純正零件 (GPC) 2008 Q4 法說會逐字稿

Good morning. My name is Janeka, and I will be your conference operator today. At this time, I would like to welcome everyone to the Genuine Parts Company 2008 fourth quarter year-end earnings conference call. (Operator Instructions). I would now like to turn the call over to Ms. Carol Yancey, Senior Vice President of Finance. Thank you. Ms. Yancey, you may begin your conference.

Thank you. Good morning, and than you for joining us today for the Genuine Parts Company fourth quarter and year-end conference call to discuss our earnings results and our outlook for 2009. 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 the assumptions underlying these statements regarding the Company and its business. The Company's actual results could differ materially from any forward-looking statements due to several important factors, described in the Company's latest SEC filings. The Company assumes no obligation to update any forward-looking statements made during this call. We will begin this morning with remarks from Tom Gallagher, our Chairman, President & CEO. Tom?

Thank you, Carol; and I'd like to add my welcome to each of you on the call today and to say that we appreciate you taking the time to be with us this morning. As we customarily do, Jerry Nix, our Vice Chairman and Chief Financial Officer, and I will split the duties on this call; and once we've concluded our remarks, we'll look forward to answering any questions that you may have. Now earlier this morning, we released our fourth quarter and year-end 2008 results, and hopefully you've all had an opportunity to review them. But for those that may not have seen the numbers as yet, a quick recap shows that sales for the quarter were $2.520 billion, which was down 4%. Net income was $87.8 million, which was down 30%, and earnings per share were $0.55 this year compared to $0.75 in the fourth quarter of 2008(Sic-see press release), an EPS decrease of 27%.

For the full year, sales were $11.015 billion, which was up 2%. Net income was $475.4 million, which was down 6%, and earnings per share were $2.92, compared to $2.98 last year, and that's down 2%. While pleased that our earnings per share exceeded the range of $2.85 to $2.90 that we gave in our January 23 release, we would also say that we're disappointed with the way that the year turned out. Through September, our sales were running up 3%, our net income was up 2% and EPS was up 6%, and our results had been fairly consistent and steady over the first nine months of year. But then starting in the second half of October, we saw a sudden and significant dropoff in demand across all four business segments; and, as mentioned a moment ago, fourth quarter revenues were down 4%. Currency exchange negatively impacted our fourth quarter results by $63 million, and the sale of Johnson Industries earlier in the year had an impact of $22 million.

These two factors accounted for 3% of our decrease, but we were still down 1% on a comparative basis. Looking at the individual business segments, Motion Industries, our industrial operation, was running 6.5% ahead through September. Then, the combination of the overall decline in industrial production in the final quarter plus the impact of extended holiday shutdowns among many of their customers, combined with the deferral of normal holiday maintenance by a number of others, contributed to a flat fourth quarter, and we ended the year at plus 5%. Despite the slower growth in the fourth quarter, we were pleased with the overall progress made in several key industry groups. Pulp and paper, food products, chemical and petrochemical, and iron and steel all grew nicely for the year; but these were offset by declines in automotive, lumber, wood products, and other housing-related industries. The 5% increase for the year is a solid performance from our industrial operations in our opinion, and this follows four consecutive years of nice growth for this team. But with the current slowdown in the manufacturing sector, the next several quarters will prove challenging.

However, we feel that the elements of their growth strategy, including product line expansions, increased penetration in targeted industries and strategic bolt-on acquisitions, will position them to emerge from the downturn with an increased share of market. Staying within the industrial segment, after running 10% ahead through September, EIS, our electrical electronic company, was down 4% in the quarter, and they ended the year with a 7% increase. Still a very respectable increase, but they encountered similar types of market dynamics in the fourth quarter as our industrial operations. They saw an industry-wide dropoff in demand starting in October that deepened as the quarter progressed, and they also saw extended plant shutdowns during the holiday season. But despite the fourth quarter dropoff, we were pleased to see the good progress that EIS made during the year in developing key account business across their customer base, as well as establishing a solid presence in an exciting new segment, the solar energy business, which we feel should present some nice opportunities for EIS in the quarters ahead.

Moving on to office products, SP Richards, our office products company, is a business that has encountered sales difficulties pretty much all year long, reflective of an overall industry slowdown that actually began in 2007. We felt that we were starting to see modest sign of the business conditions firming up just a bit in the second and third quarters, but then the high level of white-collar job reductions in the final months of the year caused office products demand to drop off, resulting in a 5% sales decrease in the fourth quarter, and we ended the year down 2%. On the positive side, we were pleased to see growth in the independently-owned office products reseller customer category. This group was up 2% in the final quarter, and the end of the year up 1%. This was offset, however, by a double-digit decrease in the national account customer segment. On the product side, our strongest increase came from cleaning and breakroom category, followed by a modest increase in core office supplies. But then technology products and furniture each had single-digit decreases.

So overall, it was a challenging year in the office products industry; and with the economy shedding jobs at the rate that it has over the past four months, we expect 2009 to be equally as challenging. But we do feel that the SP Richards strategy of product line expansions in key categories, private brand initiatives and enhanced marketing and e-content programs will position them and their customers for solid growth once again as their markets start to stabilize. And finally, automotive. Sales for this group were down 6% for the quarter, and they were even for the year. Now, our automotive results were affected by the sale of Johnson Industries in the first quarter of the year. This amounted to a difference of $22 million in the fourth quarter, and currency exchange also had an impact of $49 million. Without the impact of these two factors, our underlying automotive business was down 1% for the quarter and up 2% for the year. We continue to see geographic differences in performance within our automotive operations.

