Greetings, and welcome to the Genuine Parts Company Third Quarter 2018 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sid Jones, Senior Vice President, Investor Relations. Thank you, sir. You may begin.

Good morning, and thank you for joining us today for the Genuine Parts Company third quarter 2018 conference call to discuss our earnings results and current outlook for the full year. I'm here with Paul Donahue, our President and Chief Executive Officer; and Carol Yancey, our EVP and Chief Financial Officer. Before we begin this morning, please be advised that this call may include certain non-GAAP financial measures, which may be referred to during today's discussion of our results as reported under generally accepted accounting principles. A reconciliation of these measures is provided in the earnings press release issued this morning, which is also posted in the Investors section of our website. Today's call also may involve forward-looking statements regarding the company and its businesses. The company's actual results could differ materially from any forward-looking statements due to several important factors described in the company's latest SEC filings, including this morning's press release. The company assumes no obligation to update any forward-looking statements made during the call. Now let me turn the call over to Paul.

Thank you, Sid, and welcome to our third quarter 2018 conference call. We appreciate you taking the time to be with us this morning. Earlier today, we released our third quarter 2018 results. I will make a few remarks on our overall performance and then cover the highlights across our business. Carol Yancey, our Executive Vice President and Chief Financial Officer, will provide an update on our financial results and our current outlook for the full year. After that, we'll open the call to your questions. So we entered the third quarter with positive momentum, having just reported record sales and earnings in the second quarter. Our teams carried this momentum over into the third quarter, producing a strong sales performance, while also improving our total operating margin, earnings and working capital position. This was encouraging as the quarter also presented our teams with a few challenges. The unfortunate passing of Tim Breen, one of our key business leaders, the termination of our proposed merger agreement with Essendant, and the effect of Hurricane Florence all impacted our businesses and our associates in the quarter. Despite these challenges, our team stayed focused and delivered total GPC sales of $4.7 billion, up 15.3% driven by the favorable impact of strategic acquisitions and a 4.3% comp sales increase. This 4.3% comp sales increase has improved from the 3.4% increase we delivered in the second quarter and 2% in the first quarter. It’s also worth noting, our performance this quarter was our strongest comp growth rate since the fourth quarter of 2014. Net income was $220 million and earnings per share was at $1.49, excluding the net impact of transaction and other cost related to the acquisition of Alliance Automotive Group and the recently terminated agreement to spin off the Business Products Group, net…

Thank you, Paul. We will begin with a review of our key financial information and then we will provide our updated outlook for 2018. Our total sales in the third quarter were up 15.3% or up 4% on a comp basis, which excludes acquisitions and a 1% unfavorable foreign currency translation. Our gross margin for the third quarter was 31.43%, which compares to 29.95% last year. Consistent with the first half of 2018, this strong increase primarily reflects the higher gross margin associated with AAG and other acquisitions. In addition, we continue to see improved margins in our core U.S. Automotive and Industrial businesses. The Industrial business has also benefited from a slight increase in supplier incentives. We remain focused on enhancing our gross margins through several key initiatives, including ongoing supplier negotiations, both globally and across our businesses; the investment in more flexible and sophisticated pricing and digital strategies; improved analytic capabilities around product and customer profitability. We expect these initiatives to support our current gross margin rates in the quarters ahead despite the growing competitiveness across the markets we serve. The pricing environment has been more inflationary in our Industrial and Business Products businesses thus far in 2018. We also saw the initial signs of inflation in our Automotive segment in the third quarter, and we would expect to see this trend continue over the balance of the year and into 2019 due to the current tariff regulation. While the impact of tariffs has been fairly minimal through the nine months, the most recent list of goods subject to the 10% tariff is extensive and something that our teams are managing with our suppliers as we move forward. We continue to expect to pass along any increases to our customers as we have thus far. Our cumulative supplier…

