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 June 30, 2022

OR

☐ 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,	GA
(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 141,430,948 shares of common stock outstanding as of July 25, 2022.

Table of Contents
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	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
PART II
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 6.	Exhibits	23
	Signatures	24

1

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)	June 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	519,131	$	714,701
Trade accounts receivable, less allowance for doubtful accounts (2022 – $57,413; 2021 – $44,425)	2,235,453		1,797,955
Merchandise inventories, net	4,296,191		3,889,919
Prepaid expenses and other current assets	1,475,493		1,353,847
Total current assets	8,526,268		7,756,422
Goodwill	2,538,240		1,915,307
Other intangible assets, less accumulated amortization	1,853,222		1,406,401
Property, plant and equipment, less accumulated depreciation (2022 – $1,370,095; 2021 – $1,339,706)	1,236,859		1,234,399
Operating lease assets	1,067,614		1,053,689
Other assets	1,015,984		985,884
Total assets	$	16,238,187	$	14,352,102
Liabilities and equity
Current liabilities:
Trade accounts payable	$	5,409,587	$	4,804,939
Current portion of debt	14,118		—
Dividends payable	126,716		115,876
Other current liabilities	1,743,439		1,660,768
Total current liabilities	7,293,860		6,581,583
Long-term debt	3,304,223		2,409,363
Operating lease liabilities	800,672		789,175
Pension and other post–retirement benefit liabilities	263,314		265,134
Deferred tax liabilities	407,763		280,778
Other long-term liabilities	514,792		522,779
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 – 2022 – 141,280,841 shares; 2021 – 142,180,683 shares	141,281		142,181
Additional paid-in capital	123,388		119,975
Accumulated other comprehensive loss	(953,228)		(857,739)
Retained earnings	4,329,115		4,086,325
Total parent equity	3,640,556		3,490,742
Noncontrolling interests in subsidiaries	13,007		12,548
Total equity	3,653,563		3,503,290
Total liabilities and equity	$	16,238,187	$	14,352,102

See accompanying notes to condensed consolidated financial statements.

2

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2022		2021		2022		2021
Net sales	$	5,602,414	$	4,783,738	$	10,897,049	$	9,248,452
Cost of goods sold	3,641,615		3,094,633		7,110,303		6,018,532
Gross profit	1,960,799		1,689,105		3,786,746		3,229,920
Operating expenses:
Selling, administrative and other expenses	1,364,015		1,349,309		2,767,994		2,544,473
Depreciation and amortization	85,890		73,960		173,259		146,256
Provision for doubtful accounts	2,899		5,037		7,393		9,946
Total operating expenses	1,452,804		1,428,306		2,948,646		2,700,675
Non-operating expense (income):
Interest expense, net	20,248		15,362		40,098		33,686
Other	(3,820)		(24,170)		(19,281)		(59,907)
Total non-operating expense (income)	16,428		(8,808)		20,817		(26,221)
Income before income taxes	491,567		269,607		817,283		555,466
Income taxes	119,038		73,111		198,916		141,260
Net income	$	372,529	$	196,496	$	618,367	$	414,206
Dividends declared per common share	$	0.8950	$	0.8150	$	1.7900	$	1.6300
Basic earnings per share	$	2.63	$	1.36	$	4.36	$	2.87
Diluted earnings per share	$	2.62	$	1.36	$	4.34	$	2.85
Weighted average common shares outstanding	141,581		144,211		141,747		144,312
Dilutive effect of stock options and non-vested restricted stock awards	723		772		835		846
Weighted average common shares outstanding – assuming dilution	142,304		144,983		142,582		145,158

See accompanying notes to condensed consolidated financial statements.

3

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Net income	$	372,529	$	196,496	$	618,367	$	414,206
Other comprehensive (loss) income, net of income taxes:
Foreign currency translation adjustments, net of income taxes in 2022 — $31,638 and $40,049; 2021 — $7,019 and $14,166, respectively	(159,078)		7,131		(116,946)		6,836
Cash flow hedge adjustments, net of income taxes in 2022 — $1,383 and $2,767 ; 2021 — $1,383 and $2,767, respectively	3,741		3,741		7,482		7,482
Pension and postretirement benefit adjustments, net of income taxes in 2022 — $2,580 and $5,160; 2021 — $3,434 and $6,855, respectively	6,986		9,334		13,975		18,630
Other comprehensive (loss) income, net of income taxes	(148,351)		20,206		(95,489)		32,948
Comprehensive income	$	224,178	$	216,702	$	522,878	$	447,154

See accompanying notes to condensed consolidated financial statements.

