純正零件 (GPC) 2004 Q4 法說會逐字稿

Good morning. My name is Marvin, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Genuine Parts Company fourth quarter and year end 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 period. If you would like to ask a question during this time, simply press star, then the number 1, on your telephone keypad. If you would like to withdraw your question, press star, then the number 2, on your telephone keypad. Thank you. I would now like to turn the call over to Miss Carol Yancey, Vice President of Finance and Corporate Secretary. Please go ahead, ma'am.

Thank you. Good morning and thank you for joining us today for the Genuine Parts fourth quarter conference call to discuss our earnings results and the 2005 outlook. Before we begin today, please be advised that this call may involve forward-looking statements , such as projections of revenue, earnings, capital structure, and other financial items, statements on the plans and objectives of the Company or of management, statement on future economic performance and assumptions that are underlying the statements regarding the Company and its business. The Company's actual results could differ materially from any forward-looking statements due to several important factors described in the Company's latest SEC filings. The Company assumes no obligation to update any forward-looking statements made during this call. We will begin this morning with brief remarks from Larry Prince. Larry?

Thank you, Carol. Good morning to each of you joining us today. We thank you for taking time to be with us. First, let me say that it feels a little bit different to be handling this call this morning as Chairman of the Executive Committee. Actually, it's a pretty good feeling, and it gives me the opportunity to introduce Tom Gallagher to you as our new Chairman and CEO. Yesterday, at our GPC board meeting, our directors elected Tom Chairman of the Board, following his election to CEO at our board meeting this past August. This actually completes our succession planning for the top leadership position at GPC. I'm sure most of you know Tom. Prior to his election to CEO last August, he was President and Chief Operating Officer for 15 years, and has been with GPC for 34 years. His move to the top really surprises no one in our Company, our customer group, or in the industries we serve. Well known and highly regarded throughout, and will be a splendid Chairman and CEO. I plan to continue as a board member and Chairman of the Executive Committee, will naturally have a great interest in the ongoing success of the Company I've been a part of for 46 years. So often when it is time for a transition of this type, companies just aren't ready, and often must look outside for an answer, and often there are problems. That is certainly not the case at GPC, and we look to the future with high confidence. With that said, I have obviously set Tom up to do most of the work I would normally do on this call today.

We also have Jerry Nix, our Chief Financial Officer with us, and he will give you the detailed remarks on our financial results. We released our fourth quarter and full year results for 2004 earlier this morning, and perhaps some of you have had an opportunity to see them. We were able to achieve record sales and earnings for the quarter and the year, and I know that Tom and Jerry will enjoy covering this with you. Now, we will ask Tom to comment on our overall results and specifically talk about each of our business groups. Jerry will follow with the financials, and then we will move to questions and discussion. Tom?

Thank you, Larry. Let me start by saying that I'm honored to be given the opportunity to lead the fine GPC team. And let me also say thank you to you, Larry, on behalf of the entire GPC family for the outstanding leadership that you have provided over the past 16 years. We are a better Company because of your guidance, and the entire GPC organization is grateful to you. Well, I'm in the fortunate position of leading my first conference call at a time that Genuine Parts Company has reported record sales and earnings. We released our fourth quarter and year end 2004 results earlier this morning, and hopefully many of you have had an opportunity to see the release.

Sales for the year were $9,097,000,000 which was up 8 percent, and this is our first time over the $9 billion mark. Net income for the year was 395.6 million, up 12 percent, and earnings per share were $2.25 which was up 11 percent. Net income and earnings per share both reached record levels in 2004. For the fourth quarter, our sales were 2,253,000,000, up 8 percent; net income was 96.3 million, up 11 percent; and earnings per share were $0.55 compared to $0.50 prior year and up 10 percent. Both sales and earnings were just a bit better than the guidance given during our third quarter conference call, which we were pleased to see. So we had a solid performance in the fourth quarter, following good results over the prior three-quarters of the year, and we're proud of the job done by the GPC team in 2004. And we are pleased to be able to report that all 4 of our business segments contributed nicely to these results.

