純正零件 (GPC) 2005 Q2 法說會逐字稿

Good morning. My name is Carol and I will be your conference facilitator. At this time I would like to welcome everyone to the Genuine Parts Company second quarter results 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. (OPERATOR INSTRUCTIONS) I will now turn the call over to Ms. Carol Yancey, Vice President of Finance and Corporate Secretary. Ms. Yancey, please go ahead.

Thank you. Good morning and thank you for joining us today for the Genuine Parts second quarter conference call to discuss our earnings results and the outlook for 2005. Before we begin this morning, 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 and its management; statements of future economic performance and assumptions 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 remarks from Tom Gallagher, our Chairman, President and CEO. Tom.

Thank you, Carol, and good morning to each of you joining us on the call this morning. We appreciate you taking the time to be with us today. Jerry Nix, Executive Vice President and Chief Financial Officer and I will share the duties this morning. Once we have completed our remarks, we will be pleased to answer any questions that you may have.

Our second quarter results were released earlier this morning. Perhaps some of you have had an opportunity to see them. Sales for the quarter were 2.476 billion, which was up 8 percent. Net income was 111 million, which was up 10 percent. Earnings per share were $0.63 this year compared to $0.58 last year, up 9 percent. So sales net income and EPS all came in at the upper end of our expectations. We feel that the GPC team did a good job in the quarter.

In looking at the sales by segment, the Industrial Group once again had the strongest results. They were up 12% in the quarter following a 13% increase in the first quarter. This is the fifth consecutive quarter of double-digit increases for our Industrial operations. As in the first quarter, we were pleased to see that Industrial increases were pretty consistent geographically as well as across broad customer and product categories. We think that this is indicative of the continued strength in the manufacturing segment of the economy right now. Both industrial production and capacity utilization figures remained quite positive through the quarter, and in fact, strengthened throughout the quarter. These two indices have historically been good leading indicators for our Industrial business. At the current levels, they would indicate good industrial activity over the second half of the year.

For planning purposes, we’re saying growth in the 10% range over the remainder of the year. Although the comps are a bit more challenging in the third and fourth quarters, we feel awfully good about the prospects for our Industrial operations. 2005 will turn out to be a splendid year for this group.

Moving onto EIS, you will recall from our last conference call that we sold the circuit supply division of EIS during the quarter. This represented $35 million in annual volume. Sales for the second quarter for EIS were down 2%. But the ongoing operations, after backing out the effect of the circuit supply sale, were actually up 5%. So they performed pretty well. Indications are positive to these operations over the second half. However, because of the loss of the circuit supply volume, we’re planning for EIS to be down 2% to 4% over the final two quarters of 2005.

Our Office Products Group had another solid quarter. Sales were up 8% following a 6% increase in the first quarter. So we saw some nice improvement. The Office Products team is benefiting from a stable economy as well as from the current job growth in the service sector. And as in the Industrial Group, the Office Products operations are enjoying pretty consistent growth geographically and across their diverse customer and product categories as well. The Office Products team has a number of product and marketing initiatives currently underway. And with the continued good execution of these initiatives, our expectation is for them to maintain growth in the 6% to 8% range for the remainder of the year.

Finally Automotive. These operations were up 6% in the quarter, which is a solid performance and a nice improvement from the 4% increase in the first quarter. As in the first quarter, our NAPA business was actually up just a bit more than the overall automotive increase. But the NAPA improvement was offset somewhat by a decrease at Johnson Industries largely caused by the sale of four of the JI locations during the second quarter. The NAPA team made good progress in the implementation of their growth strategy in the quarter. NAPA Auto Care, major accounts, store resets, outside sales, installer connectivity, and especially markets of heavy-duty tools and equipment and paint each met their objectives for the quarter.

We were also pleased with the progress made in the area of new distribution. During the quarter we opened 20 new stores, which is a big improvement from the first quarter. We feel that the NAPA team is now back on track in this important initiative. They are committed to maintaining their focus on new distribution over the second half of the year.

You may recall that in our first quarter call we gave you an update on the progress of our Company Store operations. This is a group of roughly 900 stores. We thought you might find it interesting to know that after being up 7% in the first quarter, the Company Store group was up 9% in the second quarter – so a little stronger performance. We think that this shows good progress being made in the company-owned operations. In looking a little further into the Company Store results, we were pleased to see that our commercial business grew at 11% for the quarter, up from 9% in the first quarter, which we feel indicates that our commercial initiatives are working pretty well for us right now. Our cash business was up 7% in the quarter, a nice improvement from the 5% increase in the first quarter. We are encouraged by the trends in both the commercial and the retail side of the business.

