UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 1-5690

GENUINE PARTS COMPANY

(Exact name of registrant as specified in its charter)

GEORGIA		58-0254510
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
2999 CIRCLE 75 PARKWAY, ATLANTA, GA		30339
(Address of principal executive offices)		(Zip Code)

(770) 953-1700
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at October 31, 2008
Common Stock, $1.00 par value per share		159,435,917 shares

 

 

PART 1 — FINANCIAL INFORMATION

Item 1. Financial Statements

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

		September 30,				December 31,
		2008				2007
		(unaudited)
		(in thousands, except share and per
		share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	124,428			$	231,837
Trade accounts receivable, less allowance for doubtful accounts (2008 — $31,372; 2007 — $15,521)			1,350,568				1,216,220
Merchandise inventories, net — at lower of cost (substantially last-in, first-out method) or market			2,318,215				2,335,716
Prepaid expenses and other current assets			279,932				269,239
TOTAL CURRENT ASSETS			4,073,143				4,053,012
Goodwill and intangible assets, less accumulated amortization			147,940				82,453
Other assets			185,420				212,615
Property, plant and equipment, less allowance for depreciation (2008 — $639,405; 2007 — $623,778)			412,755				425,989
TOTAL ASSETS		$	4,819,258			$	4,774,069
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Trade accounts payable		$	1,070,513			$	989,816
Current portion of debt			250,000				250,000
Income taxes payable			18,506				45,578
Dividends payable			63,003				60,789
Other current liabilities			223,634				201,793
TOTAL CURRENT LIABILITIES			1,625,656				1,547,976
Long-term debt			250,000				250,000
Other long-term liabilities			206,058				193,147
Minority interests in subsidiaries			68,439				66,230
SHAREHOLDERS’ EQUITY
Stated capital:
Preferred Stock, par value — $1 per share			-0-				-0-
Authorized — 10,000,000 shares — None issued
Common Stock, par value — $1 per share
Authorized — 450,000,000 shares
Issued — 2008 — 160,556,738; 2007 — 166,065,250			160,557				166,065
Accumulated other comprehensive (loss) income			(150,773	)			(123,715	)
Retained earnings			2,659,321				2,674,366
TOTAL SHAREHOLDERS’ EQUITY			2,669,105				2,716,716
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	4,819,258			$	4,774,069

See notes to condensed consolidated financial statements.

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

		Three Months Ended Sept. 30,								Nine Months Ended Sept. 30,
		2008				2007				2008				2007
		(unaudited)
		(in thousands, except per share data)
Net sales		$	2,882,115			$	2,797,556			$	8,495,073			$	8,215,926
Cost of goods sold			2,033,110				1,973,068				5,974,372				5,776,909
Gross profit			849,005				824,488				2,520,701				2,439,017
Operating expenses:
Selling, administrative & other expenses			616,395				595,107				1,835,998				1,761,690
Depreciation and amortization			21,768				21,994				66,469				64,014
			638,163				617,101				1,902,467				1,825,704
Income before income taxes			210,842				207,387				618,234				613,313
Income taxes			79,825				78,807				230,601				233,059
Net income		$	131,017			$	128,580			$	387,633			$	380,254
Basic net income per common share		$	.81			$	.76			$	2.37			$	2.24
Diluted net income per common share		$	.81			$	.76			$	2.36			$	2.23
Dividends declared per common share		$	.39			$	.365			$	1.17			$	1.095
Weighted average common shares outstanding			161,603				168,819				163,324				169,862
Dilutive effect of stock options and non- vested restricted stock awards			673				1,006				689				1,022
Weighted average common shares outstanding — assuming dilution			162,276				169,825				164,013				170,884

See notes to condensed consolidated financial statements.

