Good morning. My name is Holly and I will be your conference operator today. At this time, I would like to welcome everyone to the Genuine Parts Company Second Quarter 2014 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) I would now like to turn today’s conference over to Sid Jones, Vice President of Investor Relations. Please go ahead, sir.

Good morning, and thank you for joining us today for the Genuine Parts second quarter 2014 conference call to discuss our earnings results and 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 this call. We will begin this morning with comments from Tom Gallagher, our Chairman and CEO. Tom?

Thank you, Sid. 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. Paul Donahue, our President along with Carol Yancey, our Executive Vice President and Chief Financial Officer and I will each handle a portion of today’s call. And once we have concluded our individual remarks, we will look forward to addressing any specific questions that you may have. Earlier this morning, we released our second quarter 2014 results and hopefully you have 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 $3.908 billion, which was up 6% over the prior year. Net income was $197.7 million, which was down 9% on a reported basis, but up 9% on a comparative basis, which I will comment on in a moment. Earnings per share were $1.28 this year compared to $1.39 last year and this represents an EPS decrease of 8% on a reported basis, but up 9% on a comparative basis. As a reminder, last year’s net income and earnings per share numbers were favorably impacted by the one-time positive adjustments that are attributable to the purchase accounting treatments on our Australian acquisition that was completed in the second quarter of 2013. Carol will cover this in more detail during her comments, but in looking at the results from pure operating standpoint, with sales up 6% and both net income and earnings per share up 9% on a comparative basis, we feel that the GPC team operated pretty well in the quarter. Looking at the sales results by segment, our automotive operations were up 5% in the quarter. Considering…

Thank you, Tom. Good morning everyone and welcome to our conference call. I am pleased to join you today and have an opportunity to provide you an update on the second quarter performance of our automotive business. Just as a reminder, we mentioned in last quarter’s conference call that on April 1, we annualized our acquisition of GPC Asia-Pacific and you will see that reflected in our Q2 numbers and on a go forward basis. As Tom mentioned in his opening remarks our automotive business grew top line revenues by 5% in the second quarter. To further explain our growth, our core automotive business grew 7% with a 2% offset due to currency exchange. I would like to take this opportunity to walk you through our automotive numbers and provide you an overview of our second quarter performance. As we look back on this past quarter’s results you will see – you will note our numbers are fairly consistent with both our fourth quarter of 2013 and the first quarter of 2014. Our teams continue to execute well in the field and coupled with solid industry fundamentals enabled us to report another good quarter with underlying growth at plus 7%. When evaluating our quarterly performance, we are encouraged to see that all regions of the U.S. are positively contributing to our sales growth. As has been the case the past couple of quarters, our divisions stretching from the Plains across the Great Lakes to the Northeast continue to lead the way for the company. In the second quarter we also saw strong sales growth in both the Southern and Mid-Atlantic regions of the country. An update on the automotive aftermarket wouldn’t be complete without a weather update. So after one of the coldest winters in a number of years, patches…

Thank you, Paul. We will begin with the review of our second quarter and six month income statements and the segment information and we will also review a few key balance sheet and other financial items. Tom will come back to wrap it up and then we will open the call up to your questions. Our total revenues were record $3.9 billion for the second quarter an increase of 6% from last year, including the 5% underlying sales growth and a 2.5% contribution from acquisitions, and this was offset by the current headwind of slightly more than 1%. If we turn to our gross profit and SG&A, we want to remind everyone as the prior year one-time items that are impacting our comparisons. In the second quarter 2013, we reported a favorable purchase accounting adjustment associated with the April 1, 2013 acquisition of the remaining 70% interest in GPC Asia-Pacific. To that end, we are required to revalue the company’s initial 30% investment and this re-measurement met a certain one-time purchase accounting cost amounted to a free tax income adjustment of approximately $36 million. And when combined with a lower tax rate, this favorably impacted our earnings per share by $0.22 in the second quarter of 2013. In accounting for the pre-tax adjustment, approximately $18 million was recorded in cost of goods sold and a $54 million gain net of expenses was recorded to selling, administrative and other expenses on our income statement. Additionally, the $36 million net adjustment is included in the other net line in the segment information provided in today’s press release. Any references we may make through our comparable results are intended to exclude the prior year impact of these one-time items. With all that said, our gross profit for the second quarter was 30.2% compared…

