $ 10 million of revenue, net of store closures, related to our current year Automotive and Industrial acquisitions, respectively.

We recorded approximately $ 92 million of goodwill and other intangible assets associated with these acquisitions, primarily related to our European Automotive acquisitions.

Other intangible assets acquired of $ 41 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.

We acquired several businesses for approximately $ 651 million, which includes certain non-cash consideration, and $ 116 million, net of cash acquired, during the six months ended June 30, 2024 and June 30, 2023, respectively.

We recognized approximately $ 100 million and $ 5 million of revenue related to our current year Automotive and Industrial acquisitions, respectively.

We recorded approximately $ 283 million of goodwill and other intangible assets associated with these acquisitions.

Other intangible assets acquired of $ 120 million consisted of customer relationships with weighted average amortization lives of 19 years.

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

The fair values of the assets acquired and liabilities assumed are preliminary.

Additional adjustments, particularly to inventory and intangible assets, may be made to the acquisition accounting during the measurement period, which may be up to one year from the respective acquisition date.

The results of operations for acquired businesses are included in our Condensed Consolidated Statements of Income beginning on their respective acquisition dates.

These acquisitions included MPEC, the largest independent owner of NAPA Auto Part stores in the U.S., which we acquired on April 30, 2024.

We recognized approximately $ 100 million of goodwill and other intangible assets associated with MPEC.

Approximate values of other assets acquired and liabilities assumed included inventory of $ 200 million, operating lease assets of $ 200 million and operating lease liabilities of $ 200 million.

Accumulated Other Comprehensive Loss

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

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

Changes in Accumulated Other

5 unchanged sentences

Other comprehensive income (loss), net of income taxes 5,775 — ( 64,642 ) ( 58,867 )

Ending balance, March 31, 2024 $ ( 515,053 ) $ — $ ( 538,851 ) $ ( 1,053,904 )

Ending balance, June 30, 2024 $ ( 512,166 ) $ — $ ( 523,573 ) $ ( 1,035,739 )

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 — — 23,827 23,827

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

Amounts reclassified from accumulated other comprehensive loss 3,826 ( 193 ) — 3,633

Other comprehensive income, net of income taxes 1,914 — 23,827 25,741

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

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

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

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 $ 235 million as of March 31, 2024, which represents our best estimate of the liability within our calculated range of $ 187 million to $ 265 million, discounted using a discount rate of 4.20 %.

The amount accrued for pending and future claims was $ 225 million as of June 30, 2024, which represents our best estimate of the liability within our calculated range of $ 180 million to $ 255 million, discounted using a discount rate of 4.36 %.

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

Our undiscounted product liability was $ 297 million and $ 308 million as of March 31, 2024 and December 31, 2023, respectively.

Our undiscounted product liability was $ 285 million and $ 308 million as of June 30, 2024 and December 31, 2023, respectively.

There have been no significant developments to the information presented in our 2023 Annual Report on Form 10-K with respect to litigation or commitments and contingencies.

5 unchanged sentences

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.

In the first quarter 2024, we incurred $ 83 million in restructuring and other costs.

For the three and six months ended June 30, 2024, we incurred $ 37 million and $ 120 million, respectively, in costs related to our global restructuring initiative.

We expect to incur total costs up to $ 200 million related to the global restructuring efforts in 2024 and to substantially complete the initiative by the end of 2025.

1 unchanged sentence

The global restructuring was approved and funded by our corporate office and therefore these costs are not allocated to our segments.

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

For the three months ended June 30, 2024, costs of $ 37 million include severance and other employee costs of $ 4 million, other restructuring costs of $ 26 million, and restructuring inventory liquidation costs of $ 7 million, which are reflected in cost of goods sold.

The table below summarizes the activity related to these costs for the six months ended June 30, 2024.

(in thousands) Severance and other employee costs Other restructuring costs (1)

4 unchanged sentences

Translation ( 90 ) 2 ( 88 )

Liability as of March 31, 2024 $ 55,902 $ 145 $ 56,047

Liability as of June 30, 2024

$ 27,681 $ 1,134 $ 28,815

(1) Amount reflects moving expenses, accelerated rent, professional fees, facility closure costs and asset impairment costs that are attributable to our restructuring.

Amount excludes a $ 7 million noncash charge reflected in cost of goods sold for inventory liquidated rather than moved during facility consolidation in connection with the restructuring.

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