For the year, the Industrial and Electrical/Electronic segments had the strongest revenue increases at 11 percent and 13 percent, respectively, followed by Automotive and Office Products that were both up 6 percent for the the year. We would like to take a few minutes to review these individual results, starting with Industrial. Our Industrial team began the year with a 7 percent sales increase in the first quarter, and then followed this with an 11 percent increase in the second quarter, 14 percent in the third, and then a 13 percent increase in the fourth quarter. So they really built sales momentum as the year progressed. And we were pleased to see the strong sales results were fairly consistent across the country and across broad product and customer categories as well, which we think is reflective of the improved situation in the manufacturing sector of the economy right now. Industrial production and capacity utilization figures are both pretty good indices for our Industrial business, and each of these have shown a steadily improving trend for 2004, and at the current levels, they present a pretty positive outlook for 2005 for our Industrial group.

Staying within the manufacturing segment of the economy, we will make a few comments about EIS, our Electrical/Electronic Company. They closed out the year with a 9 percent increase in the fourth quarter, and as mentioned earlier, EIS was up 13 percent for the year. We did see a little softening in the electronics side of business in the fourth quarter, but the core electrical business held up quite well. After 3 consecutive years of sale decreases, we were especially pleased to see EIS produce a double-digit increase in 2004. This management team has really done a fine job of working their way through a very difficult period, and they are well positioned to take advantage of the improved trends in their industry. As with the industrial segment, EIS's customer base is experiencing pretty good demand right now, and this is reflected in industry indices which look favorable for 2005 as well.

Moving on to Office Products, this is a group that had a fairly consistent performance throughout most of the year. Sales were up 6 percent in the first quarter, followed by a 5 percent increase in the second quarter, they jumped to an 8 percent increase in the third quarter, and then moderated some to a 4 percent increase in the fourth quarter, ending the year up 6 percent. I should point out that sales for the first 6 weeks of 2005 are up over the fourth quarter levels, and more in line with the first 3 quarters of the year. The Office Products Group experienced good growth with both their independent dealer customers, as well as with the megadealers. They produced solid increases pretty consistently across all product categories. We feel that the 6 percent increase for the year is a fine performance for the Office Products team, and with the plans that they have in place, we are looking for another good year from them in 2005.

And finally , Automotive. This group got off to a strong start to 2004, with a 10 percent sales increase in the first quarter. We did have the benefit of an extra day in the quarter, but it was still a strong performance. We then saw some moderation in the growth rates, ending the second quarter up 4 percent, followed by a 3 percent increase in the third quarter. We started to see some pick up late in the third quarter, which we mentioned in conference call in October, and this carried on through the final months of the year, and the Automotive operations posted a 6 percent increase for the fourth quarter, matching their year-to-date increase. As a point of information, the NAPA operations actually did a little better than this in the quarter and for the year, but the overall automotive numbers were brought down some by weaker results at Johnson Industries and in Mexico. In prior calls, we've updated you on our progress with our NAPA growth strategy, which we refer to as our 7 key initiatives, and we would like to make a few brief comments on these initiatives this morning.

Starting with NAPA Auto Care, we ended the year with over 13,000 Auto Care members. This is our largest wholesale initiative, and we are pleased to report that we exceeded 2004 sales targets with this key customer group. In the area of major accounts, we made good progress in this important area of our business, and we generated a 7 percent increase with major account customers in 2004. Pipeline Plus and store resets, 950 stores were completed in the year, meeting our goal, and we exceeded our goals in adding outside sales representation, installer connectivity, and in the specialty markets of heavy duty paint, and tools and equipment as well. In the area of new distribution, we fell short of our goal. We had targeted 100 net new stores, and we ended the year with 47. So, we missed it by a fair amount. However, I would also say that 2004, while short of our goal, was the first year that we were able to show an increase in several years. After experiencing modest declines in store count for a few years, we were able to end 2004 with a net increase of 47 stores, and our Automotive management team is committed to the 100 new stores in 2005. So in looking back, we met or exceeded our goals in 6 of the 7 key initiatives, and we were able to generate the additional 200 to $225 million in volume that we had targeted from these initiatives. The net result of all of this, is that our Automotive Group had its best sales increase in several years, and with continued focus on each of these 7 initiatives throughout the organization, we feel that the Automotive operations are positioned to have another good year in 2005.

