GPC 10-K & 10-Q changes, risk factors and insider trading

Some statements in this report, as well as in other materials we file with the SEC or otherwise release to the public and in materials that we make available on our website, constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Senior officers may also make verbal statements to analysts, investors, the media and others that are forward-looking. Forward-looking statements may relate, for example, to futurethe operations,company's view of business and economic trends for the coming year and the company's expectations regarding its ability to capitalize on these business and economic trends; the company's full-year 2026 outlook and the company's ability to successfully execute on its strategic priorities, including the company's anticipated synergiesseparation of Global Automotive and benefitsGlobal ofIndustrial anyinto acquisitionstwo orindependent, divestitures,publicly astraded well as prospects, strategies, investments, financial condition, economic performance (including growth and earnings), industry conditions and demand for our products and services.companies. We caution that our 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 in our forward-looking statements as a result of various important factors. Such factors include, but are not limited to, those discussed below.

With respect to our North America Automotive segment,and International Automotive segments, the primary factors are:

•changes in travel patterns, which may cause consumers to rely more on other forms of transportation;

•the consolidation of certain of our manufacturing customers and the trend of manufacturing operations being moved overseas, which subsequently reduces demand for our products;

•changes in legislation or government regulations or policies whichthat could impact international trade among our multi-national customer base and cause reduced demand for our products; and

As a distributor of automotive and industrial parts, our business depends on developing and maintaining close and productive relationships with our suppliers. We depend on our suppliers to sell us quality products at favorable prices. A variety of factors, many outside our control, affect our suppliers' ability to deliver quality merchandise to us at favorable prices and in a timely manner. These include raw material shortages, inadequate manufacturing capacity, labor strikes, shortages and disputes anywhere within the supply and distribution chain delivering products to us, tariff and customs legislation and enforcement, transportation disruptions, taxtaxes and other legislative uncertainties, public health emergencies and/or weather conditions.

Furthermore, financial or operational difficulties at a particular supplier could cause that supplier to increase the cost, or decrease the quality, of the products we purchase.purchase or prevent that supplier from operating. Supplier consolidation could also limit the number of suppliers from which we may purchase products and could materially affect the prices we pay for these products. In addition, we would suffer an adverse impact if our suppliers limit or cancel the return privileges that currently protect us from inventory obsolescence.

In addition, the automotive aftermarket industry continues to experience consolidation. Consolidation among our competitors could further enhance their financial position, provide them with the ability to offer more competitive prices to customers for whom we compete, take advantage of acquisitions and other opportunities more readily, rapidly scale and invest in their businesses, more successfully utilize developing technology, including data analytics, artificial intelligence, and machine learning, and allow them to achieve increased efficiencies in their consolidated operations that enable them to more effectively compete for customers. If we are unable to continue to develop successful competitive strategies or if our competitors develop more effective strategies, we could lose customers and our sales and profits may decline.

We have operations or activities in numerous countries and regions outside the United States,U.S., including throughout western Europe and Australasia. As a result, our global operations are affected by economic, geopolitical and other conditions in the foreign countries in which we do business as well as U.S. laws regulating international trade. Specifically, instability in the geopolitical environment in many parts of the world (including as a result of the conflict between Russia and Ukraine, the conflict and unrest in the Middle East, and China-Taiwanrecent developments in relations between the U.S. and Venezuela) and other disruptions may continue to put pressure on global economic conditions and supply chains. For example, the U.S., other NATO members and other countries across the globe have instituted sanctions and other penalties against Russia in response to its conflict with Ukraine. While we do not have operations in Russia or Ukraine, retaliatory measures such as this have created, and may continue to create, global security concerns that could result in broader military and political conflicts, further disrupt global automotive supply chains and otherwise have a substantial impact on regional and global economies, any or all of which could adversely affect our business, particularly our European operations.