Thank you, Paul and Carol. So, that’s a recap of our second quarter and first half results. And as we look back over the past two quarters, we feel that our folks have made good progress in a number of key areas. Our sales and earnings on a comparative basis at the mid-year point are at record levels and all four of our business segments are showing year-to-date operating margin improvements. On the balance sheet side, accounts receivable and inventory have been managed well and accounts payable continues to trend in the right direction. Cash from operations is solid and working capital efficiency has shown nice improvement. From an individual business perspective as we look back over the first six months of the year, we are encouraged by the steady and consistent performance in our automotive business on a comparative basis and we are encouraged as well by the sequential improvements in our non-automotive businesses. At the same time, we are a bit unclear as to where we are in the economic cycle. While most of the external indicators and indices are generally favorable for all of our businesses, we still hear and sense a degree of uncertainty and caution among many of our customer base and the strength of the economic recovery is a bit weaker than many had predicted. Additionally, we still have the variability of currency exchange which as we said earlier impacted us by over 1% both on the revenue and earnings side in the quarter and first half of the year. With all of that said, however, based upon our performance year-to-date and the solid initiatives that are underway across each of our businesses, we feel that a few modest upward adjustments in our revenue guidance are appropriate. At this point, we would leave industrial…

Thank you. (Operator Instructions) And your first question will come from the line of Matthew Fassler with Goldman Sachs.

Hi, good morning. This is Chandni Luthra on behalf of Matt Fassler. How are you?

We are fine. We hope you are.

Good morning.

Hi, thank you. We just had a quick couple of questions. We wanted to check if there is any impact for you winning the consolidated Office Depot of snacks business now that particularly as the business shifts to you as the acquisition seasons?

Well, what we have said in our prior call was that on an annualized basis this will yield about $100 million in annual revenue. The revenue is starting to shift currently. We have said prior that it would start to kick in on July 1 and it is in fact starting to flow through currently. And then there was a question in the prior call as to whether or not this would impact our gross margins and we said that it would have some impact on the gross but we will get some leverage off of the increased volume as well.

Alright. Perfect. Thank you. And my second question relates to your industrial margins, we wanted to basically understand is there potential for stronger recovery on industrial margins, particularly now that you are starting to see some revenue growth and as this growth continues to persist into the year?

If in fact the growth continues in the high-single digit levels, yes we would think that there might be some opportunity for margin expansion.

Alright. Thank you so much. I appreciate it.

Alright. Thank you.

And your next question will come from the line at Christopher Horvers with JPMorgan.

Thanks. Good morning.

Good morning Chris.

Good morning Chris.

A couple of questions on the updated guidance, so the increase in auto and office is that mainly and each one of those reflecting the year-to-date and then in the case of the office now you have this acquisition or are you inherently raising your outlook for the back half as well?

Well, I think it’s a combination. The first part of your comment I think is accurate. We have seen – we will see the impact in office products of the Impact Products acquisition as well as increased Office Depot business which will have a positive impact. In the case of automotive, we have seen some – we think pretty good performance from the automotive team. We think the external factors are generally positive and our expectation is that based upon where we ended the first half of the year that something in that 7% to 8% range is a reasonable expectation for us on the automotive side. I would just add one other thing, Chris. We were a little bit encouraged by a couple of things in office products. It may be too early to tell if it’s a trend. But I mentioned in my comments that we did see sequential improvement in all four of the major product categories. And then we also saw improved performance coming from our independent resellers which our team has been working on for quite some time and hopefully that’s the beginning of what maybe some sustainable positive growth coming from that important part of our business.

Okay. So then just to clarify, it sounds like auto is sort of what we are seeing year-to-date passing out through to the revenue outlook for the year or whereas in the office there is the acquisition and some encouraging signs that’s taken your confidence up as to actual back half outlook?

I think that’s accurate.

Okay. I know your last year you mentioned June being a pretty wet month out there, are you normally hoping for very hot weather, so cars are breaking down or was that actually a drag to the auto performance in June?

Yes. Chris this is Paul, certainly a bit of a drag. What we had hoped for coming off that brutal winter we had in many parts of the country was to move right into the hot summer. And we have not seen that in most parts of the country and certainly June being as wet as it was, we did not see the kind of lift that we normally would have with some hotter temperatures across the country.

But is – I guess is your – does that suggest that or how do you think that plays out than as you look out over this summer and then to the balance of the year I mean the lag impact from the weather, is your outlook anymore positive or negative as a result of June’s outcomes?