In summary, as we look back over 2004, we're pleased with the progress that was made by the GPC team. We were able to show consistent improvement in each of the 4 quarters of the year, and all 4 of our business segments contributed nicely. The net result was a record sales and earnings for year for Genuine Parts Company. At this point, I would like to turn it over to Jerry to cover financials, and then we will do a brief review of how we see 2005 shaping up. And after that, we will open it up to your questions. Jerry?

Thank you, Tom. Good morning. Appreciate you joining us today. We will continue with the review of the income statement and segment information. Then we'll touch on a few key balance sheet items. We'll be brief, and then we'll open the call up to your questions. Review of the income statement shows the following: Total sales in the fourth quarter were up 8 percent at 2.25 billion. It was nice to finish the year with a strong quarter, and for the year, sales were 9.1 billion, also up 8 percent. As previously mentioned, these were record sales levels for us in both the fourth quarter and the year. So we are very proud of the GPC team for this accomplishment. Gross profit in the quarter was 33.30, compared to 32.66 last year, up 64 basis points. We've been focused on improving our gross margins and we saw progress in our numbers each quarter in 2004. There was nice report growth on this line, and for the year, gross profit was 31.11. Now we're pleased with the progress shown in 2004, but believe it could have been better, and we are working to show more improvement in 2005, and beyond. However, there are factors that we have discussed in previous 2004 quarterly conference calls which affected our ability to show greater gross margin gains in 2004. These factors are: Strong sales at Motion and EIS, which are historically lower gross margin businesses, lower levels of vendor discounts and volume incentives, and the usual pricing pressures and shifts in customer and product mix. We believe that our ongoing focus on gross margin initiatives, as well as the benefit of more normalized levels of discounts and incentives will continue our positive gross margin trends in 2005.

Fourth quarter, SG&A as a percent of sales increased 31 basis points from 26.25, to 26.56. For the year, SG&A decreased from 24.27 to 24.11. That's an improvement of 16 basis points in '04. Fourth quarter, our SG&A expenses as percent of sales were higher than in '03, as our more recent run rates on items such as employee benefits, insurance, and legal and professional costs, were up compared to last year. We will discuss this further in a moment. Overall, we are pleased with our improvement in this area for the year, and we will continue to focus on effective cost management going forward. Net income for the quarter was 96.3 million, that's up 11 percent. Earnings per share was $0.55 compared to $0.50 last year. Year net income of 395.6 million, up 12 percent from '03, and earnings per share was $2.25, up 11 percent from 2003.

Now, let's discuss the results by segment. For the quarter, our Automotive revenue was 1 billion 164.1 million, that's up 6 percent, with operating profit of 91.3 million, up 25 percent. So nice margin, operating margin improvement there. For the year, Automotive had revenue of 4 billion 739.3 million, representing 52 percent of the total Company, up 6 percent. Operating profit of 396.0 million, that's up 9 percent, so good operating margin improvement there from 8.1 to 8.4. Industrial Group for the quarter had revenue of 637.0 million, that was up 14 percent, and they had operating profit of 48.6 million, up 20 percent. For the year, Industrial had 2 billion 511.6 million in revenue, representing 27 percent of the total Company revenue, up 11 percent, and operating profit of 173.8 million, up 15 percent, so nice operating margin improvement there. Office Products for the quarter, 375.6 million, that's up 4 percent. Operating profit of 42.2 million, up 5 percent, so slight margin, operating margin improvement there for the quarter. And for the full year, Office Products had revenue of 1 billion 540.9 million. That represents 17 percent of the total Company revenue, up 6 percent. And operating profits were 150.8 million, and that represents a 5 percent increase. So operating margin, we're flat there, but still outstanding at 9.8 percent.

