gpc-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-5690

__________________________________________

GENUINE PARTS COMPANY

(Exact name of registrant as specified in its charter)

__________________________________________


GA						58-0254510
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2999 WILDWOOD PARKWAY,

30339

ATLANTA,

(Address of principal executive offices)

(Zip Code)

678-934-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of each exchange on which registered

Common Stock, $1.00 par value per share

GPC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 140,515,640 shares of common stock outstanding as of April 17, 2023.


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PART I		Page

Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Income	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Statements of Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20

PART II

Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 6.	Exhibits	22
	Signatures	23

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


(in thousands, except share and per share data)	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	651,183	$	653,463
Trade accounts receivable, less allowance for doubtful accounts (2023 – $56,236; 2022 – $53,872)	2,420,848		2,188,868
Merchandise inventories, net	4,579,590		4,441,649
Prepaid expenses and other current assets	1,532,810		1,532,759
Total current assets	9,184,431		8,816,739
Goodwill	2,599,770		2,588,113
Other intangible assets, less accumulated amortization	1,790,120		1,812,510
Property, plant and equipment, less accumulated depreciation (2023 – $1,476,073; 2022 – $1,435,677)	1,373,541		1,326,014
Operating lease assets	1,121,007		1,104,678
Other assets	838,663		847,325
Total assets	$	16,907,532	$	16,495,379

Liabilities and equity
Current liabilities:
Trade accounts payable	$	5,677,134	$	5,456,550
Current portion of debt	290,326		252,029
Dividends payable	133,737		126,191
Other current liabilities	1,816,327		1,851,340
Total current liabilities	7,917,524		7,686,110
Long-term debt	3,094,319		3,076,794
Operating lease liabilities	844,174		836,019
Pension and other post–retirement benefit liabilities	198,552		197,879
Deferred tax liabilities	391,526		391,163
Other long-term liabilities	521,801		502,967
Equity:
Preferred stock, par value – $1 per share; authorized – 10,000,000 shares; none issued	—		—
Common stock, par value – $1 per share; authorized – 450,000,000 shares; issued and outstanding – 2023 – 140,545,475 shares; 2022 – 140,941,649 shares	140,545		140,941
Additional paid-in capital	147,690		140,324
Accumulated other comprehensive loss	(1,006,801)		(1,032,542)
Retained earnings	4,644,770		4,541,640
Total parent equity	3,926,204		3,790,363
Noncontrolling interests in subsidiaries	13,432		14,084
Total equity	3,939,636		3,804,447
Total liabilities and equity	$	16,907,532	$	16,495,379

See accompanying Notes to Condensed Consolidated Financial Statements.

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GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


	Three Months Ended March 31,
(in thousands, except per share data)	2023		2022
Net sales	$	5,765,118	$	5,294,635
Cost of goods sold	3,751,717		3,468,688
Gross profit	2,013,401		1,825,947
Operating expenses:
Selling, administrative and other expenses	1,511,244		1,403,979
Depreciation and amortization	87,215		87,369
Provision for doubtful accounts	5,639		4,494
Total operating expenses	1,604,098		1,495,842
Non-operating expense (income):
Interest expense, net	16,864		19,850
Other	(11,967)		(15,461)
Total non-operating expense (income)	4,897		4,389
Income before income taxes	404,406		325,716
Income taxes	100,449		79,878
Net income	$	303,957	$	245,838
Dividends declared per common share	$	0.950	$	0.895
Basic earnings per share	$	2.16	$	1.73
Diluted earnings per share	$	2.14	$	1.72

See accompanying Notes to Condensed Consolidated Financial Statements.

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GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended March 31,
(in thousands)	2023		2022
Net income	$	303,957	$	245,838
Other comprehensive income, net of income taxes:
Foreign currency translation adjustments, net of income taxes in 2023 — $5,255; 2022 — $8,411	23,827		42,132
Cash flow hedge adjustments, net of income taxes in 2023 — $0; 2022 — $1,384	—		3,741
Pension and postretirement benefit adjustments, net of income taxes in 2023 — $703; 2022 — $2,580	1,914		6,989
Other comprehensive income, net of income taxes	25,741		52,862
Comprehensive income	$	329,698	$	298,700

See accompanying Notes to Condensed Consolidated Financial Statements.

