Good morning my name is Shawn and I will be your conference operator today. At this time I would like to welcome everyone to Genuine Parts Second Quarter Earning's Conference Call. (Operator Instructions). I will now turn the conference over to Ms. Carol Yancey, Senior Vice President of Finance and Corporate Secretary. Thank you, you may begin our conference.

Thank you, good morning and we thank you for joining us today for our second quarter earnings conference call to discuss our recent results and the outlook for the reminder of 2010. Before we begin this morning, please be advised that this call may involve forward-looking stalemates 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 assumptions underlining 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 obligations to update any forward-looking statements made during this call. We will begin this morning with remarks from Thomas Gallagher our, Chairman, President and CEO, Tom.

Thank you Carol, 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 early this morning we released our second quarter 2010 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 that the sales for the quarter were $2.847 billion, which was up 12%. Net income was a $124.5 million, which was up 20% and earnings per share were $0.78 this year compared to $0.65 in the second quarter of 2009 and the EPS increase was 20%. After being up 6% in sales and 13% in earnings in the first quarter, we were pleased to show continued improvement and further strengthening in our results in the second quarter. That now puts us up 9% in sales for the 6 months and up 17% in both net income and earnings per share on a year-to-day basis and we feel that we are in a good position at the halfway point in the year. And looking at the second quarter results by business segment; our two industrial related businesses continue to generate strong increases. Motion Industries, our Industrial Distribution segment was up 26% in sales in the quarter and EIS, our electrical distribution business was up 32%. Now a portion of the Motion increase is attributable to the BC Bearing acquisition that was completed on March 1st of this year. We mentioned…

Thank you, Tom. 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 for a quick recap and guidance update and then we'll open the call up to your questions. A review of the income statement shows the following; total sales were up 12% to $2.8 billion for the second quarter following a 6% sales increase in the first quarter. We are pleased expansion improved sales momentum this quarter with solid growth in automotive and especially strong results in our industrial and electrical businesses. For the six months ended in June, our sales stand at 5.4 billion up 9% from 2009. Gross profit in the second quarter decreased 50 basis points to 28.9% of sales, compared to 29.4% in the second quarter last year. Although down, this decline is less than the 70 point decrease experienced in the first quarter and for the year, gross margin of 29.1% is now down approximately 60 basis points from 29.7 for the six months through June last year. As we mentioned in our last quarter's call, that decrease thus far in 2010 primarily reflects the margin pressures in our automotive and office businesses. In automotive, the price and actions we took during the April to September timeframe last year has yet to fully annualize. And in office we continue to experienced competitive pricing pressures associated with the tough employment conditions affecting that industry. We had anticipated these headwinds impacting our gross margins to the second and third quarter of 2010, and to a lesser degree each period. Clearly, we have more work to do here and our management teams are focused on improving this line. So, look…

Thank you, Jerry. So, that recaps our second quarter and first half 2010 results. With sales up 9% year-to-date and earnings up 17% we feel that we're well positioned to report a good performance for the full year. And we are proud of the job that the GPC team has done both on the operating side and on the balance sheet side through mid-year. As far as the reminder of the year is concerned, we are mindful of the uncertainty that has been created by some of the mixed economic data that has recently been released. However, we are also influenced by the strength of our first half results and by what our management team anticipates in the months ahead. With that said, we feel that an upward adjustment in our full year guidance is appropriate. As we see it now, we would say that a full year revenue expectation of plus 7% to plus 9% would be more in line with our current thinking up from our prior guidance of plus 3% to plus 5%. And then we would increase our prior EPS guidance from 255 to 270, to the current 270 to 280 and we look forward to refining this further in our third quarter conference call. At this point we would to take your question and we will turn the call back over to Shawn to assemble the question for us, Shawn.

(Operator Instructions) And your first question is from the line of Scot Ciccarelli with RBC Capital Markets.

Hey guys, how are you. I guess one of my questions is, now that we are starting to see improvements on the revenue growth, I know guys typically get vendor rebates, I know in auto and I believe industrial as well, is that going to be one of the supporters for gross margin going forward, number one and number two, when does that start to flow through? When do you actually know your purchasing levels are high enough, that you really start to benefit from that?