Electrical/Electronic Group had revenue in the quarter of 81.3 million, that was up 9 percent. Operating profit of 3.3 million, up 94 percent. For the year, the Electrical/Electronics Group had revenue 335.6 million, representing 4 percent of the total. They were up 13 percent. Had operating margins -- had operating profit of 14.6 million, up 105 percent for the year. And nice operating margin improvement going from 2.4 in '03 to 4.4 in '04. So total revenue for the full -- for the quarter, 2.25 billion, that was up 8 percent, with operating profit 185.4, up 20 percent. And then for the full year, total revenue of 9 billion 097.3 million, up 8 percent for the year. Operating profit 735.2 million, up 11 percent for the year. So margin, operating margin expansion there from 7.91, 8.1. We had interest expense of 8.1 million for the quarter, and 37.3 million for the year. Down 28 percent from 51.5 million in '03, due to our reduction of debt over the year. 2005, we expect our interest for the year to be in the $30 million range. Other category was $25 million for the quarter and $62 million for the year, that's up from $41 million in '03. Other consists primarily of corporate expense at $59 million, but also includes goodwill amortization expense and minority interest. Corporate expense was affected by increases in our pension costs, employee benefits such as stock option expense, insurance costs such at workers compensation, and legal and professional costs including the costs associated with Sarbanes-Oxley requirements. We anticipate these types of costs in the aggregate, to at least moderately increase again in 2005. We have accounted for this in our forward-looking guidance.

Now let's touch base on a few key balance sheet items. Cash at December 31 increased to 135 million, 15 million last year. Beginning in the second quarter of 2004, we saw our cash position improving due to our stronger income, improved working capital position, and cash flow from the exercise of stock option. As you may know, our cash was 285 million at September 30th, '04, and we used approximately 125 million in November to pay down our current debt. Our accounts receivable increased 4 percent from last year, less than our sales increase for December and for the quarter. Our receivables continue to move at a favorable rate to sales. We feel good about the quality of receivables at the current time. Inventory was up 3 percent compared to last year. We believe this is a reasonable increase relative to our sales increase. Industrial inventory was a primary area of focus for us again in '04, decreased by more than 7 percent during the year. Effective inventory management remains a key initiative for us as we look ahead in 2005. Accounts payable increased 21 percent from last year, due to increased purchases related to the increased sales, as well as the extended terms established with our vendors. We're pleased with the progress made in this area in 2004.

Working capital was 2.5 billion at December 31, '04, up 3 percent from 2003. Improvement in working capital position was an important initiative for us in '04, and we will continue to focus on improving our working capital efficiency in 2005. Our current ratio at the end of the year was 3.2 to 1, versus 3.5 to 1 the prior year. We would emphasize that our balance sheet remains in excellent condition. Continued to generate strong cash flow and we feel good about how we've invested our cash, to build our businesses and create value for our shareholders. We generated approximately $555 million of cash flow from operations in 2004, and this cash was used primarily in 4 key areas. First, we paid dividends of $209 million. Continue to believe that dividends are important, and our board of directors has authorized an increase in the dividend to $1.25 per share in '05, up 4 percent from the $1.20 per share last year. New dividend is 56 percent of 2004 earnings, and represents our 49th consecutive year of dividend increases. We've paid a dividend every year since going public in 1948, we have increased it every year since 1955. You know this record continues to distinguish Genuine Parts Company from most other companies.

