Good day and welcome to the Genuine Parts Company Second Quarter 2017 Earnings Conference Call. Today's conference is being recorded. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] At this time, I would like to turn the conference over to Sid Jones, Senior Vice President, Investor Relations. Please go ahead Sir.

Good morning and thank you for joining us today for the Genuine Parts Company second quarter 2017 conference call to discuss our earnings results and current outlook for the full year. 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 the call. We'll begin this morning with comments from our President and CEO, Paul Donahue. Paul?

Thank you, Sid, and welcome to our second quarter 2017 conference call. We appreciate you taking the time to be with us this morning. Earlier today, we released our second quarter 2017 results. I will make a few remarks on our overall performance, and then cover the highlights by business. Carol Yancey, our Executive Vice President and Chief Financial Officer, will provide an update on our financial results and our current outlook for 2017. After that, we'll open up the call to your questions. So to recap our second quarter performance, total sales were up 5% to a record setting $4.1 billion with net income coming in at $190 million and earnings per share increasing 1% to $1.29 compared to $1.28 in the second quarter last year. These results represent the total sales and earnings across our global Automotive, Industrial, Office and Electrical operations, which we will discuss in more detail throughout this call. As a diversified global distributor, we continue to benefit from the balance of serving a broad range of markets. The diversity in our operations combined with an ongoing strategy to drive both organic and acquisitive growth produced a second consecutive quarter of 5% total sales growth. Each of our four distribution businesses produced improved total sales with our strongest performances in the Industrial and Electrical segments. Our teams are committed to generating sustainable sales growth, while also streamlining our cost structure to improve profitability. Thus far in 2017, we have acquired businesses with approximately $180 million in annual revenues and made a minority investment in a market leading industrial distributor in Australia. We anticipate that each of these new businesses will positively contribute to our future results. Turning to organic growth, total comp sales were up 2% in the second quarter and improved result relative to…

Thank you, Paul, and we'll begin with a review of our key financial information and then we'll provide more information on our updated outlook for 2017. Total sales in the second quarter set a new record our us of $4.1 billion, up 5% including a 2% increase in comparable revenues. Our gross margin for the quarter was 30.2% compared to 29.9% in the second quarter last year. The 30 basis point improvement is the result of our ongoing initiatives, to enhance gross margins across our businesses as well as higher supplier incentives. In addition, we continue to benefit from those acquisitions with higher gross margin and higher expense models as some of those have not anniversaried in this quarter. We're encouraged by our progress in improving our gross margin, and we look to produce an approximate 30% gross margin over the balance of the year. We saw somewhat of an inflationary pricing environment across our businesses in the second quarter with each of our business segments showing at least slight inflation through the first six months of the year. Our cumulative supplier price changes through June stand at one tenth of 1% for automotive positive, up 1.6% for Industrial, up 0.6% for Office and up 1.6% for Electrical. Turning to our at SG&A our total expenses for the second quarter were $943 million up 9% from last year and at 23% of sales. Rising labor, freight and delivery costs and addition to our ongoing spending for planned technology and digital investments, which are very critical to our long-term growth strategies are driving the increase in our operating expenses. And as mentioned before we've yet to anniversary certain higher gross margin and higher expense acquisitions. Finally we also continue to experience the deleveraging of expenses associated with the slow organic sales…

Thank you Carol. We move forward with the goal of building on our six-month performance and remain focused on further strengthening the organic sales in our businesses, as well as maximizing the benefits of our recent acquisitions. We are also committed to executing on our plans to enhance gross margins and remove unproductive costs from our operations. As Carol mentioned, we have several initiatives in process to reduce expenses and improve our overall cost structure and we expect to recognize some of these savings over the balance of the year. Additionally, we believe our continued efforts in each of these areas along with a strong balance sheet, solid cash flows, and effective capital allocation will positively contribute to stronger long-term growth for the company and serve to maximize shareholder value. So with that we'll turn the call back over to Alisia, and Carol and I will be happy to take your questions.

Thank you Sir. [Operator Instructions] We will go first to Christopher Horvers of JPMorgan.

Thanks good morning everybody.

Hey good morning Chris.

Good morning.

Why don’t you focus first on the U.S. NAPA division, on the heels of the O'Reilly pre-announcement, a couple of weeks ago, I think that the plus one in the U.S. probably comes off, certainly a bit better and it looks like you've actually closed the gap to O'Reilly in that regard. So can you talk about, they talked about a stronger April and then you know it sounded like May and June being disappointing. Can you talk about the monthly cadence in the U.S. NAPA division.