Scot, this is Jerry. I'll take that, it does effects us, it effects us more so in the office products and industrial business than it does in the automotive, but it does have an impact. But the automotive business and the office products business did not, they plan as much as the industrial business, so the fall off from there volume incentive was not as great. It was a significant last year in the industrial side of our business and they have been to evaluate in their incentive program with all the supplier, and then trying to renegotiate those, but I don't know how they have done with that, and I don't know how successful they've been, but it did have an impact on the margins in the industrial segment in the second quarter. If you see the significant improvement in the margins there, probably a third of that was attributable to volume incentives and the rest of it is operating cost, they did a very good job taken out last year, and have not yet back entered the system, but I would also tell you that while we attribute to volume incentives, you wouldn't get those volume incentive if this wasn't the coverage because they are based on purchases so we wouldn't be making those purchases if we didn't have the business recovery, so the two of them tie together. We stay on that back to the sales volume level we had in 2007, even with a significant progress, so but it will help us on improve gross margin going forward.

Okay, that's helpful Jerry and then as you look at the total run rate, what you accomplished this quarter particularly industrial, I guess that's the one where I feel like it's the biggest one factor. Going forward in the balance of the year, do you think there is still a lot of inventory filling this past quarter, the second quarter, or is this kind of where the new run rate level is obviously counting per seasonality?

Scott, this is Tom. There may have been some inventory build-up or replenishment, but I think most of the revenue increase really came from normal plan in the quarter.

All right, that's very helpful. Thanks a lot guys.

All right, thank you.

Thank you.

Next one is from the line of Gregory Melich with ISI.

Hi, good morning gentlemen, this is Mike Montani in from for Greg. ISI: Hi, good morning gentlemen, this is Mike Montani in from for Greg.

Good morning, Mike.

Good morning, Mike.

I have actually probably two key questions for you. The first one was really related to sequential progress in demand, if you could talk about how that evolve over the course of the quarter and also just a feel for -- by geography especially in California if you're seeing anything noteworthy there in the Automotive? ISI: I have actually probably two key questions for you. The first one was really related to sequential progress in demand, if you could talk about how that evolve over the course of the quarter and also just a feel for -- by geography especially in California if you're seeing anything noteworthy there in the Automotive?

I'll take that Mike. The quarter was very consistent sequentially, so we didn't see any significant fluctuations. Geographically, my guess is you're referring more to Automotive than any of the other businesses and here again our Western operations are performing in line with our expectations, and we think we are faring reasonably well in the marketplace out there.

Great, and just with regard to the cost control you've done a strong job so far with keeping those under control, and if we were to remove the 9 million sort of boggy that you had in 2Q of last year, it seems that SG&A dollars would be up closer to 5.9. I guess as we look ahead now and with recovering volumes, can you talk about your outlook in terms of adding back headcount and to or any initiatives you have that might give us an indication of, is that 5.9 is now the new run rate, or how to think about that? ISI: Great, and just with regard to the cost control you've done a strong job so far with keeping those under control, and if we were to remove the 9 million sort of boggy that you had in 2Q of last year, it seems that SG&A dollars would be up closer to 5.9. I guess as we look ahead now and with recovering volumes, can you talk about your outlook in terms of adding back headcount and to or any initiatives you have that might give us an indication of, is that 5.9 is now the new run rate, or how to think about that?

Mike, I don't think you can say that that's the new run rate. Last year, we took about $75 million in total out of our SG&A. Our expectation is that this year, we'll probably add about 20 million of that back in. The best we can tell is if we've added back in about 10 million of it through the first half of the year. Over the last couple of years, we reduced our headcount by about 12, 11 to 12%. If you just look at the first half of the year, we've added about a half of a percent back to headcount to support the sales growth. Certainly we -- lot of that were infrastructure changes we made last year that will not come back into the system, so I think we are still along solid ground saying now that 75 million SG&A reduction last year were probably had back in 20 million or so this year.

And just the final point that I had and then I'll jump back in the queue. But on the cash side obviously continued to manage that very well, and now over 400 million as we move ahead should we think about potentially more activity from the M&A side or potentially more buy back, as you have a nice uptick there with the 50 million in repo this quarter. Thank you. ISI: And just the final point that I had and then I'll jump back in the queue. But on the cash side obviously continued to manage that very well, and now over 400 million as we move ahead should we think about potentially more activity from the M&A side or potentially more buy back, as you have a nice uptick there with the 50 million in repo this quarter. Thank you.

All right Mike, thank you. Yeah, you will see more activity and we did hold back, and we've not held back on acquisition because of the lack of cash. If we sure wanted, and we're working while it made sense and we could get to the proper valuation we do it, and in that position continues to be the same. We will -- active in the second quarter in our share purchase, and we will continue to be, and try to buy on weakness. It's easy to get rid of that cash. It's easy to spend it, but that's not our goal. Our goal is to spend it, so that we can maximize shareholder value. Shawn, you take the next call, please?

