Good morning, ladies and gentlemen, and welcome to the Monro Muffler Brake Second Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) This conference is being recorded and may not be reproduced in whole or in part without permission from the company. I would now like to introduce Ms. Jennifer Milan of FTI Consulting. 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 cost 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 in this call does not constitute an admission by Monro or any other person that the events or circumstances described in such statements are material. Joining us for this morning’s call from management are John Van Heel, President and Chief Executive Officer; Cathy D’Amico, Chief Financial Officer; and Rob Gross, Executive Chairman. With these formalities out of the way, I’d like to turn the call over to John Van Heel. John, you may begin.

Thanks, Jen. Good morning and thank you for joining us on today’s call. We are pleased that you are with us to discuss our second quarter fiscal 2014 performance. After some brief opening remarks, I will review our quarterly performance then provide you with an update on our key initiatives and 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. Similar to our performance in the first quarter our strong business model enabled us to deliver sales and net income growth of 16% and 18% respectively in the second quarter. We are disappointed in our top line results which remained weaker in the second quarter than we had hoped. However we were able to deliver bottom line results within our guidance range with improvement in operating margin and continued out-performance of our recent acquisitions despite what remains a choppy sales environment. This performance is the result of our team’s consistent execution of our proven strategy and the initiatives that continue to enable us to lead our industry in both strong and weak markets. During our second quarter we delivered on our key objectives of benefiting from lower material cost, controlling operating expenses, generating strong sales and earnings contributions from our recent acquisitions and capitalizing on opportunities to complete additional acquisitions at attractive prices. As we look to the second half of fiscal 2014, we expect these positive trends to grow. However, the macro environment and retail environment remained weak during the quarter and continued to negatively influence consumer purchasing behavior with uncertainty increasing and consumer confidence decreasing. We continued to see consumers defer significant purchases and trade-down focusing on repairs that can no longer be put off. Given this…

Thank you very much (Operator Instructions) And we go first to Bret Jordan of BB&T Capital Markets. Bret Jordan – BB&T Capital Markets: Good morning. A couple of quick questions here. And John, I guess if you look at the tire category and you look at the markets that you’re in geographically, how do your volumes appear to stack up to the market as a whole?

Looking at all of the NDAs that we had signed, you know I think our – you know our experience is hanging in there with what I see in the markets. Bret Jordan – BB&T Capital Markets: Okay, and I guess what was the mix of branded versus the import product in the third – in the second quarter?

Import at 30%. Bret Jordan – BB&T Capital Markets: Okay. And I guess, in the commentary, you were talking about tire costs down meaningfully, could you give us sort of a handle on what we look at right now buying -- what the year-over-year reduction in branded versus import pricing might be?

We, well the import we – we talked about 15% to 20%, and you know on the branded side you know we – we had been in the 5% to 8% range. We are now much more close to that 8% range across the Board. Bret Jordan – BB&T Capital Markets: Okay, great and then I guess one question, I guess, if you look at the exhaust category which is sort of an outlier, what’s the average vehicle age when you’re doing exhaust replacement, that seems like a fairly long-life product, and maybe sort of an average transaction expense on that if people are…?

Yeah on… Bret Jordan – BB&T Capital Markets: Are people investing a large -- yeah, go ahead.

On average, that’s 11, 12 years. Bret Jordan – BB&T Capital Markets: Okay, and what’s the average ticket on in the exhaust, is that sort of an indicator that people are planning to maintain these aged cars because they are making a large investment?

Yes. Bret Jordan – BB&T Capital Markets: Is that fair to think of it that way?

Yeah several hundred dollars, I mean there – it’s an investment. Bret Jordan – BB&T Capital Markets: Okay. All right. And as far as the NDAs, how many of them are signed now?

Excuse me? Bret Jordan – BB&T Capital Markets: How many?

We have 6, we have 6 NDAs right now. Bret Jordan – BB&T Capital Markets: Okay and one last question, can you give us a feeling for the size ranges of those prospective deals?

They are the same 5 to 40 store chain. Bret Jordan – BB&T Capital Markets: Okay, great. Thank you.

Sure. Thank you.

Our next question comes from Scott Stember with Sidoti & Company. Scott Stember – Sidoti & Company: Good morning.

Good morning.

Hey Scott. Scott Stember – Sidoti & Company: Can you give what the sales were by months on a percentage basis?

Sure, the comp sales by months? Scott Stember – Sidoti & Company: Yes.

July was – July was down [four tenths], August was down [2.8%], September was down [3.2%]. Scott Stember – Sidoti & Company: Got you. And just going back to the tire segment, could you talk about what some of the competitors in the market are doing, if you are seeing some -- getting a little bit more aggressive on pricing as everybody is waiting for the units to come back into the market, and just talk about the condition of these tires as they’re coming in, and I imagine that there – they’ve got to be really excessively worn, and at some point we have to see some kind of churn here?