GENUINE PARTS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		Nine Months
		Ended September 30,
		2008				2007
		(unaudited)
		(in thousands)
OPERATING ACTIVITIES:
Net income		$	387,633			$	380,254
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			66,469				64,014
Share-based compensation			10,018				10,750
Excess tax benefits from share-based compensation			(313	)			(4,176	)
Other			3,362				3,629
Changes in operating assets and liabilities			1,836				154,249
NET CASH PROVIDED BY OPERATING ACTIVITIES			469,005				608,720
INVESTING ACTIVITIES:
Purchases of property, plant and equipment			(60,091	)			(83,781	)
Acquisitions and other			(98,735	)			(20,316	)
NET CASH USED IN INVESTING ACTIVITIES			(158,826	)			(104,097	)
FINANCING ACTIVITIES:
Stock options exercised			1,364				10,134
Excess tax benefits from share-based compensation			313				4,176
Dividends paid			(188,805	)			(181,925	)
Purchase of stock			(228,863	)			(152,161	)
NET CASH USED IN FINANCING ACTIVITIES			(415,991	)			(319,776	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH			(1,597	)			9,232
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			(107,409	)			194,079
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			231,837				135,973
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	124,428			$	330,052

See notes to condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note A — Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the Annual Report on Form 10-K of Genuine Parts Company (the “Company”) for the year ended December 31, 2007. Accordingly, the quarterly condensed consolidated financial statements and related disclosures herein should be read in conjunction with the 2007 Annual Report on Form 10-K.

The preparation of interim financial statements requires management to make estimates and assumptions for the amounts reported in the condensed consolidated financial statements. Specifically, the Company makes estimates in its interim consolidated financial statements for the accrual of bad debts, inventory adjustments, discounts and volume incentives earned, among others. Bad debts are accrued based on a percentage of sales, and volume incentives are estimated based upon cumulative and projected purchasing levels. Inventory adjustments are accrued on an interim basis and adjusted in the fourth quarter based on the annual book to physical inventory adjustment. The estimates for interim reporting may change upon final determination at year-end, and such changes may be significant.

In the opinion of management, all adjustments necessary for a fair presentation of the Company’s financial results for the interim period have been made. These adjustments are of a normal recurring nature. The results of operations for the nine months ended September 30, 2008 are not necessarily indicative of results for the entire year.

Note B — Segment Information

		Three Months Ended September 30,								Nine Months Ended September 30,
		2008				2007				2008				2007
		(in thousands)								(in thousands)
Net sales:
Automotive		$	1,393,118			$	1,381,007			$	4,127,518			$	4,037,568
Industrial			907,015				849,631				2,686,297				2,522,675
Office products			458,968				460,425				1,332,167				1,342,932
Electrical/electronic materials			126,827				111,863				363,712				329,416
Other			(3,813	)			(5,370	)			(14,621	)			(16,665	)
Total net sales		$	2,882,115			$	2,797,556			$	8,495,073			$	8,215,926
Operating profit:
Automotive		$	111,730			$	115,023			$	317,888			$	325,690
Industrial			77,220				69,669				222,781				204,330
Office products			33,426				33,183				114,721				119,052
Electrical/electronic materials			10,272				7,685				29,175				23,224
Total operating profit			232,648				225,560				684,565				672,296
Interest expense, net			(7,391	)			(4,706	)			(21,877	)			(16,550	)
Other, net			(14,415	)			(13,467	)			(44,454	)			(42,433	)
Income before income taxes		$	210,842			$	207,387			$	618,234			$	613,313

Net sales by segment exclude the effect of certain discounts, incentives and freight billed to customers. The line item “Other” represents the net effect of the discounts, incentives and freight billed to customers, which is reported as a component of net sales in the Company’s condensed consolidated statements of income.

Note C — Comprehensive Income

Comprehensive income was $360.6 million and $472.8 million for the nine months ended September 30, 2008 and 2007, respectively. The difference between comprehensive income and net income was due to foreign currency translation adjustments, adjustments to the fair value of derivative instruments and amounts amortized into net periodic benefit cost as required by Statement of Financial Accounting Standards (“SFAS”) No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (“SFAS No. 158”), as summarized below:

		Nine Months Ended September 30,
		2008				2007
		(in thousands)
Net income		$	387,633			$	380,254
Other comprehensive (loss) income:
Foreign currency translation			(36,594	)			79,697
Derivative instruments, net of tax			-0-				242
Amounts amortized into net periodic benefit cost:
Prior service cost, net of tax			293				51
Actuarial loss, net of tax			9,243				12,522
Total other comprehensive (loss) income			(27,058	)			92,512
Comprehensive income		$	360,575			$	472,766

Comprehensive income for the three months ended September 30, 2008 and 2007 totaled $109.1 million and $169.1 million, respectively.