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GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)


	Three Months Ended March 31, 2023
(in thousands, except share and per share data)	Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Parent Equity		Non-controlling Interests in Subsidiaries		Total Equity
January 1, 2023	140,941,649	$	140,941	$	140,324	$	(1,032,542)	$	4,541,640	$	3,790,363	$	14,084	$	3,804,447
Net income	—	—		—		—		303,957		303,957		—		303,957
Other comprehensive income, net of tax	—	—		—		25,741		—		25,741		—		25,741
Cash dividend declared, $0.9500 per share	—	—		—		—		(133,737)		(133,737)		—		(133,737)
Shares issued from employee incentive plans	14,832	15		(1,280)		—		—		(1,265)		—		(1,265)
Share-based compensation	—	—		8,646		—		—		8,646		—		8,646
Purchase of stock	(411,006)	(411)		—		—		(67,090)		(67,501)		—		(67,501)
Noncontrolling interest activities	—	—		—		—		—		—		(652)		(652)
March 31, 2023	140,545,475	$	140,545	$	147,690	$	(1,006,801)	$	4,644,770	$	3,926,204	$	13,432	$	3,939,636


	Three Months Ended March 31, 2022
(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
January 1, 2022	142,180,683	$	142,181	$	119,975	$	(857,739)	$	4,086,325	$	3,490,742	$	12,548	$	3,503,290
Net income	—	—		—		—		245,838		245,838		—		245,838
Other comprehensive income, net of tax	—	—		—		52,862		—		52,862		—		52,862
Cash dividend declared, $0.8950 per share	—	—		—		—		(126,891)		(126,891)		—		(126,891)
Shares issued from employee incentive plans	18,670	19		(1,082)		—		—		(1,063)		—		(1,063)
Share-based compensation	—	—		7,171		—		—		7,171		—		7,171
Purchase of stock	(571,604)	(572)		—		—		(72,347)		(72,919)		—		(72,919)
Noncontrolling interest activities	—	—		—		—		—		—		(412)		(412)
March 31, 2022	141,627,749	$	141,628	$	126,064	$	(804,877)	$	4,132,925	$	3,595,740	$	12,136	$	3,607,876

See accompanying Notes to Condensed Consolidated Financial Statements.

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GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Three Months Ended March 31,
(in thousands)	2023		2022
Operating activities:
Net income	$	303,957	$	245,838
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	87,215		87,369
Share-based compensation	8,646		7,171
Excess tax benefits from share-based compensation	(584)		(714)
Changes in operating assets and liabilities	(201,727)		59,144
Net cash provided by operating activities	197,507		398,808
Investing activities:
Purchases of property, plant and equipment	(88,100)		(78,045)
Proceeds from sale of property, plant and equipment	1,971		5,895
Proceeds from sale of investments	80,482		—
Acquisitions and other investing activities	(39,589)		(1,348,795)
Net cash used in investing activities	(45,236)		(1,420,945)
Financing activities:
Proceeds from debt	693,400		2,890,000
Payments on debt	(652,138)		(1,784,585)
Shares issued from employee incentive plans	(1,265)		(1,063)
Dividends paid	(126,191)		(115,876)
Purchases of stock	(67,501)		(72,919)
Other financing activities	(4,118)		(1,593)
Net cash (used in) provided by financing activities	(157,813)		913,964
Effect of exchange rate changes on cash and cash equivalents	3,262		4,248
Net decrease in cash and cash equivalents	(2,280)		(103,925)
Cash and cash equivalents at beginning of period	653,463		714,701
Cash and cash equivalents at end of period	$	651,183	$	610,776

