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Letter to the Editor

Genuine Parts Company Reports Sales and Earnings for Second Quarter and First Half of 2003

For the six months ended June 30, 2003, sales totaled $4.2 billion, up 2 percent as compared to the same period in 2002. Net income for the six months, before the cumulative effect of changes in accounting principles related to cash consideration from vendors and goodwill as discussed below, was $178.6 million compared to $183.1 million for the same period in the prior year, a decrease of 2 percent. On a per share diluted basis, net income for the period before the cumulative effect of a change in accounting principle equaled $1.02. After accounting changes recorded in the first quarter of 2003 and 2002 as discussed below, net income was $159 million this year compared to a net loss of $212 million in the previous six months. Earnings were $.91 compared to a loss of $1.21 for the six months in 2002.

Mr. Prince stated, "As you may recall, in the first quarter of 2003, the company adopted Financial Accounting Standards Board's EITF No. 02-16 related to the accounting treatment for cash consideration received from vendors. Under this new method, vendor allowances are considered a reduction in the cost of goods sold. As a result of EITF No. 02-16, a non-cash charge of $20 million was recorded as of January 1, 2003, representing the cumulative effect of a change in accounting principle. In addition, in the first quarter of 2002, we completed our impairment testing for goodwill in conjunction with the new provisions introduced in FASB Statement No. 142, resulting in a non-cash charge of $395 million."

Mr. Prince further commented, "The Automotive Group improved revenues by 2 percent for the quarter and for the six months and this was the eighth consecutive quarter of sales growth for our automotive parts operations. S. P. Richards, our office products company, was up 6 percent for the quarter and 4 percent for the six months, showing steady improvement. Motion Industries, our industrial group, was down 1 percent for the quarter and up 1 percent for the six months reflecting the contracting manufacturing economy and declining capacity utilization. EIS, our electrical group, was down 9 percent for the quarter and 8 percent for the six months."

Prince concluded, "We are pleased with the initiatives in each segment and we are committed to the execution of these plans. Our balance sheet remains in excellent shape and we continue to generate strong cash flows. We remain optimistic about the long-term sales and earnings growth opportunities for Genuine Parts Company."

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