4

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)

	Three Months Ended June 30, 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
April 1, 2022	141,627,749	$	141,628	$	126,064	$	(804,877)	$	4,132,925	$	3,595,740	$	12,136	$	3,607,876
Net income	—	—		—		—		372,529		372,529		—		372,529
Other comprehensive income, net of tax	—	—		—		(148,351)		—		(148,351)		—		(148,351)
Cash dividend declared, $0.895 per share	—	—		—		—		(126,716)		(126,716)		—		(126,716)
Share-based awards exercised, including tax benefit of $2,423	30,588	30		(13,387)		—		—		(13,357)		—		(13,357)
Share-based compensation	—	—		10,711		—		—		10,711		—		10,711
Purchase of stock	(377,496)	(377)		—		—		(49,623)		(50,000)		—		(50,000)
Noncontrolling interest activities	—	—		—		—		—		—		871		871
June 30, 2022	141,280,841	$	141,281	$	123,388	$	(953,228)	$	4,329,115	$	3,640,556	$	13,007	$	3,653,563

	Six Months Ended June 30, 2022
(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	—	—		—		—		618,367		618,367		—		618,367
Other comprehensive income, net of tax	—	—		—		(95,489)		—		(95,489)		—		(95,489)
Cash dividend declared, $1.79 per share	—	—		—		—		(253,607)		(253,607)		—		(253,607)
Share-based awards exercised, including tax benefit of $3,137	49,258	49		(14,469)		—		—		(14,420)		—		(14,420)
Share-based compensation	—	—		17,882		—		—		17,882		—		17,882
Purchase of stock	(949,100)	(949)		—		—		(121,970)		(122,919)		—		(122,919)
Noncontrolling interest activities	—	—		—		—		—		—		459		459
June 30, 2022	141,280,841	$	141,281	$	123,388	$	(953,228)	$	4,329,115	$	3,640,556	$	13,007	$	3,653,563

5

	Three Months Ended June 30, 2021
(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, 2021	144,458,057	$	144,458	$	117,867	$	(1,023,760)	$	4,085,998	$	3,324,563	$	11,546	$	3,336,109
Net income	—	—		—		—		196,496		196,496		—		196,496
Other comprehensive income, net of tax	—	—		—		20,206		—		20,206		—		20,206
Cash dividend declared, $0.815 per share	—	—		—		—		(117,406)		(117,406)		—		(117,406)
Share-based awards exercised, including tax benefit of $4,863	279,441	280		(14,181)		—		—		(13,901)		—		(13,901)
Share-based compensation	—	—		8,286		—		—		8,286		—		8,286
Purchase of stock	(1,435,825)	(1,436)		—		—		(182,929)		(184,365)		—		(184,365)
Noncontrolling interest activities	—	—		—		—		—		—		(280)		(280)
June 30, 2021	143,301,673	$	143,302	$	111,972	$	(1,003,554)	$	3,982,159	$	3,233,879	$	11,266	$	3,245,145

	Six Months Ended June 30, 2021
(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, 2021	144,354,335	$	144,354	$	117,165	$	(1,036,502)	$	3,979,779	$	3,204,796	$	13,207	$	3,218,003
Net income	—	—		—		—		414,206		414,206		—		414,206
Other comprehensive income, net of tax	—	—		—		32,948		—		32,948		—		32,948
Cash dividend declared, $1.63 per share	—	—		—		—		(235,120)		(235,120)		—		(235,120)
Share-based awards exercised, including tax benefit of $6,627	383,163	384		(19,714)		—		—		(19,330)		—		(19,330)
Share-based compensation	—	—		14,521		—		—		14,521		—		14,521
Purchase of stock	(1,435,825)	(1,436)		—		—		(182,929)		(184,365)		—		(184,365)
Cumulative effect from adoption of ASU 2019-12 (1)	—	—		—		—		6,223		6,223		—		6,223
Noncontrolling interest activities	—	—		—		—		—		—		(1,941)		(1,941)
June 30, 2021	143,301,673	$	143,302	$	111,972	$	(1,003,554)	$	3,982,159	$	3,233,879	$	11,266	$	3,245,145

(1)We adopted Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes, during the first quarter of 2021.