The midwest, southwest, mountain and northeast portions of the country all performed well in 2008, while the southeast and certain western states like California, Arizona, and Nevada had the most challenges. Our commercial business held up better than our cash business for the year, led by positive results in our two primary commercial programs, NAPA Auto Care and Major Accounts. For the year, our total commercial business was up low-single digits, while our cash business was down just slightly -- pretty much in line with industry trends, we think. In the near term, we feel that automotive demand will continue to be dampened by the overall economic conditions. However, the underlying fundamentals for the industry remain longer-term positive; and as the economy starts to rebound, we feel that an upturn in automotive demand will follow. In the meantime, we continue to work on programs like NAPA Auto Care and Major Accounts, and strategic initiatives like our import parts and heavy-duty truck parts programs, all of which we feel will position our automotive operations for long-term success.

So this is a quick overview of the fourth quarter and full-year results, and we'll have more to say about them in our closing comments and in the Q&A portion of the call. But first, we'll ask Jerry to take a few minutes to cover the financial results. Jerry?

Thank you, Tom. Good morning. We appreciate you joining us on the call today. We're first going to review the income statement and segment information, then touch on a few key balance sheet and other financial items. We'll be brief and then open the call up to your questions. The view of the income statement shows the following, total sales for the fourth quarter were down 4% to $2.5 billion, reflecting the rapid decline in demand in all of our businesses late in the year.

For the year, we finished up 2% at $11.0 billion, and this increase represents another record level of sales for GPC. Our consistent and steady record of sales growth is something we strive for, but we clearly have our work cut out for us as we move into 2009. Gross profit in the quarter increased 21 basis points to 29.83% to sales compared to 29.62% in the fourth quarter last year. We're pleased to show progress for the quarter in our gross margin; and for the year, gross margin held relatively steady with the prior two years, at 29.72% to sales. To show progress on this line, we continue to focus on several factors, including the impact of product and customer mix, as well as our global sourcing initiatives. In addition, we had the benefit of inflationary pricing in 2008, which exceeded any increases we've had as far back as the early 80's. Offsetting the benefits of inflation and our margin initiatives are the competitive pricing pressures associated with lower demand and the difficult economic conditions impacting our markets. For the year, our accumulative pricing -- which represents a prior increase to us -- plus 6.0% in automotive, 7.9% in industrial, 4.2% in office products, and 8.3% in electrical.

Now let's look at SG&A. For the fourth quarter, SG&A as a percent of sales was 23.8% versus 21.88% in the fourth quarter of '07; and for the full 12 months in 2008 was 22.73%, up 59 basis points from 2007. We can attribute much of the fourth quarter increase to the significant and rapid loss of sales volume and its impact on our ability to leverage expenses. We've felt this to a lesser degree throughout the first nine months of the year. Additionally, in fourth quarter, we had certain expense adjustments that impacted this line. These include items such as retirement plan valuation adjustment, referenced in our January 23 release, as well as insurance reserve adjustments and an increase to our reserve for bad debts.

We also earned less interest income in 2008, which impacted this line in the quarter and throughout the year. After we adjust for these items and our loss of expense leverage, SG&A as a percent of sales in the fourth quarter is up approximately 20 basis points from the fourth quarter in '07, which is in line with where we were through the first nine months of 2008. Given the uncertainty of our sales levels in 2009, we have a great deal of work to do to improve the expense side of our businesses. In 2008, we reduced our workforce by approximately 1,600 employees or 5% of our headcount. For 2009, we currently have initiatives to further reduce our expenses, including additional reductions associated with personnel costs such as headcount reductions effective in the current quarter of '09, salary and pay freezes, the deferral of additional stock option grants, travel limitations, and post-retirement benefits, among others. We also have planned savings in areas such as fleet management and fuel and energy consumption, as well as facility rationalization.

Our management teams are very focused on the ongoing assessment of the appropriate cost structure in our businesses and the need for future cost reductions, while maintaining our high standard for excellent customer service. Every expense category that we have is under review, no matter how small. For the quarter, the tax rate was approximately 41.6%, which compares to 38.0% for the fourth quarter of '07. Primarily, the fourth quarter rate increase was due to the non-deductible expense associated with the retirement plan valuation adjustment. For the year, our tax rate was approximately 38.1%, which is up slightly from 38.0% for the full year in '07. Currently, we expect the tax rate for 2009 to increase about 38 -- to 38.5%. This increase is due to higher foreign taxes and the positive tax impact last year from the sale of Johnson Industries. Net income for the quarter, $87.8 million, down 30%; earnings per share of $0.55 compared to $0.75 last year, down 27%. For the year, net income of $475 million was down 6%, and EPS of $2.92 compared to $2.98 in '07, down 2%.

As Tom mentioned, we're disappointed with our performance for the year, and especially our fourth quarter. Now let's discuss the results by segment. For the fourth quarter, automotive had revenue of $1,194.0 million, and was down 6%. Operating profit of $67.5 million, down 23%; the operating margin was down to 5.7%. Industrial group for the quarter had revenue of $828.4 million, and revenue flat for the quarter with operating profit of $71.9 million, down 7%; and operating margins still strong, but down to 8.7% from 9.3% to prior year. Office products had $400.3 million in revenue, down 5%. Operating profit of $29.4 million, down 22%; and our operating margins dropped to 7.3% for the quarter. Electrical had revenue in the quarter of $102.2 million. That was down 4%. Operating profit of $7.5 million was up 5%, so nice margin expansions to close the quarter with 7.4% operating margin there.