Note D — Recently Issued Accounting Pronouncements

On September 15, 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. SFAS No. 157 does not expand the use of fair value in any new circumstances. The provisions of SFAS No. 157, as issued, are effective for the fiscal years beginning after November 15, 2007. In February 2008, the FASB issued FASB Staff Position 157-2 that deferred for one year the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (that is, at least annually). As of January 1, 2008, the Company has adopted SFAS No. 157 for all financial assets and liabilities and for non-financial assets and liabilities recognized or disclosed at fair value on a recurring basis. The Company determined that the adoption did not have a significant impact on the Company’s consolidated financial statements. Additionally, the Company does not expect the adoption of SFAS No. 157 for non-financial assets and liabilities, effective January 1, 2009, will have a significant impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (“SFAS No. 141(R)”). SFAS No. 141(R) will change the accounting for business combinations. Under SFAS No. 141(R), an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS No. 141(R) will change the accounting treatment and disclosure for certain specific items in a business combination. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS No. 141(R) will have an impact on accounting for business combinations once adopted, but the effect is dependent upon acquisitions at that time.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 establishes new accounting and reporting standards for any non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. The Company does not expect that SFAS No. 160 will have a significant impact on the Company’s consolidated financial statements.

Note E — Share-Based Compensation

As more fully discussed in Note 5 of the Company’s notes to the consolidated financial statements in the 2007 Annual Report on Form 10-K, the Company maintains various long-term incentive plans, which provide for the granting of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance awards, dividend equivalents and other share-based awards. SARs represent a right to receive the excess, if any, of the fair market value of one share of common stock on the date of exercise over the grant price. RSUs represent a contingent right to receive one share of the Company’s common stock at a future date. The majority of awards previously granted vest on a pro-rata basis for periods ranging from one to five years and are expensed accordingly on a straight-line basis. The Company issues new shares upon exercise or conversion of awards under these plans. Most awards may be exercised or converted to shares not earlier than twelve months nor later than ten years from the date of grant. At September 30, 2008, total compensation cost related to nonvested awards not yet recognized was approximately $21.3 million, as compared to $25.5 million at September 30, 2007. The weighted-average period over which this compensation cost is expected to be recognized is approximately three years. The aggregate intrinsic value for options, SARs and RSUs outstanding at September 30, 2008 was approximately $36.3 million. At September 30, 2008 the aggregate intrinsic value for options, SARs and RSUs vested totaled approximately $19.8 million, and the weighted-average contractual life for outstanding and exercisable options, SARs and RSUs was approximately six years. For the nine months ended September 30, 2008, $10.0 million of share-based compensation cost was recorded, as compared to $10.8 million for the same period in the prior year.

For the nine months ended September 30, 2008, the Company granted approximately 1,400,000 SARs and 116,000 RSUs.

Note F — Employee Benefit Plans

Net periodic pension cost included the following components for the three months ended September 30:

										Other Post-retirement
		Pension Benefits								Benefits
		2008				2007				2008				2007
		(in thousands)
Service cost		$	13,307			$	13,432			$	220			$	188
Interest cost			22,569				20,496				404				360
Expected return on plan assets			(28,675	)			(27,558	)			—				—
Amortization of prior service (income) cost			(6	)			(83	)			93				93
Amortization of actuarial loss			4,475				6,472				404				356
Net periodic pension cost		$	11,670			$	12,759			$	1,121			$	997

Net periodic pension cost included the following components for the nine months ended September 30:

										Other Post-retirement
		Pension Benefits								Benefits
		2008				2007				2008				2007
		(in thousands)
Service cost		$	39,996			$	40,078			$	660			$	564
Interest cost			67,838				61,162				1,212				1,080
Expected return on plan assets			(86,184	)			(82,160	)			—				—
Amortization of prior service (income) cost			(13	)			(264	)			279				279
Amortization of actuarial loss			13,485				19,367				1,212				1,068
Net periodic pension cost		$	35,122			$	38,183			$	3,363			$	2,991

Pension benefits also include amounts related to a supplemental retirement plan. During the nine months ended September 30, 2008, the Company did not contribute to the pension plan.

