At this time I would like to welcome everyone to the Genuine Parts Company 2008 fourth quarter and year end earnings conference call. (Operator Instructions) I would now like to turn the call over to Ms. Carol Yancey, Senior Vice President of Finance.

Good morning and thank you for joining us today for the Genuine Parts Company fourth quarter and year end conference call to discuss our earnings results and our outlook for 2009. Before we begin this morning, please be advised that this call may involve forward-looking statements such as projections of revenue, earnings, capital structure and other financial items, statements on the plans and objectives of the company and its management, statements of future economic performance, and the assumptions underlying these statements regarding the company and its business. The company’s actual results could differ materially from any forward-looking statements due to several important factors described in the company’s latest SEC filings. The company assumes no obligation to update any forward-looking statements made during this call. We will begin this morning with remarks from Tom Gallagher, our Chairman, President and CEO.

I would like to add my welcome to each of you on the call today and to say that we appreciate you taking the time to be with us this morning. As we customarily do, Jerry Nix, our Vice Chairman and Chief Financial Officer, and I will split the duties on this call and once we have concluded our remarks we will look forward to answering any questions that you may have. Now earlier this morning we released our fourth quarter and year end 2008 results and hopefully you have all had an opportunity to review them, but for those who may not have seen the numbers as yet, as quick recap shows that sales for the quarter were $2.52 billion, which was down 4%. Net income was $87.8 million, which was down 30%, and earnings per share were $0.55 this year compared to $0.75 in the fourth quarter of 2008, an EPS decrease of 27%. For the full year sales were $11.015 billion, which was up 2%. Net income was $475.4 million, which was down 6% and earnings per share per share were $2.92 compared to $2.98 last year and that’s down 2%. While pleased that our earnings per share exceeded the range of $2.85 to $2.90 that we can in our January 23rd release, we would also say that we are disappointed with the way that the year turned out. Through September our sales were running up 3%, our net income was up 2%, and EPS was up 6% and our results have been fairly consistent and steady over the first nine months of the year. But then starting in the second half of October we saw a sudden and significant drop off in demand across all four business segments, and as mentioned a moment ago, fourth quarter…

We are first going to review the income statement and segment information and then touch on a few key balance sheet and other financial items. We will be brief and then open the call up to your questions. A view of the income statement shows the following. Total sales for the fourth quarter are down 4% to $2.5 billion, reflecting the rapid decline in demand in all of our businesses late in the year. For the year we finished up 2% at $11.0 billion and this increase represents another record level of sales for GPC. Our consistent and steady record of sales growth is something we strive for but we clearly have our work cut out for us as we move into 2009. Gross profit in the quarter increased 21 basis points to 29.83% to sales compared to 29.62% in the fourth quarter last year. We are pleased to show progress for the quarter in our gross margin, and for the year gross margin held relatively steady with the prior two years at 29.72% to sales. To show progress on this line we continue to focus on several factors, including the impact of product and customer mix as well as our global sourcing initiatives. In addition, we had the benefit of inflationary pricing in 2008, which exceeded any increases we have had as far back as the early 80s. Offsetting the benefits of inflation in our margin initiatives are the competitive pricing pressures associated with lower demand and the difficult economic conditions impacting our markets. For the year, our cumulative pricing which represents the prior increases to us plus 6.0% in Automotive, 7.9% in Industrial, 4.2% in Office Products, and 8.3% in Electrical. Now let’s look at SG&A. For the fourth quarter SG&A as a percent to sales was 23.8%…

