Leigh Parrish – IR John Heel – President and CEO Catherine D’Amico – CFO Rob Gross – Executive Chairman.

Bret Jordan – BB&T Capital Markets Nicholas Zangler – Stephens Inc. Investment Bank Brett Hoselton – KeyBanc James Albertine – Stiefel Scott Stember – Sidoti & Company Mike Montani – ISI Group.

Good day everyone and welcome to the Monro Muffler Brake Inc First Quarter 2015 Earnings Conference. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Leigh Parrish, please go ahead..

Thank you. Hello, everyone, and thank you for joining us on this morning’s call. I would just like to remind you that on this morning’s call, management may reiterate forward-looking statements made in today’s release.

In accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, I would like to call your attention to the risks and uncertainties related to these statements, which are more fully described in the press release and the company’s filings with the Securities and Exchange Commission.

These risks and uncertainties include, but are not necessarily limited to, uncertainties affecting retail generally such as consumer confidence and demand for auto repair, risks relating to leverage and debt service, including sensitivity to fluctuations in interest rates, dependence on, and competition within the primary markets, in which the company’s stores are located, and the need for, and costs associated with store renovations and other capital expenditures.

The company undertakes no obligation to release publicly, any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.

The inclusion of any statement on this call does not constitute an admission by Monro or other person that events or circumstances described in such statements are material. Joining us for this morning’s call from management are John van Heel, President and CEO; Cathy D’Amico, CFO and Rob Gross, Executive Chairman.

With these formalities out of the way, I’d like to turn the call over to John. John, you may begin..

Thanks, Leigh. Good morning and thank you for joining us on today’s call. We are pleased that you are with us to discuss our first quarter fiscal 2015 performance. I’ll start today with the review of the results for the quarter and an update on our key initiatives. And then we’ll provide our outlook for the remainder of the fiscal year.

I’ll then turn the call over to Cathy D’Amico, our Chief Financial Officer, who will provide additional details on our financial results.

As we started off our new fiscal year, our flexible business model enabled us to deliver sales growth of 5.5% and strong net income growth of 25% in the first quarter, but we are not satisfied with the 1% comparable store sales increase. We were able to deliver total sales in bottom line results within our guidance range.

Importantly, during the quarter, despite the challenging consumer spending environment we continue to deliver on our key objectives of increasing traffic, benefiting from lower material costs, managing operating expenses, generating strong sales and earnings contribution from our recent acquisitions and capitalizing on opportunities to completely additional acquisitions at attractive prices.

Our performance is the result of our team’s consistent execution of our proving strategy and the initiatives that enable us to lead our industry, in both strong and weak markets. Our first quarter comparable store sales increase of 1% reflects traffic gains of 2%.

We generated a comparable store sales increase of approximately 2% in the first seven weeks of the quarter. However, comparable store sales softened the last six weeks of the quarter, particularly in the tire category, although units remained positive.

Turning to our performance within specific categories, we were encouraged to see comparable store sales increases across all of our service and maintenance categories.

We believe that last year’s harsh winter benefited repairs and maintenance categories such as brakes and alignments, with comparable store-sales for these category up will combine 9% and front end-shocks up 6%. More discretionary categories such as exhaust also benefited, improving from last quarter to a 1% increase.

Additionally, we were pleased to see comparable store oil changes, continue to drive traffic with an increase of 2% during the quarter. These results going straight, our consumer continued to turn to us for repairs that can no longer be delayed, as well as to perform basic maintenance on their ageing vehicles.

We expect that last year’s extreme winter weather will benefit the service business as we move through the fiscal year.

We believe that the challenging consumer spending environment is weighing on tires in particular, because of their high cost, which is evidence by a 3% decline in comparable stores tire sales as customers traded down to lower price tires, while our comparable – our store tire units increased 1%.

This reduced our overall comparable store sales by approximately 1.5% during the quarter. The pressure on tire sales was entirely related to the change in tire sales and mix to the lower price, what more profitable direct imports which drove improvement in our gross margin and gross profit per tire.

We are in the process of raising prices on direct imports by 3% to 5% as we speak. We continue to be effectively positioned to meet the consumer’s needs through our expanded tire assortment, which provide additional value oriented option. And we are pleased that customer acceptance in the first quarter was very strong.