Yeah, we were pretty consistent across the U.S. Chris. We were essentially up for each month, April, May and June. Globally, it was a little shift. Globally, we saw a little bit of a slide in April. But across the U.S., it was consistent across each month.

And then if you look at the, it was a lot easier comparison. And as you mentioned, it's been a cool summer so far, at least up until very recently. So we've been waiting to get further away from winter. Does the cooler summer sort of push out the rebound off the two consecutive warm winters? And then related to that, as you look forward, the compares do step up again in the fourth quarter. So are we sort of running out at two year? Or do you expect the business to continue to rebound into the end of the year?

Well.

In U.S. NAPA?

Yeah, let me take the first part of the question. I may ask you to repeat the second part of that, Chris. But look, if you look across our business, what's encouraging for us is that our Northern divisions, so we're talking about the Northeast, the Midwest, the Mountain divisions, are performing well. And I think I called out Mountain last quarter as our top performer. They just happen to have the most normalized winter in that part of the country. Where we're a little bit softer than we are in the Northern divisions is in the Southern divisions. And so Southeast, Southwest, Atlantic are a little bit softer, and there's a gap between the top performers and the others of about 300 basis points. We think that will close as the year progresses. The South has been, I think, impacted a bit by the cooler temps. And certainly, we have had a ton of precipitation down here in the South. So we think that, that gap will close a bit as we move through the course of the year.

And some have mentioned some pressure around the Hispanic customer. In fact, the Target CEO was quoted just this week talking about that. Are you seeing areas, Texas and along the border of Mexico, softer trends in those areas? And is that contributing to the softness in the South?

Well, I'd answer that a couple of ways, Chris. As you heard me say, our DIY business was good in the quarter. And if you think about the consumer that you're referencing, I think that would probably show up a bit in our DIY retail numbers. So we're quite pleased with our retail business. As a matter of fact, we had a very good June in our retail business. That said, I would tell you that our Southwest is down a bit or softer than our Northern Division. Whether I can attribute that to one specific demographic, it's hard to say. There's a lot of different factors at work.

Okay and just last question, I promise. So as it relates to the cooler summer, are you concerned that, that pushes out the recovery in the U.S. NAPA business?

No, you saw our guidance for Automotive, Chris, and we've taken all those factors into account. And we're expecting 3% to 4% overall. And look, I think the good news for all of us, especially in the Midwest, is it's getting hot, and it's getting hot down here in the South. And we'll see business start to turn almost immediate as the temps go up. So we're feeling pretty good about the second half of the year, as I think was illustrated in our guidance.

Thanks very much Paul.

You are welcome, good to talk to you Chris.

We'll go next to Chris Bottiglieri of Wolfe Research.

Hi, and thank you for taking the question. A couple. One, I guess I just need to clarify I mean, so the comp gap did decelerate a little bit, I mean, sort of the tier comp stack. And then you're getting a lot of self-help initiatives and a little bit of inflation. So maybe I'll ask the question a little bit differently. What do you think the overall market has been doing? Do you think it is, are you nearing at the peers? Or do you think the market itself is a little bit weaker?

Well I think, Chris, I have to mention it's a good question. I think that our business, and I can't speak for our public company peers. We'll hear their numbers here shortly. But I think it's an accurate assessment that the automotive aftermarket has slowed somewhat over the past number of quarters, and there's a lot of reasons that we all talk about. And certainly, back-to-back mild winters has been a big factor. You know that. I think one of you guys have referenced it as an air pocket that stepped down in that 7 to 9 year age group of vehicles. So that sweet spot has been a little bit of a headwind, I think, for us and in the demand for repairs. And then if you look at some of the tailwinds that we've had in the past, and whether that be miles driven, cheaper gasoline, those tailwinds are still there, but they're lessening than what I think we saw perhaps a year or two ago. So those would be the reasons we'd point to for just a bit of slower growth. But again, we're cautiously optimistic about the second half of the year and as we distance ourselves from these mild winters.

Gotcha and then as you’re seeing really strong performance in the DIY stores that you're doing a lot of self-help out and you're kind of closing the gap to peers. But can you maybe talk about the stores that are just you're chugging along with your kind of normal procedure? How are those stores performing on the DIY side?