Well, that recaps our fourth quarter and full year results and 2008 certainly proved to be an interesting and challenging year for us. We felt that we were holding up reasonably well through the first nine months but then the pace and the depth of the economic decline in the fourth quarter impacted all four of our businesses, and this has continued in the early days of 2009 as well. As you might expect, our Industrial and Electrical businesses are having the most difficult time right now, running double-digit decreases for the first six weeks of the year. Office Products is about where they were in the fourth quarter and Automotive is showing just slight improvement. So overall, we continue to feel the effects of the economic slowdown and providing guidance for 2009 is extraordinarily difficult right now. So much depends on what happens in the economy and how this will affect our revenues for the year. Our feeling right now is that 2009 will be another challenging year, with the first two quarters being the most difficult. Looking at the first quarter, we have already given you a sense of our sales results through the first six weeks. Additionally, we have one less sales day in the quarter this year compared to last and we also continue to face an unfavorable exchange rate adjustment. The net result is that we think that revenues for the quarter will be down 6% to 10% and with revenue at this level our expectation if for earnings per share to be in the $0.45 to $0.60 range compared to $0.75 last year. For the full year, at this point in time, we would say a revenue expectation of down 5% to down 8% and an EPS expectation of $2.25 to $2.75 would be appropriate. Now, we recognize that the EPS range of $2.25 to $2.75 is quite broad but until we get a sense for how the economy is going to react in the months ahead, it’s hard for us to be any more precise but we would hope to be able to narrow the guidance some as we get a little further into the year. In the meantime, while we can’t control the economic conditions impacting our company, nor predict the length of the current cycle, we can control how we run the business. And in the near term the focus of the entire GPC management team is on maximizing our revenue opportunities while at the same time driving our cost reduction and asset management initiatives throughout each of our business segments. At this point we would like to address any question you may have.

(Operator Instructions) Your first question comes from John Murphy – BAS-ML. John Murphy – BAS-ML: [break in audio] . . . we’re looking at as a big guidance range for the revenue decline, which makes a lot of sense and you have given us a pretty big, wide range on the earnings per share expectations that you have for 2009. If you could just highlight the major levers that you may be able to pull, in addition to what you’re doing already, if sales really are coming in at the lower end of the range.

We may have missed the first part of your question, but when you refer to the levers, are you talking about expense levers or revenue levers? John Murphy – BAS-ML: I apologize. I said in light of the big range on revenue, which I understand, I mean, it makes sense right now, and the big range that we see on EPS, if we were down 8% on revenue, what would be the incremental levers that you would be pulling to cut costs, above and beyond what you’re doing right now? Or is it just intensifying the efforts?

Well, the major things that we are looking at right now obviously would be the headcount. Jerry mentioned we were down 5% in headcount for 2008. We were down an additional 2% in January and will continue to monitor that as we work our way through the quarter. We are also looking at, and have embarked upon, some facility rationalizations and consolidations and those steps are underway. We have looked at things like outbound transportation, route optimization, which we feel has some potential for us as we dig deeper into this. And we have got a number of initiatives that are either underway or are about to be underway to help bring the cost structure down. John Murphy – BAS-ML: If we just think about, there in the decline we say towards the end, or in the second half of the quarter, which was pretty severe across the board, was there anything that you could tell whether you were gaining or losing market share in your segments?

No, I wouldn’t say that. I think at this point our sense is that we performed at the market perhaps in Automotive and in Office Products. We may have gained just a little bit of share in Industrial and Electrical. But I think the market just really started to drop pretty dramatically as the quarter progressed. John Murphy – BAS-ML: On acquisitions as we go through 2009, is there the chance that you might be able to conquest business from some of these weaker players, or these players that you might have acquired in the past and back fill your distribution centers, or would there be the need to make these smaller bolt-on acquisitions as we go through 2009, to gain some share maybe?

Well, we think both of the scenarios that you described are possible and maybe probable, as we work our way into the year. we do think that we will be able to take advantage of some underlying weakness in perhaps some of the competition in the months ahead and one of the strategies we have is to build our cash position and if it means that we can do it through acquisition we will be in a cash position to do that. If not, we are in a position to continue to invest in some of the sales and marketing initiatives that we’ve got underway.

I might point out, we remain a very disciplined buyer, particularly in this market and as you can imagine, we have seen evaluations of some of the targeted companies come down and we may see further decline in some of those valuations. But that’s what we’re looking at. John Murphy – BAS-ML: Just one point of clarification. You were saying that you saw a slight improvement in Auto through the beginning of this year.