See accompanying notes to condensed consolidated financial statements.

6

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30,
(in thousands)	2022		2021
Operating activities:
Net income	$	618,367	$	414,206
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	173,259		146,256
Share-based compensation	17,882		14,521
Gain on sale of real estate	(102,803)		—
Intangible asset impairment	17,061		—
Excess tax benefits from share-based compensation	(3,137)		(6,627)
Changes in operating assets and liabilities	70,356		136,074
Net cash provided by operating activities	790,985		704,430
Investing activities:
Purchases of property, plant and equipment	(152,976)		(89,993)
Proceeds from sale of property, plant and equipment	140,841		22,065
Proceeds from divestitures of businesses	26,102		13,705
Acquisitions of businesses and other investing activities	(1,557,420)		(97,168)
Net cash used in investing activities	(1,543,453)		(151,391)
Financing activities:
Proceeds from debt	3,850,642		31,599
Payments on debt	(2,872,124)		(142,295)
Share-based awards exercised	(14,420)		(19,330)
Dividends paid	(242,767)		(231,627)
Purchases of stock	(122,919)		(184,365)
Other financing activities	(13,901)		(2,159)
Net cash provided by (used in) financing activities	584,511		(548,177)
Effect of exchange rate changes on cash and cash equivalents	(27,613)		(7,639)
Net decrease in cash and cash equivalents	(195,570)		(2,777)
Cash and cash equivalents at beginning of period	714,701		990,166
Cash and cash equivalents at end of period	$	519,131	$	987,389

See accompanying notes to condensed consolidated financial statements.

7

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, 2021. Accordingly, the unaudited condensed consolidated financial statements and related disclosures herein should be read in conjunction with our 2021 Annual Report on Form 10-K. Significant accounting policies and other disclosures normally provided have been omitted since they are disclosed in our Annual Report and have not changed.

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 and six months ended June 30, 2022 are not necessarily indicative of results for the year ended December 31, 2022. 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 have determined that any recently adopted accounting pronouncements did not have a material impact on our condensed consolidated financial statements and all recent accounting pronouncements not yet adopted are not applicable or are expected to have an immaterial impact on our condensed consolidated financial statements.

Debt

1.750% and 2.750% Senior Notes Offering

On January 6, 2022, we issued $500 million of unsecured 1.750% Senior Notes due 2025. Simultaneously, we issued $500 million of unsecured 2.750% Senior Notes due 2032. 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.

8

Derivatives and Hedging

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

		June 30, 2022				December 31, 2021
Instrument	Balance Sheet Classification	Notional		Balance		Notional		Balance
Net investment hedges:
Forward contracts	Prepaid expenses and other current assets	$	1,406,950	$	172,393	$	925,810	$	73,819
Forward contract	Other current liabilities	$	—	$	—	$	235,180	$	2,935
Foreign currency debt	Long-term debt	€	700,000	$	730,870	€	700,000	$	792,820

The tables below present gains and losses related to designated net investment hedges:

	Gain (Loss) Recognized in AOCL before Reclassifications				Gain Recognized in Interest Expense for Excluded Components
(in thousands)	2022		2021		2022		2021
Three Months Ended June 30,
Forward contracts	$	66,986	$	(13,329)	$	7,565	$	6,574
Foreign currency debt	50,190		(12,670)		—		—
Total	$	117,176	$	(25,999)	$	7,565	$	6,574

	Gain Recognized in AOCL before Reclassifications				Gain Recognized in Interest Expense for Excluded Components
(in thousands)	2022		2021		2022		2021
Six Months Ended June 30,
Forward contracts	$	86,380	$	24,186	$	15,130	$	13,148
Foreign currency debt	61,950		28,280		—		—
Total	$	148,330	$	52,466	$	15,130	$	13,148

Fair Value of Financial Instruments

As of June 30, 2022 the fair value of our senior unsecured notes was approximately $3 billion, which are designated as Level 2 in the fair value hierarchy.