So in looking back over the quarter, we feel that the NAPA team turned in solid results. We are optimistic about what they will do over the remainder of the year.

We will, however, continue to have decreases at Johnson Industries for the next several quarters as we continue to work our way through their current challenges. With this in mind, we are planning on combined automotive increases in the 5% to 7% range in quarters three and four.

This gives you a recap of the sales results for the quarter. At this point, Jerry will cover the financials.

Thank you, Tom. Good morning. We appreciate you joining us today and welcome all of you to the call. We’ll first review the income statement and the segment information then touch on a couple of key balance sheet items. We’ll be brief. Then we’ll open the call up to your questions.

A review of the income statement shows, as Tom reported, total sales were up 8% to $2.5 billion. That is pretty strong results after an excellent start in the first quarter. For the six months ended June 30 ’05, sales totaled 4.8 million, up 7% compared to the same period last year. Gross profit for the quarter was 30.75% to sales compared to 30.16 last year. That is up 59 basis points. Year-to-date, gross profit was 31.09 compared to 30.70, up 39 basis points. As you can see, we’ve made some improvement in our gross margin trends during the year. We are working hard to ensure that this continues.

I should note that we have experienced price increases in each of our businesses this year. Working with customers, we’ve been able pass along some of these price increases. This is one reason for our gross margin gain. For the six months ended in June, our cumulative pricing year-to-date automotive is 0.5%. Industrial is 3.5%; 2.1% in Office Products; and also 2.1% in Electrical. SG&A as a percent to sales increased 4 to 6 basis points from 23.03 to 23.49 for the quarter and for the six-month period in ’05 was 23.78, up 34 basis points. We had made consistent improvement in this area prior to the last few periods. Effectively managing our costs remains a very important initiative for us. More recent run-rates on those items discussed in previous calls such as employee benefits, including stock options and pension costs, insurance and legal and professional expenses such as Sarbanes-Oxley costs have trended up over the last few quarters. In addition the freight expense associated with our delivery programs has impacted this line. As we enter the second half of ’05, we continue to look for these costs to level off on a comparative basis. So we should show some progress in addition to our expenses as a percent of sales over the remainder of the year. We have our work cut out for us in the area. We must do a better job, though, if we are turn this into a favorable trend. Net income for the quarter of $111 million was up 10% and earnings per share of $0.63 compared to $0.58 last year, up 9%.

Now let’s discuss the operating results by segment. In the automotive sector for the second quarter, they had revenue of $1,294,800,000 representing 52% of the total. That was up 6%. Operating profit of 110.8 million, up 1%. So there is some slight margin deterioration, which we’ll discuss in a moment. For the six-month period, automotive had revenue of $2,463,700,000, up 5% and operating profit 206.1 million, up 2%.

The Industrial Group for the second quarter had revenue of 702.6 million, representing 28% of the total. That is up 12%. They had operating profit of 50.4 million. That is up 32%. So they had an outstanding operating margin improvement going from 6.1 to 7.2. For the full six months Industrial was $1,389,300,000. That is up 12%. Operating profit 98.6 million, up 17%.

Office Products for the quarter, revenue of 401.6 million representing 16% of the total. That is up 8%. They had operating profit of 35.6 million. That is up 9%, so a margin improvement from 8.8 to 8.9.

Electrical Group had revenue of $83.7 million. That is down 2% representing 4% of the total. The operating profit for the quarter was $4.7 million, up 10% so again excellent margin improvement going from 5.0 to 5.6. And for the six months, they had revenue of 168.0 million. That is down 0.5%, and operating profit 8.0 million, up 7%.

In total you see we get to the $2,475,700,000, up 8% with operating profit of 201.5 million, up 9% with an overall margin improvement – operating margin improvement of 8.0 to 8.1. For the six month period in total 4,817,900,000. That is up 7%. Operating profit of 394.4 million, up 6%. So our total sales up 8% and operating profit up 9% for the quarter. We were able to show an overall margin improvement of 10 basis points with three of our four segments improving their operating margins.

As previously mentioned, the one segment that did not improve in the quarter was Automotive. A couple of specific issues, which will help explain their shortfall, plus the second quarter in 2004 was a very strong quarter operating-margin-wise for the Automotive Group.