Now looking at the full year for the segments. Automotive had revenue of $5,321.5 million, up 0.20%, representing 48% of the total Company revenue, with an operating profit of $385.4 million, down 7%. So their operating margin declined from 7.8% in '07 to 7.2%. The industrial group, revenue was $3,514.7 million, up 5%, representing 32% of the total. Operating profit of $294.7 million was also up 5%, so their margin stayed strong and finished the year at 8.4% of sales. The office products group for the full year had revenue of $1,732.5 million, down 2%, representing 16% of the total Company revenue, with operating profits of $144.1 million, down 8%, with their operating margins slipping from 8.9% to 8.3%. The electrical group had revenue for the full year of $465.9 million, up 7%, and representing 4% of the total. Operating profit , $36.7 million. That was up 21%, and their margins expanded nicely from 7.0% to 7.9%.

So in summary, operating profit for the fourth quarter fell 16% on a 4% sales decrease, resulting in operating margins of 7.0% for the total Company, which is down from 8.0% in the fourth quarter of 2007. For the year, our operating profit margin was 7.8%, down slightly from 8.1% in 2007. With steady and consistent gross margins, our decrease in operating margin directly correlates to the increase in our operating costs, which includes the expense adjustments mentioned earlier for the quarter and the year. We're working hard to improve this situation as we go into 2009. We had net interest expense of $8.0 million for the fourth quarter; and for the full year, our net interest expense was $29.8 million compared to $21.1 million in '07. This is up from the prior year due to our $10 million decrease in interest income in '08, which results from lower rates and less invested cash related to our increased expenditures for dividends, acquisitions, and share repurchases. We expect our net interest to improve to approximately 26 to $28 million in '09, due to favorable interest terms on a portion of our long-term debt.

Other category, which includes corporate expense, amortization of intangibles and minority interest, were $18.1 million in the fourth quarter, $62.5 million for the year. This fourth quarter increase from '07 was mainly due to an $11 million retirement plan valuation adjustment. In addition our amortization of intangibles was slightly higher throughout 2008 due to the acquisitions. Looking ahead, we currently project the total Other category to be in the 50 to $60 million range for 2009.

Now let's touch base on a few key balance sheet items. Cash at December 31 was $68 million, down $164 million from December of '07. Our lower cash balance relative to '07 was mainly due to the increased expenditures in 2008 for acquisitions, share repurchases, and dividends, as mentioned earlier, as well as our decrease in net income. We expect our cash position to remain sound in the year ahead, but also look for our cash balances to vary based on investment opportunities that may arise in the year, such as acquisition and share repurchases. Accounts receivable increased 1% from last year, including acquisitions, on a 2% increase in revenue for the year. We continue to feel good about the quality of our receivables; but in this environment, know that we must be especially diligent in monitoring the financial condition of our customers and their ability to pay. For 2009, our goal at GPC remains to grow receivables at a rate less than sales growth. Inventory at 12-31-08 was $2.3 billion, down 1% from last year, which includes acquisitions.

We've shown steady improvement on our inventory levels for several consecutive years now, and will continue to manage this key investment and show more progress in the year ahead. Accounts payable also showed improvement again in 2008, increasing 2% from last year to $1.0 billion. Improved payment terms with certain suppliers and the expansion of our procurement card program have driven the increase on this line. We should see additional progress here in '09, as well. Working capital was $2.6 billion at December 31, up approximately 3% from December 31, '07. We've added this account for the reclassification of $250 million in debt from current liabilities in '07, to long-term debt in '08. For the year, we maintain our working capital as a percentage of sales, or working capital efficiency, at $0.23 on the sales dollar, which was even with last year, and has improved from $0.25 in '06. We're pleased with our progress in managing working capital, and would also emphasize that our balance sheet remains in excellent financial condition.

Now before moving away from the balance sheet, we thought it would be helpful to discuss the accounting for our pension plan in 2008, which has affected several of our balance sheet categories at December 31 and will have future implication in further years. In accordance with FAS 158, which requires the recognition of the over or underfunded status of pension and other retirement benefit plans on the balance sheet, we increased our pension liability at 12-31-08, which had the effect of increasing our deferred tax asset and decreasing other assets and shareholder's equity. As you may know, we implemented a soft freeze to the pension plan effective January 1, 2009, and we feel this action should serve as to minimize the volatility in our accounting for the funding requirements and costs associated with this plan going forward. We'll say here that the future state of the markets and pension assumptions, such as a discount rate, will likely dictate the timing of any savings from this soft freeze of the plan.

We continued to generate solid cash flows, and in 2008 cash from operations was approximately $530 million for the year; and after deducting capital expenditures and dividends, free cash flow was $173 million for 2008. We're pleased with the strength of our cash flows in '08, and also feel good about how we used our cash during the year. As we transition to 2009, our priorities for cash remain. First and foremost, the dividend, which we've paid every year since going public in 1948; and as you may know from our January 23rd announcement, the Board approved a 3% increase in annual dividend for 2009 to $1.60 a share. The 2009 dividend represents 55% of our 2008 earnings and marks the 53rd consecutive year of increased dividends paid to shareholders. The current year loan on our dividend is approximately 5%. Other priorities for cash include the ongoing reinvestment in each of the businesses, share repurchase; and, where appropriate, strategic types of acquisitions in each of our business segments.