The operative word is slight. We did see it improve a bit through the first six weeks. Not enough to say that with confidence that we may have hit the bottom. But just a bit of improvement, and hopefully that is where we will stabilize and start to come back from.

Your next question comes from Matthew Fassler – Goldman Sachs. Matthew Fassler – Goldman Sachs: First of all, you said that Automotive, ex currency and Johnson Industries, I think you said was down 1% this quarter?

1% for the quarter, up 2% for the year. Matthew Fassler – Goldman Sachs: So third quarter was also up, too, roughly?

I believe that’s right. Matthew Fassler – Goldman Sachs: And kind of related to that, what are you seeing in terms of store count, company-owned and also network-wide, and what is the financial status, so far as you could tell, of the jobbers in the network?

As far as the store count in total, we basically had a flat year. We were up 9 on a net new-store basis. We opened a number of stores but we also closed or consolidated a number. I would say that as far as the financial health of our customers, as a general rule, these are pretty well capitalized businesses, and you know, we do have arrangements with our lenders for programs to keep them financial healthy. We are working very closely with them to keep them in that shape. But as far as expectations for this year, I would say that our store count will perhaps increase modestly but now as much as we would have hoped in more normal times. Matthew Fassler – Goldman Sachs: My second question relates to currency, broadly speaking. You quantified it at roughly $63.0 million for the quarter. I might have missed what the impact was for the year, and as you discuss that can you just talk about the country mix so that we can forecast that appropriately?

Sure. The impact for the year was fairly modest. It was very slightly negative but the dollar strengthened, you know, as the year progressed so we wound up getting more of an impact over the latter part of the year. The way our business breaks down is that we’re roughly 90% U.S., 9% Canadian, 1% Mexico. Matthew Fassler – Goldman Sachs: So it’s primarily Canada. And is that Canadian exposure essentially even through your businesses or is it disproportionately allocated to one or two divisions?

It’s Automotive primarily, although we do have some in Industrial as well. Matthew Fassler – Goldman Sachs: So is Automotive a double-digit Canadian percentage?

No. It would be, let’s see, I’m working it in my mind, but no, it would be about 12%. I think you’re about right. Matthew Fassler – Goldman Sachs: The receivables number did move a little opposite the direction of sales and Jerry, you made some allusion to this earlier on and you also spoke briefly about the allowance for doubtful accounts. Can you talk about the aging? Can you talk about where the receivables are, where they reside? And I guess more importantly than the dollars, what is the source of the slower payment from your customers? Does it differ by division or by customer type?

Our bad debt expense was up $10.0 million in the year. And our aging has not really changed much. We saw a slight change in January of about 1%. But obviously the piece of the business that we’re the most concerned about would be in our Industrial and Electrical businesses because the manufacturing sector is the most hard-hit and that’s where you more than likely are going to see bankruptcies. We are in pretty good shape as far the receivables within the Automotive side and the Office Product side. Of course, you know our exposure there to the independent network is about 75% or so and we have to stay close to that as well as the mega channels that represent that other 23%, 24%.

Your next question comes from Analyst for Anthony Cristello- BB&T Capital Markets. Analyst for Anthony Cristello- BB&T Capital Markets: Looking at the Automotive segment, the 1% decline in the fourth quarter seems to be a fairly significant departure from what you saw in the third quarter on a continuing ops basis. From a macro perspective it would seem that the environment didn’t really materially deteriorate and gas prices certainly were at much lower levels. Could you provide a little more color on what you see as the underlying drivers behind the softness in Q4 Automotive sales?

First of all, in terms of the gasoline pricing, through November gasoline pricing was still a little bit higher than it had been same month prior year. We did see moderation from the peaks earlier in the year but it was still month-over-month higher. If you look at things like retail sales, consumer spending, you will see that they seem to decline at a faster rate as the quarter progresses than they had earlier in the year. That has an effect on our business as well. I think retail sales were actually down 7% in December and were down modestly for the whole year, but the biggest decrease came in the fourth quarter. Then the overall decline in GDP had an effect on our business as well. But the biggest part is consumer spending and the concern the consumer has on how they’re going to meet their budgets.