The first issue is Johnson Industries, as Tom just mentioned, where we continue to address the challenges associated with our current ACDelco distribution agreement as discussed in prior calls. We recently sold four under-performing Johnson locations. Although this is a positive for us in the long term, its impact on the quarter contributed to our margin decline. We are making progress at Johnson. But we believe that we are still a few quarters away from getting them back to where they need to be.

Second, and as we reposition our rotating electrical line within our re-manufacturing operations. Here we have done some recent pricing adjustments in order to drive additional growth. This has impacted results in the quarter as well as for the year. We’ll continue to work our way through these adjustments. We expect that their impact will moderate as the year progresses.

These two items, which are short-term in nature, pretty much account for the margin degradation. Our core NAPA business has performed very well. In summery, we feel that the automotive margin will show some gradual improvements in the quarter ahead. This combined with the good job being done in the other three segments should enable us to show overall margin enhancement for the year as we’ve planned.

We had interest expense in the quarter of $7.3 million. That is down about 2.6 million, or 26% from the prior year due to our debt reduction. For the year, we would expect interest expense to be approximately $30 million.

The other category’s 14.4 million for the quarter is up about $3.5 million or 32%. That is made up of $13.3 million in corporate expense with the remainder in the amortization of intangibles and minority interests. The increase, which we had anticipated, mainly due to a variety of costs affecting corporate expense such as employee benefit expense, higher legal and professional costs, and primarily the expense associated with stock options being granted.

Now let’s touch base on a few key balance sheet items. Cash at June 30 increased to $261 million from 128 million last year. Our cash position improved significantly beginning with the second quarter last year and continues into ’05 due to our stronger income, improved working capital position, and to some extent the cash flow from the exercise of stock options. Through June, our cash from operations of about $317 million is up 33% from the same period last year. Free cash flow, which deducts CapEx and dividends from cash from operations, is approximately $170 million. That is up 56%. We are encouraged by the continued generation of excellent cash flows and opportunities that a strong position provides the Company. Our priorities for cash remain as a strong dividend, share repurchases, re-investment in each of our businesses, and where appropriate strategic bolt-on (ph) types of acquisitions. Although we would not expect any one transaction to be very large in scope, we feel like a small acquisition that we would be interested in, will add value to our businesses.

Accounts receivable was up 6% on an 8% sales increase, so we continue to maintain our receivables at a level below our growth rate in revenue. We also feel good about the quality of our receivables at this time.

Inventory was down 1% from the prior year and down 3% on nearly $75 million from December ’04. We feel good about this inventory level relative to our sales growth. We will continue to focus on our inventory management initiatives to further improve our inventory numbers as we look forward in ’05. Payables were up 25% from last year reflecting increased purchases due to increased sales volume as well as the effect of extended time to establish with our vendors. We’ve made significant progress in this area in the last 12 months and have plans for more improvement going forward. Working capital was $2.5 billion at quarter-end compared to 2.4 billion June 30 last year with the change mainly reflecting our increase in cash. At this level of working capital, we continue to improve our working capital efficiency.

Current ratio of 3-1-1 is the same as in the prior year. Our balance sheet remains in excellent condition. Total debt of $501 million remains unchanged in ’05. That is down 126 million from the same period last year. This represents 16% of our total capitalization compared to 21% last year. Looking ahead, we expect our debt to remain at the current level of 500 million until our first $250 million credit facility is due in 2008. The second 250 million is due in 2011. The pre-payment of this debt is cost-prohibitive due to the make-hole (ph) provisions included in the debt agreements.

Capital expenditures – they were $19.6 million. That is up from 13.5 million in the second quarter last year. Our year-to-date expenditure is 40.3 million. We continue to expect our CapEx for the year to be in the $80-million to $90-million range.

Depreciation and amortization -- $17.2 million for the quarter, 34.3 million for the six months ended June 30 ’05. We expect this to be in the $70-million to $75-million range for the full year.

Opportunistic share repurchase has been a priority for us. As a part of our share repurchase program, we did purchase approximately 1.5 million shares of our Company stock during the first six months of the year. This leaves us with 4.5 million shares authorized for repurchase as of June 30. We have no set pattern, but we will remain active in the program as we continue to see that investment in GPC stock will provide a good return to our shareholders.

We’re pleased with our results for the second quarter and six months. We look forward to continued improvement over the balance of the year. Our initiatives to grow sales remain very important to us as do our initiatives to control our costs. As always, we are also intent on managing our balance sheet and generating excellent cash flows, which support our future plans for maximizing shareholder value.

