Welcome everyone to the Genuine Parts first quarter earnings release conference call. (Operator Instructions) At this time I will turn the call over to our host, Ms. Carol Yancey, Senior Vice President of Finance. Ma’am, please go ahead.

Thank you. Good morning and thank you for joining us today for the Genuine Parts first quarter 2010 earnings call to discuss earnings results and the 2010 outlook. 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 or its management, statements of future economic performance and assumptions underlying the 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. Tom?

Thank you, Carol and 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. Earlier this morning, we released our first quarter 2010 results and hopefully you have had an opportunity to review them. For those who may not have seen the numbers as of yet a quick recap shows sales for the quarter were $2.602 billion which was up 6%. Net income was $100.6 million which was up 13% and earnings per share were $0.63 this year compared to $0.56 in the first quarter of 2009 and EPS increase was 13%. After the challenges that we encountered throughout 2009 we are pleased to report a positive quarter on the revenue quarter and pleased also to follow our 13% earnings increase in the fourth quarter of last year with another 13% increase this quarter. Admittedly we were going up against a very soft first quarter in 2009 but we think our results this year demonstrate continued sequential improvement and we are glad to start 2010 off with a respectable first quarter. In looking at the individual segment results, our two manufacturing sector related businesses, industrial and electrical electronic showed very nice recoveries in the first quarter. Our industrial segment was up 9% in revenue and they generated positive sales results across most of their product categories and throughout the majority of their customer segments as well. It has been a number of quarters since we have been able…

Thank you Tom. Good morning. We appreciate you joining us on the call today. We will first review the income statement and segment information and then touch on a few key balance sheet and other financial items. Tom will come back with a recap and then we will open the call up to your questions. A review of the income statement shows the following; total sales for the first quarter are up 6% to $2.6 billion. We are pleased to start the year with some positive sales momentum especially in industrial and electrical which show tremendous improvement following a very difficult year in 2009. Gross profit in the quarter decreased 70 basis points to 29.2% of sales compared to 29.9% in the first quarter last year. This decrease primarily reflects the pricing actions we took in our automotive segment the second half of last year as well as competitive pricing pressures in the office product segment which we see impacting our gross margin for the foreseeable future. Despite this impact on our margin we are doing a much better job appropriately adjusting our pricing to remain competitive in the markets which is clearly helping our top line growth. We are making up for the decline on the gross margin line with cost savings and an overall improvement in operating expenses. So we remain focused on continued gross margin improvement in the long-term but expect this line to remain under some pressure over the next few quarters. For the year through March our cumulative pricing which represents [the prior] increases to us was positive 0.2% in automotive, a positive 0.1% in industrial, negative 0.2% in office products and plus 1.0% in electrical. Now let’s look at SG&A. For the first quarter SG&A expenses of $598 million were up 2% from $588…

Thank you Jerry. That concludes our comments on the first quarter. We are pleased to get 2010 started off on solid footing. As far as the remainder of the year is concerned we feel it is still a bit too early for us to be making any significant changes to the full-year guidance provided in our February call. However, based upon the first quarter results it might be appropriate to increase the full-year revenue range from plus 2% to plus 4% to plus 3-5% largely driven by the improved performance in industrial and electrical and then to narrow the earnings range somewhat from the $2.52-2.70 provided in our last call to $2.55-2.70 and we will look forward to refining the range a bit more as we get another quarter or so under our belt. That concludes our planned remarks. At this time we would like to open the call up to your individual questions. We will turn the call back over to the Operator.

(Operator Instructions) The first question comes from the line of Matthew Fassler - Goldman Sachs.

You alluded I believe to average daily sales in March being up about 11%. If you could share with us, that is obviously substantially stronger than the quarter overall up 6%. You intimated that automotive was somewhat better as the quarter progressed. If you could share with us the source of that strength and whether you feel it is indicative of what the quarter could look like.