See accompanying Notes to Condensed Consolidated Financial Statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.General

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes required by accounting principles generally accepted in the U.S. (“U.S. GAAP”) for complete financial statements. Except as disclosed herein, there have been no material changes in the information disclosed in the Notes to the Consolidated Financial Statements included in the Annual Report on Form 10-K of Genuine Parts Company (the “Company,” “we,” “our,” “us,” or “its”) for the year ended December 31, 2022. Accordingly, the unaudited Condensed Consolidated Financial Statements and related disclosures herein should be read in conjunction with our 2022 Annual Report on Form 10-K. There were no significant changes to our accounting policies from those disclosed in the Summary of Significant Accounting Policies Footnote in the Notes to Consolidated Financial Statements in our 2022 Annual Report on Form 10-K.

The preparation of interim financial statements requires management to make estimates and assumptions that affect the amounts reported in the unaudited Condensed Consolidated Financial Statements. Specifically, we make estimates and assumptions in our unaudited Condensed Consolidated Financial Statements for inventory adjustments, the accrual of bad debts, credit losses on guaranteed loans, customer sales returns, and volume incentives earned, among others. Inventory adjustments (including adjustments for a majority of inventories that are valued under the last-in, first-out (“LIFO”) method) are accrued on an interim basis and adjusted in the fourth quarter based on the annual book to physical inventory adjustment and LIFO valuation. Reserves for bad debts, credit losses on guaranteed loans and customer sales returns are estimated and accrued on an interim basis based on a consideration of historical experience, current conditions, and reasonable and supportable forecasts. Volume incentives are estimated based upon cumulative and projected purchasing levels.

In the opinion of management, all adjustments necessary for a fair presentation of our financial results for the interim periods have been made. These adjustments are of a normal recurring nature. We have reclassified certain prior period amounts to conform to the current period presentation. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of results for the year ended December 31, 2023. We have evaluated subsequent events through the date the unaudited Condensed Consolidated Financial Statements covered by this quarterly report were issued.

Recent Accounting Pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASU”) 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 not be applicable or are expected to have an immaterial impact on our Condensed Consolidated Financial Statements.

In September 2022, the FASB issued ASU 2022-04, Liabilities-Supplier Finance Programs. This standard requires disclosure of the key terms of outstanding supply chain finance programs and a rollforward of the related amounts due to vendors participating in these programs. The new standard does not affect the recognition, measurement or financial statement presentation of any amounts due. The guidance is effective in the first quarter of 2023, except for the rollforward, which is effective in the first quarter of 2024. For additional information, please refer to the supply chain finance programs section herein.

Derivatives and Hedging

We are exposed to various risks arising from business operations and market conditions, including fluctuations in certain foreign currencies. We use derivative and non-derivative instruments as risk management tools to mitigate the potential impact of foreign exchange rate risks. The objective of using these tools is to reduce fluctuations in our earnings and cash flows associated with changes in these rates. Derivative instruments are recognized in the Condensed Consolidated Balance Sheets at fair value and are designated as Level 2 in the fair value hierarchy. They are valued using inputs other than quoted prices, such as foreign exchange rates and yield curves.

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


		March 31, 2023				December 31, 2022
Instrument	Balance Sheet Location	Notional		Balance		Notional		Balance
Net investment hedges:
Forward contracts	Prepaid expenses and other current assets	$	606,950	$	45,189	$	606,950	$	46,670
Forward contract	Other current liabilities	$	106,800	$	3,748	$	106,800	$	3,064
Foreign currency debt	Long-term debt	€	700,000	$	763,420	€	700,000	$	749,280

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


	(Loss) Gain Recognized in AOCL before Reclassifications				Gain Recognized in Interest Expense for Excluded Components
(in thousands)	2023		2022		2023		2022
Three Months Ended March 31,
Net investment hedges:
Forward contracts	$	(5,324)	$	19,393	$	3,158	$	7,565
Foreign currency debt	(14,140)		11,760		—		—
Total	$	(19,464)	$	31,153	$	3,158	$	7,565

Fair Value of Financial Instruments

As of March 31, 2023 the fair value of our senior unsecured notes was approximately $3.0 billion, which are designated as Level 2 in the fair value hierarchy. Our valuation technique is based primarily on prices and other relevant information generated by observable transactions involving identical or comparable assets or liabilities.