Question is from the line of Matthew Fassler with Goldman Sachs.

Thanks a lot, and good morning. My first question relates to the industrial business. If you look at your total revenue line, it was $882 million and two years ago in 2008, your revenue was $898 million. So with the strong recovery here you you're sort of -- and plus the acquisition of Bearings, you're almost back to 2008 levels. The profit dollars that you generated from industrial were 16 million light so and the margin is about 170 basis points lower. So I guess the question associated with that would be is the margin associated with the bearing business that much lower than the margin on the core Motion Industries business or is there some other element of impairment, either something structural or mix of business or perhaps vendor rebates not yet coming all the way back that would explain why the margin hasn't come back as much as the sales has recovered.

Matt, this is Tom. There are a couple of thoughts to that question. The margins at BC Bearing initially are just a bit lower than the Motion overall margins, but it's a company that's making terrific progress, and we're very confident in what they will do in terms of meeting the margin expectations. So, it's a good organization, good management and they will be accretive to us as we go forward. On the rebate side of it, all of that has not flowed through yet. We still have reduced inventories on the industrial side, and we'll continue to work to bring those down a bit over the remainder of the year. So, well, Jerry mentioned that about a third of the improvement came from incentives. We still in our planning don't have all of the incentives added back that we were able to get back in 2008. And then the final thing I would just say is that the revenues have come back very nicely there. For planning purposes only, we're saying that our revenues will not get all the way back to the 2008 levels. This year we hope they do, but we're cautious as I mentioned in my comments based upon some of the recent economic data that's come out. We are saying, we just want to remain a little bit on the conservative side, in our expectations for the industrial business specifically, but all of our business is over all. But we are still looking for a nice double digit increase from the industrial business in the second half of the year.

Got it, second question, if you could just remind when the BC Bearing deal closed and what the parallel number was in the first quarter to the 18% that you talked about for Motion in Q2?

Sure, the deal closed at the end of February, so March 1st they became part of Motion Industries and they added about 7% to the overall Motion increase in the second quarter.

Great. And I guess the next question I will ask relates to gross margin, Jerry. You spoke about anticipated improvement in Q3 and in Q4. Now last year in Q4, you had some -- essentially one time factors drive a very big year on year increase in gross margin. You're up I think a 123 basis points year-on-year after having been down over the first nine months. And my sense was that, that was a very tough bogey for you at your end and that there was an expectation that even if the underlying trend was solid, that you would probably de-lever gross margin in the fourth quarter. Were your comments saying that you think you could actually surmount that fourth quarter bogey and have up gross margins in Q4?

No, I don't mean it that way. We will make a little progress each quarter; we will have less of a decreasing growth margin in the third quarter. We had significant LIFO gains last year because of the inventory reductions in the fourth quarter and that's what contributed to that gross margin improvement. We are looking to reducing our inventories further this year, but it will not be to the level of last year as you can imagine with the recovery on the revenue side. Matt, I would be pleased if we could hold our gross margin in the fourth quarter this year compared to the fourth quarter last year.

Do you think it's actually feasible to get back to that 31% level though in the fourth quarter?

I think so, yes.

Got it, okay. Thank you very much.

Your next question is from Tony Cristello with BB&T Capital. Tony Cristello - BB&T Capital: Thank you, gentlemen, good morning. Tom, if you look at the industrial business particularly this quarter, very, very strong organic growth and it appears that that level of growth is outpacing what we would think would be general industry levels. Is there something going on as well with your ability as a market leader relative to some of the independents in the marketplace in terms of share gains that is also adding to what appears to be a very, very strong level of growth during the quarter.

Tony, I don't think we've got enough data to really give you an informed answer there. I do know that our industrial team, after suffering the way that they did in 2009, worked hard over the course of 2009 to better refine and develop their growth initiatives and that team is absolutely focused on building volume in a profitable way and I think their execution is awfully good. Where it's coming from, I wouldn't try to address, but we think that they have done a great job through the first half and they are going to give us a strong second half as well from our perspective. Tony Cristello - BB&T Capital: And with respect to sort of categorizing the industrial segment as more of a late cycle recovery, are the growth rates you're seeing today and sort of how you're portraying what you anticipate for the second half consistent with your view right now of where you think this cycle currently may be?

Yes. Tony Cristello - BB&T Capital: And do you think that some of the level of production and some of where the cycle and things are concerns in the macro, I should say, are they consistent also with this stage of the cycle?