I don’t think our attitude is anymore negative. If we get a hot stretch we get two weeks of unusually warm weather, yet in July or in August, we think that we will see some positive impact from that, but even absent that, I think that the performance that Paul had outlined both on the retail side and on the commercial side, Major Accounts, NAPA AutoCare, I think those results are really what give us a little more confidence in partly why we have raised our guidance.

Understood, very clear. Thanks very much.

Thank you.

Thanks, Chris.

Thank you, Chris.

And your next question will come from the line of Brian Sponheimer with Gabelli & Company. Brian Sponheimer - Gabelli & Company: Hi, good morning Tom. Hi Carol. Hi, Paul, how are you?

Good morning, Brian.

Good, Brian. Brian Sponheimer - Gabelli & Company: A question on just within auto, you’ve got a lot of changing dynamics regarding the competitive landscape, what are you seeing as far as maybe your ability to either gain some share this quarter or do you think that, that you are performing in line with your peers?

Well, Brian, this is Paul. We are the first ones out. So, we will hear our peer group here in the weeks ahead, but we are pleased with our quarter. It’s consistent with our first quarter and it’s consistent with the fourth quarter of last year. And we are very pleased with the cadence of the quarter, April was strong, May was strong, June as was referenced earlier was a bit softer, but the comps get tougher in the second half. And I think I referenced that in my comments. But we are pleased with where we find ourselves and with the initiatives that the guys are all working on it. Brian Sponheimer - Gabelli & Company: Any opportunities to – have you taken in any prior Carquest distributors into the NAPA family?

We have taken some, Brian and hopefully we will take some more as time goes on. Brian Sponheimer - Gabelli & Company: What do you think has been the biggest differentiator for you in having those crossovers take place?

But I think those that have made the change have benefited from the comprehensiveness of the NAPA program. And I think they have been surprised by the strength of the NAPA program. And I think they are pretty outspoken in terms of what is done for them and their business. So, hopefully there will be a few more that will make their way to the NAPA system in the months ahead. Brian Sponheimer - Gabelli & Company: And the other three businesses, if I am looking at the last eight months or so you guys have obviously been very acquisitive, what does that pipeline look like now for potential deals and just do you think you have another good 12-month, 24-month runway, where you can be this acquisitive?

Well, in the acquisition side of it, you never know what the timing is going to be. And you have always got to have a number of discussions going on at any given time. So, I think the best way I could answer that is to say that we have multiple discussions that are occurring, but we will have to wait and see how many of them actually develop and come to fruition, but we are pleased with where we find ourselves in terms of the discussions and we are certainly proud of the team for what they have been able to get done over the past year or so. Brian Sponheimer - Gabelli & Company: If you were to find something that would be the size of an Exego either in any of your four groups, would that side scare you at this point or would you be open to it?

No, I don’t think we would be intimidated by the size. It really is a function of how accretive it could be to the shareholders at Genuine Parts Company. And if we can find any business that we acquire needs to be accretive to GPC. We don’t knowingly do any acquisitions that are dilutive. So, the size is not the most critical factor. It’s what we think the performance will be post-acquisition. Brian Sponheimer - Gabelli & Company: Alright. And just last one from me. Carol, I think I heard you say that you may look to pay down some debt with cash flow as the year progresses, if you are paying 3% on your debt and you get a 2.6% current return on given the dividend, why wouldn’t share repurchase, more aggressive share repurchase be the right use of capital there?

Well, Brian, we are not committing to anything. What we are doing is trying to keep some flexibility as we look at our balance sheet and our capital structure so and keeping that flexibility be it incremental share repurchases or an acquisition opportunity. So, we are just trying to balance. We haven’t totally committed on what we are going to do on the debt. We are just going to look to balance what our cash needs are and what makes the most sense for the shareholder. Brian Sponheimer - Gabelli & Company: Alright, thank you very much.

Thank you.

Thank you, Brian.

And your next question will come from the line of Bret Jordan with BB&T Capital Markets. Bret Jordan - BB&T Capital Markets: Good morning.

Good morning Bret.

Good morning Bret. Bret Jordan - BB&T Capital Markets: Couple of quick questions and in your prepared remarks you had mentioned some gross margin pressure in the automotive from customer and product mix, could you give us a little bit more color, is that just a migration to national accounts or is there anything changing on the promotional environment on the products side?