In fact we saw direct higher import increase to over 40% of tire units sold for the first quarter ,compared to 32% in fiscal 2014 and the mid-20s in the fiscal 2013. As a result, we saw gross profit dollars per tire increase year-over-year, as well as sequentially from the fourth quarter of fiscal 2014.

We expect consumers to continue to trade down this year; however we believe that the tire category will benefit in the second half of fiscal 2015 from last year’s harsh winter, as more consumers replace one tire as of this year’s winter weather.

Moving on to gross margin, we generated significant gross margin expansion in the first quarter delivering an increase of 310 basis points to 41.4%, our highest gross margin percentage since the first quarter of fiscal 2012, when our tire sales makes us only 35%.

Our ability to expand our gross margin was largely due to reduced material costs particularly in tires. It’s worth noting that in September we will begin to lock the significant benefits of lower product costs we experienced in fiscal 2014.

That being said, we remain very focused on pursuing lower tire costs from direct and branded suppliers by capitalizing on the significant increase in purchasing power, that is resulted from our recent acquisition. For the first quarter, total operating expenses increased due in large parts, to layering in the new stores operating expenses.

Higher year-over-year acquisition related costs and to a lesser extent, a higher investment and advertising. We remained focused on cost control and expect to leverage our expense structure on higher sales for the full year.

Despite the difficult environment, we achieved another quarter of significant operating income growth with first quarter operating profit up 27% year-over-year and operating margin expansion of 230 basis points to 13.5% sales.

Overall, we remained focused on increasing our market shares and same store sales growth, opening additional new stores in existing markets, and extending our footprint into new markets and acquiring competitors at attracted valuations. We continue to see more opportunities for attractive deals in this challenging macro environment.

We are confident that acquisitions in fiscal 2015 will exceed our 10% annualized sales growth target, as outlined in our long-term plan, which will continue our profitable growth.

Our ability to complete acquisitions at attractive prices is due to our superior experience and targeting and integrating acquisition, our two store branch strategy and our financial strength. These factors represented distinct competitive advantage that underpins this key component of our growth strategy.

Along those lines, we are pleased to announce today that we have signed a definitive agreement to acquire 35 higher choice stores in Florida, a new state for the company.

These stores are located in major west coast and east coast Florida markets, allowing us to enter the state with a premier chain and a solid foundation for continued store growth there. This transaction is expected to close in mid August.

We believe that a large market like Florida can support similar store account to what we operate in states like New York, Pennsylvania and Ohio, all of which have approximately 150 stores. The acquisitions we have completed and announced to date in fiscal 2015, at 54 locations with total annualized sales of approximately $64 million.

This represents 8% sales growth this fiscal year with an approximate sales mix of 55% service and 45% tires. We anticipate that these acquisitions will be slightly dilutive in the second quarter of fiscal 2015, but expecting will be accretive by our fourth quarter.

In fiscal 2015, we expect earnings accretion of $0.25 to $0.27 from the fiscal 2013, 2014 and 2015 acquisition including the slight dilution from our fiscal 2015 acquisitions. This compares to previous guidance of $0.27 to $0.30 provided at the end of last quarter.

Our acquisitions increased total sales in store account, and raise our purchasing power and vendors. They also allow us to further leverage distribution, advertising, field management and corporate overhead costs, all of which will help drive future operating margin expansion.

Our primary focus remains, increasing store density in our geographic footprint, while opportunistically entering new and continuous markets as we have with our fiscal 2015 deals. We still see meaningful opportunity for attractive deals in the marketplace given the current macro environment.

The owners of target independent tire dealers are generally individual to our ad one year in retirement age without an internal succession option. We presently have 10 NDA signed, excluding the acquisition we expect to complete this quarter and in line with the high number of NDA’s we had signed at the end of our fourth quarter.

Based upon on recent transactions and our existing NDA, we remain very optimistic about our opportunities for additional acquisitions in the near future. Before I turn to the details of our outlook, I want to discuss our overall view on the industry and key trends, which remain very positive.