Tom, I turn it back to you.

Thank you, Jerry. So that is a recap of the results for the quarter. We’re pleased with the job done by the GPC team. After being up 7% in sales and 6% in earnings in the first quarter, all four of our business segments had improved performances in the second quarter. For the six months, we’re up 7% in sales and 8% in earnings. We think that we’re in a good position to (inaudible – background noise) a respectable performance in 2005.

Earlier in our comments, we gave you our current estimates for sales growth for each of the individual business units. Putting it all together, it works out to a combined 6% to 8% increase for GPC for the remainder of the year. We continue to be comfortable with the 2005 earnings guidance given in our last call of $2.40 to $2.45 per share.

At this point we’ll turn it over to Carol. We’ll be happy to take any questions that you may have. Carol.

Thank you sir. (OPERATOR INSTRUCTIONS) John Casesa, Merrill Lynch.

Thanks very much. Tom and Jerry, I want to ask you about the growth in your asset base. You asset base is growing about as fast as your earnings base. So return on assets aren’t improving very much. I notice that property, plant, and equipment is up 14% year-over-year. Is that investment in new stores? Exactly what’s – why is the asset base growing as fast as it is?

It’s not necessarily investment in new stores. That’s a piece of it. It’s more an investment in systems company-wide. You are right. We are aware of that. Part of it is also we’re bringing our inventory down, which is a part of those assets. But I think more of it is in the property, plant, and equipment. That is a growth due to some systems that we’ve been implementing for a number of years.

Is this IT stuff as opposed to bricks and mortar?

That’s correct.

In terms of cash, I didn’t catch this. You have $260 million of cash on the balance sheet. Short of an acquisition, what level of cash are you comfortable with?

I don’t know that I can give you a specific number. We are probably going to be more active in the share repurchase at this point. You may see us pick up the pace a little bit in some of the smaller bolt-on strategic-type acquisitions that we’re talking about.

Okay. To Tom, your remarks on Johnson Industries – or maybe it was Jerry’s. I forgot. What has to happen from here to make that business – to restore – to get to acceptable levels of return with that business?

We’ve got to basically change the composition of the sales base there, which we’re working on. It’s a slow process. But we are making progress. In fact, in the month of June we were quite pleased with what we saw the mix being. So we think that we’re on the right track. But we’ve got a good bit of work to do yet. It’s going to take us a couple more quarters to get there. But we are optimistic about our ability to make the turn.

Is that product mix you were talking about?

Product mix and customer mix.

Without revealing anything, can you describe for us what you are trying to do there?

We’ve been somewhat dependent upon one product line and a segment of a customer group at Johnson heretofore. What we’re trying to do, is we’re trying to broaden our footprint both from a product standpoint as well as from a customer standpoint to not be as dependent as we once were.

Okay. Thanks very much.

David Siino, Gabelli & Co.

Morning. I would like to dig a little deeper on the automotive margins. Johnson – so you are saying that the sale of the four Johnson Industries sites depressed margins in the quarter. Does that imply that Johnson Industries has higher margins than the overall business?

No, it doesn’t imply that. As a matter of fact, they have lower margin. It wasn’t just the sale of the four Johnson Industries. Johnson Industries itself impacted the margins in the quarter.

So it was just from an operational standpoint?

That’s correct, yes.

Okay. Also on automotive, you mentioned that a year ago you had a strong comp from a year ago. I think the margin was probably around 9%. Is that the new standard for the automotive business? Historically you’ve gotten as high as 10. Do your comments imply that 9 is really what we’re shooting for here?

I’ll answer that one. You are right to pick up on the fact that our quarter two last year was a strong quarter. It was the best quarter of the year for us, in fact. As far as our targets, we’ve said for some time now that our Automotive margin targets are 9%, 9.5%. We were able to show a 20-basis-point improvement in automotive margins last year. As Jerry mentioned earlier, we still think that we’ll show margin improvement in the Automotive operations this year and that over a several-year period, we’ll get those margins back up to 9%, 9.5%.

I might add to that. Our operating margin in the Automotive – we were 8.8 in ’02. We were 8.1 in ’03. We were 8.4 last year. All those numbers are for the full year.

Okay. I guess I was looking back further than that. But business has changed quite a bit. The last question. How far do you think you can take the working capital – taking cash out of the balance sheet on that side?