Thank you, Carol. In our closing comments last quarter, we alluded to a few areas requiring improvement and we outlined our plans to drive these improvements. We called out the need to show progress in our core operating results, specifically our U.S. Automotive margins. We discussed the need to drive core sales growth to better leverage our fixed expenses. We also discussed rising cost and the need to aggressively attack operating cost, while continuing to provide exceptional customer service. We are pleased we can report progress in just about every facet of our U.S. Automotive operations along with our other business units. As we look to the highlights from the third quarter, there are many. Sales remained strong at $4.7 billion and up 15%. Comp sales were up 4.3%, our strongest comp increase in almost four years, driven by improvement across all of our business segments. Automotive comp sales plus 3%, including a 3.2% increase for our U.S. operations, the strongest comp since Q1 of 2016. Industrial comp sales at plus 7%, the strongest comp since Q4 of 2014. And finally, Business Products Group comp sales 1.3%, their strongest comp growth since Q3 of 2015. We saw a continued gross margin expansion and improving SG&A expense trend. Our operating margin expansion driven by 30 basis point improvement in Automotive and 20 basis point improvement in Industrial. Adjusted EPS of $1.48 was up 29%, and we strengthened our balance sheet, improved our operating cash flows, with the excellent working capital management. We announced strategic acquisitions with Automotive adding TMS and Platinum in Europe and Hastings in the U.S. and Industrial adding HSC. And finally, we increased our full year sales guidance to plus 14% to plus 15%, and we fine-tuned our full year adjusted EPS guidance to plus 19% to plus 21% over last year. So, it was a productive quarter for GPC, and we entered the final quarter of 2018 with plans and initiatives to further improve on our operating results. We remain committed to an organic and acquisitive sales strategy to drive long-term sustained revenue growth while also focusing on the continued improvement in our gross margins and cost management. We are excited for the future, and as always, we look forward to updating you on our progress when we report again next quarter. With that, we'll turn it back to the operator, and Carol and I will be happy to take your questions.

Thank you. [Operator Instructions]. Our first question comes from the line of Christopher Horvers with JPMorgan. Please proceed with your question.

Thanks. Good morning.

Good morning, Chris.

Good morning.

Nice acceleration in NAPA U.S. and upside in industrial.

Thank you.

Wanted to ask a little bit about the do-it-for-me side of NAPA in the U.S. Looking at the past two quarters, we had you about down 1% in the U.S. do-it-for-me in 1Q and then up a similar modest amount in 2Q. It seems like the do-it-for-me side accelerated to, call it, a 4% to 5% trend. Is that about right? And broadly, can you talk about the category performance that you saw that drove this acceleration?

Sure, Chris. Happy to do so. When you say category, you're talking product categories, Chris?

Yes, please.

Yes. So, strong-strong quarter in our battery business, strong quarter in our filter business. Those two categories are two of our single largest categories. We had another good quarter in our tool and equipment business. So those would be three that certainly would warrant being called out. But we also called out AutoCare, our NAPA AutoCare business, which is a $1 billion-plus business for us. We had our really -- our second really good quarter in a row. Many of the initiatives our team has put into place are beginning to take hold, which is great to see. And on the Major Accounts side, our nationally-branded chain, all showed solid growth in the quarter as well. So a combination of things. And Chris, we always talk about the weather. That certainly did not hurt us at all in the quarter as well.

So I had a question about that, I mean, I could understand having strong AC business given the hot summer in July, in August in the battery, but you commented that September was your best month, I think, in the U.S. on a days -- day basis given the extra Sunday that you had. So what would you attribute the strength in September to? Is it just that sort of lag effect? Is it more pricing coming through on the inflation front? Any comment there?

Well, September was still -- again, if you go back to the weather, Chris, September was still really warm month in many of our markets. But I think it's also, as we have said many, many times on these calls, that the weather tends to build on itself. So you had a really cold winter followed by a hot summer. That hot summer -- the batteries and the like aren't going to fail immediately when you hit the months of June and July. It does tend to build on itself. And I think, what we saw with our strong average daily sales in September was just really the culmination of all that wear and tear, and certainly, we saw it in the failure-type products as well as the maintenance products.

And then the last question is on the inflation front, I mean, some of the CPI data seems to be accelerating here in the third quarter. You talked about auto inflation, I think, 40 bps cumulatively through the first nine months and I think the first half was sort of flat. So does that imply that maybe a 100 bps of the comp acceleration is pricing coming through on the inflation front?

Yes, I think on the inflation front, we did see a bit of inflation in Q3 and you mentioned the 40 bps that really is what we saw in the latter part of the nine months. We'd be lucky to get to a full point by the end of the year, maybe more like a 0.5 to maybe 0.75 at the end of the year, excluding any kind of tariff impact. So again, positive for us to see but truly not a significant impact on our true same-store sales. I mean, we had, just as Paul mentioned, strong commercial growth with a couple of our major wholesale-type programs and improvement across the board in a lot of product categories.

Understood. Thanks very much. That’s great.

Thanks, Chris.

Our next question comes from the line of Scot Ciccarelli with RBC. Please proceed with your question.

