GPC 2017 Annual Report

Our increased debt levels could adversely affect our cash flow and prevent us from fulfilling our obligations. We have an unsecured revolving credit facility and unsecured senior notes, which could have important consequences to our financial health. For example, our level of indebtedness could, among other things: • make it more difficult to satisfy our financial obligations, including those relating to the senior unsecured notes and our credit facility; • increase our vulnerability to adverse economic and industry conditions; • limit our flexibility in planning for, or reacting to, changes and opportunities in our industry, which may place us at a competitive disadvantage; • require us to dedicate a substantial portion of our cash flows to service the principal and interest on the debt, reducing the funds available for other business purposes, such as working capital, capital expenditures or other cash requirements; • limit our ability to incur additional debt with acceptable terms; and • expose us to fluctuations in interest rates. In addition, the terms of our financing obligations include restrictions, such as affirmative, negative and financial covenants, conditions on borrowing and subsidiary guarantees. A failure to comply with these restrictions could result in a default under our financing obligations or could require us to obtain waivers from our lenders for failure to comply with these restrictions. The occurrence of a default that remains uncured or the inability to secure a necessary consent or waiver could have a material adverse effect on our business, financial condition, results of operations and cash flows. ITEM 1B. UNRESOLVED STAFF COMMENTS. Not applicable. ITEM 2. PROPERTIES . The Company’s corporate and Automotive Parts Group headquarters are located in two office buildings owned by the Company in Atlanta, Georgia. The Company’s Automotive Parts Group currently operates 57 NAPA Distribution Centers in the United States distributed among eight geographic divisions. Approximately 90% of the distribution center properties are owned by the Company. At December 31, 2017, the Company operated approximately 1,100 NAPA AUTO PARTS stores located in 45 states, and the Company had either a noncontrolling, controlling or other interest in 200 additional auto parts stores in 14 states. Other than NAPA AUTO PARTS stores located within Company owned distribution centers, the majority of the automotive parts stores in which the Company has an ownership interest are operated in leased facilities. In addition, NAPA Canada/UAP operates 12 distribution centers, one fabrication/remanufacturing facility and approximately 188 automotive parts and Traction stores in Canada. In Mexico, Auto Todo operates 11 distribution centers, one automotive parts store, and one tire center, and NAPA Mexico operates one distribution center and 13 automotive parts stores. These operations in both Canada and Mexico are conducted in leased facilities. GPC Asia Pacific operates throughout Australia and New Zealand with 12 distribution centers, 482 auto parts stores, primarily under the Repco banner, and 78 branches associated with the Ashdown Ingram, Motospecs, McLeod and RDA Brakes operations. These distribution center, store and branch operations are conducted in leased facilities. In 2017, the Company expanded its global distribution net- work to Europe through the Alliance Automotive Group acquisition described above. In France, the Company operates 15 distribution centers and 220 company-owned stores. In the U.K., the Company operates 25 dis- tribution centers and 106 company-owned stores. In Germany, the Company operates eight distribution centers and 37 company-owned stores. Alliance Automotive Group serves affiliated outlets in Poland, but has no company-owned operations in that country. AAG’s locations are operated in leased facilities, other than three distribution centers and the U.K. country office which are company-owned. 15

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