That I don't know, Tony. I don't know that I can answer that. I'll come back may be and -- just to develop a little bit more the comments earlier. Right now, we know that regardless of where we are in the cycle, that we've got a terrific customer base that's producing product. And our team is focused on trying to maximize our penetration in each of these customers and trying to grow our presence in every customer that we service. And I think that we may be a little bit ahead of the overall growth rate but it's really coming from the focus and the intensity that the team has placed on maximizing our share of spend in our respective customer's places of business. Tony Cristello - BB&T Capital: Okay, okay. And one last question, you've made significant changes in 2009, particularly in the Auto segment with some of the initiatives you had on price. Are there any initiatives new that you might have underway or do you think that everything you've done to date is about as much as you'd like or has been sufficient enough to get the business back where you wanted it to be?

Well, no. We don't think we're done by any stretch and we've got a number of things that our team is working on. We would not want to disclose some of those on the call but we don't think that we're finished. And frankly we think there's more upside yet in the Automotive business if we continue to stay focused on the things that we've identified as opportunities for us. Tony Cristello - BB&T Capital: Do you think that the trends that the Automotive, sort of the aftermarket in and of itself has experienced right now, is there more of a cyclical nature to what we're seeing rather than, hey, once the economy recovers, the trends are not going to see 6, 7, 8% type organic growth, and it's going to come back to a much more normalized level? Or do you think some of the variables such as depressed vehicle sales and high unemployment and some of these other factors, average age, are truly going to allow for a longer sustainable tail of growth for the aftermarket?

I do, personally, Tony. If you look at a lot of the studies that have come out, what they would suggest is that while new car sales may rebound some over the next couple of years, we're not going back anytime soon to the historical levels, the 16.5, 17 million new car sales per year. The vehicle fleet is projected to continue to grow at a reasonable rate and the aging of the vehicles is projected to continue to persist. So what we see from a number of the studies is that the growth in the vehicles is actually going to come in the age category, six years and above, and we think that's a very, very good prospect for companies like ours because that's our target customer. Once the car gets to be six years or older, chances are the aftermarkets going to have an opportunity to do supply the parts that are needed to fix it. So, we think that the next couple of years could be reasonably good years for the aftermarket. Tony Cristello - BB&T Capital: Okay, great, thank you guys.

Thank you.

Your next question is from the line of John Murphy with Bank of America.

Hey guys, John Murphy. How are you? [Multiple Speakers]: Good John. How are you doing?

Good. Just kind of a follow-up on some of your highlights on inventory, you guys are doing a very good job of keeping your inventory lean, but I was just wondering as we look at the autos, the auto segment specifically, but your other segments as well, if you feel like the inventory in the channel across the board is very lean as well, even your competitors as well as your customers and as we hopefully see demand recover, there may be some real demand pull as well some potential restocking. I'm just trying to get a gauge of where we are in inventory in the channel in general for autos and your other segments.

John, I'll try to answer that and maybe will try to break it into pieces. If we look at inventory levels, at the installer level in the channel, I don't think there is going to be significant increase in demand going forward because they have historically kept their inventories fairly lean and rely on their serving part store to get them that part that they need within 20 or 30 minutes, so I don't think there is going to be much pull from that. I think that's going to be driven more by the increase in business that they experience. If we look at the store level at least within the NAPA channel, I think the inventories are in pretty good shape. I don't think that they are extraordinarily lean, nor do I think that they are extraordinarily heavy. I think we are pretty well balanced, and that's one of the things that within NAPA we take some pride in is that we keep the inventories fairly responsive to what we see in the marketplace. So, there is not a lot of access that sits there at any time in the cycle. So, I think there we won't see huge inventory build-up on the part of our customer base giving us increased demand. I think it's again going to be largely driven by the ultimate consumer demand, and then in our own case in our distribution centers, I think we do have some opportunity there to continue to work on what we would consider to be a little bit more investment than we absolutely have to have with enhanced technology and enhanced logistical capabilities that we're seeing some opportunities to do a better job with a little bit less. So, our inventories make them down just a little bit. Hopefully, it will come down a little bit and we will keep our service levels up as we have been, but I don't see that. I'm more concerned about inventory in the channel. Honestly, it's back a level or two from us and that's with maybe some of our vendors are important to them. Some of their raw material component suppliers and we have seen some recent examples where some of our good vendors historically are providing really, really good service have been impacted by some of there components suppliers who have not been able to keep up with the demand but, that's something that I think will be worked though over the next quarter or two. But I don't anticipate that inventory build up in the channel is going to give us any inflated demand.

