Good morning. My name is Jodie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Genuine Parts Company First Quarter 2012 Earnings Release Conference Call. [Operator Instructions] I would now like to introduce Ms. Carol Yancey, Senior Vice President of Finance. Please go ahead.

Thank you. Good morning, and thank you for joining us today for the Genuine Parts First Quarter Conference Call, where we'll discuss our earnings results and the outlook for the remainder of 2012. Before we begin this morning, please be advised that this call may involve forward-looking statements regarding the company and its businesses. 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 comments from Tom Gallagher, our Chairman 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 be with us this morning. As we customarily do, Jerry Nix, our Vice Chairman and Chief Financial Officer, and I will each handle a portion of the call. And we're especially pleased to have Paul Donahue, our recently elected Genuine Parts Company President, with us as well. And once Paul, Jerry and I have concluded our remarks, we will look forward to answering any questions that you may have. Now earlier this morning, we released our first quarter 2012 results, and hopefully you've had an opportunity to review them. But for those who may not have seen the numbers as yet, a quick recap shows sales for the quarter were $3,181,000,000, which was up 7%. Net income was $146.3 million, which was up 16%. And earnings per share were $0.93 this year, compared to $0.80 in the first quarter of 2011, and the EPS increase was also 16%. So we are pleased that the sales and earnings momentum that we saw throughout 2010 and 2011 continued on into the first quarter of this year. As a result, we feel that we're off to a good start to the year, and we look forward to another solid performance from the Genuine Parts team in 2012. A review of the results by business segment shows that our industrial operations continue to produce the largest increases. Motion Industries, our industrial distribution business, was up 12% in the quarter. This is on top of their 24% increase in the first quarter of last year, so it was a tough comparison. But they handled it well, and we continue to feel good about the progress being…

Thank you, Tom, and I would add my welcome to each of you and say that I'm pleased to join Tom and Jerry this morning to review the first quarter performance of our Automotive business. As you may know, this is our largest segment. We ended the first quarter up 6%. This follows a 6% increase in the fourth quarter and an 8% increase for the full year in 2011. So our Automotive operations continue to perform well. We'd like to point out that these results are essentially same-store sales increases, and this demonstrates the solid progress being made by our Automotive management team. Let's begin with the result of company-owned store group. We can tell you that our commercial business continues to outperform our retail business, although we did see a marked improvement in retail this quarter relative to the trend experienced in 2011. Turning to our retail business first. The quarter ended up 6%. This compares to a 1% increase in 2011, and we are encouraged by the strength we saw in our retail business in the first quarter. On the commercial side, the quarter ended up 7%, which is fairly consistent with the 8% growth we reported in 2011. And we're encouraged by the strong and consistent growth in our commercial business. Our NAPA AutoCare and our major account business showed another quarter of double-digit sales growth, and this follows back-to-back years of double-digit increases in these 2 very important commercial initiatives. The steady progress in each of these businesses continues to drive our overall commercial sales growth. Our fleet business was up mid-single digits again, in the first quarter, which is consistent with the growth we saw in this channel all of last year. The underlying factors for the Automotive aftermarket remain positive. A bit of…

Thank you, Paul. Good morning. We appreciate you joining us on the call today. We'll first review the income statement and segment information then touch on a few key balance sheet and other financial items. Tom will come back to wrap it up, and then we'll open the call up to your questions. A review of the income statement showed the following: Total sales in the first quarter were up 7% to $3.2 billion, and this follows a 7% sales increase in the fourth quarter of 2011. And this is the kind of steady and consistent growth we look for in our businesses, and we're excited about the opportunity to improve on this record again at 2012 and beyond. Gross profit improved by 8% in the first quarter and was 28.9% of sales, up from 28.5% in the first quarter of 2011. We've made good progress on improving our gross margin over the last few quarters, including the most recent quarter. We expect our ongoing initiatives to effectively manage supply chain costs, increase distribution efficiencies and maximize our pricing potential to continue -- to generate continued gross margin expansion over a year -- on a year-over-year basis for the next several quarters. Our management teams are committed to this effort. We currently project a 10- to 20-basis-point increase in gross margin for the full year. For the year, our cumulative pricing, which represents supply increases to us, was a negative 0.2% in Automotive, plus 0.3% in Industrial, plus 2.1% in Office Products and a negative 1.0% in Electrical. Turning to SG&A. Total expenses were $691 million in the first quarter and improved to 21.7% of sales versus 22.1% in 2011. We're pleased to show the continued improvement in controlling our expenses again this quarter as we made solid progress on…