Hi. This is actually Jonathan Livers on for Scot this morning. Thank you for taking my question and really nice quarter guys.

Thank you.

Thank you.

Yes. Could you give us a sense of what geographies performed well, especially in the U.S. auto side of the business?

Yes. Happy to Jonathan. We saw real strength in some of our biggest markets. We were certainly led in the quarter by our Midwest business, our Midwest team had a terrific quarter with strong single-digit comps. Our Northeast part of the country also had a very strong quarter, and that team has been performing well all year. Some of our warmer markets to the Southeast and Southwest performed well. Again, the Southeast has been stepping up most of the year for us. So those would be four that I would definitely call out.

Yes. Thank you for that. And just a quick follow-up if I could, what kind of – could you perhaps quantify or discuss? You mentioned it briefly at the beginning that the impact of Hurricane Florence in the quarter that had on the business? I know you just mentioned the Southeast was strong, but any impact it had there?

Yes. Well, first Jonathan, I appreciate you asking that question. The -- we had two events, one really hit in October and that would be Michael, but Florence definitely had an impact across our business and more in our Atlantic division, which is up in the Carolinas. We had close to, I think, 100 stores closed at one time in NAPA, but we also had many of our Motion branches that were closed. We'll pick up some of those sales with storm-related-type products, generators, cleanup supplies and the like. And -- but I would tell you, a good bit of our focus was really assisting both our associates as well as our independent owners, just helping get back on their feet and recover from some of the damages in the stores. Michael, which, as we know, was I think the worst hurricane to hit the U.S. in 50-plus years. We still have parts at the Panhandle that do not have electricity. We had stores as well as Motion branches in the Panhandle. Panama City had significant damage, significant water damage. But other stores in the Panhandle as well as South Georgia as well were impacted.

Got it. Thank you very much for the color.

You’re welcome.

Our next question comes from the line of Matt Fassler with Goldman Sachs. Please proceed with your question.

Thanks so much. Appreciate it. I want to start with a couple of quick ones on Automotive. First of all, you spoke about the pace of the trend through Q3 and through September in particular. Can you talk about the organic automotive comp implied in your guidance for the fourth quarter?

Sure. We are implying for an Automotive comp guidance would be similar to where we are through the full year. So if you look at Automotive, and our total Automotive comps excluding AAG through the nine months around 2%, so we would assume in Q4 that we would have 2% to 3% comps, but maybe more towards the 3% range. So that's implied in our guidance. Matthew

Got you. And I know that we're only on October 18, for there's only 18 days. Anything that you've seen quarter-to-date to shake you off that?

Well, that's consistent with what our implied Q4 guidance is. So again, we're going to be comfortable with that range.

Got you. Understood. And then, second question, in Industrial, you spoke about some of the factors, some of the cross wins, I guess, impacting the ability to leverage in that business, and your sales have clearly recovered and you're closing the gap with your peers on the comp store sales line as well. Can you talk about what you need to see or what you can do to extract more leverage from that sales strength? Is it a function of industry conditions? Is it a function of getting the comp above that 7% level? If you could talk, maybe if there are cost initiatives that are underway. And I know you referred to some of them that you think you can get more traction as we move through the year and then into 2019.

Yes. So great question. And look, we are pleased with where Industrial is from a sales basis, and actually, as we called out all year, they've had really nice improvement on the gross margin line. So for the quarter and year-to-date, nice, close to 40 bps improvement on the gross margin line. Where the headwinds are is in SG&A, and as we pointed out all year, I mean, they saw, as with many businesses, significant increase in freight and freight-related cost. So to the tune of 20 to 25 basis points is what we are seeing. We saw it in Q2 and seeing in Q3. Also, have some payroll pressures, which, again, we talked about before. So it's causing them -- despite having a strong 7% growth, causing them not to quite have as much leverage on the SG&A side. Having said that, our industrial teams are working really hard to make sure that they can pass along these increases and look forward to passing those along. You don't always are able to pass it along as quickly as you'd like because so much of their business is under contract. But they're working hard to kind of drive the freight recovery through higher cost of invoicing, and they're also looking to leverage better on their staffing levels and just overall SG&A. So again, we see improvement there but really the things that are holding us back are on the SG&A line.

And Matt, I would just add to that, the team at Motion is always looking at opportunities to consolidate facilities and branches where possible and where necessary. We are also looking at further investing in productivity-enhancing technology in our operations as well. And then last is, as we do in our Automotive business, we're just looking constantly at tools that will help us optimize our pricing approach and pricing strategies.