Note G — Guarantees

In June 2003, the Company completed an amended and restated master agreement to its $85 million construction and lease agreement (the “Agreement”). The lessor in the Agreement is an independent third-party limited liability company, which has as its sole member a publicly traded corporation. Properties acquired by the lessor are constructed and/or then leased to the Company under operating lease agreements. No additional properties are being added to this Agreement, as the construction term has ended. The Company does not believe the lessor is a variable interest entity, as defined in FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (“FIN No. 46”). In addition, the Company has verified that even if the lessor was determined to be a variable interest entity, the Company would not have to consolidate the lessor nor the assets and liabilities associated with properties leased to the Company. This is because the assets leased under the Agreement do not exceed 50% of the total fair value of the lessor’s assets, excluding any assets that should be excluded from such calculation under FIN No. 46, nor did the lessor finance 95% or more of the leased balance with non-recourse debt, target equity or similar funding. The Agreement has been accounted for as an operating lease under SFAS No. 13, Accounting for Leases and related interpretations. Rent expense related to the Agreement is recorded under selling, administrative and other expenses in our condensed consolidated statements of income and was $2.0 million and $3.8 million for the nine months ended September 30, 2008 and 2007, respectively.

This Agreement, having a term of six years expiring in 2009, contains residual value guarantee provisions and other guarantees that would become due in the event of a default under the operating lease agreement, or at the expiration of the operating lease agreement if the fair value of the leased properties is less than the guaranteed residual value. The maximum amount of the Company’s potential guarantee obligation, representing the residual value guarantee, at September 30, 2008, is approximately $62.7 million. The Company believes the likelihood of funding the guarantee obligation under any provision of the operating lease agreements is remote.

The Company also guarantees the borrowings of certain independently controlled automotive parts stores (“independents”) and certain other affiliates in which the Company has a minority equity ownership interest (“affiliates”). Presently, the independents are generally consolidated by unaffiliated enterprises that have a controlling financial interest through ownership of a majority voting interest in the entity. The Company has no voting interest or other equity conversion rights in any of the independents. The Company does not control the independents or the affiliates, but receives a fee for the guarantee. The Company has concluded that it is not the primary beneficiary with respect to any of the independents and that the affiliates are not variable interest entities. The Company’s maximum exposure to loss as a result of its involvement with these independents and affiliates is equal to the total borrowings subject to the Company’s guarantee.

At September 30, 2008, the total borrowings of the independents and affiliates subject to guarantee by the Company were approximately $187.9 million. These loans generally mature over periods from one to ten years. In the event that the Company is required to make payments in connection with guaranteed obligations of the independents or the affiliates, the Company would obtain and liquidate certain collateral (e.g., accounts receivable and inventory) to recover all or a portion of the amounts paid under the guarantee. When it is deemed probable that the Company will incur a loss in connection with a guarantee, a liability is recorded equal to this estimated loss. To date, the Company has had no significant losses in connection with guarantees of independents’ and affiliates’ borrowings.

Effective January 1, 2003, the Company adopted FIN No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“FIN No. 45”). In accordance with FIN No. 45 and based on available information, the Company has accrued for those guarantees related to the independents’ and affiliates’ borrowings and the construction and lease agreement as of September 30, 2008. These liabilities are not material to the financial position of the Company and are included in other long-term liabilities in the accompanying condensed consolidated balance sheets.

Note H — Acquisitions

During 2008, the Company acquired eight companies in the Industrial, Office Supply, Electrical/Electronic and Automotive Groups for approximately $111.3 million. The acquisitions were accounted for in accordance with SFAS No. 141 and, accordingly, the Company allocated the purchase price to the assets acquired and the liabilities assumed based on their fair values as of their respective acquisition dates. The results of operations for the acquired companies were included in the Company’s condensed consolidated statement of income beginning on their respective acquisition dates. The Company recorded approximately $60.0 million of goodwill and other intangible assets associated with the acquisitions.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes contained herein and with the audited consolidated financial statements, accompanying notes, related information and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2007.

Forward-Looking Statements

Some statements in this report, as well as in other materials we file with the SEC or otherwise release to the public and in materials that we make available on our website, constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Senior officers may also make verbal statements to analysts, investors, the media and others that are forward-looking. Forward-looking statements may relate, for example, to our future operations, prospects, strategies, financial condition, economic performance (including growth and earnings), industry conditions and demand for our products and services. The Company cautions that its forward-looking statements involve risks and uncertainties, and while we believe that our expectations for the future are reasonable in view of currently available information, you are cautioned not to place undue reliance on our forward-looking statements. Actual results or events may differ materially from those indicated as a result of various important factors. Such factors include, but are not limited to, the ability to maintain favorable supplier arrangements and relationships, changes in laws and regulations, including changes in accounting and taxation guidance, changes in general economic conditions, changes in the financial markets, including particularly the capital and credit markets, the growth rate of the market for the Company’s products and services, competitive product and pricing pressures, including internet related initiatives, the effectiveness of the Company’s promotional, marketing and advertising programs, the uncertainties of litigation, as well as other risks and uncertainties discussed from time to time in the Company’s filings with the SEC.