Thank you, Jerry and Paul. So that's a recap of our first quarter results, and we're pleased to start the year with a solid performance, and we feel that we are positioned to produce another good year in 2012. As far as the remainder of the year is concerned, we remain comfortable with the full-year revenue guidance that was provided on our February call. At that time, we said that we expected Automotive to be up 5% to 7%, Industrial and the Electrical/Electronic to each be up 8% to 10%, and Office Products to be up 1% to 3%. Through the first quarter, Automotive is right in, line, Industrial is a bit above, and Office Products and Electrical are each a little bit below. However, we continue to feel that these are generally appropriate expectations at this time, and this would give us a full-year revenue increase of 6% to 8% for the entire company. On the earnings side, our prior guidance was for earnings per share to be $3.85 to $4. And at this point, we feel that it would be appropriate to raise this to a new range of $3.93 to $4.05, which would be up 10% to 13%. Additionally, assuming that we close on the Quaker City Motor Parts transaction on May 1 as planned, this would add approximately 1% to the full-year revenue and $0.04 to $0.05 to the earnings numbers. So that will conclude our planned comments this morning, and we would like to now address any questions that you may have. And we'll turn the call back over to Jodie.

[Operator Instructions] Your first question comes from the line of John Murphy from Bank of America Merrill Lynch.

Elizabeth Lane on for John. My first question is regarding the recent production disruption of CDT and Nylon 12. And I'm just wondering if a potential global shortage of fuel lines and brake lines and other auto parts that use Nylon 12 is likely to have any kind of material impact on your NAPA business?

No, it will not impact our business in a material way. At this point, we don't see any supply disruption. That's not to say we won't experience some as we move through the next few months. But those 2 product categories are not large categories for us.

Okay. Great. And second, it looks like the Aftermarket Auto Parts business is doing pretty well, but we keep seeing continued weakness in the tire replacement market in the U.S. So what do you think is the disconnect there? And why are people buying certain replacement auto parts but not tires?

I think it may have something to do with the financial situation of the consumer, and if they can defer any maintenance type items, they'll defer it. And on the things that we see, the outbound flow, it's largely nondiscretionary and we see the strength there.

Your next question comes from the line of Scott Ciccarelli from RBC Capital Markets.

This is Patrick Palfrey sitting in for Scott today. I guess, first off, could you talk a little bit about why gross margins were so strong, especially on the NAPA side of business. Industrial, I understand because it has more leverage, but NAPA hasn't proven to work that way, at least in recent times.

Patrick, this is Jerry. I'll take that. Actually, gross margins in the Automotive were not up for the quarter. The other 3 segments' gross margins were all up, and some of that -- the strong operating margin in the Automotive is strictly from the controlling of their SG&A-type expenses. Some of the contribution in the gross margin improvement in our Office Products -- they had a nice increase in gross margin, and they did some year-end buys. And you heard our numbers, they had some inflation in the first quarter, so that improved their gross margin. And we have specific initiatives in all the businesses and they just started to pay off in the first quarter. So we did see the 40-basis-point improvement in gross margin, but that was not a contributing factor to the strong operating margins in Automotive.

Okay. And then I guess, just another question, if I may. Within the Automotive business, could you talk about the cadence of the quarter and maybe how the mild weather and gas would have affected sales trends?

The quarter was relatively consistent. The weaker of the 3 months was February. The other 2 months were pretty consistent. And then as far as weather impact, we did see some impact on products like rotating electrical and some under-hood product, but the offset might have been the fact that we really had quite a nice quarter on the retail side. So the mild weather might have actually helped the retail business, in our opinion, anyway.

Your next question comes from the line of Matthew Fassler from Goldman Sachs.

A couple of questions. First of all, if you think about the DIY and the commercial business, just to try to understand the relative size of DIY. To the extent that DIY picked up 5 percentage points or so from Q4 to Q1 and the aggregate sales increase was roughly unchanged, is it that small a piece of the business that it can't really move the needle or is it a rounding factor? Or is there a third issue that would have kept the number flat even though DIY got down as good as it did?

No. The DIY business, I think you probably will recall, is 20% to 25% of the total business and the remainder of the business is on the commercial side. Our commercial business performed well in the quarter. Additionally, we feel good about the progress that was made, especially as Paul said in our 2 key commercial businesses: Auto Care and major accounts, double-digit increases. So it's just the way the numbers came together.

Got it. And then within the Automotive business, I'm interested what you saw. If you think about failure, and you think about maintenance and you think about discretionary, obviously discretionary numbers aren't going to be that big of a business for you in general. How did the trend look in the quarter and how did it concur to what might have seen in 2011?

The trend on what, Matt? I'm not sure I got the question.

I guess the mix among failure-related products, maintenance-related products, and then any discretionary that you might sell, where you saw the relative strength within the Automotive business.

I'll try to take it from the latter part back. The product categories that performed well for us in the quarter, quite well, were things like brake products, undercar products, showed good strength as the quarter progressed. And then as I mentioned, things like rotating electrical and some of the underhood categories were softer. But the things that performed pretty well for us were, in our opinion, non-discretionary-type items that are things that needed to be replaced for vehicle safety or performance.