Well I’d love to tell you they're performing as well as the stores that we have gone in and gone through our total refurb. But what we've done Chris, is our level of refurbs, if you will, in our stores varies. So it varies from a total overhaul of resetting fixtures to painting the stores to increasing hours to bringing in additional people. That would be on a major overhaul. And to a lesser degree, we're trying to impact all of our stores by increasing our store hours and adding more retail-focused personnel. I mentioned our strong performance in June in our retail business. And in June, we saw both transaction and basket size go up for the first time in a couple of quarters. We're investing in business development managers in our retail stores, which I think are having a very positive impact on our business. So overall, we're positive about our retail business. And we're positive despite, I think, a bit of a hysteria out there around what the online players are going to do to DIY.

Got you. Yeah, that's helpful. And then just one final question on Industrial. Yes, extremely strong organic revenue growth. I wonder if you can give us a sense for why you think the incremental margins came a little bit lighter than maybe than I would have expected. Is it your investments, is that bifurcated between gross margin, SG&A, deleverage, like kind of what you're seeing in that segment and kind of your outlook for your outlook for margins in that segment?

Look we did little bit lighter margin improvement in the quarter, but I would look to what we've done for the six months. And you've got a 20 basis point improvement in margin for the six months, sales being up 7%, profits up 10%. That is indicative of their gross margin initiatives, which they have been working on for two plus years. Their core gross profit has been up for a number of quarters. We also had higher supplier incentives, which again is tied to the improved growth and the increase in purchases. The cost reductions that they made are actually, we’re seeing improvement in their SG&A. But for us to move the needle, it takes some time. And again, showing through six months 20 basis point improvement is a nice job by that team. So we're going to expect that to continue as we move forward. But having said that, the guidance is really more of a factor in the lower comparable sales and the leverage issues that are in the other segments, not Industrial.

Got you. That's helpful. So it sounds like the margins have held up pretty well in that segment? Is that the takeaway there?

Yes they have.

Very great, thank you very much for your time I appreciate it.

Thank you Chris.

Thank you Chris.

We'll go next to Elizabeth Suzuki of Bank of America Merrill Lynch.

Hi guys.

Hi Elizabeth.

Good morning, can you just remind us what percentage of the Auto business is DIY versus to do-it-for-me? And I know you mentioned that DIY outperformed the commercial business, but just curious how much of the Auto business is currently being sold to DIY customers.

So it’s good question Elizabeth. And it varies by country. But our U.S. NAPA business, our DIFM commercial business, which is our dominant part of our business, is 75 plus percent, which leaves our DIY business at 25% approximately of the overall. It's different in Australasia, where we have a more stronger retail presence. And Canada is very similar. Mexico is very similar as well.

Great thanks that is really helpful and within the Auto segment, you mentioned that pricing was up about a 0.10%. And which product categories within that are showing the most strength? And which are under some pressure? And how would you expect pricing overall to trend going forward for the rest of the year?

Well look we are coming off of five years of either deflation or no inflation in Automotive. So the fact that we ticked positive even though it was 10 basis points, we're encouraged to see that. As far as what we're estimating for the full year, it could be 0.5 point. I'm not sure it'll be a full point. But the categories we're probably seeing it in would be commodities. But again, we're not modeling for a significant uptick in that inflation between now and the end of the year. It's pretty modest, but it was encouraging to see a bit of improvement this quarter.

Yes, definitely. And just one more quick one on Auto, is that if used vehicle pricing really starts to come under some significant pressure as supply goes up, do you think that, that would impact the auto aftermarket at all? I mean, does it make the consumer any more likely to scrap their older vehicle than fix it up? Or is the average consumer just not even really looking at that?

Well, Elizabeth I don't think that's going to be a significant factor for us going forward. I think the – everything I read, some of your peers that follow the dealer segment, it appears the used vehicle market is pretty strong right now. That's always a good thing for us. So we don't expect to see any significant shift going forward.

Alright great thank you.

You are welcome.

We'll go next to Seth Basham of Wedbush Securities.

Thanks a lot and good morning.

Hi, good morning Seth.

Good morning.

My questions would fit in the Auto business. If you could maybe fare it out for us a little bit the difference in growth trajectory for the wholesale business versus the company-owned stores on the do-it-for-me inside?

I am sorry Seth can you repeat that.