Forward-looking statements are only as of the date they are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. You are advised, however, to review any further disclosures we make on related subjects in our subsequent Forms 10-Q, 10-K, 8-K and other reports to the SEC.

Overview

Genuine Parts Company is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The Company has a long tradition of growth dating back to 1928, the year we were founded in Atlanta, Georgia. During the nine months ended September 30, 2008, business was conducted throughout the United States, Puerto Rico, Canada and Mexico from approximately 2,000 locations.

For the third quarter of 2008, we recorded consolidated net income of $131.0 million compared to consolidated net income of $128.6 million in the same period last year, an increase of 2%. For the nine months ended September 30, 2008, we recorded consolidated net income of $387.6 million compared to consolidated net income of $380.3 million in the same period last year, an increase of 2%. During the third quarter of 2008, we continued to focus on initiatives to grow sales and earnings. Such initiatives included new products, product line expansion, the penetration of new markets including acquisitions, and a variety of gross margin and cost savings initiatives. Our growth initiatives have enabled us to capitalize on the opportunities presented in the markets we serve. As a result, we have reported improved performance for the quarter and the nine months ended September 30, 2008.

Sales

Sales for the third quarter of 2008 were $2.88 billion, an increase of 3% compared to $2.80 billion for the same period in 2007. For the nine months ended September 30, 2008, sales were $8.50 billion compared to $8.22 billion for the same period last year, which was an increase of 3%. The sales growth in the quarter and nine month periods ended September 30, 2008 was largely driven by our internal growth initiatives across all our businesses, by acquisitions, which were approximately 1% of total sales in the quarter and nine month periods ended September 30, 2008, and by stable industry conditions in our Industrial and Electrical/Electronic businesses.

Sales for the Automotive Parts Group increased 1% in the third quarter of 2008 and 2% for the nine months ended September 30, 2008, as compared to the same periods in the previous year. We expect our sales and product expansion initiatives in the Automotive Parts Group to provide further growth opportunities. The Industrial Products Group increased sales by 7.0% and 6.5% in the three and nine month periods ended September 30, 2008, respectively, as compared to the same periods in 2007. The market indices, such as Industrial Production and Capacity Utilization, held at reasonable levels during the first nine months of 2008, evidencing continued strong market-wide demand which has positively impacted sales for the Industrial Products Group. In addition, this group benefited from acquisitions, which were approximately 2% of sales for this group in both the quarter and nine months ended September 30, 2008. Sales for the Office Products Group for the third quarter of 2008 were flat as compared to the same period in 2007. For the nine months ended September 30, 2008, sales decreased 1% as compared to the nine months ended September 30, 2007. This group continues to experience weak market conditions, which have resulted in an industry-wide softening of demand. Sales for the Electrical/Electronic Materials Group increased 13% and 10% in the three and nine month periods ended September 30, 2008, respectively, as compared to the same periods of the previous year. The market indicators for this segment supported continued expansion in the industry during the first nine months of 2008, which favorably impacted sales for this group.

Cost of Goods Sold/Expenses

Cost of goods sold for the third quarter of 2008 was $2.03 billion, a 3% increase from $1.97 billion for the third quarter of 2007. As a percent of sales, cost of goods sold was consistent at 70.5% for the three months ended September 30, 2008 compared to 70.5% for the same period in 2007. For the nine months ended September 30, 2008, cost of goods sold was $5.97 billion, a 3% increase from $5.78 billion for the same period last year, and as a percent of sales was consistent at 70.3% for both periods. For the nine months ended September 30, 2008, cumulative pricing increased 4.7% in Automotive, 6.7% in Industrial, 2.7% in Office Products and 7.2% in Electrical/Electronic over the same period last year.