The quarter got a little bit stronger as we progressed through. We were impacted across all of our businesses by the weather we experienced in the early and mid part of the quarters and that had an impact on the January/February results but March was clearly the strongest performance in the quarter. The April results thus far in the month are in line with the March results so they are pretty encouraging as well.

On the gross margin if you could shed a little more light on some of the items you discussed? I am particularly interested in why if the automotive price cuts are one of the impediments to margin you didn’t seem to experience that kind of pressure in the second half. At least it wasn’t as visible as the second half of last year on the automotive operating income there might have been other things masking it, but if you could shed some light that it would be terrific.

I will try to answer that. First of all the pricing adjustments that were done starting really in the second quarter of last year were done sequentially as the year progressed. So all price adjustments were not done in Q2 and Q3 last year. They were done over a period of time. What we have seen is that the ones that were done first are getting the kinds of results we had hoped to achieve and frankly what we needed to achieve. If we look at our under car product category, for instance, that is where we took the first steps and some of the product categories that would be in the under car group would be things like brake rotors, brake drums, ride control, all of those lines are performing well and they are not a drag on the margin at this point. Some of the lines that came later in the cycle and under hood might be an example where we adjusted more recently, ignition pricing we adjusted things like wire sets, our unit increases are up and are moving in the right direction but we don’t have the velocity yet that offsets the gross profit drag and that is where we are still facing a little bit of an impact. What will happen in our opinion is we think this will moderate as we progress through the months ahead. We think as we get towards mid-year and on into the third and fourth quarters this will not be a headwind and we should be stabilized from what we see now. The bulk of the adjustments that needed to be made have been made. There may be a little bit left but they are not as significant as the ones we have already adjusted.

You had some pressure associated with vendor rebates in the industrial business last year. Your industrial business seems to be, if anything, ahead of plan today. At what point can you start to recapture some of that gross profit margin in the industrial business?

We will have to judge that towards the end of the year. I can tell you that for planning purposes we are assuming the same rebates we earned last year in 2009. Your question earlier about the gross margin in the fourth quarter there were some unusual items. If you recall we picked up a significant amount from our LIFO [inaudible] in the fourth quarter last year due to the inventory reductions and we are not assuming that at this point this year but we are assuming the same rebates in industrial for 2010 that we took in 2009.

Is that based on the sales that you are tracking today? I would think those rebates are materially lower than what you had experienced really in any year prior to last year. So is there the potential you have some catch up in the industrial business if business remains good?

There is the potential. We are not planning for it. If it happens that is great. The other side of it is we continue to work hard on the inventory levels and we continue to bring those down and that mitigates some of the revenue growth we are seeing in the industrial business.

The next question comes from the line of Scot Ciccarelli – RBC.

Can you help clear up something regarding BC Bearing? I guess I don’t know the seasonality of that business but I would have assumed, just assuming a general run rate you would have about $12-15 million of revenue from BC in the quarter but if it was four points of growth it had to be closer to $30 million. Can you help clarify that?

There are two things. It is not just BC Bearing. We acquired a company called General Tool on May 1 of last year and that number is in that 4 point acquisition growth as well. Our numbers for BC Bearing were a little bit less than what you referenced but not materially so. It was more a matter of the General Tool and BC Bearing combined.

A follow-up on Matt’s question just in terms of the industrial profits. They are down fairly materially in terms of the margins from what we saw say two years ago. I understand you are doing your inventory reductions but I would also think with all of the cost cuts there would be a lot of leverage in that particular segment without changing guidance obviously at this point. Can you just talk about the leverage potential in that segment that this point?

I think the quarterly results demonstrate the kind of leverage we can get. They were up 9% in revenue and up 43% in operating profit so I think they got some pretty extraordinary leverage on that 9% sales number. We don’t…

Is there any reason you should drop off from the current margin rate or should we expect it to kind of expand or at least stay the same or expand if we are to see kind of the same sales run rate we have seen?