•adverse changes in international trade policies and relations, including U.S. relationstariff with Chinapolicies;

Despite our implementation of various security measures, our IT systems and operations (and the third-party IT systems and operations with which we interact) could be subject to damage or interruption from computer viruses, natural disasters, unauthorized physical or electronic access, power outages, telecommunications failure, computer system or network failures, wire transfer failure, employee error/malfeasance, cyber-attacks, security breaches, and other similar disruptions. For example, the CrowdStrike outage that occurred in July 2024 negatively impacted our operations and financial results in the third quarter of 2024. In addition, the IT systems of businesses that we have acquired or may acquire could present issues that we were not able to identify prior to the acquisition or other issues that continue to pose risk to us, such as those related to collection, use maintenance and data disclosure practices or other cybersecurity vulnerabilities. Additionally, the techniques and sophistication used to conduct cyber-attacks and breaches of IT systems change frequently, including as a result of the deployment of evolving artificial intelligence tools and machine learning tools used to identify vulnerabilities and create more effective phishing attempts, and have the potential to not be recognized until such attacks are launched or have been in place for a period of time. Maintaining, operating, and protecting these systems and related personal and sensitive information about our employees, customers and suppliers requires continuous investments in physical and technological security measures, employee training, and third-party services which we have made and will continue to make. A cyber-attack or security breach could result in, among other things, sensitive and confidential data being lost, manipulated or exposed to unauthorized persons or to the public or delay our ability to process customer orders and manage inventory. While we also seek to obtain assurances from third parties with whom we interact to protect confidential information, there are risks that the confidentiality or accessibility of data held or utilized by such third parties may be compromised.

To date, we have not experienced a material breach of cybersecurity; however, our computer systems and the computer systems of our third-party service providers have been, and will likely continue to be, subjected to unauthorized access or phishing attempts, computer viruses, malware, ransomware or other malicious codes. In particular, work-from-home arrangements rely on virtual environments and communications systems, which have been subjected to increasing third-party vulnerabilities and security risks at various businesses.

A serious prolonged disruption of our information systems for any of the above reasons could materially impair fundamental business processes (including the timely reporting of financial information) and increase expenses, decrease sales or otherwise impact earnings and cash flows. Furthermore, such a disruption may harm our reputation and business prospects and subject us to legal claims if there is loss, disclosure or misappropriation of or access to our customers, employees or suppliers' information. As the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, compliance with these requirements could also result in significant additional costs. As threats related to cybersecurity breaches grow more sophisticated and frequent, it may become more difficult to timely detect and protect our data and infrastructure. For further information about our cybersecurity strategy, risk assessment and management processes, see "Item 1C. Cybersecurity."

Effective internal controls are necessary for us to provide reliable and accurate financial statementsstatements, safeguard our assets and to effectively prevent fraud. However, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. There can be no assurance that all control issues or fraud will be detected. As we continue to grow our business, our internal controls continue to become more complex and require more resources. Further, some of our employees work remotely and could introduce potential vulnerabilities to our financial reporting systems and our internal control environment and the effectiveness of our internal controls over financial reporting. Any failure to maintain effective controls could prevent us from timely and reliably reporting financial results and may harm our operating results. In addition, if we are unable to conclude that we have effective internal control over financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified report as to the effectiveness of our internal control over financial reporting, as of each fiscal year end, we may be exposed to negative publicity, which could cause investors to lose confidence in our reported financial information. Any failure to maintain effective internal controls and any such resulting negative publicity may negatively affect our business and stock price.

Our business, financial condition, results of operations and cash flows have been and may in the future be adversely affected by uncertain global economic conditions, including inflation or deflation, domestic outputs, geopolitical uncertainty and unrest, employment rates and wages, including increases in minimum wage, changes in tax policies, changes in energy costs, instability in credit markets, declining consumer and business confidence, fluctuating commodity prices, elevated interest rates for prolonged periods, monetary policies, volatile exchange rates, changes in fiscal and regulatory priorities as a result ofunder the outcome of the 2024 U.S.current presidential election,administration, and other challenges that could affect the global economy. Both our commercial and retail customers may experience deterioration of their financial resources, which could result in existing or potential customers delaying or canceling plans to purchase our products.

Our vendors may also be adversely affected by these and other uncertain or deteriorating macro-economic conditions, which could impact their ability to fulfill their financial obligations to us. Further, we are exposed to accounts receivable risk and, thus, any significant deterioration in our customer's credit quality could lead to increased credit losses, reduced cash flow, and could have an adverse material effect on our financial condition and results of operations.