I don’t think there is any limit. We are going to continue to work to bring our inventories down. We’re going to continue to extend our terms out with our vendors. I’m not sure that there is a limit. It may come to a point that it may not make sense. We’re going to continue to work in that direction.

Okay, terrific. Thank you.

Frank Brown, Suntrust.

Good morning. Just looking at the Automotive side in the seven key initiatives, could we get some kind of update on the sales contribution from some of the stuff like the major accounts, or the outside sales reps in terms of how progress is there in incremental sales? Did any of those initiatives have investment costs that adversely impacted the automotive margin in the second quarter?

They don’t have any significant investment cost associated with them. So that has no bearing on the margin, really. The only one that does carry some investment with it is the new distribution and only when we have Company-owned stores as opposed to the independently-owned stores.

As far as the progress made, our major account business – we had another good quarter and year-to-date. Our major account business is running up 10%. It continues to be a strong contributor to us. Those numbers are reflected in what we think are pretty strong commercial numbers that we reported earlier. Our NAPA Auto Care business continues to move ahead nicely. We continue to make solid improvement there both in terms of adding some NAPA Auto Care centers and improving our penetration within the NAPA Auto Care centers.

Outside sales people – we continue to add. We’re ahead of target through the first half. We’ll end the year in good shape on it.

The Connectivity, the same thing. We’ll end the year ahead of what we had targeted – making good contribution there. So I think if you put it all together, we feel pretty good about the progress that was made both in the quarter and year-to-date in those areas.

The one that we reported last time that we were disappointed in was the new distribution. We did not have a good first quarter. But we think we came back nicely in the second quarter. We think we’re back on track to drive some additional NAPA stores over the second half of the year.

And that target. Was that target 100 for the full year?

Yes, it was. That’s right.

Okay, great. That’s helpful. Just one other question. The Office Product business – that was a nice acceleration relative to the first quarter. Is anything going on there that would be new in terms of market share improvement?

The main thing we’re doing there is just trying to execute on the strategies. I think the Office Products team is doing a terrific job. They’ve got a broad-based growth strategy. They are executing very well on each of the elements. We did tell you in the last call that we had launched the new catalog in the first quarter. We thought that that would help us in the subsequent quarters of the year. We think that has certainly had some impact as well. We publish a catalog once a year. It was published in the first quarter of this year.

Great, thanks. Nice quarter.

Himanshu Patel, JP Morgan.

Good morning. Most of my questions have been answered. Jerry, just one clarification. I think you said 20 new stores were added in Q2. Do you have the year-ago number?

I can give you what it was for the full year. I don’t have it in front of me by quarter. For the full year, we ended the year at 47 last year.

Okay. Just for clarification. Is that all Company stores or Company and ----?

No. It’s a combination of Company-owned and independently-owned.

How many of those were Company?

In the quarter or in the year?

In the quarter.

About half and half.

I can get you what they were in the second quarter last year. I just don’t have that handy.

Okay. And then I think you had mentioned – what was the target for the full-year in terms of new store openings for ’05?

100 with 50 of them being Company-owned and 50 being independently-owned.

So, I am just trying to think. How does that spread out over the course of the year? Should we think it’s pretty even within the next two quarters?

We are going to have to pick up the pace in the second half of the year in order to hit that 100. If we were to do 25 per quarter over the second half of the year, we’ll end the year with 70 or 75 stores. So that will be a little bit short. So we’re going to have to pick it up some in quarters three and four in order to get it done.

Okay. Then on Johnson Industries, if we remove that from the equation, would underlying Automotive margins be flat to up?

Our core NAPA margin would be flat to up. But the change in the electrical program that we discussed had an impact as well. Our core NAPA margins would have been flat.

Right. Thanks a lot.

Gerald Marks, Raymond James.

Good morning. So other net went up to 14.4 million from 10.9 million last year. What was the reason for the spike up in that line item?

I can’t answer that. It’s just the stock options, I think. We’ve been expensing options for just over a year now. That would have been the biggest component in that increase.

If you look at the corporate expense part of that, the 13.3 million and the other net, then there are a couple things. We’ve got the Sarbanes-Oxley costs. Then we’ve got the expensing of the stock options. Those two items account for the increase.

So going forward – you estimated on a pro-rata basis annually. So that trend should continue on in the third and fourth quarters?

Somewhat. I think for the year we’re going to see that other category come in flat to maybe up 3% or 4%, which will be about $60 million is what we were in total last year.