Second, capital expenditures with 25.5 million for the fourth quarter, and 72.1 million for the full year, relatively consistent with our expenditures of 73.9 million in '03. Related depreciation and amortization was 12.4 million in the quarter, 62.2 million for the year. We expect our capital expenditures to increase to the 80 to $90 million range for '05. And would expect our depreciation and amortization to be 70 and 75 million in '05. Third, the total debt at December 31, 2004, was down $177 million from last year, closing at 501 million compared to 678 million in '03. This debt level represents 16.5 percent of total capitalization, compared to 22.7 percent last year. Continued reduction of debt has been a high priority for us, and we have reduced our debt by over $100 million a year for 3 years in a row.

Looking ahead, we currently expect our debt to remain at this current level until our first 250 million credit facility is due in 2008. Another priority for us has been opportunistic share repurchases. As part of our share repurchase program, we purchased approximately 600,000 shares of our Company stock in 2004, leaving us with additional 6 million shares authorized for repurchase as of December 31, '04. Remain active in the program as we continue to see an investment in GPC stock will provide a good return to our shareholders. Thus far in 2005, we purchased another 350,000 shares. We continue to believe that the use of cash in these areas serves to maximize the total return to our shareholders. We're pleased with our results for the four quarter, and the full year of 2004. And today, we are working hard to extend our positive trends in 2005. We expect our initiatives to grow sales, improve margins, and control costs to continue our growth pattern this year and beyond. We'll support these growth initiatives with a healthy balance sheet, and continued strong cash flows. Thank you for listening to the call today, and I'll turn it back over to Tom at this time.

Thank you, Jerry. At this point, we would like to make a few comments about the outlook for the individual businesses for the first quarter and for the year, starting with Automotive. The trend in the Automotive Group is positive, after a 4 percent increase in the second quarter, and a 3 percent improvement in the third quarter, we saw demand pick up over the final quarter of year, and we were up 6 percent. And based upon what we have seen through the first half of this quarter, we would expect our Automotive sales to hold in this 5 to 6 percent range for the first quarter, and at this point, we feel that this is a reasonable expectation for the year as well. The Industrial operations have been generating double-digit increases pretty consistently for a number of months, and we expect them to be in the 12 to 14 percent range for the first quarter. And as of right now, we would prefer to remain cautious for the year, and we would say 7 to 10 percent. Our guidance for the Office Products Group for the fourth quarter was 6 to 8 percent, and they fell short of this, at 4 percent. We think that this was largely attributable to delaying the launch of the new catalog from the the fourth quarter of 2004 to the first quarter this year. This was the right decision, but it did cost them some sales in the final quarter. However, based upon what we see currently, we think that they will be back in the 6 to 8 percent range this quarter, and we feel that 5 to 7 percent is a reasonable expectation for Office Products for the year.

And finally, Electrical/Electronic. We have seen some moderation in their sales, primarily on the electronics side, and we want to remain on the cautious side here. So we are saying 4 to 7 percent for the quarter, as well as for the year. When we put it all together, we would say 6 to 8 percent would be a reasonable expectation for the total Company for the quarter, and 5 to 7 percent for the year. On the earnings side, the first quarter last year was our strongest quarter of the year. We earned $0.57 and this was up 13 percent. So we are going up against a good prior year performance. Based upon the current sales outlook, we would anticipate earnings to be in the $0.60 to $0.62 range. And for the year, with revenue growth in the 5 to 7 percent range, we are comfortable with the current full year estimate of $2.42. This will be up 8 percent over 2004, which we feel is a reasonable expectation at this point. At this point, we will turn it over to Marvin, and ask that he open it up for questions. Marvin?

(OPERATOR INSTRUCTIONS) Darren Kimball, Lehman Brothers.

Thanks. Congratulations once again to Tom and Larry.

Thank you, Darren.

I just had a question on the other. Why was it so lumpy in the context of the year? And is that what you expect as a function of the way you accrue for it in 2005? What could we expect sort of the run rate of that category to be in the first quarter?