Got it. And then the final question. Your read on the Office product sector over the past several quarters has been spot on. That being said, it was very interesting that the Megas really showed that first signs of life for quite a while and the independents maybe more of a problem this quarter. If you think about what drove the Megas to the extent that you can discern, whether it's full forward on the manner of restocking, or whether there might be a more sustained recovery evident in your businesses?

We actually don't have a read on that, Matt. We're anxious to see the reports as they come out from the Megas and see how their contract segments all perform in the North American delivery segments. But you know they strengthened a bit, comparatively speaking, in the fourth quarter. They range from being down 1 flat to up 2, which was a stronger performance than what any other individual companies had experienced prior. So we think that maybe they're doing a pretty good job right now. They're comparing -- in our case, they're comparing against some subdued results in the prior quarter. So we don't know enough about it to know whether this is a trend or whether it's just the way it came together in the quarter.

Your next question comes from the line of Michael Montani from ISI Group.

I was going to ask on the Automotive side just following up on weather, if I could for a moment. Historically, when you guys have seen perhaps bit more moderate temperatures in the winter, would you say that, that potentially could have a slowing effect as we get into the spring because there may not be as much breakage, or is that sort of premature to speculate on?

I think it's a bit premature to try to draw any conclusions like that. The best thing that can happen for the Aftermarket is that when we get into this summer, we get some extreme heat, and that will create some additional demand in the Aftermarket.

Okay. And then I guess if I could follow up for a minute. On AP to inventory ratio, I mean, you guys continue to make progress there, now 66%, I guess, in total. Can you give us a feel for maybe where the Automotive side of the business might be and how you would compared to some of your competitors there, like Autozone. Is it 110%?

Mike, this is Jerry. We don't have that information to give you, but you're comparing apples and oranges there. We're a wholesaler with local distribution centers, and we continue to push up vendors for extended terms and we'll continue to do so, and some initiative we have there. But we are just going to continue to push it out, and we don't have a specific target. We don't know where it will take us. But every quarter, we try to do better. And I don't think it's reasonable for us to expect to take our terms out as far as some of the retailers have.

Okay. And just the last question I had was on Quaker City. Is there anything you can share at this point in time as it relates to potential purchase price or multiples on that?

No, not at this time. Maybe as we get further along, but not currently.

Your next question comes from the line of Brian Sponheimer from Gabelli and Company. Brian Sponheimer - Gabelli & Company, Inc.: Just a question on Office Products here. You really had an outstanding performance from an operating profit perspective in the quarter. What levers are you pulling there to help keep that margin above that 8.5% level? And how sustainable do you think that, that is going forward in maybe a 1% to 2% GDP growth-type environment?

I'll try to take that one, Brian. I'll preface my comments by saying that from an operating point of view, we think the Office Products team has done a terrific job and not just in this quarter but in the past year or so. If we get any kind of top line growth in that business, they're going to do a heck of a job for us. Among the things that they've done a good job on would be managing their margins. They're showing good progress in that initiative. They've done a very good job on expense control in a number of different areas, and we think that, that will continue. And if we can get revenue growth even in the low single-digits with all the good work that's been done over there on all these other categories, I think that the margin will continue to show some improvement for us.

Brian, I'd also point out that the cyclicality of their business, the first quarter and the fourth quarter are strongest operating margin quarters. So if we get to the second quarter and they drift under 8%, that doesn't mean that they're not as good a job. Brian Sponheimer - Gabelli & Company, Inc.: No, I certainly -- we've got a long history of seasonality here. I understand. And just talking about share repurchases, very light in the first quarter. Anything driving that? Was it giving working capital build out, it just wasn't a priority?

Couple of things there, Brian. Certainly, we've been conservative with our balance sheet and our cash, knowing that we have the acquisition of Quaker City that we expect to close on May 1. And then we have another acquisition, a smaller one that we're looking at. We will continue to buy shares and our intent for the year is to buy at least enough shares to cover any options that we grant. And the board granted about 1.1 million, 1.2 million shares in options at their last meeting. And so we will still say it is fully our intent to buy at least that many shares in the year. And we do try to buy on pullback, and if we see that we'll be more active than we are at the current time. Brian Sponheimer - Gabelli & Company, Inc.: Great. And just one number that I missed. The pricing for Auto within the quarter, was that up 1%? Did I hear that correctly?

That was down 20 basis point.

Negative. Negative.

[Operator Instructions] Your next question comes from the line of Keith Hughes from SunTrust.

This is Judy in for Keith. I just want to clarify on the Quaker City acquisition that you're going to close in May. You said that it's about 1% for the full-year revenue and 4% to 5% for earnings. Was that for the full year?