There continue to be 245 million cars on the road in the U.S. that are getting older and consumers are keeping and maintaining their vehicles longer.

We know this, because the average age of vehicles on the road has increased to 11.7 years, in fact vehicles over 12 years old, represented 25% of our traffic during the quarter, the highest level we’ve seen with average ticket on these older vehicles consistent with our overall average.

Although deferrals and trade downs have decreased in this economy, consumers continue to repair and retain these older vehicles, and as evidenced by our positive comparable store-sales this quarter, in categories such as front-end shocks and exhausts. Additionally, fewer consumers have an interest in and are able to work on their vehicles.

The number of overall service basis declining, and there remain numerous acquisition candidates that meet our criteria.

As we look at the position of our business within the industry, our key competitive advantages are still in place including our low cost operations, superior customer service and convenience, price advantage versus car dealers, along with our store density and two brand store strategy.

Now, to details of our outlook, as we previously stated, we experience sales volatility in the latter part of the first quarter and this is carried over into July, with comparable store sales at minus two through the first three weeks.

Sales have remained soft in the entire category; well other changed traffic, key service categories and tire units continue to be positive. Our guidance for the second quarter and fiscal year, assumes a back microenvironment, even in light of the relatively easy comparable store sales comparisons from last year.

As a reminder, comparable store sales in August and September last year, were a combined minus 3%. Just turning that around will get us to the higher ends of sales guidance for the quarter.

Looking through our results for the remainder of the fiscal year, we continue to believe that last year’s winter weather will drive positive traffic and growth within the service business, and benefit tires in our third and fourth quarters. We also believe that our expanded tire offering effectively positions us to capture higher tire unit sales.

For the full fiscal year, taking into account the anticipating sales contributions from our competed and announced acquisitions, we now expect total sales to be in the range of 900 to 920 million. We are narrowing our comparable store sales guidance for fiscal 2015 to an increase of 1% to 3% versus the prior range of an increase of 1% to 4%.

Based on new sales assumptions, we are advising our estimated fiscal year 2015 EPS to a range of $1.95 to $2.8 on the range of a $1.95 to $2.15. An increase of 17% to 25% year-over-year versus a $1.65 diluted earnings per share in fiscal 2014.

Operating margins are expected to expand approximately 100 basis points for the year, and will lessen the magnitude from the 230 basis point expansion achieved in the first quarter, as we begin to anniversary the lower product cost realized this year, and add significant acquisition sales.

Additionally, as we stated on last quarter’s call, we expect fourth quarter fiscal 2015 operating margin improvements to be limited by higher healthcare cost, due primarily to the Affordable Care Act in addition to last year’s significant product cost reductions.

It’s worth noting that, excluding the new Florida acquisition, our full year operating margin will increase by approximately 150 basis points, consistent with our initial guidance for the year and on top of the 140 basis point improvements in fiscal 2014.

Based upon trends month-to-date, we expect second quarter comparable store sales to be flat to up 2% and total sales to be in the range of $222 million to $228 million. We anticipate second quarter operating margin to expand approximately 125 basis points.

As a result, we expect diluted earnings per share to be in the range of $0.50 to $0.52, including $0.02 of annual non-cash direct to stock option expense and the slight dilution from the previously announced 2015 acquisitions.

This compares the earnings per share of $0.42 for the second quarter of fiscal 2014, and represents earnings per share growth of 19% to 24%. Our long-term plan remains unchanged, and continues to call for on average, 15% annual top line growth including 10% growth through acquisitions, 3% to 4% comps and 1% to 2% increase from Greenfield stores.

Our acquisitions have generally diluted their earnings in the first six months, as we overcome due diligence and geo related costs, while working through initial inventory and the operational transition of these stores.

With cost savings and recovery in sales was also generally break even to slightly accretive year one and $0.09 to $0.12 accretive year two and year three. Over a five year period, that should improve operating margins by 300 basis points and deliver an average of 20% bottom line growth.

Our disciplined acquisition strategy is further strengthening our position in the marketplace, and will continue to provide meaningful value to our shareholders for many years to come. Before I turn the call over to Cathy, I would like to say that I’m proud of the performance of our team during our first quarter.