Opportunistic share repurchase will remain a high priority for us, and as part of our repurchase program we purchased approximately 6.8 million shares of our Company stock during 2008. On November 17, 2008, the Board authorized the repurchase of an additional 15 million shares; and combined with the 3.5 million shares remaining under the 2006 authorization, we currently have approximately 18.5 million shares authorized to repurchase. We have no set pattern for these repurchases, but we remain active in the program, as we continue to believe that investment in GPC stock, along with the dividend, provides the best return to our shareholders. As we mentioned, strategic acquisitions continue to be an important use of cash and are integral to our growth plans for the Company. In 2008, we closed on a total of 11 acquisitions, and these included at least one in each of our business segments. We're pleased with the acquisition opportunities that have presented themselves this year, and remain disciplined in our approach to this growth strategy.

We believe we've added quality companies to our operation class, which we expect to be accretive to our returns. For the fourth quarter and the year, acquisitions contributed approximately 2.5% and 1.5% to total sales, respectively; although these revenues were partially offset by the sale of Johnson Industries. These new businesses are important to us. We look forward to more success with this element of our growth strategy. We plan to follow a similar pattern of strategic acquisitions in our various segments. Capital expenditures were $45.0 million for the fourth quarter, up from $31.9 million in the fourth quarter last year. For the full year, CapEx of $105 million was down from $115.6 million in '07. Looking to 2009, we should see our CapEx spending at approximately $75 million as we move in slowly to start any new projects in the near term; but we will continue to make the necessary reinvestment in our businesses.

CapEx investments are primarily being made in productivity enhancement projects. Depreciation and amortization was $22.2 million in the quarter, $88.7 million for the year, up slightly from 2007. We expect D&A to be in the range of $85 million to $95 million in 2009, relatively steady with '08. We feel positive about our priorities for cash as we move into 2009. We continue to believe the use of cash in these areas serves to maximize the total return to shareholders. Total debt remained unchanged at $500 million, although the $250 million in current debt in 2007 -- which expired in November of '08 -- was renewed on favorable terms another five years and reclassified as long-term debt during the fourth quarter. Our $500 million in long-term debt at December 31, '08, and that includes $250 million which matures in November of 2011, and $250 million due in 2013.

Total debt to total capitalization at December 31, 2008, was 17.7%, and we're comfortable with our capital structure at this time. We would point out that although the debt remained the same, our debt ratio was up from last year; and this relates to our year-end pension accounting, which reduced equity as mentioned earlier. The Company is stable, our balance sheet is strong, and we believe this will allow us to weather the current economic climate in fine fashion. We closed the year in 2008 facing extremely difficult economic conditions, and it would appear that these conditions will continue for some time.

As we turn our attention to 2009, we'll remain focused on the proper execution of our short and long-term growth plans, and believe this approach will help us perform through this cycle. We're confident in the positive fundamentals of our businesses, and we will believe we will be a stronger Company when the economy begins to turn as long as we remain focused on those areas that we have control over. We are making appropriate adjustments to our cost structure; and we'll stay diligent on expense controls as well as asset management, regardless of what happens with the economy. We'd expect to show progress in these areas; but as you know, the degree of improvement is more difficult to forecast in a volatile economic climate such as today. We'll continue to support our initiatives with a strong and healthy balance sheet and sound cash flows,

We continue to think positive about our businesses, their strategic plans, and their prospects for long-term growth. We are proud of our dedicated employees and their efforts, and this is especially true in these uncertain times. We are very appreciative of their efforts in making Genuine Parts Company the great Company that we believe it to be, and we know we have the right people in place to make it an even better Company in the years ahead. Tom, I'll turn it back

Thank you, Jerry. Well, that recaps our fourth quarter and full-year results, and 2008 certainly proved to be an interesting and challenging year for us. We felt that we were holding up reasonably well through the first nine months, but then the pace and the depth of the economic decline in the fourth quarter impacted all four of our businesses, and this has continued in the early days of 2009, as well. As you might expect, our industrial and electrical businesses are having the most difficult time right now, running double-digit decreases through the first six weeks of the year. Office products is about where they were in the fourth quarter, and automotive is showing just slight improvement.

So overall, we continue to feel the effects of the economic slowdown, and providing guidance for 2009 is extraordinarily difficult right now. So much depends upon what happens in the economy and how this will affect our revenues for the year. Our feeling right now is that 2009 will be another challenging year, with the first two quarters being the most difficult. Looking at the first quarter, we've already given you a sense of our sales results through the first six weeks. Additionally, we have one less sales day in the quarter this year compared to last, and we also continue to face an unfavorable exchange rate adjustment. The net result is that we think that revenues for the quarter will be down 6% to 10%; and with revenue at this level, our expectation is for earning per share to be in the $0.45 to $0.60 range compared to $0.75 last year.