In addition, our indebtedness is rated by credit rating agencies. Our overall credit rating may be negatively impacted by deteriorating and uncertain credit markets or other factors that may or may not be within our control. The interest rates on our unsecured revolving credit facility, as well as any additional indebtedness we may incur in the future, are impacted by our credit ratings. Accordingly, anymaintaining negativean impactinvestment ofgrade rating is important, as it helps reduce our borrowing costs and facilitates financing programs important to our business operations, including our supply chain finance program. Any deterioration or uncertainty in these credit ratings, or placement of our credit ratings on “"review”" or “"watch”" status, could resultincrease inour higherborrowing costs under our unsecured revolving credit facility and limit access to favorable financing. Additionally, if these programs or underlying customer or supplier terms do not continue and we are unable to secure alternative programs, our cash and working capital may be negatively affected and we may have to utilize our various financing arrangements or increase our long-term borrowings for short- and long-term liquidity requirements. Such outcomes could materially increase interest expense and couldadversely impactaffect the terms and cost of any additionalfuture indebtedness we incur in the future.debt.

The concern over climate change has led to legislative and regulatory initiatives aimed at reducing greenhouse gas emissions (“GHG”). For example, regulations that impose extensive mandatory requirements related to GHG continue to be considered by or have been issued by policy makers in both the federal and certain state governments in the U.S., by the European Union, and by national governments in Canada, the U.K., Australia and elsewhere. In many cases, these requirements differ and may conflict from country to country, increasing our costs or requiring significant management time and attention. Many of the regulations that have been issued outside the U.S. create mandatory, annual reporting requirements related to carbon emissions and other sustainability-related information that will ultimately be subject to audit and could expose our company to fines, regulatory inquiry or negative publicity if we fail to comply. Additionally, significant increases in fuel economy requirements, new federal or state restrictions on emissions of carbon dioxide or new federal or state incentive programs that may be imposed on vehicles and automobile fuels could adversely affect demand for the products we sell. We may not be able to accurately predict, prepare for and respond to new kinds of technological innovations with respect to electric vehicles and other technologies that minimize emissions. Laws enacted to reduce GHG could directly or indirectly affect our suppliers and could adversely affect our business, financial condition, results of operations and cash flows. Changes in automotive technology (including the adoption of electric vehicles or the use of artificial intelligence and machine learning) and compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional compliance costs and other expenditures by us or our suppliers all of which could adversely impact the demand for our products and our business, financial condition, results of operations or cash flows.

Many factors influence our reputation and the value of our brands including the perception held by our customers, suppliers, business partners, investors, regulators, other key stakeholders and the communities in which we do business. Our business faces increasing scrutiny and regulations related to corporate social responsibility practices and disclosures and we face an increasing risk of damage to our reputation and the value of our brands if we fail to act responsibly and/or in compliance with applicable laws and regulations in a number of areas, such as environmental stewardship and sustainability, supply chain management, climate change, inclusion, workplace conduct, human rights, philanthropy and support for local communities. We are continually assessing our obligations under proposed and enacted rules and expect that compliance could require substantial effort in the future. Standards for tracking and reporting on sustainability matters, including climate-related matters, have also not been harmonized. Changes to these standards could require adjustments to our accounting or operational policies, as well as updates to our existing systems to meet these reporting obligations. We will therefore likely need to be prepared to contend with overlapping, yet distinct, disclosure approaches, frameworks and requirements.

The trading price of our common stock is subject to fluctuations, and may be subject to fluctuations in the future based upon external economic and market conditions. The stock market in general has experienced significant price and volume fluctuations that have sometimes have been unrelated or disproportionate to the operating performance of listed companies. These broad market, geopolitical and industry factors among others may harm the market price of our common stock, regardless of our operating performance and growth outlook, and the value of your investment may decline.

Genuine Parts Company ("GPC") is a leading global service organizationprovider withof automotive and industrial replacement parts and value-added solutions. We have a long history of growth and innovation dating back to our founding in Atlanta, Georgia, in 1928. Over nearly a century, we’ve built a reputation for delivering excellent customer service, profitable growth, leading distribution capabilitiesgrowth and strong cash flow.flow generation.

