GENUINE PARTS CO

Previous wording

The following discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and accompanying notes contained herein and with the audited Consolidated Financial Statements, accompanying notes, related information and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2024. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of results for the year ended December 31, 2025.

Current wording

The following discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and accompanying notes contained herein and with the audited Consolidated Financial Statements, accompanying notes, related information and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2024. The results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of results for the year ended December 31, 2025.

Previous wording

We caution you that all forward-looking statements involve risks and uncertainties, and while we believe that our expectations for the future are reasonable in view of currently available information, you are cautioned not to place undue reliance on our forward-looking statements. Actual results or events may differ materially from those indicated as a result of various important factors. Such factors may include, among other things, changes in general economic conditions, including unemployment, inflation (including the direct and indirect impact of tariffs and other similar measures, as well as the potential impact of retaliatory tariffs and other actions) or deflation, financial institution disruptions and geopolitical conflicts such as the conflict between Russia and Ukraine, the conflict in the Gaza strip and other unrest in the Middle East; volatility in oil prices; significant cost increases, such as rising fuel and freight expenses; public health emergencies, including the effects on the financial health of our business partners and customers, on supply chains and our suppliers, on vehicle miles driven as well as other metrics that affect our business, and on access to capital and liquidity provided by the financial and capital markets; our ability to maintain compliance with our debt covenants; our ability to successfully integrate acquired businesses into our operations and to realize the anticipated synergies and benefits; our ability to successfully implement our business initiatives in our two business segments; slowing demand for our products; the ability to maintain favorable supplier arrangements and relationships; changes in national and international legislation or government regulations or policies, including changes to import tariffs, environmental and social policy, infrastructure programs and privacy legislation, and their direct and indirect impact to us, our suppliers and customers; changes in tax policies; volatile exchange rates; our ability to successfully attract and retain employees in the current labor market; uncertain credit markets and other macroeconomic conditions; competitive product, service and pricing pressures; failure or weakness in our disclosure controls and procedures and internal controls over financial reporting; the uncertainties and costs of litigation; disruptions caused by a failure or breach of our information systems, as well as other risks and uncertainties discussed in our 2024 Annual Report on Form 10-K and from time to time in our subsequent filings with the SEC.

Current wording

We caution you that all forward-looking statements involve risks and uncertainties, and while we believe that our expectations for the future are reasonable in view of currently available information, you are cautioned not to place undue reliance on our forward-looking statements. Actual results or events may differ materially from those indicated as a result of various important factors. Such factors may include, among other things, changes in general economic conditions, including unemployment, inflation (including the direct and indirect impact of tariffs and other similar measures, as well as the impact of retaliatory tariffs and other actions) or deflation, financial institution disruptions and geopolitical conflicts such as the conflict between Russia and Ukraine, the conflict in the Gaza strip and other continuing unrest in the Middle East; volatility in oil prices; significant cost increases, such as rising fuel and freight expenses; public health emergencies, including the effects on the financial health of our business partners and customers, on supply chains and our suppliers, on vehicle miles driven as well as other metrics that affect our business, and on access to capital and liquidity provided by the financial and capital markets; our ability to maintain compliance with our debt covenants; our ability to successfully integrate acquired businesses into our operations and to realize the anticipated synergies and benefits; our ability to successfully implement our business initiatives in our two business segments; slowing demand for our products; the ability to maintain favorable supplier arrangements and relationships; changes in national and international legislation or government regulations or policies, including changes to import tariffs, environmental and social policy, infrastructure programs and privacy legislation, and their direct and indirect impact to us, our suppliers and customers; changes in tax policies, including those included in the One Big Beautiful Bill Act; volatile exchange rates; our ability to successfully attract and retain employees in the current labor market; uncertain credit markets and other macroeconomic conditions; competitive product, service and pricing pressures; failure or weakness in our disclosure controls and procedures and internal controls over financial reporting; the uncertainties and costs of litigation; disruptions caused by a failure or breach of our information systems, as well as other risks and uncertainties discussed in our 2024 Annual Report on Form 10-K, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 and from time to time in our subsequent filings with the SEC.