For the full year, at this point in time, we would say a revenue expectation of down 5% to down 8% and an EPS expectation of $2.25 to $2.75 would be appropriate. Now, we recognize that the EPS range of $2.25 to $2.75 is quite broad; but until we get a sense for how the economy is going to react in the months ahead, it's hard for us to be any more precise. But we would hope to be able to narrow the guidance some as we get a little further into the year. Meantime, while we can't control the economic conditions impacting our Company, nor predict the length of the current cycle, we can control how we run the business. And in the near-term, the focus of the entire GPC management team is on maximizing our revenue opportunities while at the same time driving our cost reduction and asset management initiatives throughout each of our business segments. At this point, we'd like to address any questions that you may have, and we'll turn the call back to Janeka.

(Operator Instructions). Your first question comes from John Murphy from Merrill Lynch.

-- we're looking at it as a big guidance range for the revenue decline which is -- makes a lot of sense. You've given us a pretty big, wide range on the earnings per share expectations that you have through 2009. If you could just highlight through the major levers that you may be able to pull in addition to what you're doing already if sales really are coming in at the lower end of the range.

John, we may have missed the first part of your question. But when you refer to the levers, are you talking about expense levers or revenue levers?

I apologize, Tom. I had said, in light of the big range on revenue, which I understand -- I mean, it may make sense now -- and the big range that we see on EPS, if we were down, you know, 8% on revenue, what would be sort of the incremental levers that you would be pulling to cut cost above and beyond what you're doing right now? Or is it just intensifying the efforts?

Well, the major things that we're looking at now, obviously with the headcount -- Jerry mentioned we were down 5% in headcount for 2008. We were down an additional 2% in January. And we'll continue to monitor that as we work our way through the quarter. We're also looking at -- and have embarked upon -- some facility rationalizations and consolidations, and those steps are underway. We've looked at things like outbound transportation, route optimization, which we feel has some potential for us as we dig deeper into this. And we've got a number of other initiatives that are either underway or are about to be underway to help bring the cost structure down.

Okay. Then second, if we just think about -- during the decline we saw towards the end -- or the second half of the quarter, which was pretty severe across the board -- was there anything that you could tell whether you were picking up or gaining or losing market share in your segments?

No. I wouldn't say that. I think at this point our sense is that we performed at the market, perhaps, in automotive and in office products. We may have gained just a little bit of share in industrial and electrical. But I think the market just really started to drop pretty dramatically as the quarter progressed.

And then just lastly, on acquisitions, as we go through 2009, is there the chance that you might be able to conquest business from some of these weaker players or these players that you might have acquired in the past and back fill your distribution centers? Or would there be the need to make these be smaller bolt-on acquisitions as we go through 2009 to gain some share maybe?

Well, we think both of the scenario that you described are possible, maybe probable, as we work our way into the year. We do think that we'll be able to take advantage of some underlying weakness in perhaps some of the competition in the months ahead, and one of the strategies we have is to build our cash position, and if it means that we can do it through acquisition, we'll be in a cash position to do that. If not, we're in a position to continue investing in some of the sales and marketing initiatives that we've got underway.

John, I might point out, we remain a very disciplined buyer, particularly in this market. And as you can imagine, we've seen the valuations of some of the targeted companies come down, and we may see further decline in some of those valuations. But that's what we're looking at.

Okay. I'm sorry. Just one point of clarification, then I'll get off. You were saying that auto -- you saw a slight improvement in auto through the beginning of this year?

A slight -- the operative word is slight. We did see it improve a bit through the first six weeks -- not enough to say with confidence that we might have hit the bottom. But just a bit of improvement, and hopefully that is where we'll stabilize and start to come back from.

Great. Thank you very much.

Thank you.

Your next question comes from Matthew Fassler from Goldman Sachs.

Good morning to you. A couple of questions. First of all, you said that automotive -- ex-currency and Johnson Industries, I think you said -- was down, was it 1% this quarter?

1% for the quarter, up 2% for the year, yes.

So third quarter was also up, too, roughly?

I believe that's right.

Okay. And kind of related to that, what are you seeing in terms of store count -- you know, Company-owned and also network wide? And what's the financial status so far as you can tell of the jobs in the network?

As far as the store count in total, we basically had a flat year. We were up nine on a net new store basis. We opened a number of stores, but we also closed or consolidated a number. I would say that as far the financial health of our customers as a general rule, these are pretty well-capitalized businesses. And you know, we do have arrangements with our lenders for programs to keep them financially healthy. We're working very closely with them to keep them in that shape. But as far as expectation for this year, I'd say that our store count will perhaps increase modestly, but not as much as we would have hoped in more normal times.

Got you. Second question relates to currency broadly speaking. You quantified it at roughly $63 million for the quarter. I might have missed what the impact was for the year. And as you discuss that, can you just talk about the country mix so that we can forecast that appropriately?

Sure. The impact for the year was fairly modest. It was very slightly negative. But the dollar strengthened, you know, as the week progressed -- or as the year progressed, so we wound up getting more of an impact over the latter part of the year. The way our business breaks down is that we're roughly 90% US, 9% Canadian, and 1% Mexico.

So it's primarily Canada. And is that Canadian exposure essentially even through your businesses, or is it -- is it disproportionately allocated to one or two divisions?

It's automotive primarily, although we do have -- we do have some in industrial, as well.

So is automotive then a double-digit Canadian percentage?

No. No, no, no, no. It would be -- let's see. I'm working it in my mind, which is always risky. But it -- no, it would be about 12%. I think 12%.

Yes, I think you're about right.