In 2024,2025, we conducted business in North America, Europe and Australasia from more than 10,70010,800 locations. Our Automotive businessbusinesses 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 year. Our Industrial business operated in the U.S., Canada, Mexico, Australia, New Zealand, Indonesia and Singapore and accounted for 37% of total revenues.

OurWe missionare isfocused toon bebeing the preferred employer, supplier, and investment of choice,partner while alsodelivering beingvalues ato valuedour corporate citizen in the communities we serve.shareholders. This missionfocus drives our strategic financial objectives: outpacingwhich marketare growing revenue growth,in excess of the market, improving operating margins, maintaining a stronghealthy balance sheetsheet, andgenerating strong cash flows, and allocating capital effectively. As we look to the future, we are leaning into modernizing our supply chain and technology through digital innovation, and data-driven strategies to enhance our competitive edge. By leveraging technology and optimizing supply chains,chains and leveraging technology, we are empowering our teams with cutting-edge tools to continue our focus on delivering exceptional customer service and driving sustainable growth. At the heart of it all is our commitment to excellence, supported by a culture of continuous improvement and a legacy of strong leadership that has guided us for nearly 100a years.century.

Comparable sales referis a key metric that refers to period-over-period comparisons of our net sales excluding the impact of acquisitions, divestitures, foreign currency and other. Our calculation of comparable sales is computed using total business days for the period and is inclusive of bothsales from our company-owned stores and sales to our independent owner'sowners. stores.The Wecompany considerconsiders this metric useful to investors because it provides greater transparency into management’s view and assessment of ourthe company’s core ongoing operations. This is a metric that is widely used by analysts, investors and competitors in our industry, however our calculation of the metric ismay not be comparable to similar measures disclosed by other companies, because not all companies and analysts calculate this metric in the same manner.

WeSegment changedEBITDA is the measure we use to assess the profitability of our segmentcompany’s profitbusiness segments and segmentit profitis margincalculated measuresas net sales less cost of goods sold and total other operating expenses of the business segment, and it excludes amounts reflected in theCorporate fourthEBITDA, quarternet ofinterest 2024expense, todepreciation and amortization and other unallocated costs. Segment EBITDA andas a percentage of Segment Net Sales is referred to as Segment EBITDA margin, respectively.margin. We believe that Segment EBITDA and Segment EBITDA margin are useful measures because they allow management, analysts, investors, and other interested parties to evaluate the profitability of our segments and they align with how management evaluates performance and sets compensation plans. Refer to the Segment Data Footnote in the Notes to Consolidated Financial Statements for additional information.

InNet 2024,sales ourincreased 3.5% in 2025 primarily due to a 2.2% benefit from acquisitions and a 0.9% increase in comparable sales. We estimate that comparable sales werebenefited flatfrom dueapproximately 2.0% of price inflation, including tariff related impacts. We continue to be affected by softer consumer demand, as macro-economic headwinds such as high interest rates and persistent cost inflation continued to impact customerour buyingcustomers, behavior.particularly in Europe. Economic activity in the U.S. manufacturing sector, measured by PMI, remained contractionary through the end of 2025 which continued to pressure Industrial net sales. The impact on net sales from foreign currency translation was negligible.

Gross profit increased $233$417 million, or approximately 2.8%,4.9%, from 20232024, duedriven primarily toby an increase in net sales. ThisGross wasprofit partiallyimproved offsetpartly bybecause a charge of $62 million charge to write down certain existing inventory associated with a new global rebranding anddid relaunchnot ofrecur in 2025. The increase in gross profit was partially offset primarily by a nonrecurring $151 million charge to reserve for expected credit losses on amounts due from First Brands, a key toolglobal andautomotive equipmentparts offering.supplier whose business significantly deteriorated in the fourth quarter following its Chapter 11 bankruptcy filing in September 2025. Gross margin increased to 36.3%36.8% from 35.9%36.3% in 2023,2024, a 4050 basis point improvement, which was primarily driven by theour benefitstrategic ofpricing acquiredand businesses.sourcing initiatives and acquisitions.