Understood guys. Thank you so much for that.

You’re Welcome. Thanks Matt.

Our next question comes from the line of Elizabeth Suzuki with Bank of America Merrill Lynch. Please proceed with your question.

Just one question on, as we look out to next year and you guys start to do your planning, and do you think there's any reason to believe that if we have a normal winter that demand would for some reason be slowing in 2019 in the auto business particularly versus 2018? I mean, anything in like the macro or demographics that you're seeing, fleet of vehicles that you think is – would be cause for a concern on the demand side.

Elizabeth, thanks for your question, and no, there is nothing on the horizon that would suggest that we should see a slowdown in our parts business here in the U.S. If anything, we think some of the tailwinds that we'll get from the car park – the aging of the car park as we further distance ourselves from 2008 and 2009 will actually be a benefit. So you started out with assuming we have normal weather, that's always an impact. We'll just – we'll continue to hope for the best. But no, they are – we are bullish on our parts business here in the U.S. and expect to see it to continue to perform well.

Great. Thanks.

You’re welcome

Our next question comes from the line of Seth Basham with Wedbush. Please proceed with your question.

My first question is on the gross margins. Another good performance, of course, driven by AAG. I was hoping you could quantify the contribution of the gross margin increase from AAG as well as the gross margin improvement in the U.S. auto businesses?

Yes. So what I would speak to on gross margin, if you strip out the impact of AAG, our gross margin in the quarter was up probably 20 to 25 basis points. And I would say that, that came from a combination of the Industrial improvement that I talked about earlier and also the U.S. Automotive improvement as well. Now these are being offset by a decline on the Business Products side, which is primarily related to the mix issues that we've faced basically all year. So our core gross profit, again, has been up pretty consistently for a couple of quarters, and we would expect to be able to continue to see improvement there.

Got it. So with Industrial up 40 bps or so, that would suggest the U.S. Automotive business is probably up somewhere in the 20 bps range year-over-year for the quarter?

Yes, that's a fair estimate.

All right, great. Thank you. And then secondly, as we think about the impact of tariffs, you guys mentioned that you expect to be able to pass along any tariffs that you – the price increases related to tariffs going forward. Could you give us some perspective on if you've already started raising prices as a result of tariffs and if you've been able to recoup all those costs?

Yes. So I think the first comment I mentioned is on the Industrial side. You saw pretty heavy inflation that they've seen year-to-date, 3.2%. That – some of that is indirectly tariff-related because there are a number of – there are manufacturing partners that have materials and components from China that could be part of their final products. So there is some implied tariff that's in the Industrial business, and we talked about passing that through and there is a little bit of a lag there. But as it relates to the Automotive side and Business Products, I mean, through the nine months, we would say that there was minimal impact of tariffs. As you know, the more significant tariff, the List 3 came into effect the last quarter – for the last week in September. So as we look ahead on that, we would expect to be working, and we have been working very closely with our suppliers, and our intention would be to pass those along to the customer.

Seth, I would just add a couple of comments to what Carol said. One of the things that doesn't get talked about much as we discussed tariffs, there's a positive outcome to the situation with tariffs as well and that's for Motion. If you recall, one of our top- performing business segments this past quarter is an iron and steel. We've got mills coming back up online in the U.S., and those are a few of our biggest customers promotion. So that business is benefiting from the tariffs, continues to do very, very well. But at the end of the day, Seth, our expectation is that we will pass along the price increases as we have in the past. But I would also tell you that we'll monitor the situation very closely. We'll watch we are lining up competitively in the marketplace and we'll respond accordingly.

Got it. And just a follow-up on that Paul. I think you guys have mentioned some 40% of your U.S. auto COGS are from China. As a mitigation strategy, would you look to find other sources for some of those products coming from China?

Yes, we would, Seth. And I would just say that the 40% is our total amount of our imports coming into the Automotive parts group. We would say, directly out of China is closer to sort of 20%. But as I said, we'll continue to monitor it, and if we have to look for alternative sources, we will do so. The advantage of having a extremely strong brand like NAPA is we can shift and we can shift very quickly to other countries and other sources if we find that we can't remain competitive in a particular market.

Got it. Thank you very much and good luck.

Your welcome.

Our next question comes from the line of Bret Jordan with Jefferies. Please proceed with your question.

Good morning guys. Question on AAG, and as you lever working capital, I guess, how have you done on an AP-to-inventory basis in Europe? And then, as you build in incremental businesses like the battery distribution, how do we think about maybe EBITDA margins looking out a year or two given the business mix?