Previous wording

For the three months ended March 31, 2025, we conducted business in North America, Europe and Australasia from more than 10,700 locations. Our Automotive business operated in the U.S., Canada, Mexico, France, the U.K., Ireland, Germany, Poland, the Netherlands, Belgium, Spain, Portugal, Australia and New Zealand and accounted for 62% of total revenues for the three months ended March 31, 2025. Our Industrial business operated in the U.S., Canada, Mexico, Australia, New Zealand, Indonesia and Singapore and accounted for 38% of total revenues during this period.

Current wording

As of June 30, 2025, we conducted business in North America, Europe and Australasia from more than 10,700 locations. Our Automotive business operated in the U.S., Canada, Mexico, France, the U.K., Ireland, Germany, Poland, the Netherlands, Belgium, Spain, Portugal, Australia and New Zealand and accounted for 63% of total revenues for the six months ended June 30, 2025. Our Industrial business operated in the U.S., Canada, Mexico, Australia, New Zealand, Indonesia and Singapore and accounted for 37% of total revenues during this period.

Previous wording

Our first quarter results of operations are summarized below for the three months ended March 31, 2025 and 2024.

Current wording

Our second quarter results of operations are summarized below for the three and six months ended June 30, 2025 and 2024.

Previous wording

SG&A expenses increased $135 million, or 8.6%, during the first quarter of 2025 compared to the first quarter of 2024. Of the 8.6% increase, 6.0% was from acquisitions and 2.6% was from other cost increases. We incurred higher SG&A expenses due to acquisitions, primarily increased personnel and rent costs from operating the U.S. automotive stores we acquired in 2024. Additionally, we incurred $14 million of lease and other exit costs related to the ongoing integration of those stores. We expect the SG&A impact of acquired stores to diminish over time as we realize the anticipated synergies from these acquisitions. The remaining SG&A increase is primarily due to planned salary and merit adjustments and increased rent from lease renewals in a higher rate environment, partially offset by $27 million in benefits from our global restructuring. We have taken extensive actions to adjust our cost structure through our global restructuring.

Current wording

We incurred higher SG&A expenses due to our recent acquisitions, driven largely by additional personnel and rent costs from acquiring more of our U.S. automotive stores from our independent owners. We expect the SG&A impact from acquiring these stores to diminish over time as we realize the impact of anticipated synergies. The remaining increase in SG&A is primarily due to planned salary and merit adjustments and increased rent from lease renewals in a higher interest rate environment. We are managing the impact of higher SG&A through our global restructuring initiatives, which we estimate had a $59 million benefit to SG&A for the six months ended June 30, 2025.

Previous wording

SG&A expenses as a percentage of sales increased to 29.1% of sales in the first quarter of 2025 compared to 27.2% last year, but improved sequentially from the fourth quarter of 2024. The 190 basis point increase was primarily driven by increased SG&A expenses from acquisitions and other items, as discussed above, and cost deleveraging from lower organic sales growth.

Current wording

SG&A expenses as a percentage of sales increased to 28.7% of sales in the three months ended June 30, 2025 compared to 27.6% last year, but improved sequentially from 29.1% of sales during the first quarter of 2025. SG&A expenses as a percentage of sales increased to 28.9% of sales in the six months ended June 30, 2025 compared to 27.4% last year. The increases in percentage for both periods in 2025 was primarily driven by increased SG&A expenses from acquisitions and other items, as discussed above, and cost deleveraging from comparable sales that were essentially flat.

Previous wording

We incurred $55 million of restructuring and other costs during the first quarter of 2025 as part of our global restructuring which was approved and initiated in February 2024 and remains on track to deliver an improved overall cost structure. Restructuring and other costs decreased $28 million compared to the prior year period, reflecting the completion of certain initiatives in 2024, including a voluntary retirement program. For additional details, refer to the Restructuring Footnote in the Notes to Condensed Consolidated Financial Statements.

Current wording

We incurred $46 million and $100 million of restructuring and other costs during the three months and six months ended June 30, 2025, respectively, as part of our global restructuring plan which was approved and initiated in February 2024 and remains on track to deliver an improved overall cost structure. Restructuring and other costs increased by $8 million compared to the prior period, reflecting costs associated with facility closures and additional severance costs. For additional details, refer to the Restructuring Footnote in the Notes to Condensed Consolidated Financial Statements.