I guess I will give a couple of comments and then Paul might comment as well. One of the things we are talking about is the product and customer mix across all of our businesses, but primarily not with automotive and office. So as Paul mentioned the key wholesale programs that we have and talking about some of those with the double-digit growth and those would be generally at a lower gross margin and then on the product mix we called out a couple of product categories that do come in at a little bit lower gross margin. But I would point out that we continue to have programs in gross margin, all of our businesses have key things going on, on the buy side and sales side to hopefully get those margins back up or at least flat. But the really nice thing is we have been able to do on the SG&A side so what you are getting is we saw that volume going through is we are able to leverage more on the expenses. So the teams and primarily auto have a done a terrific job on the SG&A line for us.

And Bert to the second part of your question there hasn’t been any fundamental change in promotional activity. Bret Jordan - BB&T Capital Markets:

Well. We don’t breakout the Australian numbers, but we can tell you that they are performing in line with our expectations and they are performing in line with our overall automotive business. Bret Jordan - BB&T Capital Markets: Okay. And then one last question on the accounts payable, it’s a pretty good number there. If we look at the business lines separately and clearly the auto vendors are more used to being asked for extended payables. I guess how much room is left if your – is auto getting close to 100% APed inventory and the other – other segments need to raise theirs or is there still room to extend payables on the automotive vendor side?

I think we still have some room we have ahead of us on the automotive. And you are right in your comment that this is much more prevalent than the automotive business than it is in the other businesses that we are in. But I think there is still some opportunity for us in the non-automotive businesses. So I think in the quarters ahead you will continue to see some nice improvement. Bret Jordan - BB&T Capital Markets: And with Exego’s payables been well levered as well or is there still would there be more room within the Exego?

Well, I think we will just leave that there is still room in the automotive side of the business and we feel good about our prospects honestly. Bret Jordan - BB&T Capital Markets: Okay. Thanks. Is there a target for APed inventories you have out there sort of on a two or three year basis company side?

We don’t have a stated target, I guess what we look at is our working capital and we have – we make sure that we have plans in place for all the categories for improvement each year, so no specific target. Bret Jordan - BB&T Capital Markets: Okay, great. Thank you.

Nice Brett.

Thank you.

And your next question will come from the line of Seth Basham with Wedbush. Seth Basham – Wedbush: Good morning.

Good morning Seth.

Good morning Seth.

The first question I have to you goes on some small cost items for clarification, it seems like you have bumped up the cost expectations for the other line as well as D&A, can you just give us some more color as to the drivers there?

Well, I think as we called out on the other lines, what we are seeing is some of the legal and professional, insurance and some of our incentives related costs. So that would primarily be what’s driving that line and some of it is in the technology area, we mentioned some of our technology improvements. So that’s primarily what’s driving that line. And then the other depreciation and amortization, was that your other one? Seth Basham – Wedbush: Yes.

Yes, the depreciation and amortization that’s the combination of a function of the additional acquisitions and the amortization that flowed in. And then the incremental depreciation if we look what our increase in CapEx is going to be on the full year. Seth Basham – Wedbush: Got it. Okay. Despite those bumps up, obviously you guys had great SG&A leverage you are expecting SG&A leverage going forward, was there anything different about this quarter relative to last in terms of the cost base and some of the moving pieces that drove the strong leverage?

I would just comment as we mentioned – that both Tom and Paul mentioned as you look from Q4 to Q1 and Q2 where we saw the sequential improvement especially in the non-automotive businesses or as you look at their core business improving over the last quarter or two, Q2 being the stronger one. What we are getting is additional leverage off the SG&A there.

Got it. And within auto itself, did you have better SG&A leverage this quarter even with the same type of top line growth?

Well, we did. And I mentioned that earlier, automotive, again with that strong volume that’s pushing through, we are having some nice improvement on their SG&A as well.

Got it. Okay. And then looking at Exego, can you give us anymore color on how you think you can grow that business going forward? Have you examined the growth opportunities? Do you have any color to share?

We have examined it. And we think there were several opportunities there. I think that expanding the store count will help us as we go forward and that can either be organic growth or perhaps acquiring some smaller independent companies and then some product line extensions we think will help them in their growth strategy going forward. So, we are pretty optimistic about what can happen with that business.

And that’s all within existing geographies?