Darren, we had a number of issues. We had legal settlements and things like that, that were at accelerated pace in the fourth quarter. We also had some workers compensation reserves. We also had costs associated with the Sarbanes-Oxley requirements, that fell pretty much in the fourth quarter. I think it will not be as fluctuating in '05 as it has been in '04, but you can probably expect to see some of those costs continue. We don't know, for instance, on the 404, just what the cost requirement are going to be on that going forward.

So, what's your best guess for a place holder there?

I'd say you take the number that we have for the full year, and just leave it there for the same period of '05. It looks like it could be a good number.

So maybe 15, 16 million a quarter, something like that?

That's correct.

Okay, that's helpful. Thank you.

David Siino, Gabelli & Company.

Just wanted to echo the congratulations to both Larry and Tom.

Thank you, David.

Jerry, could you just run down the pricing in the quarter?

Okay. David, I have it for the year, and the Automotive for the full year was 1.2, the Industrial Group had 5.3, Office Products had 0.9, and the Electrical Group had 1.0. And that's (indiscernible) from the beginning of the year.

Okay. Any acceleration in any of those categories?

Not really. You know, we were pretty consistent with the Automotive throughout the year. We did have a little pick up in the Industrial side, and not much -- enough in the Office Products and Electrical Group to make a difference.

Okay. And would you say, Jerry, that you would have a favorable rebate experience in '05 versus '04, since you've largely taken out the inventory in industrial?

We still have more inventory to reduce at the Industrial side, David. The impact on us will not be as great on the volume incentive side as it has been in the past. And particularly, if business stays as strong, because volume incentives are based on purchases. And if business is good, that'll allow us to to both. But we will still probably have a negative impact in '05, but nothing to the extent we experienced in '03 and '04.

Okay. And last question for Tom. The new stores we've been talking about for a couple of quarters now, what seemed to be the ongoing issues with -- is it a matter of finding sites, or just execution?

David, the quarter -- in the fourth quarter this year, we wound up with a net of plus 8 which was below where we thought we would be. And the primary reason was that we had opened a good many more than that, but we also consolidated or closed a number, resulting in that net gain of 8. So I think our folks have the message right now, and I believe that they have got the momentum starting to move, and we feel pretty darn good about our ability to net out at 100 for 2005. It just took us a little while to get everybody on board, and get this thing moving.

Okay. Thanks, and good luck, Larry.

Thank you.

Frank Brown, SunTrust.

Is there anything else that you can tell us in terms of adding color on the Automotive side? A very strong revenue gain there, and I just wonder if you could break it down a little bit between company-specific factors, where you are seeing positives on your initiatives, as opposed to kind of pent up demand and a rebound from storm impacts, or whatever, in the third quarter.

Frank, I'll handle that. As far as Company owned versus independently owned, the Company owned stores performed a bit better for the year, than the independently owned, but we had solid improvement in both categories. As far as geographic, we had strong performance throughout most of the country, and honestly, we felt pretty good about that. As far as product categories, we saw good performance in thing like filters, brakes, chassis, batteries, they were all product lines that performed well for us, and we would expect that that will continue. So I think that we benefited from a combination of factors. 1, the improving demographics and the overall market I think helped us, the improving economy. And then I think we gained a little bit from the implementation of these strategies as we talked about.

Dax Balius, Gates Capital Management.

The depreciation amortization was down several million dollars year-over-year in the fourth quarter. Can you explain why that happened and why you think it's -- and if there's going to be, if the 70 or 75 is a reasonable estimate for '05?

Yes, I think it is a reasonable estimate for '05. We were down from 16.9 to 12.4 in the fourth quarter. But again, for the year, we were down 7 million and that, and that's just some of the assets that are being -- becoming fully depreciated. And what we expect in the CapEx area, we will probably still be 70 million in G&A.

Why was the fourth quarter so much lower than the previous quarters? The first, second, and the third quarter of this year?

Just the way we capitalized assets, and when they expired in their life cycle.

I couldn't hear you. Could you speak up, please?

It's just the way we capitalized the assets and the way they expire in their life cycle. There's nothing in that number but that.