Guarantees

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”). While such borrowings of the independents and affiliates are outstanding, we are required to maintain compliance with certain covenants. At March 31, 2023, we were in compliance with all such covenants.

As of March 31, 2023, the total borrowings of the independents and affiliates subject to guarantee by us were approximately $940 million. 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. To date, we have not had significant losses in connection with guarantees of independents’ and affiliates’ borrowings and the current expected credit loss reserve is not material. As of March 31, 2023, there are no material guaranteed loans for which the borrower is experiencing financial difficulty and recovery is expected to be provided substantially through the operation or sale of the collateral.

As of March 31, 2023, we have recognized certain assets and liabilities amounting to $69 million each for the guarantees related to the independents’ and affiliates’ borrowings. These assets and liabilities are included in other assets and other long-term liabilities in the Condensed Consolidated Balance Sheets. The liabilities relate to our noncontingent obligation to stand ready to perform under the guarantee programs and they are distinct from our current expected credit loss reserve.

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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. As of March 31, 2023 and December 31, 2022, the outstanding payment obligations to the financial institutions are $3.0 billion and $3.1 billion, respectively. The amount settled through the SCF program was $1.0 billion and $855 million for the three months ended March 31, 2023 and March 31, 2022, respectively.

Earnings Per Share

We calculate basic earnings per share by dividing net income by the weighted average number of common shares outstanding. Certain outstanding options are not included in the diluted earnings per share calculation because their inclusion would have been anti-dilutive. Antidilutive common stock equivalents excluded from the diluted earnings per share calculation are not material.

The following table summarizes basic and diluted shares outstanding:


	Three Months Ended March 31,
(in thousands, except per share data)	2023		2022
Net income	$	303,957	$	245,838

Weighted average common shares outstanding	140,804		141,916
Dilutive effect of stock options and non-vested restricted stock awards	921		926
Weighted average common shares outstanding – assuming dilution	141,725		142,842
Basic earnings per share	$	2.16	$	1.73
Diluted earnings per share	$	2.14	$	1.72

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2. Segment Information

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


	Three Months Ended March 31,
(in thousands)	2023		2022
Net sales:
Automotive	$	3,505,827	$	3,275,621
Industrial	2,259,291		2,019,014
Total net sales	$	5,765,118	$	5,294,635
Segment profit:
Automotive	$	264,420	$	264,573
Industrial	261,987		188,353
Total segment profit	526,407		452,926
Interest expense, net	(16,864)		(19,850)
Intangible asset amortization	(39,122)		(39,694)
Corporate expense	(66,015)		(41,751)
Other unallocated costs (1)	—		(25,915)
Income before income taxes	$	404,406	$	325,716

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


	Three Months Ended March 31,
(in thousands)	2023		2022
Other unallocated costs:
Gain on insurance proceeds (2)	$	—	$	634
Transaction and other costs (3)	—		(26,549)
Total other unallocated costs	$	—	$	(25,915)

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

(3) Amount primarily reflects costs associated with the January 3, 2022 acquisition of Kaman Distribution Group.