I might also point out the decline in gasoline prices did not correlate to an increase in miles driven. Miles driven continued to go down. The money that they would have been putting into the pump has gone to paying off credit card debt or whatever. Miles driven continued to be down and actually the decrease in miles driven accelerated some. So the fact that gasoline price was down didn’t correlate.

I think Jerry makes a great point. If we look at what happened with miles driven, by our calculations they were down 1.8% in the first quarter, were down 2.6% in the second quarter, 3.4% in the third quarter, and they are going to be down over 4% in the fourth quarter. Analyst for Anthony Cristello- BB&T Capital Markets: Do you happen to have the commercial versus the retail or cash sales number for the fourth quarter specifically, and then the slight improvement seen in Automotive sales to date in 2009, have you seen any material shift or change, either comparing the commercial segment to retail, or even just on a regional basis?

What we said was that for year our commercial business was up low single digit and our cash business was down just a bit. Those same patterns extended through the fourth quarter, with commercial being up just slightly and cash being down a bit more than the full year. And we don’t see any significant change in the patterns for the first six weeks of the year. Analyst for Anthony Cristello- BB&T Capital Markets: In terms of guidance for 2009, is the assumption that economic and market conditions remain relatively consistent with current levels? And also, what are your expectations for full year 2009 revenues on a segment basis?

We don’t have the numbers for you today on a segment basis but as far as the economy, it’s our expectation it may get a little bit more difficult before it gets better but we are counting on conditions being about the same through year end.

Your next question comes from Analyst for Gregory Melich - Morgan Stanley.

On future pricing, as we look in prices into you from your vendors have sort of been at record levels, especially through Q4. Are you seeing any moderation with respect to prices in, at least, as we head into Q1 and do you have any different outlook there, for the near term at least?

Right now we do see evidence that pricing will not be nearly as significant in 2009 as it was in 2008. Our expectation, and we don’t have firm guidance from our vendors at this point, but our expectation is that pricing will moderate, probably be positive for the year, but nowhere near what we saw in 2008. Analyst for Anthony Cristello- BB&T Capital Markets: As a follow-up to the independent jobber points that have been raised before, is there anything there that you can mention with respect to inventory levels at the jobbers? Do you feel that they are at capital-constrained, or have they really, as you mentioned, been able to access capital freely through third-party vendors and so forth so that’s not really an issue with inventories.

No, I don’t think that’s an issue for the NAPA jobbers. As I mentioned, we have lending and credit arrangements through our banking relationships and they have money to lend and they are lending money. So that’s a strength for us right now perhaps, but the jobbers that are in an expansive mood are able to access capital and go ahead and do what they need to do.

It also serves no purpose for us to load these independent NAPA jobbers up with inventory. We need them to get a good return on their investment and we need them to be successful, therefore we will be. So we’re not looking to load them up with inventory. We think they have adequate inventories. Analyst for Anthony Cristello- BB&T Capital Markets: And with respect to some of the work you have been doing on cost management, it’s traditionally been a very strong area for you, as we look ahead here, I have this year’s SG&A dollar growth up above 4% and that might be a little bit over if we were to deduct some of the one-time things, but as we look ahead for next year, after some of these moves you’ve made, is there any way to think about that in terms of either SG&A dollar growth rate or in terms of let’s say, 1% of sales is equal to 25 basis points or 30 basis points of EBIT margin impact, almost equal?

The initiatives that we have identified on the call this morning, we would say have an annual estimate of savings of $50.0 million to $60.0 million. We have got other things we’re looking at and will continue to enact what need by done on the cost side. I would say that the $50.0 million to $60.0 million will feed into the income statement on a sequential basis as we continue to work our way through the year.