Yes, so I'll start off with a working capital for AAG and just comment that our improvement in working capital in Q3 was completely driven by our core existing business, primarily Automotive, with the impact of extended terms with some of our U.S. vendors and then also more normalized level of purchasing. So we have not seen the impact of the working capital improvement, specifically for AAG. But having said that, we've got a number of things in process that we know that we will be able to achieve those synergies and the working capital improvement within the next – at the end of three years is what we've got out there. So we are certainly encouraged by the opportunities we have coming on working capital from AAG and know that there are opportunities there.

And then Bret, I would just – the second part of your question, with some of our acquisitions, our expectations is those will not be dilutive to our overall margins. And as you know, we've been quite active on the M&A front in Europe and we intend to continue to be. I think what has been encouraging for us in 2018 is our core growth, and we continue to see same-store sales in the core markets we currently compete in, in the 3% to 4% range. And that's been – that's honestly been very encouraging for us, and we expect that – and intend to keep that moving forward. We're excited with the acquisitions of both TMS and Platinum and then Hennig, which will be, we suspect, finalized in Q4. All three will be additive to AAG in 2019.

Okay. Great. And then one final question on the U.S. auto. You mentioned national accounts were strong. Have you picked up new national accounts? Or is this strength with existing national accounts? I'm just – I guess, the real question is, is your 3.2% U.S. comp, do you think that that's a share gain number? Or do you think that was sort of in line with the underlying market growth?

Well, I guess, Bret, we'll have to wait and see how the other public companies report. You never quite know for sure.

I was hoping you were going to tell us. That was the point.

When you're the first one out, you'll have to kind of wait and see. But look, we're pleased with the 3.2%, and as I said in my prepared remarks, Bret, our team has worked awfully, awfully hard, and it's great to see the turnaround and the continued sequential improvement in our same-store sales. I would just give you a little bit more color on our Major Account business. The growth that we're seeing, I called out our nationally-branded chain, they are doing well. Where we've seen a little bit of a softness is in some of our government business and a bit of our fleet business, and that's an opportunity for us to get that back on a growth curve in Q4 and on into 2019.

Okay great thank you.

Yes, you welcome.

Our next question comes from the line of Greg Melich with MoffettNathanson. Please proceed with your question.

Hi thanks and great quarter guys. I wanted to follow up on a couple of things. Carol, I think you mentioned that pressure was more in SG&A and actually freight cost showing up in SG&A. Is that the reason that the guidance actually was unchanged or trend a little bit at the top end despite sales being stronger? Was there anything else that sort of factored into that, the guidance shift calculation?

Yes. I'll just mention, and you're right, on the payroll and the freight, both of those in Q2 and also Q3 are growing at a pace much further than our sales. So if sales are growing without AAG 5%, freight and delivery is up something like 10%, 11% and payroll's up 6% or 7%. So you're certainly seeing that and we're expecting that to continue in Q4. The real modification, and again, we were pleased to be able to raise our sales guidance when we considered where we were thus far in nine months, consider the acquisitions. And then quite honestly, net of an FX headwinds, we are pleased to raise the sales guidance. We really just fine-tuned the earnings guidance based on where we are thus far. And look, FX had a negative impact of $0.02 in the quarter, and there may be a little bit more pressure in Q4. As I mentioned, we still have the pressures from payroll and freight. We called out a little bit of a corporate expense number, too. So just – really just narrowing, refining where we think we're going to be based on where we are through nine months.

Got it. And then Carol, another follow-up on the balance sheet, and then Paul, I had a strategy question. We're at a level now we have, I guess, 1.5 times debt to EBITDA, so plenty of ability to do other things. When the new lease accounting comes in, we get to back to around three times debt to EBITDA. Is that – do you think that's about a rough – add a little bit of over a turn when we think about the new standards? Or you haven't even looked at that yet?

Actually, if we – we're still looking at that. When you look at our minimum lease payments, which is something like $1.1 billion and when you add some of the other items that will go in there, you're probably fairly close. But quite honestly, as I think all companies probably facing this, I think there will be a consistent change in how everybody looks at this and whether everybody pulls it out and would start it without leases or it just adjust. But again, we – the idea is we have a reasonable level that we are at right now. We certainly have capacity and flexibility, and with our working capital improvement, we're really pleased with that. So I don't think the lease number is going to change the basic strategy of our capital allocation or debt or acquisition strategy.