In February 2024, we approved and announced a global restructuring designed to better align our assets and further improve the profitability of the business. This initiative included severance, an announced voluntary retirement offer in the U.S.,U.S. alongduring with2024, aand rationalization and optimization of certain distribution centers, stores and other facilities. WeIn 2025, we incurred a $62 million inventory charge, described above, and $221$254 million of restructuring and other costs related to the initiative, which includes $91 million of severance costs.initiative. We recognized approximately $45$175 million in cost savings related to this global restructuring initiative for 2024.2025.

Our effective income tax rate was 23.1%(26.4)% as of December 31, 2024,2025, compared to 24.4%23.1% in 2023.2024. For the year ended December 31, 2024, theThe rate decrease is primarily due to a change in net income and expanded investment and domestic credit benefits.

Net Income, Adjusted Net Income and AdjustedSegment Net IncomeEBITDA

Net income was $66 million in 2025, a decrease of 92.7% compared to $904 million in 2024, a decrease of 31.3% compared to $1.3 billion in 2023.2024. Diluted earnings per share ("EPS") was $6.47$0.47 in 2024,2025, down $2.86$6.00 compared to $9.33$6.47 in 2023.2024. Adjusted net income was $1.1$1.0 billion in 2024,2025, a decrease of 13.4%10.0% compared to $1.3$1.1 billion in 2023.2024. Adjusted diluted EPS was $8.16,$7.37, down $1.17$0.79 compared to $9.33$8.16 in 2023.2024.

North America Automotive

2024North EBITDA decreased 4.2% or $56 million from 2023, and EBITDA margin decreased 70 basis points to 8.7% in 2024 compared to 9.4% in 2023, driven by the following factors.America Automotive segment sales grew $522$308 millionmillion, or 3.7% due3.3%, primarily todriven by acquisitions. Gross profit increased $275$282 millionmillion, or 4.9%8.2%, andwith gross margin improvedexpanding 50170 basis pointspoints, primarily due to our strategic acquisitionspricing, insourcing our U.S. business, including MPECinitiatives and Walker.acquisitions. OurHowever, grossthese profitgains improvementwere wasmore than offset by rising operating expenses. Operating expenses increased $330$325 million, with approximately 75% of the increasemillion driven by personnel costcosts, increaseshealthcare ofcosts, $200 millionrent and rentfreight. increasesWhile ofacquisitions $53 million. Operating expenses increased partly duecontributed to acquisitions,the howeverrise in expenses, the decline in EBITDA and EBITDA margin declineswas largely weremainly driven by persistent cost inflation, primarily in wagespersonnel costs, healthcare costs and rent, in our existing businesses.rent.

20232025 EBITDA wasdecreased $1.3$24 billion,million, aor decrease of 2.6%4.2%, from 2022,2024, and EBITDA margin decreased 7090 basis points to 9.4%9.3% in 20232025 compared to 10.1%10.2% in 2022,2024, driven by the following factors. International Automotive segment sales increasedgrew 4.2%$302 million or 5.4% primarily driven by a 2.8%3.3% contributionbenefit from acquisitions and 2.1% growth in comparable sales, partially offset by a 0.7% unfavorable impact from foreign currency and other.acquisitions. Gross profit increased $295$151 million, or 5.5%,6.0%, inand 2023gross margin improved 20 basis points primarily due to salesstrategic growth. This improvement was offset by a $330 million increase in operating expenses, including $160 million attributed to higher personnel expenses that were driven by persistent cost inflationpricing and thesourcing effects of acquisitions.initiatives.

Corporate EBITDA primarily reflects costs related to our corporate headquarter'sheadquarters' broad support to our business units and other costs that are managed centrally and not allocated to business segments. These include personnel and other costs for company-wide functions such as executive leadership, human resources, technology, cybersecurity, legal, corporate finance, internal audit, and risk management, as well as asbestos-related product liability costs and A/R Sales Agreement fees. Our operational objective is to maintain Corporate EBITDA within a range of 1.5% to 2.0% of net sales.