Okay. The receivables number did move a little opposite the direction of sales. And Jerry, you know, you made some elusion to this earlier on, and you also, I think, spoke briefly about the allowance for doubtful accounts. Can you talk about the aging? Can you talk about where the receivables are -- where they reside? And I guess more importantly than the dollars, which I'm sure you'll ultimately collect, sort of, what's the source of the slower payment from your customers? Is it -- does it differ by division or by customer type?

Matt, yes. We were -- our bad debt expense was up $10 million in the year, and our aging has not really changed much. We saw a slight change in January of about 1%. But the -- obviously, the piece of the business that we're the most concerned about would be in our industrial and electrical businesses, because the manufacturing sector is the most hard hit, and that's where you are more than likely going to see bankruptcies. We're in pretty good shape as far as the receivables within the automotive side and the office product side. Of course, you know our exposure there to the independent network is about 75% or so, and we have to stay close to that, as well, as the mega channels that represent that other 23%, 24%.

Great. Thank you so much.

All right, thank you.

Thank you.

Your next question comes from Tony Cristello from BB&T Capital Markets.

Good morning, gentlemen, this is actually [Alan Hosminoles] in for Tony. Just a few things. Looking at the automotive segment, the 1% decline in the fourth quarter seems to be a fairly significant departure from what you saw in the third quarter on a continuing ops basis. From a macro perspective, it seemed that the environment didn't really materially deteriorate, and gas prices certainly at much lower levels. Could you provide us with just a little more color on what you see as the underlying drivers behind the softness in Q4 automotive sales?

Well, first of all, in terms of the gasoline pricing, through November, gasoline pricing was still a little bit higher than it had been same month prior year. We did see moderation from the peaks earlier in the year, but it was still month over month higher. If you look at things like retail sales, consumer spending, you'll see that they seemed to decline at a faster rate as the quarter progressed than they had earlier in the year. That has an effect on our business, as well. I think retail sales were actually down 7% in December and were down modestly for the whole year. But the biggest decrease came in the fourth quarter. And then the overall decline in GDP had an effect on our business, as well. But the biggest part is consumer spending and the concern the consumer has on how they're going to meet their budgets.

Alan, I might also point out, the decline in gasoline prices did not correlate to an increase in miles driven. Miles driven continued to go down. The money that they would have been putting into the pump has gone to spend paying off credit card debt or whatever. Miles driven continued to be down, and -- and actually the decrease in miles driven have accelerated some. So that -- the fact that gasoline prices went down didn't correlate.

I might -- I might just pick up on that. I think Jerry makes a great point. If we look at what happened with miles driven, by our calculations they were down 1.8% in the first quarter, were down 2.6% in the second quarter, 3.4% in the third quarter, and they're going to be down over 4% in the fourth quarter.

Okay. And just as a follow-up, do you happen to have the commercial versus the retail or cash sales numbers for the fourth quarter specifically? And then the slight improvement seen in automotive sales to date in 2009, have you seen any material, you know, shift or change, either comparing the commercial segment to retail or even just on a regional basis?

Well, the -- what we said is for the year, our commercial business was up low-single digit and our cash business was down just a bit. Those same patterns extended through the fourth quarter, with commercial being up just slightly and cash being down a bit more than the full year. And we don't see any significant change in the -- in the patterns for the first six weeks of the year.

Okay, and then just the last question. In terms of guidance for 2009, is the assumption that economic and market conditions remain relatively consistent with current levels? And also, what are your expectations for full-year 2009 revenues on a segment basis, if you could?

We don't have the numbers for you today on a segment basis. But as far the economy, it's our expectation it may get a little bit more difficult before it gets better. But we're counting on conditions being about the same through year-end.

Okay. Great. Well, thank you guys very much.

Thank you.

Your next question comes from Keith Hughes from SunTrust.

My question had been answered. Thank you.

Thank you, Keith.

Your next question comes from Gregory Melich from Morgan Stanley.

Hey, guys. This is Mike [Montoni] in for Greg. Thanks for taking my question.

Good morning, Mike.

Good morning. Just had two things, quickly actually. One was on future pricing. So as we look in, prices in to you from your vendors have been at record levels, especially through 4Q. Are you seeing any moderation with respect to prices in, at least, as we head into 1Q? And do you have any different outlook there for the near-term, at least?

Right now, we do see evidence that pricing will not be nearly as significant in '09 as it was in '08. Our expectation -- and we don't have the firm guidance from our vendors at this point -- but our expectation is that pricing will moderate -- probably be positive for the year, but flow where near what we saw in 2008.

Okay. Great. And then sort of as a follow-up to the independent jobber points that have been raised before, is there anything there that you can mention with respect to, you know, inventory levels at the jobbers? Like, do you feel that they're at all capital constrained? Or have they really, as you mentioned, been able to access capital freely through third-party vendors and so forth so that that's not really an issue with inventories?

I don't think that's an issue for the NAPA jobbers. As I mentioned, we have lending and credit arrangements through our banking relationships, and they have money to lend, and they are lending money. So that's a strength for us right now perhaps. But the jobbers that are in an expansive mood are able to access capital and go ahead and do what they need to do.

It also serves no purpose for us to load those independent NAPA jobbers up with inventory. We need them to get a good return on their investment, and we need them to be successful, and therefore we will be. So we're not looking to load them up with inventories. We think they have adequate inventories.