Your next question comes from [Brian Sundheimer – Govilia Company]. [Brian Sundheimer – Govilia Company]: I was curious if you could speak to on the Automotive side, any decline over the course of the quarter in a move towards lower priced parts from the independent repair shops?

That’s a trend that we’ve seen really all year long. If we look at the outbound sales pattern of our product categories, we have two levels of product and the lower-priced SKU movement is stronger than the higher-priced SKU movement. So that’s not anything that has changed materially from quarter to quarter; it’s been fairly consistent all year long. [Brian Sundheimer – Govilia Company]: On the Office side, I was curious if you were seeing something along the same lines as there are fewer while collar jobs and companies are naturally ordering less product. Are they moving down in product mix as well? Moving toward obviously lesser priced and for you, lower margin product?

Lower margin in terms of dollars, not necessarily in terms of percentage. But yes, that pattern is similar in the Office Products industry. [Brian Sundheimer – Govilia Company]: Any increase in cadence in that?

No, again, fairly consistent throughout the year.

Your next question comes from Alan Zeigler - First Manhattan.

If we went to the Office Product area, and you mentioned earlier that 75% of your sales are to independents to balance to the big-box guys, just strategically, if we take the 10,000-mile look, is there any reason why that mix shouldn’t change over the next couple of years. I mean, just in terms of how the world is evolving, and do you have any strategies in place to make that mix change, given where we’re at?

I think as we look at the mix we’re comfortable with it and I would say that somewhere between 75% and 80% of the business with the independent reseller and 20% to 25% with the big-box is probably where it will shake out over time.

And why wouldn’t you do more to the big-box given that it would seem that the independent guys would be shrinking. I’m assuming; maybe it’s not a correct statement but it would seem like they would be shrinking and the bigger guys, at least Staples for example, might be growing.

I think the fact of the matter is the independents are not contracting currently. I think that they are holding up reasonably well in the current environment. I mentioned that our business with them was actually up 2% in the quarter and 1% for the year. And for the last couple of years our growth on the independent side has been a little stronger than our growth on the mega side. We don’t have any strategy that says there’s a limitation to how much business we want to do with the larger companies and we continue to work with them. We currently do business with all of them and will continue to look for ways to grow that business with them But their primary focus is really on their own internal distribution and the wholesaler is a fill in supplier to them on their needs, on a more urgent basis.

Your next question is a follow-up from Matthew Fassler – Goldman Sachs. Matthew Fassler – Goldman Sachs: On the Office Products business, you talked about the local guys actually still being flat to up 3 this quarter. Understanding that their businesses are somewhat different than the megas, they still are dealing with the same economy and the office products business, broadly speaking, has typically moved with GDP. So how much longer do you that this customer group can defy the bigger-picture macro trends, and might there be something different about the way they’re using you, perhaps taking in more inventory from you rather than buying direct or maybe just buying in more as opposed to sell through? Because there’s something about that disconnect that doesn’t quite compute.

The independent for the most part is not inventory intensive. Most of the independents will buy a small portion of their overall needs on a direct basis and mostly the highly priced sensitive items and the remainder they will rely on a wholesaler. Some of our fastest growing independent customers are actually stockless. They don’t have inventory. They rely on their expertise, which is sales and marketing, and rely on us to do the fulfillment for them. So I think that they, too, are affected by the slowdown in the economy, there’s no question about that. They’re not as impacted as the negatives in certain customer categories because they’re not the ones that deal with the large firms that have had the most massive contraction in office workers. They’re not immune to it by any stretch but they’re not as exposed to it either. So I would say that our expectation for our independent business going forward is that we will get modest growth in 2009 but growth all the same, because of some of the initiatives they’ve got underway. Matthew Fassler – Goldman Sachs: Is it possible that their customers think smaller and less sophisticated or less disciplined about their purchases and I’m wondering if in prior periods they slowed later, perhaps later than the megas, or did you not see that?