Other unallocated costs represent restructuring and other costs andcosts, acquisition and integration related costscosts, and other. These increaseddecreased year-over-year due to the global restructuring initiative that was approved in February 2024 and the significant increase in acquisition activity in 2024.2025.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part 1,I, ITEM 1A, "Risk Factors", in our 2025 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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, 2025. The results of operations for the three and six months ended MarchJune 31,30, 2026 are not necessarily indicative of results for the year ended December 31, 2026.

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 persistent inflation (including the direct and indirect impact of tariffs and retaliatory tariffs) or deflation, geopolitical uncertainty and unrest (including from the conflict ininvolving the United States and Iran) and declining consumer confidence; our ability to successfully implement the separation of Global Automotive and Global Industrial and achieve the anticipated benefits of such transaction; volatility in oil prices; significant costs, such as elevated fuel and freight expenses; 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 three 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 global trade regulations, environmental and social policy, infrastructure programs and privacy legislation,legislation and related uncertainties, and their 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 its disclosure controls and procedures and internal controls over financial reporting; the uncertainties and costs of litigation; 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; disruptions caused by a failure or breach of our information systems; the success of our global restructuring efforts and the annualized cost savings arising therefrom, as well as other risks and uncertainties discussed in our 2025 Annual Report on Form 10-K and from time to time in our subsequent filings with the SEC.

For the threesix months ended MarchJune 31,30, 2026, we conducted business in North America, Europe and Australasia from more than 10,800 locations. Our Automotive businesses operated in the U.S., Canada, 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 threesix months ended MarchJune 31,30, 2026. 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.

We are focused on being the preferred employer, supplier, and partner while delivering valuesvalue to our shareholders. This focus drives our strategic financial objectives which are growing revenue in excess of the market, improving operating margins, maintaining a healthy balance sheet, generating strong cash flows, and allocating capital effectively. As we look to the future, we are leaning into modernizing our supply chain and technology through digital innovation, and data-driven strategies to enhance our competitive edge. By optimizing supply chains and leveraging technology, we are empowering our teams with cutting-edge tools to continue our focus on delivering exceptional customer service and driving sustainable growth. At the heart of it all is our commitment to excellence, supported by a culture of continuous improvement and a legacy of strong leadership that has guided us for nearly a century.

We are navigating through several external factors that create uncertainty and volatility in our operating results. These factors, and any changes to these factors, among others, could have a material adverse impact on customer behavior and our future operating results. For additional discussion regarding these external factors and other risks, refer to Risk Factors in Item 1A of Part 1I within our Annual Report on Form 10-K for the year ended December 31, 2025.

We continue to monitor the global trade environment, including the tariffs on merchandise inventories sourced directly or indirectly from several countries, such as China, Canada, and Mexico, and their impact on our operations. During the threesix months ended MarchJune 31,30, 2026, tariffs continued to drive higher pricesproduct to our customerscosts and costcustomer inflationpricing, that impactedimpacting our gross margin and SG&A expenses. We continue to manage these challenges through strategic pricing and sourcing initiatives, leveraging global supplier relationships and technology tools. We are closely monitoring the recent U.S. Supreme Court decision on February 20, 2026, invalidating certain tariffs imposed under the International Emergency Economic Powers Act. The ultimate impact of this ruling, including whether importers may be entitled to refunds or previously paid tariffs, remains uncertain and subject to further legal proceedings. Our exposure as the importer of record represents less than 0.5% of our total purchases. Accordingly, we have not recorded any adjustments to our financial statements related to potential refunds, as any such amounts would not be material and are not reasonably estimable at this time. We continue to take steps to manage tariff-related cost pressures; however, these actions may not fully offset increased costs in future periods.

Our first quarter results of operations are summarized below for the three and six months ended MarchJune 31,30, 2026 and 2025.

NetFor the three months ended June 30, 2026, net sales increased 6.8%6.0% in 2026 duecompared to 2025. The increase was driven by a 2.4%3.4% increase in comparable sales, a 3.1%1.4% benefit from favorable impact of foreign currency and other, and a 1.3%1.2% benefit from acquisitions. We estimate that comparable sales benefited from approximately 3.0% of price inflation, including tariff related impacts.