We continue to service more customers, drive higher tire unit sales, while generating more profit per tire, despite sales pressure from trade down, control operating costs, do an excellent job of integrating acquisitions, and find and act, on new acquisition opportunities at attractive prices.

The hard work cash-in for superior customer service and consistent execution that our employees deliver every day, are reflected in our sale and earnings results and are critical to enroll brand strength and success. We greatly appreciate their efforts.

With that, I would like to turn the call over to Cathy for a more detailed review of our financial results.

Cathy?.

Thanks John, and good morning, everybody. Starting with sales, sales in total increased 5.5% an $11.3 million. New stores which we decided stores, open or acquired after March 31, 2013 add $11.2 million including sales of $9.9 million from the fiscal 2014 and 2015 acquired stores.

Comparable store sales increased nine-tenths of a percent and there was a decrease in sales from clothes stores of approximately $1.5 million. There were 90 selling days in both the current and prior year first quarters. At June 28, 2014 the company had 966 company operated stores as compared with 935 stores at June 29, 2013.

During the quarter ended June 2014, the company added 19 stores and closed six. Both profit for the quarter ended June 2014 was $90 million of 41.4% of sales as compared with $78.9 million or 38.3% of sales for the quarter ended June 2013.

The increase in gross profit for the quarter ended June 28, 2014 as a percentage of sales is due to a decrease in total material cost as compared to the prior year. This was largely due to a shift in the mix of tires sold to lower cost direct import tires, which carry a higher margin.

Operating expenses for the quarter ended June 2014, increased $4.8 million and was $60.6 million or 27.9% of sales, as compared with $55.8 million or 27.1% of sales for the quarter ended June 2013.

The majority of the increase in operating expense dollars was attributable to cost such as manager pay, advertising and supplies related to a full quarter of expenses for the fiscal 2014 new stores, and a partial quarter of expenses for the fiscal 2015 acquisition start. As well as due diligence costs associated with the fiscal 2015 acquisitions.

Operating income for the quarter ended June 2014 of $29.4 million, increased by 27.3%, as compared to operating income of approximately $23.1 million for the quarter ended June 2013, an increase as a percentage of sales from 11.2% to 13.5%.

Net interest expense for the quarter ended June 2014 at 0.1% of sales was relatively flat as a percentage of sales as compared to the same period last year. Weighted average debt outstanding for the first quarter of fiscal 2015, decreased by approximately $27 million, as compared to the first quarter of last year.

The decrease is primarily related to a decrease in debt outstanding under our revolving credit facility, as well as a decrease in capital lease debt.

This was offset by an increase in the weighted average interest rate of approximately 130 basis points from the prior year, primarily due to the impact of purchase accounting for the FY, ‘13 fiscal year 13, which were interest expense in Q1 of last year.

The effective tax rate for the quarter ended June 2014 and June 2013 was 38.1% and 36.5% respectively of pre-tax income. The difference in the tax rate lowered earnings per share for the fiscal 2015 first quarter by approximately $0.01 per share versus last year.

We should expect a tax rate of approximately 38% for the next three quarters of this year. Net income for the current quarter of $16.9 million increased 24.8% over last year – last year’s quarter ended June 2013. Earnings per share on a diluted basis of $0.52 increased 23.8%, as compared to last year’s $0.42 per share.

Moving on to the balance sheet; our balance sheet continues to be strong, our current ratio at 1.2:1 is comparable to last year’s first quarter and year-end fiscal 2014. For the quarter ended June 28, 2014, we generated approximately $34 million of cash flow from operating activities and paid off $3 million of debt.

In addition, we used some of the cash flow from operating activities to finance the fiscal 2015 acquisitions, which added 19 stores to date. At the end of the first quarter, debt consisted of $106 million of outstanding revolver debt, and $86 million of capital leases and financing obligations.

As a result of the debt paid out, our debt-to-capital ratio, including capital leases, decreased 100 basis points, to 31% at June 2014, from 32% at March 2014. Without capital and financing leases, our debt-to-capital ratio was 20% as of June 2014 and March 2014.

Under our revolving credit facility, we have $250 million that is committed through December 2017. And additionally, we have a $75 million accordion feature included in the revolving credit agreement. We currently are paying LIBOR plus 125 basis points, but expect that spread to drop to 100 basis points in our second quarter.