No, that's not 4% to 5%, that's $0.04 to $0.05.

For the full-year of earnings?

For the impact of the -- from May 1 to the end of the year.

Okay. That's from May 1, fine. Okay. And just to touch back on the Exego acquisition now that that's closed. Are you seeing similar trends there with your core North American market or is there any difference between their commercial and retail, or any areas you can improve there on that acquisition?

If we look at it from a revenue standpoint, of the Aftermarket in North America is a bit healthier heavier than the Aftermarket in that part of the world, but the folks there are doing a good job in view of what the circumstances look like. From an operating standpoint, they continue to do a nice job there as well, so they're performing in line with what our expectations were going into the transaction.

Okay. So you're still looking for maybe about $0.04 to $0.05 contribution from that for this year?

For this year, that's right.

Your next question comes from the line of Mario Gabelli from Gabelli.

Unfortunately, I've been grazing on other calls. How much did you indicate you're paying for Quaker?

We have not given that information out, Mario, and because it hadn't been determined. There's still due diligence going on. We expect to close at May 1. And we'll have some numbers. They will be in the 10-Q that we file in the Subsequent Events section.

All right. And the number that was given in terms of increased earnings, was that largely the range increase in part because of the initial inclusion of this acquisition or was it -- or does that exclude the increased number?

That excludes the Quaker City.

Okay. So that would be -- that Quaker stated incremental to the range that was given earlier?

That's right.

That's right.

All right. And then just to hitchhike on the question of Auto Parts prices, and I'll talk to you, Paul, maybe off the line about the changes in discount structure that may or may not be going on, but what do you think the price increase for the basket of what you're selling would be like in the second quarter and for the full year?

We would think that for the full year, it's going to be positive, not negative, would be our expectation for the full year. And at this point because...

So, Tom, I'm a little confused. In other words, it was negative 0.2% in the first quarter. That will incrementally change and accelerate as you sell the constant mix, constant number of units, it's going to increase revenues?

As the year progresses, and I'd say at this point, Mario, well, we think it would be something between 1% and 2% for the full year.

This is for Jerry. I mean, Jerry, you look at the tale of 2 cities. You read O'Reilly, you read Autozone, they're at 2.3x EBITDA in terms of leverage. Any comments?

We're not looking to match them in leverage. We're pleased with our balance sheet. But I would tell you we may have to incur some leverage with the acquisition of Quaker City.

Yes, I understand. That's for about 2 days. I got it. You're going to be at a billion-dollar run rate in EBITDA this year then?

I hope that's correct.

Well, come on. You've got Quaker State (sic) [Quaker City] coming in. How many stores? How many jobbing stores and how big is the D.C.?

They've got 271 stores that they service, and they've got 6 distribution centers in that mid-Atlantic corridor.

Tom, what percentage of the NAPA system brand do they -- stores -- that are still open other than Quaker? Or is that the last -- that's obviously the last big one?

That is it. This will complete the initiative, that's right.

Okay. So you started this, what, 30 years ago?

There abouts, if not longer.

We deliver and we're persistent.

We've got the drill, Jerry, I just now want to figure out what you're going to do going from Australia to New Zealand to China.

Your next question comes from Michael Montani from ISI Group.

I just had a quick follow-up for you. Was going to ask on the Automotive gross margins, Tom or Paul, if you can just elaborate a bit on why those gross margins were down in the quarter. That seems to be a little bit of change from what last year's then.

No, that's -- I don't believe that statement is accurate. Our Automotive margins, you may recall in prior calls, we said were under pressure. What we've seen is a steady progression, but still not back to the point of stability. And we would expect that we'll see some of that as the year progresses and they're just lagging the other 3 businesses in terms of the progression through this process.

Okay. And just if I could, on Office Products, I mean, obviously the outlook seems more positive, or constructive, for the back half. Is that primarily due to product line extensions or is there certain initiatives, Tom, that you can share with us?

Well, it's a combination of things. There will be some product line extensions that we think will be beneficial. There's some specific sales initiatives that we prefer not to get into on the call, but some pretty impactful, we think, potentially impactful initiatives that will help us as the year progresses. And we are hoping for some stability in the marketplace. The data that we have would suggest that the Office Products industry still is experiencing modest contraction. So we're hoping to see that turn here in the next quarter or 2 but we're not counting on it necessarily. We're trying to do the things that we have direct control over, but we're not in a position to give out specific sales initiatives.

[Operator Instructions] At this time, there are no further questions. I will now turn the conference back over to management for any closing remarks.

Jodie, thank you very much. We appreciate your joining us on the call today and we appreciate your continued interest and support of Genuine Parts Company. We look forward to talking to you in our second quarter conference call, if not sooner. Have a good day.

Thank you. That concludes today's Genuine Parts Company First Quarter 2012 Earnings Release Conference Call. You may now disconnect.