Gross profit increased $165$146 million, or 7.6%,6.3%, with gross margin increasing 20approximately 10 basis points to 37.3%37.8% during the firstthree quartermonths ofended 2026June 30, 2026, compared to the same prior year period. TheseGross profit increased $312 million, or 6.9%, with gross margin increasing approximately 20 basis points to 37.6% during the six months ended June 30, 2026, compared to the same prior year period. The increases in gross profit are primarily reflectdriven by increased sales, and our margin expansion reflects our ongoing pricing and sourcing initiatives, partially offset by the impact of inflationtariffs and tariffsMiddle onEast conflict-driven inflation in product costs.

SG&A expenses increased $147 million, or 8.6%, during the first quarter of 2026 compared to the same prior year period. The growth in SG&Aboth expenses wasperiods primarily due to inflationary cost pressures affectinghigher salaries and wages, rentfreight, healthcare, rent, and freightIT andcosts, as well as additional operating expenses linkedassociated towith recent acquisitions. Additionally,In addition, SG&A expenses increased due to foreign currency exchange impacts of approximately $70$30 million relativeand to$100 million for the priorthree yearand period.six months ended June 30, 2026, respectively. We also incurred costs of $18$16 million and $34 million related to the planned separation of our Global Automotive and Global Industrial businesses.businesses for the three and six months ended June 30, 2026, respectively. Our global restructuring initiatives provided a 30 basis point benefit to SG&A for both the three and six months ended June 30, 2026.

WeAs continuea to actively mitigate the impactpercentage of thenet inflationary cost environment through our global restructuring initiatives, which we estimate had a $26 million benefit tosales, SG&A increased approximately 60 basis points for both the three monthsand endedsix Marchmonth 31,period 2026.primarily due to inflationary pressures on freight, healthcare, rent, ongoing planned investments in technology, and separation costs. In response to sustainedongoing inflationary cost pressures, during the six months ended June 30, 2026, we executedimplemented targeted cost-control initiatives, including reductions in discretionary travel, limited merit-based compensation adjustments in certain regions, and the strategic deferral of select technology and other projects. As a result of some of these actions, salaries and wages as a percentage of net sales during the three and six month periods were roughly flat.

As part of our global restructuring plan, which was approved and initiated in February 2024, we incurred $58$71 million and $129 million associated with facility closures and additional severance costs during the firstthree quarterand ofsix 2026.months ended June 30, 2026, respectively. For additional details, refer to the Restructuring Footnote in the Notes to Condensed Consolidated Financial Statements.

Depreciation and amortization expenses increased $16$12 million and $27 million for the three and six months ended June 30, 2026, respectively, related to planned investments in technology and supply chain initiatives.

We incurred $41$43 million in net non-operating expensesexpense during the firstsecond quarter of 2026, a $5$4 million change from $36$38 million in net non-operating expensesexpense in the prior year period. We incurred $83 million in net non-operating expense during the six months ended June 30, 2026, a $9 million change from $75 million in net non-operating expense in the prior year period. This category primarily includes net interest expense, investment income, foreign currency gains and losses, and fees associated with our Accounts Receivable Sales Agreement ("A/R Sales Agreement").

Net income was $189$228 million for the firstthree quartermonths ofended June 30, 2026, a decrease of 3.0%10.7% compared to $194$255 million during the firstsecond quarter of 2025. Diluted earnings per share ("EPS") was $1.37$1.65 for the firstsecond quarter of 2026, down $0.03$0.18 compared to $1.40$1.83 during the first quarter of 2025. Theprior year over year decline in net income is primarily due to persistent cost inflation, higher depreciation and amortization from ongoing investments, and higher interest expense. This was partially offset by gross margin expansion and benefits from our global restructuring program and cost actions, which are discussed above in more detail.period.

Adjusted netNet income was $245$416 million for the firstsix quartermonths ofended June 30, 2026, a increasedecrease of 0.6%7.4% compared to $449 million during the same prior year period. OnDiluted aearnings per share basis, adjusted net income("EPS") was $1.77,$3.01 anfor increasethe ofsix 1.1%months ended June 30, 2026, down 6.8% compared to $1.75$3.23 induring the same prior year period.