The wholesale business independents relative to the strength to growth at the company-owned stores, specifically on the do-it-for-me side of the equation, if you can get to that level of granularity.

The total sales that we're reporting, we're talking about for the quarter only. Our comps were up 1% overall, and that's all of our business. So that's independents, that's company stores, that's inclusive of all of our stores. And as we saw – as I think I mentioned earlier, our trend throughout the quarter was very steady, and we were basically plus 4% across the way. DIY, I mentioned, was a bit stronger. But both, I think the other important takeaway, Seth, is that both DIFM and DIY improved sequentially quarter-over-quarter. I am not sure I answered your questions, Seth, but…

Yeah, that’s helpful but I was just wondering if the wholesale business grew any more or less than the company-owned stores business?

We would say that we had similar results in both the company-owned stores and the independent stores. And again, pointing to the sequential improvement from Q1 to Q2. So it would be similar.

Got it helpful. And then secondly, just in terms of what's happening with fleet and major accounts. Any more color on what you think the drivers are of that persistent weakness?

Yeah, I think look think our major account business, Seth, which is a significant part of our overall DIFM business, I think our business continues to track with our customers' business. I don't believe we're losing market share. Matter of fact, I would contend that perhaps we've gained a bit of market share overall. But I believe our numbers overall reflect their business. The fleet business, again, sequentially improved. And I would tell you also, in our major account business, we saw sequential improvement quarter-over-quarter. We also saw sequential improvement in our fleet business quarter-over-quarter. The fleet business, Seth, I think that we're going to continue to see that improve. If I look across – I mean, you follow the Motion business and how strong our Industrial business is as a whole. Ultimately, and we've always said this, is that fleet tends to lag a bit behind the market. So we're still confident that we'll continue to see sequential improvement in the fleet business going forward.

Thank you very much.

You’re welcome Seth.

Thanks Seth.

We'll go next to Brian Sponheimer of Gabelli.

Hi good morning everyone.

Hi Brian.

Hi Brian.

Want to talk about Motion. You've handled the NAPA business very well. I was a little surprised, given the comp store increase, to see margins expand just to 10 bps. So can you talk a little bit about if there are any friction costs there that would lead to maybe a little bit less leverage than you would normally expect?

I can’t say it is any one thing, Brian. I think what – look with that group, they are being very cautious on when they're adding back expenses and the payroll that we took out, and we think about the facilities that we rationalized. And as businesses come back, they've had to weigh that in, in bringing back in some of those costs. Some of the gross margin improvements, and you know 50% of that business is with major accounts, national accounts, there continues to be a significant amount of competitive pricing pressures. In some of those contracts, you're under pricing agreements, and so you may not be able to pass through. There may be some kind of lag there. So I can't say it's anything in particular. I mean, sometimes, you get subtle changes between the quarters. But still, we like what we're seeing with the 20 basis points through six months. I mean, one thing to remember, too, is their core growth – I mean, the core growth is a function, it's lower than what the total number is. So you got some acquisition costs that are still weighing in there. The other thing I'll just mention, we've kept their inventory down through the six months. And with that, we're not ramping up the level of incentives as quickly as you might expect. So we're trying to work hard on focusing on the balance sheet as well.

Hey Brian, I would just add to Carol's comments. First off, thank you for the question on our Industrial business. It gives us an opportunity to brag a bit on our Motion team. We've been, in past quarters, a little bit cautious to go out and say we think that, that business is now coming back full speed. But what we're seeing and continue to see is very encouraging. When we look at products like industrial hose and pneumatics that were up double digits in the quarter industrial supplies, hydraulic hose, seals, accessories up high single digits in the quarter, it's very, very encouraging for us. And then you look across the various metrics, whether it be the PMI number in June, which was 57.8 or capacity utilization, industrial production, all with arrows going up. Rigs count, our rigs count was up 500 over a year ago, and it's our highest in two years. So a lot of things to be bullish on and optimistic when you look at our Industrial business.

And just, Carol, one on AP-to-inventory. Slight slowdown in the three months versus a year ago. If you're looking apples-to- apples kind of on a comp store basis, I guess how much of the deceleration would have been from the acquisitions as opposed to just maybe a little bit larger inventory growth than you're expecting?

