Mail Stop 3651
April 10, 2006
Via U.S. Mail and Facsimile
Thomas C. Gallagher
Chief Executive Officer
Genuine Parts Company
2999 Circle 75 Parkway
Atlanta, Georgia 30339
RE: Genuine Parts Company
Form 10-K for the Fiscal Year Ended December 31,
2005
File No. 001-05690
Dear Mr. Gallagher:
We have reviewed your filing and have the following
comments.
We have limited our review to only financial statements and
related
disclosures and do not intend to expand our review to other
portions
of your document. Where indicated, we think you should revise
your
document in response to these comments and comply with the
remaining
comments in all future filings. If you disagree, we will consider
your explanation as to why our comment is inapplicable or a
revision
is unnecessary. Please be as detailed as necessary in your
explanation. In some of our comments, we may ask you to provide
us
with information so we may better understand your disclosure.
After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We
look forward to working with you in these respects. We welcome
any
questions you may have about our comments or any other aspect of
our
review. Feel free to call us at the telephone numbers listed at
the
end of this letter.
Form 10-K for the fiscal year ended December 31, 2005
Management`s Discussion & Analysis
Results of Operations, page 16
1. Where changes in results are attributed to more than one
factor,
please revise to quantify the impact of each material factor. For
example, you state cost of goods sold was impacted by higher
vendor
prices and lower levels of vendor discounts and volume incentives.
Please also consider the use of tables to list and quantify
factors,
with subsequent narrative analysis of the underlying reasons for
the
changes.
Exhibit 13
Report of Independent Registered Public Accounting Firm on the
Financial Statements, page 22
2. Please revise your audit opinion from your independent
registered
public accounting firm in future filings to include Schedule II as
part of the audit scope, as required by Article 5-04(c) of
Regulation
S-X.
Consolidated Statement of Income, page 24
3. Please separate your Selling, administrative and other expense
line
item into operating and non-operating expenses. Your operating
expenses should be broke out by, but not limited to selling,
general &
administrative expenses; provision for doubtful accounts;
depreciation
and amortization of intangibles assets; other operating costs or
expense ( note: finance charges of retail operations should be
disclosed separately per SAB 8B); non-operating income; and non-
operating expense. Foot note disclosure does not satisfy your
requirements to disclose the aforementioned items on the face of
your
consolidated statement of income. Also your non-operating
expenses /
income should separately disclose dividend income; interest
income;
interest on securities; net gain(loss) on securities; other
income;
and interest and debt discount amortization expense.
Additionally,
please separately disclose the amounts of minority interest in
income
of consolidated subsidiaries and equity in earnings of
unconsolidated
subsidiaries. See Article 5-03(b) of Regulation S-X for guidance.
Please revise in future filings accordingly.
Note 1. Summary of Significant Accounting Policies
4. We note from your disclosures in note 8, note 9 and Item 1 of
your
10-K that you have minority equity ownership interests in several
entities, which are not included in your Exhibit 21. In this
regard,
please provide us with and include in your future filings the
disclosures required by paragraph 20 of APB No. 18.
Other Long-Term Liabilities, page 28
5. We note from your disclosure that one of the components of your
other long-term liabilities is insurance liabilities. Based on
your
disclosure, we note that you are self-insured for the majority of
group health insurance cost and carry various large risk
deductible
policies for the majority of workers` compensation liabilities.
Also
you calculate these insurance liabilities based on historical
claims
information. In this regard, please provide us with and revise
future
filings to include a discussion of how incurred but not reported
claims are included in your determination of such reserves.
Additionally, please revise your future filings to disclose
separately
the balances related to benefit liabilities, obligations under
capital
leases, and insurance liabilities.
Note 4. Leased Properties, page 31
6. We note from your disclosure that you have an $85,000,000
construction and lease facility, under which properties acquired
by
the lessor are constructed and then leased to you under operating
lease agreements. It appears that at December 31, 2005 the total
amount advanced and outstanding under this facility was
approximately
$83,000,000. We also note that the resulting leases are accounted
by
you as operating leases and no debt obligation is recorded in your
balance sheet related to these leases. Supplementally explain to
us,
with a view toward expanded disclosure, the nature of your
involvement
associated with the construction of the properties acquired and
built
by the lessor, which are then leased to you and your basis
supported
by the authoritative accounting literature for your accounting
treatment. Your response should include, but should not be
limited
to, your considerations as to the requirements in EITF 97-10.
Note 8. Guarantees, page 38
7. We note from your disclosure that you have residual value
guarantees which become due in the event a default under or at the
expiration of your operating lease agreements. We also note that
you
have guaranteed approximately $175,000,000 of total borrowings
from
certain independently controlled automotive parts stores
(independents) and certain other affiliates. It appears that
based
on your belief that the likelihood of funding the guarantee
obligation
under any provision of the operating lease agreements is remote
and,
to date, you have had no significant losses in connection with
guarantees of independents` and affiliates` borrowing, that you
have
not accrued any amount related to these guarantees. We remind
you
that because the issuance of a guarantee imposes a noncontingent
obligation to stand ready to perform in the event that the
specified
triggering events or conditions occur, the provisions of paragraph
8-
12 of Statement 5 regarding the guarantor`s contingent obligation
under a guarantee should not be interpreted as prohibiting the
guarantor from initially recognizing a liability for that
guarantee
even though it is not probable that payment will be required under
that guarantee. See paragraph 9 of FIN No. 45 for guidance. In
this
regard, please tell us, with a view toward expanded disclosure,
how
your amount of guarantee liabilities accrued at the balance sheet
date, if any, was in accordance with FIN No. 45. If no such
amounts
exist, or they are immaterial, please state so. In addition,
please
provide an accounting policy that clearly and completely discloses
the
conditions when a residual value or guarantee loan amount is
recognized as a liability in your consolidated financial
statements.
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a cover letter that keys your responses to our
comments
and provides any requested information. Detailed cover letters
greatly facilitate our review. Please understand that we may have
additional comments after reviewing your responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing
includes all information required under the Securities Exchange
Act of
1934 and that they have provided all information investors require
for
an informed investment decision. Since the company and its
management
are in possession of all facts relating to a company`s disclosure,
they are responsible for the accuracy and adequacy of the
disclosures
they have made.
In connection with responding to our comments, please
provide, in
writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal
securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division
of Corporation Finance in our review of your filing or in response
to
our comments on your filing.
You may contact Jeff Jaramillo at (202) 551-3212 or Lyn
Shenk,
Assistant Chief Accountant, at (202) 551-3380 if you have
questions
regarding comments on the financial statements and related
matters.
Please contact Max Webb, Assistant Director, at (202) 551-3755
with
any other questions.
Sincerely,
Linda Cvrkel
Branch Chief
Via facsimile: Jerry W. Nix, Chief Financial Officer
(770) 956-2207
Thomas C. Gallagher
Genuine Parts Company
April 10, 2006
Page 1