North America Automotive EBITDA increased $9$12 million, or 6.3%,6.0% compared tofor the samethree periodmonths inended 2025,June and30, EBITDA margin increased 10 basis points to 6.6% from 6.5%,2026, driven by the following factors. North America Automotive segment sales grew $98$93 million, or 4.3%,3.8%, primarily driven by ana 2.2%2.6% increase in comparable sales and 1.6%a 1.3% benefit from acquisitions. Gross profit increased $41$32 millionmillion, or 4.7%, with gross margin expanding 20 basis points,3.3%, primarily driven by higher sales and benefits from our pricing and sourcing initiatives. Operating expenses increased $20 million due to ourcontinued strategicinflationary pricing, sourcing initiatives, and acquisitions.pressures. These gainscost pressures were partially offset by continued inflationary pressures on salaries and wages and freight costs, as well as the incremental expenses associated with acquired businesses. The increase in EBITDA margin reflects our gross margin improvement andcontinued benefits of our global restructuring and disciplined cost control initiatives.

International Automotive EBITDA increased $6$8 million, or 4.6%,6.0% compared tofor the samethree priormonths yearended period,June and30, EBITDA margin decreased 80 basis points to 9.1%,2026 driven by the following factors. International Automotive segment sales grew $185$120 millionmillion, or 13.2% primarily8.2%, driven by a 10.6%4.9% benefit from favorable foreign currency exchange. Sales also benefited fromexchange, a 2.3%2.7% contribution from acquisitions, and a 0.3%0.6% increase in comparable sales. Gross profit increased $79$55 million, or 12.4%,8.1%, in-line with the increase in sales. GrossOperating marginexpenses declinedincreased 30$47 basis points primarilymillion due to the impact of businesses acquired after the first quarter of 2025 that operate at a slightly lower gross margin. Our EBITDA margin declined due to a $73 million increase in operating expenses, driven primarily bycontinued inflationary pressures impacting personnel costs, rent and freight, including statutory minimum wage increases in certain jurisdictions.freight. These cost pressures were partially offset by the continued benefits of our global restructuring and disciplined cost control initiatives.

Industrial EBITDA increased 12.7%$28 tomillion, $314or million9.8%, compared tofor the samethree priormonths yearended period,June and30, EBITDA margin increased 90 basis points year over year to 13.6%,2026 driven by the following factors. Industrial segment sales increased by $115$159 million or 5.2%,7.1%, for the three months ended June 30, 2026, primarily driven by a 3.9%6.1% increase in comparable sales and a 1.0%0.8% benefitfavorable fromimpact of foreign currency exchange.currency. Gross profit increased $45$65 millionmillion, or 6.8%,9.4%, withprimarily grossdriven marginby expandinghigher 50sales basis points due to theand benefits offrom our strategic pricing and sourcing initiatives. Our effective cost initiatives resulted in a 50 basis point improvement in operating expenses as a percentage of sales compared to the same prior year period.

Corporate EBITDA amounted to a losslosses of $120$108 million, or 1.9%1.6% of net sales, and $227 million, or 1.8% of net sales, for the three months ended MarchJune 31,30, 2026 and six months ended June 30, 2026, respectively, compared to a losslosses of $91$79 million, or 1.6%1.3% of net sales, forand $170 million, or 1.4% of net sales, in the threeprior monthsyear ended March 31, 2025.periods. The increased losslosses waswere primarily driven by inflationary pressures impacting personnel costs and health insurance.

Other unallocated costs for both periods represent restructuring and other costs, separation costs, and acquisition and integration related costs and other. For the firstsix quartermonths ofended June 30, 2026, we incurred $58$134 million of restructuring and other costs and $18$34 million of separation costs.

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 and six months ended MarchJune 31,30, 2026, 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.

(4)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 MarchJune 31,30, 2026, we applied the statutory income tax rates to the taxable portion of all of our adjustments, which resulted in a tax impact of $19$24 million.million and $43 million, respectively.

Currently, we believe that our existing lines of credit, term loan A facilities, commercial paper program, and cash generated from operations will be sufficient to fund our operations for the foreseeable future, including working capital requirements, strategic acquisitions, dividends, share repurchases, capital expenditures, scheduled debt and interest payments, and income tax obligations.