The issues on the inventory, the comments on the inventory, I would say, and we mentioned that inventory was up 6% without acquisitions versus the 9%, and what you're speaking to is a little bit of change there. I would say certainly, a portion of it is acquisitions and a fair portion of it. And then the other increases are probably more coming from – on the Automotive side. And again, looking at – a lot of it is looking at our inventory analytics and some of our predictive modeling and all that. And so we're working hard to get that inventory down in Automotive, but some of that is coming from just the depth and breadth of inventory that you've got to have in really getting into your supply chain and all the data analytics. But acquisitions, probably half of it, and the other part is just probably coming from the Automotive side.

Much appreciate, best of luck.

Yeah, thank Brian.

Okay Brian.

We'll go next to Matthew Fassler of Goldman Sachs.

Thanks a lot, good morning to you.

Good morning Matt.

So a couple of questions. The first is on Automotive, and I guess it's sort of a big-picture backdrop question. As you think about the aging of the fleet and where the surge is and air pockets are, et cetera, what are the ages that you think, critical ages ranges that are most important for the different pieces of your business, most notably thinking about commercial and then thinking about DIY?

Yeah, so that number, Matt, kind of has shifted through the years, right. We have historically looked at that 6 to 12 year age group as the sweet spot for our DIFM business. And I don't think that has really moved at all. I still think that's the key age group for our DIFM business. As we look at our DIY business, I think that number continues to move out, so anywhere from 12 to 17 and 18. When you look at the average vehicle on the road today at 11.7 years and how well built and constructed cars are today, that number continues to move out, and we're seeing more and more older vehicles, 15-plus-year vehicles, at our stores and shopping in our DIY counter. So I don't think it's changed dramatically but probably a bit more on the DIY side.

And just thinking about your perspective on when VIO trends may have started to weigh on this space because within that 6 to 12 year range, we obviously had this massive depth, and I would imagine that there's maybe a little more volatility, and the impact, maybe more of a bit of a cliff impact. Do you feel like this has been a headwind for a while or are we just seeing it now? Was there a headwind that was perhaps masked by cold weather a couple of years ago? What's your best sense as to when this may have churned and when do you think it might start to rebound in your favor again?

Yes, it's a great question, Matt, and I think it was masked. I think that when you go back a couple of years ago, when we were collectively, as an industry, pounding out strong mid to even high single-digit comps kind of quarter after quarter, I think it got masked. We had a couple of really harsh winters that probably drove a higher level of increase than what we attributed to weather. So I don't want to say they snuck up on it, but. certainly, I think last year and this year is having an impact. When we see that trailing off, we'll be really, as we get into back half of 2018 and 2019, we think it will be less of a factor than what it perhaps has been in the last couple of years.

Appreciate it. And then I have very quick follow-ups on the financial front. I'll just ask them together. The first is just directional color on the gross margin assumption embedded in your guidance. It's still roughly flattish year-on-year. And then the second one, I believe that the operating cash flow and free cash flow guidance came down a little bit more than the implied net income guidance. And that's with, I think, a CapEx number that's slightly lower. So did you round it down to the nearest $50 million? Or is there some nuance related to working capital or something else that may have changed for the business? Thank you.

Yes, so on the cash flow question, we would say that was more of a working capital change. And we gave you a range, so that was kind of our best thinking at this time, and it would be working capital. And then as far as gross margin, I mean, look, we had a nice improvement through the six months. The quarter looks good. We were just under 30% last year, so we would hope to be right around 30%, which may give us a couple basis point improvement. So we should see it be a little bit better than the prior year.

Great. Thank you so much.

Thanks Matt.

Thank you.

We'll go next to Bret Jordan of Jefferies.

Hey good morning It's David Kelly on for Bret. Thanks for squeezing me in. Just a quick follow-up on your DIY e-tail comments earlier and thinking about your out-performance in the category. Are you seeing any change in the DIY pricing environment, either a strategy shift from any of the traditional peers out there or anything notable from e-tailers trying to enter the market?

No, it's been relatively the same, David. We're bullish on our retail business only because I think of the initiatives that we've put into play. And the initiatives, so the bar would settle fairly low for us. And when you look at what we focused on, the retail basics, it's store hours. It's having retail-focused personnel on the floor. It's having the right products on the counters. So, I mean, really just an attention to the retail basics. And as that store count that we've gone through, what we call our Retail Impact initiative, we'll have 500 stores now at the end of the year. We started that a couple of years back. It's been a slow ramp-up, but it's now beginning to be a fairly significant chunk of our overall stores. So those stores are impacting our business. And as I've said, we had a good month of June now with both basket and ticket size going up for the first time in a few quarters. So it's good. But I think largely, it's the initiatives that we've put into play.