Previous wording

Depreciation and amortization expenses increased $25 million related to planned investments in technology and supply chain initiatives.

Current wording

Depreciation and amortization expenses increased $24 million and $49 million for the three and six months ended June 30, 2025, respectively, related to planned investments in technology and supply chain initiatives.

Previous wording

We incurred $36 million in net non-operating expenses for the three months ended March 31, 2025, a $42 million change from $5 million in net non-operating income in the prior year period. This category primarily includes net interest expense, pension and investment income, foreign currency gains and losses, and fees associated with our Accounts Receivable Sales Agreement ("A/R Sales Agreement"). The $42 million expense increase includes the effects of a $20 million increase in net interest expense in 2025, due to increased borrowings, and a $13 million decrease in pension income as a result of changes in expected returns due to the planned termination of our U.S. pension plan.

Current wording

We incurred $38 million in net non-operating expenses for the three months ended June 30, 2025, a $26 million change from $12 million in net non-operating expense in the prior year period. The $26 million expense increase primarily includes the effects of an $18 million increase in net interest expense in 2025, due to increased borrowings, as well as a $14 million decrease in pension income as a result of changes in expected returns due to the planned termination of our U.S. pension plan.

Previous wording

Automotive EBITDA decreased $34 million, or 10.7%, in the first quarter compared to the prior year period, and Automotive EBITDA margin decreased to 7.8% compared to 8.9% in the prior year period, driven by the following factors. Automotive segment sales grew $91 million, or 2.5%, in the first quarter of 2025 due to contributions from prior year strategic acquisitions of independent stores in our U.S. business, partially offset by one less selling day. Gross profit increased $96 million, or 7%, and gross margin improved 160 basis points primarily due primarily to the acquisitions in our U.S. business and strategic sourcing initiatives. Our gross profit improvement was offset by rising operating expenses. Operating expenses increased $130 million, mainly driven by increased personnel and rent costs, which increased primarily from operating the U.S. stores we acquired in 2024. We expect the expense impact of acquired stores to diminish over time as we realize the anticipated synergies from these acquisitions. The increase in operating expenses was primarily due to acquisitions, however declines in Automotive EBITDA and EBITDA margin largely were driven by loss of expense leverage due to lower organic sales growth in our existing businesses.

Current wording

The increase in operating expenses and declines in Automotive EBITDA and EBITDA margin were driven by the factors detailed above.

Previous wording

Industrial EBITDA and EBITDA margin both remained flat in the first quarter compared to 2024. Industrial segment sales declined $8 million, or 0.4%, primarily driven by a decline of 0.7% in comparable sales due to one less selling day in the U.S. compared to the prior year period, partially offset by a 1.3% benefit from acquisitions. Gross profit and operating expenses in our Industrial segment remained largely unchanged compared to the prior year. These results highlight continued benefits of our global restructuring efforts within the Industrial segment, enabling effective cost management in an uncertain economic environment.

Current wording

Gross profit and operating expenses in our Industrial segment remained largely unchanged over both periods compared to the prior year.

Previous wording

Corporate EBITDA amounted to a loss of $91 million, or 1.6% of net sales, for the three months ended March 31, 2025, compared to a loss of $82 million, or 1.4% of net sales, in for the three months ended March 31, 2024. We continue to consolidate certain back-office functions at Corporate to streamline operations and drive improvements. Our operational objective is to maintain Corporate EBITDA within a range of 1.5% to 2.0% of net sales.

Current wording

We continue to consolidate certain back-office functions at Corporate to streamline operations and drive improvements. Our operational objective is to maintain Corporate EBITDA within a range of 1.5% to 2.0% of net sales.

Previous wording

Other unallocated costs represent restructuring and other costs and acquisition and integration related costs and other. These decreased year-over-year due to the aforementioned decrease in costs related to the global restructuring initiative that was approved in February 2024.

Current wording

Other unallocated costs represent restructuring and other costs and acquisition and integration related costs and other.