I think we might have seen the reverse. And I’m not speaking with a great sense of recollection, honestly, but I think that in some prior cycles we actually saw the independents contract more than we saw the megas. And I think this one is just a little bit different. Matthew Fassler – Goldman Sachs: Jerry, can you just once again state what the pricing number was for the Automotive business?

For Automotive, 6.0%.

Your final question comes from Stephen Chick- Friedman Billings Ramsey.

In the NAPA sales trends for the fourth quarter, if we adjust for Johnsons and the FX rate, you’re down about 1% on an ongoing basis. And I have that you had incrementally a slightly higher level of acquisitions in the quarter than the past. And it looks like things were still, albeit lower levels of inflation, still helpful maybe in nominal terms. So it kind of looks like it’s about a 300 basis point down tick in the sales of that business. And I know we haven’t heard from others in the industry yet, but we’re slated to this week. But the commentary out of others seemed a little more favorable in terms of their trends, at least in the last public discussion out of them, which was October and maybe even a little bit into November. So I was wondering if you could speak to that? Are you seeing anything competitively with your stores or are we just simply going to be surprised and when these others report in the next couple of days, I guess you would expect them to see the same type of sales trend deceleration.

Well, I can’t tell you what to expect when others report. You mentioned you think we were off 300 basis points in the quarter. I’m not sure how you got there.

Last quarter your ongoing Automotive operations sales, you reported up 3%.

Are you talking sequential?

Yes.

Okay, I misunderstood what you were saying. We saw a slowdown in the quarter. And we have acknowledged that. And we saw it across all of the businesses, not just Automotive, and we think that the fourth quarter was a very, very challenging quarter for most businesses. I think what we are seeing from others that are reporting currently is that the weakest quarter of the year for them was also the fourth quarter because of the overall slowdown.

I understand that and I guess it’s tough because we haven’t seen some of your direct competitors in that business, but it seems like the commentary out of them was, or has been, a little more favorable than the slowdown you’ve seen.

Maybe what we ought to do is wait until we get the reported numbers and then we can have another conversation about it. It’s hard to speculate on what others might or might now be doing. I don’t know.

Do I have the acquisition number right here? What is the sales volume that you acquisition within Automotive during the quarter. I have it as roughly $16.0 million.

We don’t give that information out. We don’t give it out by business segment.

What we can tell you is that we gave up $22.0 million on the Johnson sale.

When you say that Industrial or motions is currently in the first six weeks running, I think you said double-digit down, is that on a reported basis? Because I know you have some acquisitions within that segment. Is that reported or is that organic?

That’s reported.

And when you say double digits, I think about that as being down 10%.

No, I would say you should be looking more in the mid teens to high teen range.

And that’s reported so organically if we try and strip out our estimates for acquisitions, it will be a little more than that?

It would be. That’s right.

Jerry, you mentioned some of the line items within your net corporate account, in the P&L. You reported $18.0 million in that line item today. The $0.07 per share post-retirement charge, I’m assuming that’s all in net other.

That’s correct.

Now I have that pre-tax that would be roughly $18.0 million then and so if I . . .

That’s not just pre-tax. It’s after tax, that’s not tax deductible.

So it’s $11.0 million then?

[inaudible]

So if I exclude that then the corporate other account still looks a little lower. If it’s $18.0 million less $11.0 million, you’re looking at something like about $7.0 million . . .

We had an additional $4.0 million in bad debt expense, we have insurance reserves, and we also had less interest income of about $3.0 million, as we mentioned.

In your cash flow statement, there’s two things, I wondered if you knew off the top of your head. One is in your financing activity, you have a $52.0 million benefit to your cash flows, looks like for the year, and I’m assuming that’s all in the fourth quarter.

I don’t know what that is, but you’re right, that is correct. Sid will have to get that for you.

There are no further questions in the queue.

We do appreciate all of you on the call continuing to show interest and support of Genuine Parts Company. We look forward to talking to you in the future with better results and under more pleasant circumstances.

This concludes today’s conference call.