So will the first and second quarter be significantly lower than the rest of the year for the first -- for '05?

It's possible. We've got some other assets that have to be set up. We are putting in warehouse management systems in a couple of the business units. And I just don't know at this point how much those will -- but it will be a little lower than it was in the first quarter and second quarter of '04.

Okay. And could you explain the -- if I'm looking at your full year guidance, the tax rate for the full year. Could you explain why the tax rate was lower for the fourth quarter and what it would be for the full year -- what you're expecting for the full year next year?

Sure, Dax. What happened is we had the lower tax rate in '04 and that was some favorable permanent differences we had. We also, with the tax act of '04, we were able to take back in some foreign tax credits that we had, and I would say that tax rate going forward in '05 would move back to 38.1. But I think you're going to see all companies, that tax rate will fluctuate a little more now going forward, because that's just the guidance that was given.

Right. Right. And, could you -- you sort of said what, what -- I don't understand what the delta is between reporting other expense of 10 million, and other expense of 25 million year-over-year in the fourth quarter. Can you explain the delta and be more specific on what those items were? I mean, that's a huge difference.

We increased the reserves in workers compensation.

How much was that?

I don't have the exact number on it. And then we had 404 expenses of $4 million that fell in there. And then we also had some legal and professional settlements and reserves that were included in that. We had an adjustment on FAS 112 for our employee benefit side that fell in there as well.

Okay. Let me ask you in a different way. What are the major changes, what are the major components of it? There's $15 million delta. What percentages are each of them? I guess 4 million was from the Sarbanes-Oxley?

Right.

That's the increase year-over-year?

And then we also had workers compensation, would have probably been about 5 million of that, and other legal and professional reserves would have been 3 to 4. So that should account for most of it.

(OPERATOR INSTRUCTIONS) Tim Denoyer, Prudential Equity Group.

Can you give me a little detail into -- in terms of your automotive store count for 2004? Can you tell me how many closings were there?

I'll have to get that for you, separately, Tim. We don't have that available right now, but the numbers that we report are always net numbers.

Right, correct. So I was sort of getting at how many closings you expect in 2005, and how that is going to change in terms of your getting to the net 100 new store goal. A little bit more color on that?

I'll have to get that for you separately, and I just don't know at this point. We always have stores that close, and not necessarily we count them as closed. They may be relocated stores or whatever. We have ownership changes, 200, 225 a year. So that is always a moving target for us, but I'll trying to track down a number of closings and get that for you.

Great. Thanks. And 1 more quick thing. In terms of your share repurchase program, did you say 350,000 shares have already been repurchased this year?

That's correct.

And how many more are authorized for the moment?

We've got right at 5.6 million left to repurchase.

David Siino, Gabelli & Company.

Jerry, just a quick question on options. Given the buyback, will the net share count actually come down in '05? Or will that more or less stay flat as the stock price keeps going up?

I think you are going to see it probably stay flat because we did grant the options, and we minimized that as best we can, with the option expense that we are adopted in 2003. But, our target certainly is to keep the share count flat. But depending on what happens with the price of stock, we may buy more.

Darren Kimball, Lehman Brothers.

I had a question on Automotive sales growth. If you guys got about 200 to 225 million from the key sales initiatives that you launched in the fall of '03, that's, depending upon which side of the range you are at, it's a 4 or 5 percent gain of, close to a 6 percent gain for the year. And so, one could argue that the underlying sales growth or the ability to have positive comps is sort of in the 0 to 2 percent range. And I'm just wondering if you agree with that split for '04, and more importantly, when you think about '05, and justifying the 5 to 7 percent sales growth opportunity, is there reason to expect another increment of 200 to 225 from these initiatives? Or is this something that sort of flattens out, and now you look for more market growth?