I think if the revenue numbers stay in line with what we saw in the first quarter then we can expect to have very, very strong profit improvement from the industrial business. Our issue right now is we are just pretty cautious in terms of what is going to happen in the manufacturing sector. What we are hearing from our customer base is they are optimistic about what they think could happen but they too are remaining very, very cautious and they are just not sure how long it is going to continue. The industrial production number and capacity utilization number that came out yesterday would give us some confidence it is going to continue for a few more months but we want to remain on the cautious side for right now.

I might also point out they had operating margin for the full-year in 2007 and 2008 of 8.4%. While that fell off dramatically last year to 5.6 we expect that to improve but keep in mind even with the sales improvement we are not back to the same sales volume they had back in 2008. It may not get back to the 8.4 this year but certainly it will trend back in that direction.

The next question comes from the line of Analyst for Tony Cristello - BB&T. Analyst for Tony Cristello - BB&T: On the automotive business and the uptick in the cash portion as the quarter progressed, was there any particular product categories that surprised you in terms of the relative strength whether either in [inaudible audio]?

I would say it is more in the hard part arena and I think the growth we had on the commercial side of the business would validate that. I mentioned our retail business and company store group was up only 1% for the quarter, sequentially improved from January through March but still was only up 1% for the quarter. So more in the hard part arena. Analyst for Tony Cristello - BB&T: In terms of the wholesale business and the pick up there was the performance fairly balanced in terms of [inaudible audio] major accounts or was there one particular area that really [wasn’t] a strong contributor to that period?

Our fleet business as we mentioned in our comments was flat for the quarter. We have to say we were pleased with that after running double digit decreases all of 2009. Seeing the fleet business come in even for the quarter gives us a little bit of encouragement. I would also add we see the truck tonnage numbers and they actually turned positive in December and then again in January for the first time in quite some time. We are hopeful that the fleet business has stabilized and perhaps we will even see a little bit of growth in that category as the year progresses. As far as the other elements of our wholesale business our major account business was up 9%. Our Auto Care business was up 7% for the quarter. So we think pretty strong performances and they follow somewhat similar increases in the fourth quarter of last year so we like the trends we see in both of those categories. Analyst for Tony Cristello - BB&T: In terms of the margin improvement in the fleet business do you have a sense of how much of that is coming from just greater utilization rates on your fleet customers or how much of that is just increasing confidence levels that are allowing them to become a bit more [inaudible].

I don’t think I can answer that question. I don’t have enough detail to give you an intelligent answer. Analyst for Tony Cristello - BB&T: On the degradation in auto margins year-over-year was that primarily a function of the accelerated rate in pricing resets as the year progressed or were there also any changes in product mix relative to last year that would impact that line item?

It would be more the pricing adjustments that were taken than the mix. There was some element of mix but not a material impact. It was more the pricing adjustments.

On looking at this margin thing when we are talking about automotive keep in mind that in the first quarter last year we had very strong gross margins and the reason for that is we were coming off of historically high inflationary numbers coming out of 2008 in all four business segments. That is part of the reason for this gross margins fall off in the first quarter.

The next question comes from the line of Keith Hughes – SunTrust. Keith Hughes – SunTrust: You talked earlier about the adjustments in pricing in automotive going on at various times last year. Are you planning any changes to that variety here in 2010?

At this point nothing near the magnitude of what was done in 2009. If you remember back in the early part of last year we said we found we had allowed ourselves to get in a position where we were not as competitive as we needed to be and we had some things that needed to be done. We have pretty much accomplished the majority of that. So we will watch what happens in the marketplace and we monitor it on an ongoing basis and if we need to adjust we certainly will. I think the worst of the headwinds are behind us. As I mentioned earlier I think as we work our way through this quarter and on into the first part of Q3 I think we will see these things start to come back in line.

The next question comes from the line of Scott Stember – Sidoti.

Did you give what the interest expense in the quarter was? I didn’t hear it.

Interest expense for the quarter was $6.7 million.