Previous wording

The following tables set forth reconciliations of net income and diluted EPS to adjusted net income and adjusted diluted EPS, respectively, to account for the impact of adjustments. We also include a reconciliation from net income to adjusted EBITDA. We believe that the presentation of adjusted net income, adjusted diluted EPS, and adjusted EBITDA, which are not calculated in accordance with GAAP, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provide meaningful supplemental information to both management and investors that is indicative of our core operations. We consider these metrics useful to investors because they provide greater transparency into management’s view and assessment of our ongoing operating performance by removing items management believes are not representative of our operations and may distort our longer-term operating trends. For example, for the three months ended March 31, 2025, certain of the non-GAAP metrics contained herein exclude costs relating to our global restructuring initiative and acquisition of acquired independent automotive stores, which are one-time events that do not recur in the ordinary course of business. We believe the non-GAAP metrics included herein also enhance the comparability of our results from period to period and with our competitors, as well as to show ongoing results from operations distinct from items that are infrequent or not associated with our core operations. We do not, nor do we suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information.

Current wording

The following tables set forth reconciliations of net income and diluted EPS to adjusted net income and adjusted diluted EPS, respectively, to account for the impact of adjustments. We also include a reconciliation from net income to adjusted EBITDA. We believe that the presentation of adjusted net income, adjusted diluted EPS, and adjusted EBITDA, which are not calculated in accordance with GAAP, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provide meaningful supplemental information to both management and investors that is indicative of our core operations. We consider these metrics useful to investors because they provide greater transparency into management’s view and assessment of our ongoing operating performance by removing items management believes are not representative of our operations and may distort our longer-term operating trends. For example, certain of the non-GAAP metrics contained herein exclude costs relating to our global restructuring initiative and acquisition of acquired independent automotive stores, which are one-time events that do not recur in the ordinary course of business. We believe the non-GAAP metrics included herein also enhance the comparability of our results from period to period and with our competitors, as well as to show ongoing results from operations distinct from items that are infrequent or not associated with our core operations. We do not, nor do we suggest investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, GAAP financial information.

Previous wording

(3) We determine the tax effect of non-GAAP adjustments by considering the tax laws and statutory income tax rates applicable in the tax jurisdictions of the underlying non-GAAP adjustments, including any related valuation allowances. For the three months ended March 31, 2025, we applied the statutory income tax rates to the taxable portion of all of our adjustments, which resulted in a favorable tax impact of $20 million.

Current wording

(3) We determine the tax effect of non-GAAP adjustments by considering the tax laws and statutory income tax rates applicable in the tax jurisdictions of the underlying non-GAAP adjustments, including any related valuation allowances. For the three and six months ended June 30, 2025, we applied the statutory income tax rates to the taxable portion of all of our adjustments, which resulted in a favorable tax impact of $9 million and $29 million, respectively.

Previous wording

Our cash and cash equivalents balance was $420 million as of March 31, 2025, a decrease of $60 million from December 31, 2024. For the three months ended March 31, 2025, we had net cash used in operating activities of $41 million, net cash used in investing activities of $155 million and net cash provided by financing activities of $129 million.

Current wording

Our cash and cash equivalents balance was $458 million as of June 30, 2025, a decrease of $22 million from December 31, 2024. For the six months ended June 30, 2025, we had net cash provided by operating activities of $169 million, net cash used in investing activities of $318 million and net cash provided by financing activities of $103 million.

Previous wording

Cash from operations decreased mainly due to lower net income and working capital changes primarily driven by seasonal sales and purchasing trends. We had $155 million in net cash used for investing activities primarily consisting of capital expenditures and acquisitions of $194 million, partially offset by $23 million in cash inflows from settling net investment hedges. The financing activities consisted primarily of $772 million in net proceeds of commercial paper, partially offset by $500 million in commercial paper borrowings to repay the principal amount of our 1.75% Unsecured Senior Notes due February 1, 2025 and $134 million for dividends paid to our shareholders.

Current wording

Cash from operations decreased mainly due to lower net income and working capital changes primarily driven by accelerated tax payments as compared to prior year. Additionally, the decrease was also impacted by the prior year timing and volume of purchases and related payments in connection with our strategic inventory investments that did not repeat in the current year. We had $318 million in net cash used for investing activities primarily consisting of capital expenditures and acquisitions of $361 million. We had $103 million in net cash provided by financing activities which comprised of $917 million in net proceeds from our commercial paper program, partially offset by $500 million used to repay the principal amount of our 1.75% Unsecured Senior Notes and $277 million for dividends paid to shareholders.