Yeah, to take your second point first, the tires that we continue to see in our base are more and more than what we’ve seen over the past several years. So, that trend is still in place. From a more broad competitive perspective, I don’t see significant changes in the broad market from Q1 to Q2, there was – there has been some pricing pressure, but that existed in our first quarter as it did in our second quarter. We did a little bit better job of managing that in the second quarter which was part of our margin improvement. But I don’t see significant changes from what we saw even earlier in the year when our units were up 4%. Scott Stember – Sidoti & Company: Okay, and you know -- just you know – with the condition of the tires as you said continuing to get worse, just trying to figure out what the – what the rub point is with customers, I mean these are safety items right as are brakes?

Yeah. Scott Stember – Sidoti & Company: And we’ve seen brakes come back at some point. Just trying to figure out what really the difference here is between tires and brakes as they are both pretty high dollar items?

Yeah – you’re right, they’re both higher ticket items. We saw strength in the tire units in Q1 particular – particularly the earlier part of Q1, maybe off winter, some folks before the driving season starts needed to replace some tires, we had some strength there. And I – the weakness that we saw in the last couple of months, I think probably ties into people looking to buy those tires that they need just before the winter season here which we’re coming up on in November so. There – in the middle, there you had our service business which was basically flat in the first quarter and strengthened somewhat in the second quarter and those are safety items. So, I think winter is a real catalyst on the tire side of the business, and I think that’s the difference. Scott Stember – Sidoti & Company: Alright just last question. You talked about the import tires being about 30% of the mix. Where was that versus a year ago and sequentially versus the first quarter of this year?

It was in the mid-20s a year ago and about 27.5 in the first quarter, high 20s.

And that’s like double, this is Rob, double over the last three years going from 15% to 30% unit so that’s what’s also going on with tires is the high price people are trading down. And we’re seeing people with tires who can buy two tires instead of four and avoid some of those things. So, I think that continues to put pressure on tires. Scott Stember – Sidoti & Company: Got you. That’s all I have. Thank you. Cathy D’Amico: Thank you.

Thank you.

We move now to Michael Montani with ISI Group. Michael Montani – ISI Group: Hey guys thanks for taking the question. I was going to ask first a house keeping question just on mix. Can you share the category mix that you had this quarter as a percentage of sales?

Sure, so for the quarter tires were 42, tires were 43, maintenance was 28, brakes was 16, exhaust was 4 and steering was 9. Michael Montani – ISI Group: Okay thanks. And then just looking at the down two comp for this quarter, it looks like oil changes up around two. Is it safe to think overall traffic is positive probably somewhere around the same level?

Overall traffic is slightly negative. Again we had – the service business was stronger, the tire business was weaker. Michael Montani – ISI Group: Okay. One thing we’ve been thinking through is just some of the impact of the debate and the issues in Washington and it looks like may be we’re getting some component of resolution. You guys obviously have pretty high exposure to those markets given DC and then also Albany and so forth. So, is there any more recent improvement that you’ve seen is this, it looks like we have at least a near term resolution, how are you guys thinking about that?

Yeah we definitely saw new tact on those areas in our sales and I mean the improvement is the change in that situation is pretty new. We’ve seen some slight improvement but definitely that uncertainty did impact us.

We think that everyone getting unemployment and back pay there should be an inflow of cash flow. Michael Montani – ISI Group: Right, sounds good. Okay and then I guess just the last thing is looking at tires I guess down six I think you said units down three. Can you just tell us what the price and the mix what those were this quarter? Thank you?

Yeah there is a chunk of each of those in there. This quarter with the movement in the import tires the mix to import tires and some of that trade down is a little bit bigger of a peak that also ties into the continued aging of the vehicle and into the margin improvement. But in the first quarter it’s a little bit flipped little bit more price little less mix. Michael Montani – ISI Group: Okay. Thank you.

Sure.

Thank you. Cathy D’Amico: Thank you.

(Operator Instructions) We move now to Peter Keith with Piper Jaffray. Peter Keith – Piper Jaffray: Hi good morning everyone. Looking at the core gross margin trend I think you sighted it was up 150 basis points so that was a nice change from flat in the first quarter. Was that something that as we look forward in tire pricing is they’re still kind of cycling through some of that lower cost inventory? Should that core gross margin trends kind of hold steady exclusive of mix or do you think that can improve in the back of the year?