The flexibility built into the agreement permits us to operate our business, including doing acquisitions without bank approval, as long as we are compliant with debt cover. Those terms, as well as our current availability of approximately $120 million, which does not include the accordion, gives us a lot of ability to get acquisitions done quickly.

We are fully compliant with all of our debt covenants and have plenty of room under the financial covenants to add additional debt for acquisitions without any car loan. During fiscal 2015, we spent approximately $9 million on CapEx in the first quarter. Store acquisitions during the first quarter of fiscal 2015 use another $18 million of cash.

Depreciation and amortization totaled approximately $8 million. And we received $1 million from the exercise of stock option. We paid about $4 million in dividends. As the full year we expect EBITDA to be in the range of between $145 million and $150 million.

Inventory is up approximately $2 million from March 2014, largely due to the acquired stores as well as the purchase of tires to expand product assortment and take advantage of some promotional pricing provided by vendors. Total inventory turns for the rolling 12 months ended June 2014, were relatively flat with last year.

That concludes my formal remarks on the financial statements. With that, I will now turn the call back over to John for some additional remarks.

John?.

Thanks, Cathy. Before we enter questions, I want to comment on the potential for additional tires imported from China. Very recent reports indicate that USW petition requesting additional tariff is moving forward and it looks as if any additional tariff or duty would not apply until later this calendar year or early next year.

First it’s hard to understand the need for additional tariffs as major tire manufacturers have reported significantly improved margins and operating results. If additional tariffs are implemented U.S. customers will end up paying more for every tire purchased period.

That said in short-term we will leverage our own distribution centers, logistics network, enroll borrowing cost as Cathy said LIBOR plus one to increase our orders of direct import tires. This will allow us to increase our competitive advantage on cost and allow us to continue to offer customers great value.

We would also expect that retail prices will begin to increase which should cover our additional warehousing cost over the year and then some. It will likely resolve our deflation impact from trade down and help our comp tire sales if units don’t suffer significantly.

As a reminder last time we dealt with additional tariffs which was October of 2009 to September of 2012 tire sales increased more than 5% in the first two year, helped by pricing.

Looking at this longer-term and consistent with how we have established our business model anything that effects the industry as a whole should increase our competitive advantage.

So if additional tariffs are implemented, we believe that our comps get better, our earning get better and smaller tire dealers would buy themselves under additional pressure which will create more opportunities for us to make accretive acquisitions. In short bring it on, With that, I will turn it over to the operator for questions..

Thank you. [Operator Instructions] We go first to Bret Jordan at BB&T Capital Markets..

Hi good morning guys..

Good morning, Bret..

Quick question on logistics sales as Florida is looking to answer, the next year is that a market that you’ll need incremental distribution for or is there distribution that comes with that package?.

There is no distribution that comes with the chain. We see significant opportunities to continue to expand there. And with additional expansion we will likely open distribution down in Florida..

Okay and then your NDAs have grown to ten are those has that increased because you’re now looking at stores in these new Western and Southern markets are those 10 NDAs in existing legacy markets?.

Those are changed within our legacy – our existing footprint and it needs two new markets. As we’d expanded into these markets our forming has continued to ring and we expected that we would see additional opportunity in those market and we absolutely are. By the way just back to your question on destitution.

The fact that we won’t be opening distribution right now it’s absolutely in Florida, it’s absolutely incorporated in the guidance that we’ve given for this year..

Okay.

And one question is relates to the tariff in your comment on probably stock filing in advance as it looks likely, would you please access storage space and those are the kind of thing we could stockpile given the incremental points of sale you have now down in the Southeast that you could expand distribution on a shorter term basis?.

Yeah, that’s absolutely part of that stock process. Again, I was just going to mentioned it is incorporated in our guidance for the year..

Okay.

And then one last housekeeping, could you give us the monthly progression, you mentioned the first couple of weeks is plus two and the last week was soft, but could you give us the three months?.

Sure, the April was up 2.2, May was up 1 and June was down 0.8..

Okay. Great! Thank you..

Thank you.

Operator?.