In terms of the Automotive segment, beyond Johnson Industries you mentioned that electrical program. Could you give a little bit more detail. I was a little confused on why that was impacting the margins negatively.

We introduced a new line into the program. In order to position that line competitively we had to reposition existing product in those lines. We actually lowered some pricing, which took the margins down on those items. That is something that we think will help to drive some growth in the quarters ahead. But it has a short-term negative. We’ll work our way through that over the remainder of this year.

Can you say what this new electrical product line is that you are rolling out at the stores?

It’s a new rotating electrical. It’s new as opposed to remanufactured.

Okay. The last question I have – the industrial margins were up 110 basis points. Your sales have been really strong for the last several quarters in this segment. We haven’t really seen the flow-through to the bottom line on the margins. Why did we see that pick up this quarter?

We’ve been expecting it to pick up. Some of it is because, as we’ve talked about in these previous calls, the rebates in volume incentive dollars that they have been adjusting to. They’ve still got some further adjustment to go. It’s just a leveraging issue at this point.

So now – but you think you’re through a lot of those past issues and now going forward we should start seeing more of a drop to the bottom line (multiple speakers)?

I think that’s a fair statement. We’re not through all of them, but we are through most of them.

That’s all I had. Thanks.

John Tomlinson (ph), Prudential Equity Group.

Good morning. I apologize. I might have missed some numbers that you mentioned earlier in the call. Can you tell me what your sales breakout for NAPA was in retail in the quarter?

We can tell you what the performance was for the quarter. The commercial business was up 11. The retail business was up 7 in our Company Store Group. The Company Stores overall were up 9 for the quarter.

Okay. Did you comment on the trends you are seeing in July? Is that pace still around that level? Or have you seen a slowdown in acceleration?

We continue to feel good about how the sales pattern is developing for us right now.

Alright. That is all I had. Thank you very much.

Jonathan Steinmetz, Morgan Stanley.

Thank you very much. Good morning everyone. I had a few questions. I joined a little late so I apologize if you’ve covered this. On the payables it seems as if you keep extending. My question is, is this still primarily on the Automotive side? I have a few follow-ups.

We will continue to work. This is an ongoing project for us. The automotive is 52% of our total revenues. So, yes the majority of it will be in Automotive. But we are working this in all four of our business segments.

And you don’t feel like you’re getting too much pushback from your suppliers the way we have heard rumblings from others in the industry?

I guess that depends on who you ask whether we’re getting too much pushback. We’re going to work with our vendors. We’ve always had a cooperative approach to that. We’ll continue to take that approach with them.

Within automotive, are there certain categories of slower-turning items where you’ve focused on doing this more than others?

I don’t think – we don’t look at it that way. We go to every vendor with a request. We don’t manage it from whether it’s a slow-moving item or not.

The inventory also looks to be doing well. Could you make any comments just operationally what you are doing to try to keep that tight?

We’ve just got a lot of focus on it right now. We’ve got a lot of talented people really working hard to enable us to do a little better job in this area.

Okay, great. Thank you very much.

(OPERATOR INSTRUCTIONS) David Siino, Gabelli & Company.

Tom, just a follow-up on the Automotive. Certainly the total comp and the Company-owned comp are quite strong. Would you – how would you characterize the Independents at the moment? Would the amount of cash and your comment both on acquisitions, are you looking to maybe buying some stores? Are there any WDs out there that are on the market?

We will buy any independently-owned store if we can’t find an independent owner who wants to buy it. It’s not our intention to necessarily grow the Company Store Group by buying independently-owned NAPA stores. We’d rather grow the Company Store Group by opening new stores in existing markets. We’d rather see the Independent side continue to grow with other Independent owners opening additional stores, buying additional stores – whatever. That is our strategy, quite honestly. We hope to continue to maintain that balance. We like the balance we have right now between Company-owned and independently-owned. As far as the performance of the independently-owned, there are really performing pretty well currently. The second quarter for the Independent owners was a stronger quarter than the first quarter. So we think positive trends that we experienced in the Company Store Group were also experienced on the Independent side as well.

Okay, thanks.

(OPERATOR INSTRUCTIONS)

Carol, do you have any additional questions on the line at this time?

No, sir. We have no further questions at this time.

If not, then we’ll go ahead and close the call out. We do appreciate your interest in joining us today. And we appreciate your ongoing interest and support of Genuine Parts Company. Thank you.

Thank you for participating in today’s Genuine Parts Company second quarter results. You may now disconnect.