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 June 30, 2022, we were in compliance with all such covenants.

As of June 30, 2022, the total borrowings of the independents and affiliates subject to guarantee by us were approximately $902 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 June 30, 2022, there are no material guaranteed loans for

9

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, 2022, we have recognized certain assets and liabilities amounting to $71 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.

Earnings Per Share

We maintain various long-term incentive plans, which provide for the granting of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance awards, dividend equivalents and other share-based awards. Certain outstanding options are not included in the diluted earnings per share calculation because their inclusion would have been anti-dilutive.

The following table summarizes anti-dilutive shares outstanding:

	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Anti-dilutive shares outstanding	456	186	748	99

2. Segment Information

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Net sales:
Automotive	$	3,467,494	$	3,196,299	$	6,743,115	$	6,149,464
Industrial	2,134,920		1,587,439		4,153,934		3,098,988
Total net sales	$	5,602,414	$	4,783,738	$	10,897,049	$	9,248,452
Segment profit:
Automotive	$	322,553	$	290,758	$	587,126	$	526,436
Industrial	225,472		150,413		413,825		275,705
Total segment profit	548,025		441,171		1,000,951		802,141
Interest expense, net	(20,248)		(15,362)		(40,098)		(33,686)
Intangible asset amortization	(39,630)		(27,384)		(79,324)		(52,928)
Corporate expense	(73,312)		(51,397)		(115,063)		(82,640)
Other unallocated income (expenses) (1)	76,732		(77,421)		50,817		(77,421)
Income before income taxes	$	491,567	$	269,607	$	817,283	$	555,466

(1)     The following table presents a summary of the other unallocated income and expenses:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Other unallocated costs:
Gain on sale of real estate (2)	$	102,803	$	—	$	102,803	$	—
Gain on insurance proceeds (3)	$	873	$	—	$	1,507	$	—
Product liability damages award (4)	—		(77,421)		—		(77,421)
Transaction and other costs (5)	(26,944)		—		(53,493)		—
Total other unallocated costs	$	76,732	$	(77,421)	$	50,817	$	(77,421)

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

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

(4)    Adjustment reflects damages reinstated by the Washington Supreme Court order on July 8, 2021 in connection with a 2017 automotive product liability claim.

(5)    Adjustment primarily reflects legal and professional, restructuring, lease termination and other costs associated with the January 3, 2022 acquisition and subsequent integration of KDG. These costs also include a $17 million impairment charge driven by a decision to retire certain legacy trade names, classified as other intangible assets, prior to the end of their estimated useful lives as part of executing our KDG integration and rebranding strategy. Refer to the acquisition footnote for more information regarding the acquisition.

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 June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
North America:
Automotive	$	2,302,008	$	2,076,562	$	4,432,881	$	3,939,367
Industrial	2,021,297		1,469,775		3,931,730		2,869,174
Total North America	$	4,323,305	$	3,546,337	$	8,364,611	$	6,808,541
Australasia:
Automotive	$	398,940	$	388,708	$	777,849	$	756,577
Industrial	113,623		117,664		222,204		229,814
Total Australasia	$	512,563	$	506,372	$	1,000,053	$	986,391
Europe – Automotive	$	766,546	$	731,029	$	1,532,385	$	1,453,520
Total net sales	$	5,602,414	$	4,783,738	$	10,897,049	$	9,248,452

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 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 billion at any point in time (which is the maximum amount allowed under the agreement as amended on January 3, 2022).

Total principal amount outstanding of receivables sold is approximately $1 billion and $800 million as of June 30, 2022 and December 31, 2021, respectively. The amount of receivables pledged as collateral as of June 30, 2022 and December 31, 2021 is approximately $1.1 billion and $973 million, respectively.