Well, that would be in existing geography. And then at the outset when we made the acquisition, we have said that our first priority would be to continue to build out and enhance market share in Australia, New Zealand and then medium term, we would be looking to use that company as a platform company to expand up into some Southeast Asian markets, which we still think could make some sense.

Got it. Thanks a lot.

Thank you.

Thank you.

And your next question will come from the line of Michael Montani, ISI Group.

Hey, guys. Thanks for taking my questions.

Hey, Mike.

Hey, Mike.

First one was for Carol, just wanted to understand how you guys are thinking about gross margins for the back half. I think from the last quarter’s call, it sounded like there was opportunity for slight upside to gross margins and now I am hearing kind of around 30. So, is there any initiatives maybe you have on track that could kind of take those margins up all else equal or is it really going to be a function of customer mix and product mix?

What – I think what we are saying is we are getting a little bit further down we are saying around 30%. I mean, we certainly as I mentioned all four of our businesses have committees and a lot of initiatives going on, where they are looking at a lot of things, but I think some of the things that are headwinds to us will remain and some of that as I talked about within automotive and their key large customers, but we have got initiatives working in all our areas. And I think I guess that will be helpful just to maintain those margins or not have the deterioration that we have had, but certainly we are combining that with our SG&A improvement and the idea would be that we maintain this 20 basis point improvement in operating margin that we have right now.

Alright, okay. Thank you. And a follow-up for Paul if I could on the auto side, there has been so much made of kind of volatility in weather and you touched on it somewhat, but the way we have been thinking about it is maybe like a low double-digit increase in April could still be up low to mid single, can you provide any color in terms of either how you guys exited, what July looks like or really what the sequential moderation would have been there?

So, Mike, we came out of Q1 as you know very strong and that continued right through both April and May. We saw some deceleration in June. And while it was still a good month, we were certainly up against some stronger comps. And I would say that early in July, just a couple of weeks in, we are seeing some of those same, I don’t want to say softness, but it’s not at the run rate at April and May.

Okay, that’s helpful. And I guess the last question I had was just on the mega versus independent splits, in the past you guys have provided some color there in terms of year-over-year growth, can you provide an update there perhaps Tom or just how should we think about the balance between those two?

But the mega growth was mid single-digit and the independent growth was just a tick down from that. And as I said, it’s the first positive quarter that we have seen on the independent side in six quarters. So, we were pleased to see it and it’s the closest comparable performance we have seen between the two over that same time period.

Okay, great. Thanks guys. Good luck.

Thank you, Mike.

Thank you, Mike.

And we do have time for one final question. Your final question for today will come from the line of Liang Feng with Morningstar.

Good morning and thanks for taking my questions.

Good morning.

Good morning.

Could you discuss in further detail the main drivers of your Major Accounts growth and whether your go to market strategy in this segment has changed a lot to help drive this double-digit performance?

I will take a first step at it and Paul may jump in. The way the program is structured is that we have headquarters to headquarters contact. And we talk about what our capabilities might be and what our value proposition might be to a major account. If there is an interest on their part to expanding the relationship, some of the terms and conditions are negotiated at the headquarters level. But then the actual implementation is done at the store level, market by market. And our proposition to the major accounts hasn’t changed for a number of years. Perhaps our consistency, dependability, our level of execution in the field may be partly what’s driving that at the rates that we are growing today.

Yes. I would just add to that that we have got great relationships with our key partners on the major accounts side. So you are talking about the likes of AAA, and Firestone, and Goodyear tire kingdom. Our competitors are chasing that business as well. We have got a very focused effort. We have got a great team that works very hard to grow our market share inside of those major accounts. And our team has done a very good job as I think is evident in our recent numbers.

Yes. This performance is particularly notable because several of your larger competitors have noted the desire to target major accounts more aggressively, have you noticed any changes within your competition from these larger competitors within this field?

No, I would just say that everyday the battle, right. Whether it’s major accounts or the business on the street, but we have not seen a major change in the levels of competition with our majors.

Thank you.

You’re welcome.

Thank you.

And that will conclude today’s question-and-answer portion. I would like to turn the conference call back over to management for closing remarks.

We want to thank everybody for participating in today’s call. And we appreciate your interest in and support of Genuine Parts Company. And we look forward to reporting back out at our third quarter release. Thank you.

And once again we like to thank you for your participation on today’s conference call. You may now disconnect.