We’re very careful improve versus prior year but sequentially remember we saw a lot more tires in Q3 so that’s going to put pressure on gross margins being tires are still low as gross margin percentage. But Q3 and Q4 gross margin but more importantly overall operating margin will continue to accelerate of what you saw in Q2 just based on the accretiveness of the deals, the average leverage we’ll get from sales and the lag effect of import tire costs making their way their cost to goods. Peter Keith – Piper Jaffray: Okay thanks Rob. That’s what I was getting at the lag effect that was the lower import cost is that still kind of ramping up as a benefit that you haven’t seen a full effect of?

Yeah we still have a way, a little way to go on that yes. Peter Keith – Piper Jaffray: Okay good. And just go back to the last question on the ASP pressure on tires has been pretty consistent at about down 3% year-on-year for Q1, Q2 another mix shift is difficult to predict. But do you have any forecast in terms of when pricing pressure or ASP on tires would kind of normalize?

Well I think you had the tariff come off in October of 2012 so we’ve had some pricing pressure since that point more – more related to the start of this year. So, we’re going to be anniversarying some of that in the next year after the next six months. So, I think that it’s probably more of a short term impact. Peter Keith – Piper Jaffray: Related to tires in terms of heavy acquisition activity from last year. What is the year-on-year sales trend look like in some of those acquired chains is that – I guess I’m wondering is that comp trend that out performing or underperforming the legacy Monro stores?

We typically don’t, this is Rob. We don’t comment on the acquisition sales run rate. What we do say is that typically we plan for anything we take over the first six months that the disruption and the change assistance will negatively impact their sales get back some of that in the second six months and then those chain will continue to run at whatever Monro is running and I think that holds true. Peter Keith – Piper Jaffray: Okay – but I was going to kind of follow on with that. So, the big chunk of acquire stores should enter your comp base in Q1 if I’m not mistaken I guess I’m trying to get at if there, if we should anticipate for modeling purposes that’s going to accretive to comp or dilutive to comp?

I think it will be neutral to comp.

Yeah but they will come in with fiscal 2015 all the fiscal 2013 acquisitions will enter comp in April. Peter Keith – Piper Jaffray: Correct, right, okay great. One last question for you then, with the historic accretion at this acquisition side provided you guys have been pretty clear on that on the $0.08 to $0.10 of there is 10% acquisition growth. With this the current comp just given the heavily concentrated tires and you’re seeing better margin dynamics in tires because of the lower cost. Would those acquisition type potential would be more accretive looking out to the next two years then perhaps historical acquisitions?

Yeah, I mean certainly we see some potential for that. One of the important aspects of the acquisitions last year was that we bought them at the highest point of tire cost and when we knew regarding especially the big chunk in November and December of last year that tire costs were starting to reverse. So, I expect the help under tire cost to continue through this year in the next year and that will absolutely continue to benefit those acquisitions and base business. Peter Keith – Piper Jaffray: Okay, thanks for the feedback and good luck [hitting] the quarter.

Thank you.

We now take a follow up question from Bret Jordan with BB&T Capital Markets. Bret Jordan – BB&T Capital Markets: Yeah John I guess on that tire cost environment over down I guess between 8% and 20% depending upon branded or import, where do you think we are in the trend of decreases how much left is there to take out? And I guess a follow up question, September being one of the key times you generally take price would you take prices up in any categories this September?

I’ll take your second question first. We’re putting a 1% increase in the service side of the business through in our third quarter here. And on the tire side we continue to manage to collect more sequentially so that’s – its somewhere in the same region about 1%.

Yeah and I guess we think the shift in mix to private label forgetting about the consumer is really being driven from the value equation of the direct imports having to reduce their prices 15% to 20% and the branded guys holding out at the 8% level. So the spread between the first year branded and the import has expanded and the customers going for value I guess the better question would be when do the branded guys to decide not to give up market share. Bret Jordan – BB&T Capital Markets: But your feeling would be there is more room to move to the downside on input cost? The price is coming and the fact is…

Yeah I mean I think there is room to continue to move down particularly in the marketing general I think there is additional room. And we still have not squeezed everything we can out of the significant increase in volume that we had from the acquisitions that we did last year and are continuing to do this year. So, I think we have as a key piece of our strategy a leg up on everybody else in that regard. Bret Jordan – BB&T Capital Markets: Okay. And then I guess one last question on tires, if you managed to move pricing up in the area of 1% with mix, is it easier to move pricing on the imports because they’re harder to price check against comparable brands since there is not a lot of comparable brand out there I know you’re sort of topping out on branded pricing which you’ve got flexibility on the import or do you see upside in both?