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Receivables sold to the financial institution and derecognized	$	2,242,273	$	1,888,942	$	4,478,718	$	3,816,873
Cash collected on sold receivables	$	2,242,274	$	1,888,940	$	4,278,729	$	3,816,868

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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 institution related to the accounts receivable sales transactions. Those fees, which are immaterial, 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 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 reserve recognized for this recourse obligation as of June 30, 2022 and December 31, 2021 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.

4. Employee Benefit Plans

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)	2022		2021		2022		2021
Service cost	$	2,586	$	3,101	$	5,202	$	6,142
Interest cost	18,849		17,962		37,716		35,868
Expected return on plan assets	(37,646)		(38,858)		(75,318)		(77,590)
Amortization of prior service cost	172		172		344		344
Amortization of actuarial loss	9,275		12,509		18,554		24,965
Net periodic benefit income	$	(6,764)	$	(5,114)	$	(13,502)	$	(10,271)

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, including KDG, for approximately $1.6 billion, net of cash acquired, during the six months ended June 30, 2022. For the six months ended June 30, 2021, acquisitions totaled $98 million, net of cash acquired.

During the six months ended June 30, 2022, we recognized approximately $238 million and $550 million of revenue, net of store closures, related to our Automotive and Industrial acquisitions, respectively. The results of operations for acquired businesses are included in our condensed consolidated statements of income beginning on their respective acquisition dates.

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. Excluding KDG, for the six months ended June 30, 2022 and June 30, 2021, we recorded approximately $185 million and $70 million of goodwill and other intangible assets associated with acquisitions. Other intangible assets acquired consisted primarily of customer relationships with a weighted average amortization lives of 20 years.

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. 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 MRO and OEM customers. KDG has approximately 1,700 employees with approximately 220 locations across the United States and Puerto Rico. As of January 3, 2022, KDG had estimated annual revenues of approximately $1 billion.

The net cash consideration transferred of approximately $1.3 billion is net of the estimated cash acquired of approximately $30 million.

The KDG acquisition was financed using a combination of borrowings under the existing unsecured revolving credit facility, proceeds of $200 million from the selling of additional receivables under our amended A/R Sales Agreement and $109 million of cash.

The following table summarizes the preliminary, estimated fair values of the assets acquired and liabilities assumed at the acquisition date as well as adjustments made to the acquisition accounting during the six months ended June

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30, 2022 (referred to as the "measurement period adjustments"). The measurement period adjustments primarily resulted from revisions to the valuation of certain tangible and intangible assets. The fair value of the acquired identifiable intangible assets is provisional pending completion of the final valuations for these assets. We are in the process of analyzing the estimated values of all assets acquired and liabilities assumed as of the acquisition date, including, among other things, obtaining valuations of certain tangible and intangible assets, as well as the fair value of certain contracts and the determination of certain tax balances. Additional adjustments may be made to the acquisition accounting during the measurement period primarily related to intangible asset revaluations, tax accounting and leases.

	As of January 3, 2022
(in thousands)	Initial Balance		Measurement Period Adjustments		As Adjusted
Trade accounts receivable	$	156,000	$	—	$	156,000
Merchandise inventories	166,000		(1,000)		165,000
Prepaid expenses and other current assets	39,000		(2,000)		37,000
Property, plant and equipment	26,000		(2,000)		24,000
Operating lease assets	49,000		(5,000)		44,000
Other assets	1,000		—		1,000
Other intangible assets	592,000		4,000		596,000
Goodwill	574,000		(6,000)		568,000
Total assets acquired	1,603,000		(12,000)		1,591,000
Trade accounts payable	85,000		—		85,000
Other current liabilities	32,000		—		32,000
Operating lease liabilities	17,000		(1,000)		16,000
Deferred tax liabilities	121,000		(10,000)		111,000
Other long-term liabilities	39,000		(4,000)		35,000
Total liabilities assumed	294,000		(15,000)		279,000
Net assets acquired	$	1,309,000	$	3,000	$	1,312,000

The other intangible assets acquired included $527 million of customer relationship intangibles and a $41 million favorable trade name licensing agreement, with amortization lives of 17 and 1.5 years, respectively. The other intangible assets have a total weighted amortization life of