Could you expand upon some of the initiatives you talked about that are having favorable results in the industrial and electrical segments? Just give a little bit more fleshed out?

The actual growth in the margins is more driven by the leverage we are gaining off of the revenue that they reported. All of our business units last year if you recall we took about $70-75 million in costs out of our SG&A in 2009. Thus far we have not really added that cost back and particularly in the industrial and electrical as our revenue has come back. They are operating off a lower expense base now and that is the reason for the expansion in their margin.

On the installer side could you maybe give some anecdotal stories you may be hearing on how dealership closures is increasing customer base coming through maybe even some of the NAPA auto shops?

That has happened is we have benefited from the dealership closures and we have benefited directly and indirectly and probably more on an indirect basis where any dealership that closed they non-warranty repair work that was being done there the majority of that has gone into the independent after market. We have an opportunity to capture some of that. As far as the dealers that have converted and gone full bore into the repair side of the business we have a number of those that have aligned themselves with NAPA Auto Care and that obviously is a direct benefit for us. We think that will continue to be a good program for us as we work our way through the remainder of the year.

On the competitive side, one of your major competitors has [inaudible] commercial business out on the West Coast in California in particular. Can you talk about how your sales are faring in West Coast and California?

One of the West Coast businesses at the high end of our performance range. I mentioned in my comments we are positive in every one of our eight geographic regions and if we look at top to bottom the West Coast would be up near the top for us. I think we are holding up pretty well there actually.

The next question comes from the line of Analyst for Himanshu Patel – JP Morgan. Analyst for Himanshu Patel – JP Morgan : I think you suggested that adjusting for currency automotive sales were up maybe an underlying 3% or so during the quarter. I was wondering what is your sense as to how this performance varies versus the competition? I am thinking in terms of market share.

You are right in terms of the underlying business being up 3% X currency exchange. If we look at our same store growth we were up about 4% in the quarter on same store performance. I think as we see it now I think that will hold up reasonably well in comparison to others. We did not have a net gain in stores in the quarter. We actually had a 12-store reduction in the quarter. We did some consolidation and combination of stores but on a same store comparison it was up 4% which I think is reasonably good in this environment. Analyst for Himanshu Patel – JP Morgan : If I remember correctly on the fourth quarter conference call you had guided to office product sales plus 3% year-over-year in 2010. Then after the first quarter minus 0.5% year-over-year performance what is your assessment of where you stand now in terms of that full-year objective?

I think if we look at what we gave as guidance we gave a range and we said flat to up 3% for the year for office products. We are down actually 0.5% through the first quarter. We still think flat to up 3% is a reasonable expectation for office products for the full-year. As I mentioned a little bit ago we think we still start to turn positive sometime in the next quarter or two and then remain positive over the remainder of the year.

The next question comes from the line of Brian Sponheimer - Gabelli & Co. Brian Sponheimer - Gabelli & Co.: Staying in office I believe you had said during the quarter furniture was up slightly but overall office products declined. Given the weak white collar employment environment could you maybe talk a little bit about why the furniture number showed some improvement?

I can give you what I think may have happened. First of all keep in mind that we are coming off of some significant decreases in the first quarter of last year in the furniture category so the comps are a whole lot easier. I think that the work that is being done by the folks involved with the furniture category in our office product company I think they have repositioned the product line. They have done some nice things with it and I think they have just gotten some pretty favorable market response as a result of the hard work that has been done there. Brian Sponheimer - Gabelli & Co.: Repositioning the product line. Could you elaborate on that a little bit?

We have done some price point repositioning but more contributing to it has been the fact that we have added some additional SKUs. We have expanded some of the product offerings. We have added some additional private label programs. We have enhanced some of the marketing programs that our dealer customers are able to use. When we put it all together I think they just got pretty good market response to some of the things that have been done.