We’ll move next to Rich Nelson at Stephens Inc Investment Bank..

Hi this is Nick Zangler in for Rich.

The comps that you just gave were those sales comps or were those traffic comps?.

Those were sales comps..

Okay.

Can you provide – I am sorry, can you provide traffic just in those three months and how that trended?.

Traffic was up for the quarter. We don’t break that out. It was up two for the quarter and we don’t break that out by month..

Okay. That’s fine.

And then what’s your guidance on comps and then comments on the consumer is the current environment still pressuring independence or do you find that they are finally released at this period exclusive of the potential Chinese character?.

Yeah, in the ten NDAs that we signed obviously, we’re getting financial statement from those individuals and we continue to see pressure on those businesses. They certainly don’t have leverage that we do to drive additional profitability.

And we’re seeing that, in their numbers and I think that’s the read of the additional acquisition opportunities we see this year..

Okay.

And then, on recent calls, it sounds like there’s a strong demand for mechanics and technicians in various service shops are you guys seeing it, finding it to be a little bit more difficult to find qualified personnel, keep them or do you see labor cost increasing or is everything going is planned in that category?.

No. I don’t find that we are having particular difficulty getting qualified guys to staff our stores, no, that hasn’t been a problem and we continue to control labor off the gains that we made last year..

Great. All right. Thanks a lot guys. Good luck..

Thank you..

Thank you..

We’ll move next to Brett Hoselton at KeyBanc..

Good morning, gentlemen..

Hi, Brett..

First I was hoping if you could talk a little bit more about tire volumes, little bit surprising, seems like you underperform the a little bit and I guess I am wondering what are your thoughts there I mean same-store unit sales up about 1% on year-over-year basis we kind of saw the industry being out maybe 100 or 200 basis points better than that.

So it seems as though you might have underperformed the industry can you talk a little bit about that do you feel you underperform the industry or is your region, do you think you are pretty much in line with your region what are your thoughts there?.

Yeah. I think we are in line with our region again from what we see in our markets and in the NDAs. I would – I guess I would offer consistent with our approach we are designed to make as much profit as we can. And we maintain our pricing discipline to achieve that.

So what I can say if anyone out there is selling more unit they’re certainly not making as much as money as we are..

And then can you talk a little about your adjustment in terms of your earnings guidance, particularly from in the upper end, what are the primary drivers there and then and how did the acquisitions factor into the adjustment in earnings guidance?.

Yes, for the year the primary adjustment is the fact after, running plus one in the first quarter we took down the high-end of sales guidance and we’ve always said that, 1% comp store sales is about $0.07 and that’s really where that lines up..

Perfect. And then can you talk a little about kind of frame out your acquisition pipeline, you typically talk maybe in terms of number on non-discloser agreements.

So can you kind of frame out the magnitude of that maybe provide potential or additional revenue opportunity? And then you’ve also just recently entered into two brand new markets and so how do we think about entering into brand new markets versus in building out your current footprint?.

Sure. The NDAs that we have are all within our existing markets and they range from five stores to 40 stores again we don’t accumulate that up but I could tell you that its well more than one year’s acquisition growth in our 10% sort of annual goal of that we had in our operating plan.

In terms of entering new markets we look for the right opportunities within those markets when we entered Michigan we did that with nearly 20 stores. We entered Florida with 35 stores.

We are not going to a new state like Florida for five stores but with the tremendous opportunities that exist down there entering with 35 stores with that cover major markets on those is a perfect way for us to get into a large market there.

And affords us the opportunity to bolt-on additional stores which will up drive the operating synergies we get by increasing the store density in our markets. But that’s how we look at it we look at Florida like it’s a 150 store state for us..

That’s specifically Bret if the 50 did hit to the companies operating margin for the full year going into these new markets because they’ll start off a little bit slower than obviously just going into our overall business model..

And it’s a lot more in the order term so thank you very much gentlemen..

Yeah. That’s why everyone’s happy that we are sending him down there..

Now we’ll go next to James Albertine at Stiefel..

Thanks and good morning everyone. Very nice way to end the call by the way with the bringing on, very refreshing the year.