Okay and then just second question, a last question, you raise your growth outlook for sales from a range of 3% to 5% to a range of 7% to 9%. Just wondering, if you can give us a break down by category, if you have it, where you receive the real strength there?

Well, we think, obviously the industrial related businesses will continue to perform well and I would say, from our planning perspective on the electrical side, we'd expect them to be up 14% to 16% over the second half of the year on the industrial side. We are thinking 13% to 15%, then again both of those numbers are a little bit tempered by some of the recent economic data that's come forth and we hope maybe there is a little bit of upside but at this point we don't want to count on it. Automotive, we are seeing 5% to 7%, 6% to 7% over the remainder of the year and that office products we're seeing flat to up 1% to 2% over the reminder of the year

Great, thank you very much.

Your next question is from the line of Himanshu Patel with JPMorgan

Hi, could you guys talk just lastly about the cadence of sales throughout the second quarter in the Automotive division and also this particularly comment on how weather maybe impacting July.

The cadence has been studied through out the quarter. We didn't see any real difference as the quarter progressed and then our July results thus far are pretty consistent with what we saw in the second quarter.

Thank you.

Your next question is from the line of Brian Sponheimer with Gabelli Company

Hi, good morning. Just one question here, most of mine have been answered, regarding use of cash, you've clearly stated your intentions for the dividend for acquisitions and for repurchase. I was just curious, if there is any intent to further fund the obligations on the pension or is that something that might actually.

Brian, yeah we are looking at that. We don't need to make a contribution to the pension plan at this point for 2010. It does appear if you look at the projection, we'll make a contribution in 2011, but those are actuarially calculated. If you'll recall we went - we made a soft freeze on our pension plan effective 1/1/2009 and so if we continued to fund that pension plan and use the cash for that, it'll get to a point over a period of time that cash will be there and there is no way for the company to get any benefits from it. At this point, we'll let the actuaries do the calculations and certainly if we are required to make a contribution, we will. But it looks like now the first contribution that we will have to make will be in 2011.

Okay, great. And on the acquisition side, obviously evaluation is of the utmost importance. Has there been any movement from what you're seeing as far the realistic expectation from candidates that are looking to potentially be acquired?

The answer is kind of mixed, it's yes or no. We have some discussions where we think we got fair valuation for both the seller and buyer prospectively, and we continue to develop those discussions, we've had other discussion where we didn't find that common point and we've just deferred them for now. One thing that may be happening is we may see private equity start to get back in the market, and if that happens and probably to move valuations up, and they would preclude us from some, but right now the discussions that we currently are having, we think are recently good possibilities over the second half of the year.

Okay, great, excellent, stuff. Thank you very much.

Thank you.

Thank you.

Your next question is from the line of Keith Hughes with SunTrust.

My question has been answered, thank you.

Thank you, Keith.

And we have time for one more question, and the question is from the line of Scott Stember with Sidoti.

Hello, good morning. Sidoti: Hello, good morning.

Good morning.

Good morning, Scott.

Yes, most of my questions have been answered. Could you just talk on the fleet side, you've shown some nice steady improvement there over the last couple of quarters. What's driving that? Is this sustainable and then maybe just dig into that a little bit? Sidoti: Yes, most of my questions have been answered. Could you just talk on the fleet side, you've shown some nice steady improvement there over the last couple of quarters. What's driving that? Is this sustainable and then maybe just dig into that a little bit?

Sure. First of all, keep in mind that we're coming off a very, very challenging period in 2009. So while we're up 4% in the quarter in 2009, we had four consecutive quarters of pretty significant decline, but what we saw happening -- beginning to happen in the early part of the year was we saw that the truck tonnage numbers were starting to firm up and improve some and the last report that we've seen takes us through the first quarter, and it looks like truck tonnage in the quarter was up about 4.5%. So we just see vehicles starting to move again because there's a little bit more demand than -- at this point we do think it's sustainable, we're not looking for a dramatic improvement from where it is currently, but we do think what we see at the moment should carry through with the remainder of this year.

Great, that's all I have. Thank you. Sidoti: Great, that's all I have. Thank you.

All right, thank you.

Shawn, thank you, we appreciate you joining us on the call today. We appreciate your continued interest and support of Genuine Parts Company. We look forward to talking to you in the future. Have a good day.

Thank you all for joining today's conference call. You may now disconnect.