Okay, great. Thanks Appreciate the color. And last one, a quick follow-up from me. We've long discussed and weighed in on some price inflation in Autos as well. Do you think that's skewed, just thinking out over the next 2 to 3 years, would that be skewed more towards commercial? Or could we also see some price inflation in DIY as well?

Well, I think if we see inflation, David, which we're not opposed to as a distributor, I think you'll see it play out on the DIFM side, but I think you'll also perhaps see a bit on DIY. DIY would most likely be more in the chemicals and oil, which we've seen some increases in. So I honestly think you will, and if, and that's a big if because we have not seen inflation, as Carol pointed out, in a number of years. But if we get a bit more, I think, primarily on the DIFM side, but I think some of that will leak over into the DIY as well

Alright great, thanks again.

Yes you’re welcome. Thank you David.

We'll go next to Scot Ciccarelli of RBC Capital Markets.

Hey guys, how are you doing?

Hey good.

Great. Paul, I wanted to clarify some of your prior comments about the DIY outperforming commercial. Did that apply to the U.S.? Or was that on, just on a global basis?

That's U.S., Scot. When we get into specific segments of the business, DIY, DIFM, we are really pulling those numbers from our U.S. business. The comments I was making earlier about our global business is the mix, like the mix in Australia, DIFM to DIY, is significantly different than it is in the U.S. But when we talk specific DIY increase or DIFM increase, we're referencing U.S.

Okay. I just want to clarify because I think those two statements had blended into one another. So with that being said, obviously DIY performs better than commercial in the U.S. I know you talked about softer growth in fleet and major accounts. Obviously, that would act as a drag on the commercial business. But what is it that would impact, in your opinion, the commercial segment more than retail? Like if the drag is things like weather, the car park, et cetera, why wouldn't both segments be impacted about the same?

Yes. So I want to just repeat something I just said a few minutes ago to David. When we see an increase on our DIY business, as we did in the quarter, and saw a nice increase in June, I think that is more indicative of the initiatives that we've put into play, Scot, versus the overall DIY segment of the automotive aftermarket. I made that comment in a bit tongue in cheek. The bar was set fairly low for us on the retail side. So when we embark on improving the retail basics in our store, we're bound to get a bit of a lift, and that's what we're now seeing. And part of it is also due to our Retail Impact initiative that we embarked on a couple of years ago to upgrade a number of our stores.

I got it. And yes, I've heard that commentary before. So you really think the reason DIY outperformed for you is the things you have done, not necessarily a change in the marketplace? Do you have any feel for a change in the marketplace? Do you think both segments performed about the same? Do you have any feel for that?

Absolutely. Hard to say, I'll be anxious to hear the other public companies when they report, Scot. But look, I think that on the DIFM side, again, if I go back to some of the comments I made earlier with consecutive mild winters, the step-down in that or as referenced, that air pocket and our sweet spot of vehicles, that's impacting, that’s certainly is impacting the DIFM side. But again, I think it's transitory, and I think we'll begin to move away from that as we move into 2018 and beyond.

Got you. And just a housekeeping item. Was there anything else to note on the corporate expense? Was there a pension adjustment? I didn't hear that mentioned. Or is it just the labor and IT investments that were already highlighted?

Yes. there was no pension or non-recurring adjustments. What we would really point to is the investments that we're making, be it in our digital initiatives, which are global across all of our businesses, IT investments, which could be in warehouse management, productivity, inventory modeling to IT security, and then payroll and then legal and professional, which is somewhat related to acquisitions. So, and look, when you look at it, that's the majority of it. We gave you a little bit higher guidance in that area, but that's, we gave you a range. We hope to do better in there, but you certainly sometimes get non-recurring, onetime items in there but hopefully, we've covered that in our range.

Got it. Okay, thanks guys.

Alright Scot. Thank you.

At this time, we have no further questions in the queue. I would like to turn the call back over to management for closing or additional remarks.

We'd like to thank you for your participation in today's conference call. We appreciate your interest and support of Genuine Parts Company, and we look forward to talking to you after our third quarter results. Thank you.

That does conclude our conference for today. We thank you for your participation.