Okay, so just wanted to make sure they're okay there moving forward. And then lastly was really, with respect to some of the work you guys have been doing on cost management -- traditionally been a strong area for you -- you know, as we look ahead here, I have this year's SG&A dollar growth up above 4%. And that might be a little bit over if we were to deduct some of the one-time things. But as we look ahead for next year after some of these moves you've made, is there any way to think about that in terms of either SG&A dollar growth rate or in terms of, let's say, 1% of sales is equal to 25 bips or 30 bips of EBIT impact, all else equal?

Well, the initiatives that we've identified on the call this morning, we would say, have an annual estimated savings of 50 to $60 million. We've got other things we're looking at, and we'll continue to enact what need be done on the cost side. I would say that the 50 to 60 will feed into the income statement on a sequential basis as we continue to work our way through the year.

Okay. Great. Thank you, guys. That's all my questions.

All right, thank you.

Your next question comes from [Brian Sundheimer[ from [Gevalia Company].

Hi, good morning.

Good morning.

I was curious if you could speak to -- on the automotive side. Any decline over the course of the quarter in a move towards lower priced parts from the independent repair shops?

Well, we -- that's a trend that we've seen really all year long. If we look at the outbound sales pattern of our product categories, we have two levels of product, and the lower priced SKU movement is stronger than the higher priced SKU movement. So that's not anything that has changed materially from quarter to quarter. It's been fairly consistent all year long.

Okay. And now in -- just on the office side, I was curious if you were seeing something along the same lines, as there are fewer white-collar jobs and companies are naturally ordering less products? Are they moving down in product mix as well? Moving towards obviously lesser priced than for you lower margin product?

Well, lower margin in terms of dollars, not necessarily in terms of percentage. But yes, that pattern is similar in the office products industry.

Any increase in cadence in that --

No. Again, fairly consistent throughout the year.

Okay. Thank you.

Thank you. Operator, do we have any other calls?

Hello?

Janeka, do we have any other calls in the queue?

Can you hear me?

We can hear you. Can you hear us?

Yes, sir. Your next question comes from [Alan Ziegler] from First Manhattan.

Hey there, gentlemen.

Good morning, Alan.

Good morning, Alan.

If we went to the office product area -- and you mentioned earlier that 75% of your sales are to independents to balance to the big box guys -- just strategically if we, you know, take the 10,000-mile look, is there any reason why that mix shouldn't change over the next couple of years? I mean, just in terms of how the world is evolving? And do you have any strategies in place to maybe make that mix change, given where we're at?

Well, I think as we look at the mix, we're comfortable with it. And I'd say that somewhere between 75% and 80% of the business with the independent reseller and 20% to 25% with the big box is probably where it will shake out over time.

And why wouldn't you do more to the big box, given that it would seem, anyways, that the independent guys are -- would be shrinking? I'm assuming. Maybe it's not a correct statement. But it would seem like they would be shrinking and the bigger guys -- at least Staples, for example -- might be growing?

Well, I think the matter -- the fact of the matter is the independents are not contracting currently. I think that they're holding up reasonably well in the current environment. I mentioned that our business with them was actually up 2% in the quarter and 1% for the year. And for the last couple of years, our growth on the independent side has been a little stronger than our growth on the negative side. We don't have any strategy that says there's a limitation to how much business we want to do with the larger companies, and we continue to work with them. We currently do business with all of them, and we'll continue to look for ways to grow that business with them. But their primary focus is really on their own internal distribution, and the wholesaler is a fill-in supplier to them on their needs on a more urgent basis.

Okay. Thank you very much.

Thank you.

Your next question comes from Matthew Fassler with Goldman Sachs.

Thanks a lot. Just by way of follow-up, two questions. On the office products business, you talked about the local guys actually still being flat to up for you this quarter. You know, understanding that their businesses are somewhat different than the megas, you know, they still are dealing with the same -- with the same economy; and, you know, the office products business, broadly speaking, has typically moved with GDP. So how much longer do you think that this customer group can defy the bigger picture macro trend? And might there be something different about the way they're using you, perhaps taking in more inventory from you rather than buying direct, or maybe just buying in more as opposed to sell-through? Because there's something about that disconnect that doesn't quite compute.

Well, the independent for the most part is not inventory-intensive. Most of the independents will buy a small portion of their overall needs on a direct basis, and mostly the highly-priced, sensitive items, and the remainer they'll rely on a wholesaler. Some of our fastest growing independent customers are actually stockless. They don't have inventory. They rely on their expertise, which is sales and marking, and rely on us to do the fulfillment for them. So I think that they, too, are affected by the slowdown in the economy -- there's no question about that. They're not as impacted as the megas in certain customer categories because they're not the ones that deal with the large firms that have had the most massive contraction in office workers. They're not immune to it by any stretch, but they're not as exposed to it either. So I would say that, you know, our expectation for our independent business going forward is that we'll get modest growth in 2009; but growth all the same, because of some of the initiatives that they've got underway.

Is it possible that their customers, being smaller and less sophisticated, are less disciplined about their purchase? and I'm wondering if in prior periods they slowed later, perhaps, than the megas? Or did you not see that?

I think we might have seen the reverse, Matt. And I'm not speaking with -- with a great sense of recollection honestly. But I think that in some prior cycles, we actually saw the independents contract more than we saw the megas, and I think this one's just a little bit different.