Previous wording

Accounts receivable increased $324 million, or 14.9%, from December 31, 2024. Inventory increased $119 million, or 2.1%. Accounts receivable and inventory were both impacted by first quarter increase in revenues and related product demand. Accounts payable increased $88 million, or 1.5% from December 31, 2024, in line with the increase in inventory. Total debt of $4.6 billion at March 31, 2025 increased $305 million, or 7.1%, from December 31, 2024.

Current wording

Accounts receivable increased $418 million, or 19.1%, from December 31, 2024. Inventory increased $260 million, or 4.7%. Accounts receivable and inventory were both impacted by an increase in revenues and related product demand in the six months ended June 30, 2025. Accounts payable increased $73 million, or 1.2%, from December 31, 2024, in line with the increase in inventory. Working capital at any point in time is subject to many variables, including seasonality, inventory management and category expansion, the timing of cash receipts and payments, vendor payment terms, and fluctuations in foreign exchange rates. Total debt of $4.8 billion at June 30, 2025 increased $522 million, or 12.2%, from December 31, 2024.

Previous wording

As of March 31, 2025, we had$420 million of cash and cash equivalents, as well as $2 billion in undrawn capacity on our Revolving Credit Agreement, before giving effect to commercial paper borrowings. From time to time, we may enter into other credit facilities or financing arrangements to provide additional liquidity and to manage against foreign currency risk. We currently believe that the existing lines of credit, commercial paper program, and cash generated from operations will be sufficient to fund anticipated operations for the foreseeable future.

Current wording

As of June 30, 2025, we had$458 million of cash and cash equivalents, as well as $2 billion in undrawn capacity on our Revolving Credit Agreement, before giving effect to commercial paper borrowings. From time to time, we may enter into other credit facilities or financing arrangements to provide additional liquidity and to manage against foreign currency risk. We currently believe that the existing lines of credit, commercial paper program, and cash generated from operations will be sufficient to fund anticipated operations for the foreseeable future.

Previous wording

As announced in 2024, our Board of Directors approved the termination of the frozen U.S. qualified defined benefit pension plan, effective September 30, 2024. In the first quarter of 2025, the change in our investing strategy related to our planned U.S. pension plan termination resulted in lower pension income given the change in expected asset returns. Settlement is expected between late 2025 and early 2026.

Current wording

As announced in 2024, our Board of Directors approved the termination of the frozen U.S. qualified defined benefit pension plan, effective September 30, 2024. Plan settlement is expected between late 2025 and early 2026.

Previous wording

On March 20, 2025, we amended our Unsecured Revolving Credit Facility to expand the borrowing capacity from $1.5 billion to $2.0 billion and extend the maturity date to March 20, 2030. We had no outstanding borrowings under the Unsecured Revolving Credit Facility as of March 31, 2025.

Current wording

In March 2025, we amended our Unsecured Revolving Credit Facility to expand the borrowing capacity from $1.5 billion to $2.0 billion and extend the maturity date to March 20, 2030. We also amended our commercial paper program to expand the borrowing capacity from $1.5 billion to $2.0 billion.

Previous wording

On March 27, 2025, we amended our commercial paper program to expand the borrowing capacity from $1.5 billion to $2.0 billion. We had $775 million outstanding under our commercial paper program as of March 31, 2025, of which $500 million was used to repay the principal amount of our 1.75% Unsecured Senior Notes with a maturity date of February 1, 2025. The net proceeds of issuances from the remaining outstanding amount have been and are expected to continue to be used for general corporate purposes.

Current wording

As of June 30, 2025, we had no outstanding borrowings under the Unsecured Revolving Credit Facility. Outstanding borrowings under our commercial paper program totaled $922 million, of which $500 million was used to repay the principal amount of our 1.75% Unsecured Senior Notes that matured on February 1, 2025. The net proceeds of the remaining borrowings are expected to be used for general corporate purposes.