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Beginning in 2023, certain functions, including cybersecurity and the management of our product liability litigation, were transferred to corporate to be streamlined and centrally managed. These costs totaled $15 million for the three months ended March 31, 2022, of which $9 million were allocated to Automotive and $6 million were allocated to Industrial based on several factors, including sales volumes and headcount. Beginning in 2023, these costs, which totaled $11 million for the three months ended March 31, 2023, are no longer allocated to our segments when measuring their operating performance. We have not restated the 2022 comparative segment financial 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. The following table presents disaggregated geographical net sales from contracts with customers by reportable segment:


	Three Months Ended March 31,
(in thousands)	2023		2022
North America:
Automotive	$	2,205,385	$	2,130,873
Industrial	2,130,715		1,910,433
Total North America	$	4,336,100	$	4,041,306
Australasia:
Automotive	$	406,762	$	378,909
Industrial	128,576		108,581
Total Australasia	$	535,338	$	487,490
Europe – Automotive	$	893,680	$	765,839
Total net sales	$	5,765,118	$	5,294,635

3. Accounts Receivable Sales Agreement

Under our accounts receivable sales agreement (the "A/R Sales Agreement"), we continuously sell designated pools of receivables as they are originated by us and certain U.S. subsidiaries to a separate bankruptcy-remote special purpose entity (“SPE”). The A/R Sales Agreement has a three-year term, which we intend to renew.

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 as amended on January 3, 2022).

The total principal amount outstanding of receivables sold is approximately $1.0 billion as of both March 31, 2023 and December 31, 2022. The amount of receivables pledged as collateral as of March 31, 2023 and December 31, 2022 is approximately $1.3 billion and $1.1 billion, respectively.

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


	Three Months Ended March 31,
(in thousands)	2023		2022
Receivables sold to the financial institution and derecognized	$	2,165,407	$	2,236,445
Cash collected on sold receivables	$	2,165,411	$	2,036,455

Continuous cash activity related to the A/R Sales Agreement is reflected in net cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows. The SPE incurs fees due to the unaffiliated financial institutions related to the accounts receivable sales transactions. Those fees, which totaled $14 million and $2 million for the three months ended March 31, 2023 and 2022, respectively, are recorded within other non-operating expense (income) in the Condensed Consolidated Statements of Income. The SPE has a recourse obligation to repurchase from the unaffiliated financial institutions any previously sold receivables that are not collected due to the occurrence of certain events, including credit quality deterioration and customer sales returns. The reserve recognized for this recourse obligation as of March 31, 2023 and December 31, 2022 is not material.

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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.

4. Employee Benefit Plans

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


	Pension Benefits
(in thousands)	2023		2022
Service cost	$	1,494	$	2,616
Interest cost	26,117		18,867
Expected return on plan assets	(41,240)		(37,672)
Amortization of prior service cost	173		172
Amortization of actuarial loss	2,341		9,279
Net periodic benefit income	$	(11,115)	$	(6,738)

Service cost is recorded in selling, administrative and other expenses in the Condensed Consolidated Statements of Income while all other components are recorded within other non-operating expense (income). Pension benefits also include amounts related to supplemental retirement plans.

5. Acquisitions

We acquired several businesses for approximately $40 million and $1.4 billion, net of cash acquired, during the three months ended March 31, 2023 and March 31, 2022, respectively. 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 Condensed Consolidated Statements of Income beginning on their respective acquisition dates.

KDG Acquisition

On January 3, 2022, we, through our wholly-owned subsidiary, Motion Industries, Inc., acquired all of the equity interests in KDG for a purchase price of approximately $1.3 billion in cash, net of cash acquired of approximately $30 million. KDG, which is headquartered in Bloomfield, Connecticut, is a power transmission, automation and fluid power industrial distributor and solutions provider with operations throughout the United States, providing electro-mechanical products, bearings, power transmission, motion control and electrical and fluid power components to maintenance, repair, and operation and original equipment manufacturer customers.

6. Accumulated Other Comprehensive Loss

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


	Changes in Accumulated Other Comprehensive Loss by Component
(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 income before reclassifications	—		—		23,827		23,827
Amounts reclassified from accumulated other comprehensive loss	1,914		—		—		1,914
Other comprehensive income, net of income taxes	1,914		—		23,827		25,741
Ending balance, March 31, 2023	$	(504,696)	$	(2,572)	$	(499,533)	$

SEC Form 10-Q filed by Genuine Parts Company