Selling, administrative and other expenses of $638.2 million remained constant at 22.1% of sales for both the third quarter of 2008 and for the same period of the prior year. For the nine months ended September 30, 2008, these expenses totaled $1.90 billion and increased to 22.4% of sales compared to 22.2% for the same period in 2007. The slight increase for the nine month period is a result of the Company’s lack of leverage on expenses on relatively weak top line growth in the Automotive and Office Products businesses, and certain non-recurring costs recorded in the first quarter of 2008, discussed below.

Operating Profit

Operating profit as a percentage of sales was 8.1% for the three months ended September 30, 2008, unchanged from the same period of the previous year. For the nine months ended September 30, 2008, operating profit as a percentage of sales was 8.1%, as compared to 8.2% for the same period of the previous year.

The Automotive Parts Group’s operating profit decreased 3% in the third quarter of 2008, and its operating profit margin of 8.0% for the three months ended September 30, 2008 was a decrease from 8.3% in the same period of the prior year. For the nine months ended September 30, 2008, operating profit decreased 2% from the first nine months of 2007 and operating profit margin decreased to 7.7%, as compared to 8.1% for the same period last year. The decrease in operating profit and operating profit margin for this group is due to costs associated with the sale of its Johnson Industries subsidiary, as well as consolidation costs in its remanufacturing operations recorded in the first quarter of 2008. The Industrial Products Group had an 11% increase in operating profit in the third quarter of 2008, and the operating profit margin for this group increased to 8.5%, as compared to 8.2% from the same period in the previous year. Operating profit increased 9% for the nine month period ended September 30, 2008, and operating profit margin increased to 8.3%, as compared to 8.1% for the same period in 2007 due to continued expense leverage. For the three month period ended September 30, 2008, the Office Products Group’s operating profit increased 1% and its operating profit margin increased to 7.3%, as compared to 7.2% in the same period of the prior year. For the nine months ended September 30, 2008, operating profit decreased 4% compared to the same period in 2007 and operating profit margin decreased to 8.6% as compared to 8.9% in the nine months ended September 30, 2007. The decrease in operating profit margin for this group in the first nine months of 2008 is due to the loss of expense leverage on the decrease in revenue for the nine months ended September 30, 2008. The Electrical/Electronic Materials Group increased its operating profit for the third quarter by 34%, and its operating margin increased to 8.1% compared to 6.9% in the third quarter of the previous year. Operating profit increased 26% for the nine months ended September 30, 2008, compared to the same period of the previous year, and operating profit margin for the Electrical/Electronic Materials Group increased to 8.0% from 7.1% as compared to the same period of 2007. The improvement in operating profit and operating margin is due to strong sales growth.

Income Taxes

The effective income tax rate was 37.9% for the three month period ended September 30, 2008 as compared to 38.0% for the three month period ended September 30, 2007. The effective income tax rate was 37.3% for the nine month period ended September 30, 2008 as compared to 38.0% for the same period in the previous year. The decrease in the rate in the nine month period is primarily due to the tax benefit on the sale of the Company’s Johnson Industries subsidiary, which occurred in the first quarter of 2008.

Net Income

Net income for the three months ended September 30, 2008 was $131.0 million, an increase of 2%, as compared to $128.6 million for the third quarter of 2007. On a per share diluted basis, net income was $.81, up 7% compared to $.76 for the third quarter of last year. Net income for the nine months ended September 30, 2008, was $387.6 million, an increase of 2% over $380.3 million recorded for the same period in the previous year. Earnings per share on a diluted basis were $2.36, up 6% compared to $2.23 for the same nine month period of the previous year. The increase in earnings per share for the three and nine month periods ended September 30, 2008 was favorably impacted by the decrease in the average diluted share count resulting from the Company’s share repurchase program.

Financial Condition

The major balance sheet categories at September 30, 2008 were relatively consistent with the December 31, 2007 balance sheet categories, with the exception of cash. Cash balances decreased $107.4 million or 46% from December 31, 2007, due primarily to the increased level of share repurchases in the period and acquisitions. Cash generated from operations of $469.0 million was primarily used to pay dividends of $188.8 million, repurchase approximately $228.9 million of the Company’s stock, invest in the Company via capital expenditures of $60.1 million, as well as for acquisitions of approximately $111.3 million.