Darren, I'll attempt to answer that first, and then Tom can jump in here. Those initiatives have been around a long time. And these are ongoing initiatives, and we just stepped up the pace a little bit in those initiatives. They affect our comp store number. It's not -- this is not something that is typically new and it doesn't have the impact on the comp store numbers. They have an impact. And they will also have an impact in '05, because it's included in the way that we would track any comp store numbers. What we report -- as you know, our store count didn't move significantly. So what we report are pretty much comp store numbers. Does that answer it?

Yes, I mean and any sense of -- I mean I understand that opening stores, obviously, is something that is a recurring stream of sales growth. But if you, if you weren't embarking on these initiatives, I mean what do you think the underlying rate of sales growth might be for your system in '05, against your expectations?

I'm not even sure that's a fair question -- assumption, because this is just part of the way we do business. If we didn't have those initiatives, I'm not sure we would have much growth at all. That's just a part of us growing our overall revenue, I think.

Darren, I might jump in here. One question was the longevity of these initiatives, and I think that we've got long life with these yet. When you think about what the 7 initiatives are, they pretty much touch all aspects of our business. And we think that we've got plenty of upside yet, to improve upon the numbers. We are pleased with the job that was done this past year, we did get the 200 to 225 million, and we would say that we can get that, certainly and maybe even a little bit more in 2005, with good execution.

That's great. Thank you.

(OPERATOR INSTRUCTIONS) Dax Balius, Gates Capital Management.

Yes. If I was doing the -- if I was doing the math right on a lot of your, on the guidance that you've given, it looks like the first, the first quarter, you are expecting -- even though you are having sales growth, that most of the segment margins would be flat year-over-year? Is that correct?

Yes, I think that would be correct, because we had such a strong first quarter in '04. You know, we had a extra day last year that brought in revenue, 1.5 percent. And if you just looked at where we are, there would be slight margin enhancement maybe in 1 or 2 of the segments, but maybe flat in the others. Overall, that's correct. If that sales growth is what he says, and our profits grow in there at 8 percent, then that's probably what we would be looking at, is basically flat margins in the first quarter.

That would be true of the year as well, on an annual basis, from an EBIT perspective.

I don't know. We don't talk in terms of EBIT, we jut talk in terms of net income. But we will show some margin improvement in '05.

Jonathan Steinmetz, Morgan Stanley.

I just want to try to get a little better handle on some of the volume rebate issues. I may have missed this, did you quantify for the full year '04 what you think reduced volume rebates cost you relative to full year '03?

No, we didn't. But I will, Jonathan. We -- it cost us about $40 million in '03, cost us about another 17 to $20 million in '04, and we'll probably see a reduction in that number again in '05, and it may come in at 7 to 8 million.

Okay. And have you structured -- is this entirely related to trying to essentially grow inventory less rapidly? Or have you changed any of the terms of your contracts, so that if you were to start to grow inventory again, you would still get less benefit?

No, we haven't changed any contracts at all. This was an issue of just reducing our inventory and improving our working capital.

Okay. So presumably in '06, if you get inventories where you want them to be and sales continue to grow, we could see a significant swing here?

That's correct, and we will try to maintain whatever that appropriate inventory level is.

Patrick Stowe, Priority Capital.

Just wondering if you could comment quickly from more of a macro perspective, in terms of the competitive positioning of all your NAPA stores, just in terms of some of the retail Daiwa (ph) stores continuing to expand faster than the market, and continuing to focus on commercial service. Have you seen any changes there, or have any general comments?

I would try to answer that one. As far as the competitive environment, we think it's as competitive today as it has been. As far as the impact on our business, our cash business and our commercial business are both growing at about the same level. So I would say that I think we are holding our own pretty well, and maybe even picking up just a little bit. And among the initiatives that we've got going in these 7 key initiatives, several of them are geared toward helping us to grow both the commercial and the wholesale side of the business -- or retail side of the business.

There are no further questions at this time.

Marvin, if we don't have any, we won't hold the call open for any additional questions. We do appreciate everybody joining us today, and we appreciate your continued interest in, and support of, Genuine Parts Company.

This concludes today's conference call. You may disconnect at this time.