The next question comes from the line of Tim Culler – Barrow Hanley. Tim Culler – Barrow Hanley : I want to clarify, [inaudible] on the pricing issues but I am a little confused. I thought Jerry said the pricing cuts at the auto and office were being essentially offset by cost reductions farther down the income statement. Then when Tom described it, it sounded as if he was saying the gross margin pressures would be offset as sales rebounded with a lag effect in response to the price cuts. So I am wondering did I misunderstand it? It seems to be one would essentially take care of itself and the other would require further efforts on SG&A and other to offset the margin pressure if the pricing continues to be soft for the foreseeable future as you said.

I think you heard both of us correct. I think Tom’s comments about making up for the gross margin thing on the volume side, hopefully that is going to happen. The other side is we are certainly going to try and continue to take costs out of our SG&A. So it is a combination of those things. Tim Culler – Barrow Hanley : You expect the margins would hold if the pricing continues to be soft for the foreseeable future? You still expect to be able to offset it going forward? Is that correct?

That is correct. Tim Culler – Barrow Hanley : I don’t know if I heard you correctly but did I hear you warming up to the idea of maybe doing more on the acquisition front than you have historically or am I just reading you the wrong way?

We did a couple of acquisitions last year. We have completed two this year. One small acquisition in the electrical the first of the year. It is about a $9 million per year business. Then we referenced the BC Bearing acquisition that was completed the first of March at about $140 million. We have as part of our overall growth strategy we have an acquisition component and all four of our businesses are actively looking for things they think may make sense. On an ongoing basis we are looking at different opportunities in the different businesses but we are fairly disciplined or at least we like to think we are in how we approach these and we will not consciously over-pay for anything. We have valuation formulas we stick pretty closely to and if we can find good, accretive, bolt-on type companies that we think make good fits for GPC then we will continue to try and add them to our portfolio of companies. I don’t think we are any more open minded. Certainly no less open minded about the acquisitions than what we have been. We found last year for instance with them their valuations were still a little bit higher than what we thought were reasonable and they may be coming a little bit more in line with the range we think is reasonable in 2010 or at least we hope so.

The next question comes from the line of Bill Selesky – Argus Research. Bill Selesky – Argus Research: On the gross margin line can you talk about the impact of incentives on the first quarter in particular?

They were down slightly because of inventory reductions for the most part but they were a factor. Not a dramatic factor but they were a factor. Bill Selesky – Argus Research: Secondly I just wanted to ask a question about the office products segment. You mentioned things should turn profitable next quarter or two. Can you tell me how pricing pressures relate to your feeling that things will get better over the next couple of quarters?

I think we don’t see any evidence of pricing pressures intensifying. Our reasons for thinking that will turn slightly positive are based upon number one the comps are a whole lot easier compared to where we have been historically. Two, we see some stabilization in the white collar employment numbers. After declining over 2 million jobs per year in 2008 and 2009 we actually had a slight positive number for the first quarter of 2010 about 182,000 service sector jobs were added in the first quarter. So we don’t believe the downward pressures are going to be as great in the employment area as what they have been. Lastly, some of the programs that the office products group has put together look encouraging to us. We talked a few minutes ago about what has happened in the furniture category. I think that should have a chance of continuing. A lot of good work is being done in the area of cleaning and break room supplies so we expect those numbers to hold up for us. Then I mentioned the core office supply category which is almost half of the business was off about 5% in the quarter and we think the team is working hard to find ways to bring that number back or at least get it slightly positive in the quarters ahead. They are the reasons we think that business could get a little bit better for us but we are not looking for a dramatic turn. As I mentioned we are thinking still that flat to up 3% for the year is a reasonable expectation for that business and hopefully as we turn and get into 2011 we will get back to more historical growth rates.

At this time we will return the call over to the management team for closing remarks.

We appreciate those of you joining us on the call today. We also appreciate your ongoing and continued support of Genuine Parts Company. We look forward to talking to you in the future if something comes up. Otherwise we will be talking to you at our second quarter conference call. Thank you and have a good day.

Thank you for your participation in today’s conference call. You may now disconnect.