No, I mean I think we’ll see where the competitive environment takes us. But we’re certainly going to continue to operate our business for profitability and we’re not going, we’re going to continue with our position as not being the lowest guy out there and being up to 5% higher. So, we’ll continue to push that in all segments. Bret Jordan – BB&T Capital Markets: Alright, great. Thank you.

Thank you.

(Operator Instructions) We move next to Quinton Mathews with QKM, L.L.C. Quinton Mathews – QKM, L.L.C: Good morning, thank you for taking my question.

No problem. Quinton Mathews – QKM, L.L.C: How are you? A follow -up on two questions ago was asked about possible improvement on the tire acquisitions from gross margins so none of that just to be clear none of the $0.08 to $0.10 accretion that you guys see on 10% acquisition growth? Anticipate any of that improvement that you would see from buying the tire acquisitions or entire cost were the highest that’s not included in the $0.08 to $0.10 accretion at all?

No that is included. What gets not included is every acquisition we do when we talk about the accretiveness, its fully loaded and its full of our P&L, the any additional benefits to the company that comes from leveraging SG&A or a corporate G&A or our buying power getting better and there is on the company side and that’s a piece of why 2% to 2.5% comps which is normally our requirement overcome inflation. This year it’s going to be somewhere between meeting a 0 to -1 to accomplish the same overall accretion, accretiveness. Quinton Mathews – QKM, L.L.C: Understood, understood. Okay, and then last one. You guys, congratulations you guys have been doing well in executing on the acquisitions. When I look at the five year goal and then I look back and correct me if I’m wrong. If I look back over the last decade I don’t think that there was a five year period where you guys compounded your sales at a 15% rate over any five year period. And arguably had the best period of time going into the recession when everybody was delay in buying new cars and again kind of that arguably are coming on tougher period of time at least comp. So what is that you see now is it a change in environment the acquisitions are going to be heavy over the next couple of years because comps are down a bit, what is that you see that you can achieve higher revenue growth over the next five years than you’ve been able to do in the past given some of the headwinds that may be out there?

Well, again the headwinds that you’re talking about new car sales hitting $16 million we were in positive comps for nine years when new car sales did run $16 million. We also if you want to go back beyond our weak last year and our mediocre this year we’re coming off a period in our markets where we were in three straight years averaging 6% comps coming out averaging I think for those three years if you include the acquisitions for last year and close to 15% acquisition growth. So I guess it depends on what period you want to slice this thing for. We’re certainly bigger, we’re financially healthier the further you go back in our cycle remember we started this thing at a $60 million market cap company that was going through restructuring many years ago. So, I guess it’s time and when you pick your party and if you start from year 2000 and look at a compound annual growth rate on the bottom line I think it’s right around 20%. And I think as John said we run the business for profitability and we will continue to do so. We’ll have years of better than sustainable comps like we did in 2009 through 2011 which will generate 30% bottom line growth and I’d like to say we’re not going to have another total [crap] year like we did in 2012. But I don’t know how you project what’s going on in the market place and the minus six comps and the highest tire cost ever in two years of declining tire units over the last 60 back-to-back and anticipate that after 11 straining years of comp increases.

I would just add to that, that over the last several years we certainly build more competencies internally here to be able to make more acquisitions in any one year than we had in the past. So, we’ve developed that piece of the puzzle out and I see a significant opportunity going forward to continue very, very healthy acquisition growth. Quinton Mathews – QKM, L.L.C: Okay sounds great. So if the – if the comps aren’t there it should be easier to buy and…

Yeah. Quinton Mathews – QKM, L.L.C: And if we unfortunately went through a two or three year period where comps were flat you could get like 15% growth through acquisitions you believe because you’ve got a better – you better would acquire it now than you were five, 10 years ago?

Yeah I mean we saw that’s going to level off over a five year period but take the worst year we ever had from an earnings perspective which was last year and we ended up growing sales by 22% if you include a 6% down comp with the acquisition fees. So, it’s a five year period it averages we’re much more concerned about consistently doubling the earnings every five year. And again I think we’ve successfully done that over the last 14 which it was a pretty good run rate. Quinton Mathews – QKM, L.L.C: Very good. Well I appreciate it guys. Thank you very much and good luck.

Thanks.

Thank you.

And that concludes our question and answer session. I’d like to turn the conference back over to our speakers for any additional or closing remarks.

Sure. I’d like to thank everyone for your time this morning. We’re making a lot of progress on margins and acquisition in the choppy sales environment. We’re encouraged by the recent uptake in our service business and are hopeful that winter brings upside in sales. We appreciate your continued support and we certainly appreciate all the efforts from our employees that are working hard to take care of our customer every day. Thank you and have a great day.

Ladies and gentleman that concludes today’s conference. Once again thank you everyone for joining us.