Got you. And then finally -- if I'm asking you to repeat yourselves, I apologize. But Jerry, could you just once again state what the pricing number was for the automotive business? I got the others, but I missed that one.

Automotive was 6.0.

6.0%. Got you. Thank you so much.

Thank you, Matt.

Your final question comes from Stephen Chick with Friedman, Billings, Ramsey.

Hi, thank you. I guess a couple questions -- and I know you've addressed it a little bit or -- a lot. But in the NAPA sales trends for the fourth quarter, you know, if we adjust for, as you said, Johnsons and the FX rate, you're down about 1% on an ongoing basis. And I have that you had incrementally a slightly higher level of acquisitions in the quarter than in the past. And it looks like things are still -- you know, albeit lower levels of inflation -- still -- still helpful, maybe in normal terms. So it kind of looks like it's about a 300 basis point downtick, you know, Tom, in the sales of that business. And I know we haven't heard from others in the industry yet, but, you know, we're slated to this week. You know, but the commentary out of others was -- you know, it seemed like more favorable in terms of -- you know, their trends, at least in the last public discussions out of them, you know, which was -- you know, say October, maybe even a little into November. So I was really wondering if you could speak to that. I mean, is -- are you seeing anything competitively, you know, with your stores? Or, you know, are we just simply going to be surprised and when these others report, you know, in the next couple of days, you know, I guess you'd expect them to see the same type of -- of sales trend deceleration?

Well, I can't tell you what to expect when others report. You mentioned you think we were off 300 basis points in the quarter? I'm not sure how you got there.

Well, I mean, last quarter, I guess, your ongoing automotive operation sales you reported -- if I have my numbers right here -- up 3%.

All right, you are talking sequential?

Yes. Yes.

Okay. Okay. I misunderstood what you were saying. We saw a slowdown in the quarter. And we've acknowledged that. And we saw it across all of the businesses, not just automotive. And we think that the fourth quarter was a very, very challenging quarter for most businesses. I think what we're seeing from others that are reporting current, that the weakest quarter of the year for them was also the fourth quarter because of the overall slowdown.

No. Yes, I understand that. And I guess it's tough because we haven't seen some of your direct competitors in that business, but it seems like the commentary out of them was -- or has been -- a little more favorable than the slowdown you've seen. And -- I'm just trying to connect dots is all.

Well, I guess maybe what we ought to do is maybe wait until we get the reported numbers, and then we can have another conversation about it.

Yes, okay.

It's hard to speculate on what others might or might not be doing. I don't know.

That's fair. Okay. And then, do I have the acquisition number right here? The -- it looks like within auto, you know, you had about -- you know, the sales volume -- or I guess, what is the sales volume that you acquired within automotive during the quarter? I have it's roughly $16 million.

We don't give that information out, Steve. We don't have that. We don't give it out in business segment.

Okay. All right. Well --

What we can tell you is that the -- we gave up $22 million on the Johnson sale.

Yes. Okay, great. I got that. Thanks. And then a couple other points of clarification, if I could. When you say that industrial or motions is currently, you know, in the first six weeks running -- I think you said double digit down, is that on a reported basis, or -- you know, because I know you have some acquisitions within that segment. Is that reported or is that organic?

That's reported.

Okay. All right. So again, when you say double digits, I'm kind of -- I mean, I know I think about that as being, you know, say down -- down 10%.

No, I'd say -- I'd say you should be looking more in the mid-teen to high-teen range.

Okay. And that's reported, so organically if we kind of try and strip out our estimate for acquisitions, it will be a little more than that?

It would be. That's right.

Okay. No, that's helpful. And then last two things if I could. Jerry, you know, you mentioned some of the line items within, you know, your net corporate account and the P&L. You reported $18 million in that line item today. I had -- the $0.07 a share post-retirement charge, I'm assuming that's all in Net Other?

That's correct, yes.

Okay. Now, I have that pretax that that would be, you know, roughly $18 million then. And so if I --

That's not -- that's not just pretax, that's after tax -- that's not tax deductible.

Oh, it's not tax -- so the $0.07 is the -- okay, it's $11 million then.

Pre and post.

Okay, okay, that's -- oh, that clarifies it then. So if I exclude that, then, you know, the Corporate Other account still looks a little lower. I mean, if it's $18 million less 11, I mean, you're looking at something like about $7 million.

We had an additional $4 million in bad debt expense, we had insurance reserves, and we also had less interest income of about $3 million, as we mentioned.

Okay. All right. Well, I'll kind of -- maybe I'll try to talk to Sid offline on that to get into the granularity of it a little bit. The last thing, if I could, though, on the call, in your cash flow statement, there's two things I was wondering if you knew off the top of your head, Jerry. One is the -- is in your financing activity. You have a $52 million, you know, benefit to cash flows, it looks like, for the year, and I'm assuming that's all in the fourth quarter. And -- sorry?

I don't know what that is. But you're right. That is correct, Sid will have to get that for you, Steve. I don't have that.

No, that's fair. I figured I'd try, though. Okay. Thanks, guys.

Thank you. Operator? Janeka?

Yes, sir. At this time, there are no further questions.

Thank you. We do appreciate all of you on the call continuing to show interest in and support of Genuine Parts Company, and we look forward to talking to you in the future with better results and under more pleasant circumstances. Thank you for joining us.

Thank you for participating in today's conference call. You may now disconnect.