To the end of – to the points that you were making on the Chinese tire tariff, to the best of our knowledge, it doesn’t look like the arguments that really changed in the last – since the last time we were having or hearing this debate.

So number one, what’s your view on sort of the USW’s arguments in more detail? Why did they think they have a better case this time around? And quite frankly, why do you think this is not – this hasn’t been sort of shutdown in process? I mean we’re sort of surprised that the received attraction they have in terms of the ongoing investigation, it sounds like? And then as it relates to all that, we haven’t seen it, but is there an effort or you part of an effort on the other side of the debate to sort of argue against the USW’s case in this instance?.

Yeah Jamie, this is Rob. I mean in total we think it’s asinine. We now have perfect information on what it did to the consumer three years ago. It didn’t cost USW jobs. All these guys are opening plants. We think it’s unbelievably stupid, but I mean look around the country and there is plenty of unbelievably stupid things going on.

We did look back at the numbers and the impact on our business when this occurred we were in two straight years of the best numbers we’ve seen even with a lower percentage of tire sales than we have now. So we’re encouraged about our total volume pick-up over the last number of years which should benefit us.

We’re encouraged about our advantage with our direct supply from China and low borrowing cost for ability to make this more profitable for us today than it was back then and as far as what’s going to occur our bet would be that its likely going to go on because it shouldn’t have gotten to this point it will take a while for these guys to end up voting on it.

But you know be careful what you ask for if you’re – if you’re the unions. I mean the bottom line is, the domestic manufactures don’t even compete with what’s going on with the imports.

They’ve given up that segment of the market and we know the only thing that’s going to occur from this is that, the average retail price for the consumer and every tire high end or low end is going up which for us will alleviate the deflation we’ve been struggling with.

And our plan is to maintain units make more money and we can’t control what goes on in areas other than inside our stores..

Sure. Understood and I appreciate that is strong color.

Just quick housekeeping items I appreciate as you always provide them the monthly comp cadence, was there a quarter-to-date number for the month of July that you would be willing to provide at this point as well or did I just miss it?.

Yeah. We said that comps through three weeks in July were down two..

Down two you said okay, so I apologize for that, but thanks for the clarifying..

Sure,..

All right. Take care..

Thank you..

[Operator Instructions] We’ll go next to Scott Stember of Sidoti & Company..

Good morning..

Good morning, Scott..

You mentioned that on tires at least that you are going to see a 3% to 5% increase price increase that you’re putting through, can you talk about what’s your plans are for price increases on the rest of your products?.

Sure. We said that, on the spring we expect about a 1% increase on service business. And we will look to give that again in the fall as we have traditionally and with regard to the price increase that we are putting through on the direct import tires right now. We had such strong acceptance of that and it is a real value.

We continue as we work that program, to look for ways to make more money in here and here we think there’s an opportunity to giving the fact that we have had positive units to capture some price here..

Okay.

And just last question on the tires for acquisition – can you really talk about their standing within the local markets and maybe how their sales have been performing notably in tires in recent quarters?.

Yeah. They are an absolute market leader down there. Great locations again like we said in key markets on Eastern and West Coast and their comps has been slightly – their comps have been positive this year..

Slightly – okay. That’s all I have. Thank you..

Alright. Thanks Scott..

We’ll go next to Mike Montani at ISI Group..

Hey, guys good morning. I –.

Good morning..

I just wanted to first ask housekeeping question if you could just to provide the percentage of sales by category that you have in the past historically..

Sure. Sales by category breaks were 17 exhaust was four, steering was the front end was 10, tires is 41 and maintenance is 28..

Okay. Thanks.

And then a question on the quarter can you just provide a little clarity in terms of how the traffic is trended throughout the quarter like it was obviously a two for the whole thing but one thing is moderated a bit and turned negative was that more due to pricing pressure or mix changing on ticket or was that traffic?.

It was traffic was positive in all of the months for the quarter including June so there’s more on the overall average ticket size..

Okay that’s helpful.

And if you could also just elaborate a bit when the ticket was down foreign tires was that basically all mix or was there point of deflation or how should we think about what you’re coming off of?.

That was all due to the changing mix to the direct import tires..

Okay and then when was the 3% to 5% increases going up I apologize if I’d missed that?.