Got it. And Paul, there's been a lot of – on the – you mentioned the retail side of the auto business. For the first time in a while, it's great to see do-it-for-me growing faster. But we have seen a lot of competitive shifts and actions going on this summer, and just this week, Advance doing a store within a store with Walmart. I'd like to just hear your opinion, if something like that would be interesting to sort of – or is it something that could put too much conflict with the do-it-for-me side of the business? Or are there other considerations that you think about if thinking about doing something like that?

Yes. Greg, as far as yesterday's announcement, it's a bit early for us to have any real specific reaction. We didn't really get any details as what their plan is or how the mechanics of this are going to work. What I would tell you from Genuine Parts Company and NAPA, what we are excited about and we'll continue to invest in is our own online initiatives and driving our omnichannel strategy. We launched an app online, which is our flagship here in the U.S. We're seeing over 0.5 million visits now per month. We have customers both click and collecting in our stores as well as having products shipped directly to home. We reached – recently launched in Australia. We've had over 3.5 million visits to our new site there, averaging 25,000 a day in terms of site visits. We launched in Canada as well. So we're focused on our omnichannel strategy. Greg, feel good about what we're doing, we feel good. And I'm glad you called out that our commercial businesses, which is our real focus. And when you think about the new sites and the announcements of yesterday, I think that's going to be more DIY-centric than it would ever be DIFM- type centric.

Got it, thanks a lot and good luck.

Thank you. Due to time constraints, our final question will come from the line of Chris Bottiglieri with Wolfe Research. Please proceed with your question.

Hi, thanks. I want to follow up on the 20% China. It was kind of lower than I was expecting. Is that just a direct source mix? Does that include Chinese sales from U.S. suppliers, the sourcing in China?

Yes, Chris. And again, I just want to be clear that what we gave out, so for our U.S. Automotive business, which, again, is probably about – if you look at our total cost of goods sold for the company, U.S. would be, say, 75% to 80%. When you look specifically at Automotive, we said 40% is directly sourced outside the U.S. and 20% of that would be China impacted by tariff. And so, as we work and look down through Industrial, as I mentioned, very, very small amount. It's more indirect. Office products, we would have something like 10% of their cost of goods sold that's subject to the Chinese tariffs, even though they source a lot more outside the U.S. There's products that aren't subject to it. So at the end of the day, when you look for GPC in total, you're talking about less than 10% of our cost of goods sold. In total, something more like maybe 7% or 8% that is impacted.

Chris, I would also – when you start to break it down on the Automotive side and you start to look at the various product categories that are impacted that we know of right now, you also need to look at what's not impacted. So our biggest categories, which I mentioned earlier, where we saw a significant growth in Q3, batteries, filters, oil and chemicals, none of those product categories are impacted by the tariffs. The tariffs, really, you're looking at undercar, some brake rotors friction, chassis-type product. So yes, it's impactful. We've got cross-functional teams working between our pricing groups, our sourcing groups, our product groups that are pouring through the data. And again, as I said in my earlier comments, our intention is that we will pass it through as we normally do, but we will also continue to monitor where we are from a competitive standpoint.

That's really helpful. And then, these numbers you've provided, are those just tariffs that have already been passed? Or does this include proposed tariffs that haven't officially been passed through yet?

So what we are talking about is the List three, the 10% tariff, about $200 billion in goods that just went into effect at the very end of September. And so what we're talking about is what is specifically impacted by the ones that have just been passed. And again, remember, there is – there was no really – no impact, virtually no impact on our business through the nine months.

Got you. That makes sense. And then just unrelated. So even an update on your U.S. fleet business. I would take like rig count and oil and kind of rebasing. Just want to get a sense for, how that business is performing? And to what extent that, that's contributing to your high levels of commercial comp growth?

Yes. I mentioned earlier, Chris, when I break down our Major Accounts business, you really got to get into the detail and look at the various segments. Our Major Accounts business was basically flat, down slightly in Q3. But our nationally-branded chains, all performed well in the quarter. Where we saw some – where we saw a bit of softness was in our fleets and some of our government business. So our team's working really hard to understand where some of that softness is coming from in the fleet business, and we're going to work really hard to turn that around in Q4 and heading into 2019.

Got you, that’s helpful. Thank you for the time.

Thank you. We have reached the end of the question-and-answer session. I would now like to turn the floor back over to management for closing comments.

Well, we want to thank each of you for listening to and participating in our earnings call today. And we look forward to reporting back to you with our Q4 results in February. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.