Accounts receivable increased $134.3 million or 11%, which is primarily due to the Company’s overall sales increase and acquisitions within our Office Products and Industrial Parts Groups. Inventory decreased $17.5 million compared to December 31, 2007, which reflects the Company’s inventory management initiatives. Prepaid expenses and other current assets increased 4%, or $10.7 million, primarily due to increased volume incentive accruals as compared to December 31, 2007. Goodwill and intangible assets increased $65.5 million in association with acquisitions made in the nine months ended September 30, 2008, and other assets decreased $27.2 million or 13%, from December 31, 2007, primarily due to the conversion of a joint venture investment to a wholly owned subsidiary, effective January 1, 2008. Accounts payable increased $80.7 million, or 8%, due primarily to increased purchases related to sales growth made in the nine months ended September 30, 2008, compared to December 31, 2007. The Company’s long-term debt is discussed in detail below.

Liquidity and Capital Resources

The Company had $500 million of total debt outstanding at September 30, 2008 and December 31, 2007. A $250 million portion matures in November 2008 with the remaining portion maturing in November 2011. The debt is at fixed rates of interest. We have in place a signed agreement to extend the debt upon maturity another five years at a fixed interest rate.

The ratio of current assets to current liabilities was 2.5 to 1 at September 30, 2008, as compared to 2.6 to 1 at December 31, 2007.

The credit and capital markets have recently experienced adverse conditions. Continuing volatility in the credit and capital markets may increase costs associated with the incurrence of debt or affecting our ability to access the credit or capital markets. Notwithstanding these adverse market conditions, the Company currently believes existing lines of credit and cash generated from operations will be sufficient to fund anticipated operations, including voluntary share repurchases, if any, for the foreseeable future. The Company is currently not dependent on any short-term borrowing arrangements that are not already available.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The information called for by this item is provided elsewhere herein and in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. There have been no material changes in market risk from the information provided under Item 7A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

Item 4. Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or furnishes under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 of the SEC that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2007, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. The capital and credit markets have been experiencing volatility and disruption for more than twelve months. In the past several months, volatility and disruptions have increased and recently reached unprecedented levels. We have exposure to counterparties with which we routinely execute transactions. Such counterparties include commercial banks, insurance companies, investment funds and other financial institutions, some of which may be exposed to bankruptcy or liquidity risks. We have diversified our exposure to such volatile liquidity risks and do not expect the current situation to significantly affect our access to capital. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table provides information about the Company’s purchases of shares of the Company’s common stock during the quarter:

ISSUER PURCHASES OF EQUITY SECURITIES

		Total								Total Number of				Maximum Number of
		Number of								Shares Purchased				Shares That May Yet
		Shares				Average				as Part of Publicly				Be Purchased Under
		Purchased				Price Paid				Announced Plans				the Plans or
Period		(1)				Per Share				or Programs (2)				Programs
July 1, 2008 through July 31, 2008			672,094			$	39.43				672,094				6,012,490
August 1, 2008 through August 31, 2008			264,821			$	41.52				260,700				5,751,790
September 1, 2008 through September 30, 2008			993,098			$	40.86				990,139				4,761,651
Totals			1,930,013			$	40.45				1,922,933				4,761,651

Item 6. Exhibits

(a)

The following exhibits are filed or furnished as part of this report:

Exhibit 3.1		Amended and Restated Articles of Incorporation of the Company, dated April 23, 2007 (incorporated herein by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K dated April 23, 2007).
Exhibit 3.2		Bylaws of the Company, as amended and restated (incorporated herein by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K dated August 20, 2007).
Exhibit 31.1		Certification signed by the Chief Executive Officer pursuant to SEC Rule 13a-14(a) — filed herewith.
Exhibit 31.2		Certification signed by the Chief Financial Officer pursuant to SEC Rule 13a-14(a) — filed herewith.
Exhibit 32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer — furnished herewith.
Exhibit 32.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer — furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EXHIBIT INDEX

Exhibit 3.1		Amended and Restated Articles of Incorporation of the Company, dated April 23, 2007 (incorporated herein by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K dated April 23, 2007).
Exhibit 3.2		Bylaws of the Company, as amended and restated (incorporated herein by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K dated August 20, 2007).
Exhibit 31.1		Certification signed by the Chief Executive Officer pursuant to SEC Rule 13a-14(a) — filed herewith.
Exhibit 31.2		Certification signed by the Chief Financial Officer pursuant to SEC Rule 13a-14(a) — filed herewith.
Exhibit 32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive Officer — furnished herewith.
Exhibit 32.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Financial Officer — furnished herewith.