No that’s okay. It’s going in as we speak here so late this month. So that’s part of the reason that I see opportunity against some weak comps from last year for us to recover some of that on the comp side for the rest of the quarter..

And just in terms of the benefits that you all did receive from the sourcing and the Chinese tires, my understanding is that the benefits basically has increased over the past year. So like maybe initially you’ve got 15% reduction and now I think you are more or like 20 or 25 on import tires.

I mean is that right like was there actually incremental benefits as we progressed through that and how do you think about cycling that on the ticket side as well because perhaps that could also help your ticket?.

Yeah I don’t see – that to me is less about ticket. Certainly it’s more about the average cost side and the gross profit. So yes we have – as you look back we initially talked about 10 to 15 right since June 20 and over 20, so there is a progression of cost there. That have come in even through the early parts of this year.

So we will get some benefit from that. And in terms of the ticket or the sales price, again our approach is to not be the lowest in the market, so with talk of tariffs and higher tariff cost, we’ll maintain our discipline there.

And I would expect as we move forward for retail pricings to cover some and that’s certainly help our comp in that deflation impact..

Thanks.

And maybe just lastly to quantify, the overall opportunity here, can you just provide a sense of how large you guys are now after all of these deals in terms of annualized tide buy in units or – and how did that change now versus the last time tire tales were in place?.

We are uplifts of 3 million tires right now, somewhere in that range, last time that the tariffs were in place we would have been half of that or less..

Okay. Thanks helpful. Thank you..

Thank you..

Thank you..

[Operator Instructions] All right, we’re going to go to Brett Hoselton at KeyBanc..

Gentlemen..

Yes..

I was hoping you kind of just talk a little bit through it sound like you are feeling very good about, it sounds like you don’t feel that the tariff is going to negatively impact your earnings.

It sound like you are actually suggesting that it might actually positively impact your earnings and I kind of – I guess I am struggling a little bit with that in that – if your cost of goods sold go up your margins are going to get squeezed obviously and then there is potentially some price demand from a consumer standpoint which might cause some sort of negative impact in terms of unit volume and so forth.

So if you kind of walk through how you think about tariff driving higher earnings?.

Yeah. I think that relates more to next year certainly and certainly the early stages of that what I do know is – what I do expect is that like last time pricing to the consumer will go up. We will have brought a bunch of tires in advanced at the existing cost and we will benefit from that.

Last time, that benefit was well more than a year like I said we ran positive 5% tires in the first two years of a tariff last time it was implemented.

So I think that is at the heart of where we see that and we talked about that certainly in terms of when you look at that on a little bit of a longer term basis and outside of that I –smaller players in the industry that don’t have the ability to source like we do. We’ll get squeezed by the tariff much sooner than that.

And that will open up additional acquisition opportunity, which again drive our profitability long-term.

We’re building long-term business here and these types of, these types dynamics in the market will help our strategy long-term because it will drive the acquisition growth and we will be able to take advantage of side and our buying power and only logistics and that work in the shorter term..

And if you were too let say pre-buy prior to the tariff, a large amount of tires in the warehouse then itself, would you consider it sounds like you in the past you’ve done more than a year, is there a possibility that you could do two years worth or three years worth, or how do you think about the order of magnitude of being able to do something along those lines?.

Look. Our comments on the tariff, we’re not to break down to absolute specific. So of what we are going to do, these rulings aren’t even final yet. I wanted to make sure that everyone goes aware that we are going to use the advantages that we have in this environment to continue to create value and to continue to grow our business and profitability.

We will fill everyone in, what we are doing as more details of what specifically will happen with the tariff come out..

That makes sense John. Thank you very much it’s just its quite compiling. So thank you..

Sure. I agree..

And that does conclude the question and answer session. At this time I’d like to turn the conference back over to the management for any closing remarks..

Great, thank you all for your time this morning. Our business is healthy. We are serving more customers, selling more tires and service continuing to grow to profitable acquisitions and driving higher earnings. We appreciate your continued support and the efforts of our employees that work hard every day to take care of our customers.

Thanks again and have a great day..

And that concludes today’s conference. Again thank you for your participation..