Good morning, ladies and gentlemen, and welcome to today's Monro Muffler Brake's Earnings Conference Call for the Third Quarter of Fiscal 2017. 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. As a reminder, ladies and gentlemen, this conference is being recorded and may not be reproduced in whole, or in part without permission from the company. At this time, I'd like to introduce Ms. Effie Veres of FTI Consulting. Please go ahead, ma'am.

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 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; Brian D'Ambrosia, 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, Effie. Good morning, and thank you for joining us on today's call. We are pleased that you are with us to discuss our third quarter 2017 performance. Today, we will start with a review of our third quarter results and update on our growth strategy, and then the outlook for the remainder of fiscal 2017. Then I'll turn the call over to Brian D'Ambrosia, our Chief Financial Officer, who will provide additional details on our financial results. Despite a difficult operating environment, the return of winter weather late in the third quarter, combined with our effective cost control and solid integration of recent acquisitions allowed us to achieve third quarter earnings at the midpoint of our guidance. Fiscal year-to-date, we've been able to capitalize on this challenging market and accelerate our acquisition and greenfield activity with the opening of 67 net new stores and the pending acquisition of 16 additional Car-X locations. Combined, these acquisitions represent $150 million in expected annualized sales and 16% sales growth. These acquisitions not only build a strong foundation for future profitability, but have also allowed us to add to our store footprint in new Southern markets. It is our ability to accelerate acquisition growth, particularly in tough years for the industry in our geographies that allows Monro to guide to flat earnings per share for the year despite negative comparable store sales, underscoring the strength of our business model. Turning to our third quarter results. Sales increased 21% to $288 million. Comparable store sales increased 2.3%, with sequential improvement month-to-month. Comps in October declined 4.1% and improved to negative 2% in November. And as mild weather gave way to snow in December, comparable store sales for the month in December increased by 11% when adjusted for one additional selling day in the month,…

Thanks, John. Sales for the quarter increased 20.6% and $49.3 million. New stores defined as stores opened or acquired after March 28, 2015, added $46.2 million, including sales of $43.8 million from fiscal 2016 and 2017 acquisitions. Comparable store sales increased 2.3%, partially offsetting this was a decrease in sales from closed stores of approximately $1.9 million. There were 90 selling days in the current quarter and 89 in the prior year third quarter. Adjusted for days, comparable store sales increased 1.1%. Year-to-date sales increased $54.9 million and 7.7%. New stores contributed $83.4 million of the increase including $77.1 million from fiscal 2016 and 2017 acquisitions. Largely offsetting this was a decrease in comparable store sales of 3.1%. Additionally, there was a decrease in sales from closed doors of approximately $6.5 million. In a limited number of transactions for the delivery of tires to national account customers, we received a delivery commission. Historically, we recorded these as a gross transaction in sales and cost of sales, netting to the amount of delivery commission in gross profit. We believe that net accounting is more appropriate for these transactions. Therefore, beginning in fiscal 2017, these transactions will be recorded on the sales line at the amount of the delivery commission. The impact of the adjustments, which lowered sales and cost of sales by equal amounts was $3.1 million and $7.4 million for the quarter and 9 months ended December 2016 respectively. These adjustments were not material to the comparable periods of the prior year or to previously disclosed comparable store sales percentages. There were 271 selling days for the first 9 months of this fiscal year and 270 last fiscal year. Adjusted for days, comparable store sales decreased 3.5%. At December 24, 2016, the company had 1,098 company-operated stores and 132 franchise…

Thank you. We'll go first to Bret Jordan of Jefferies.

Hey. Good afternoon, guys. It's David Kelley in for Bret this morning. Just wondering if you could provide some quick commentary on regional performance delta in January and February, maybe what you're seeing in Northern versus Southern markets, and if you've seen any change from December to January in some of your Southern stores that'll be great?

Sure. In January and February, the Southern markets continue to outperform. Obviously, when you look at our January and February of last year, we sold a lot of tires because we finally – last year we got a little bit of winter weather in January. So, that's really skewing the result I think. Overall, like we said, the South was flat for the quarter, in the third quarter, and that is with some impact early in that quarter in October from Hurricane Matthew, which impacted those stores primarily. So, for January and February I think those trends are continuing. The South is continuing to outperform.

Okay. Great. Thanks. And just a quick follow-up on that. You mentioned tires, any significant performance shifts in other specific categories? Just looking again kind of end of year or two, what we're seeing in January year-to-date?

Yeah. Sure. Well, and I called out during my prepared remarks that the brake category quarter-to-date in these first five weeks is positive. I think it's plus 2% on a positive last year, and that certainly is a much better run rate than what we saw earlier this fiscal year.

Okay Great. Perfect. And then one more and I'll pass it along. Any color on, I guess, some of the multiples you're seeing in the acquisition market, any significant changes there either up or down? That would be great as well.

No. In the 5 to 40 stores that we've talked about here where we have more than 10 NDAs still, we're not seeing any changes in the multiples. What I will say is that we do buy-off of trailing EBITDA. And in a year like this, trailing EBITDA is pressured. So, prices overall are reflecting that and getting better.

All right. Thank you. Appreciate the commentary.

Sure. Thank you.

We'll move next to Rick Nelson of Stephens.

Thanks. Good morning.

Good morning.

I'd like to follow-up on guidance for the fourth quarter, which implies EBITDA margin down about 100 basis points we're calculating. If you could tell us what the drivers are to that?

Yeah. It's simply deleveraged from the sales adjustment. The impact in the change in our guidance reflects the fact that we had anticipated a positive comp in the fourth quarter here, and given the start in January, we needed to revise that. So, it's just basically that impact. If you take that, that's basically a 3.5% comp store change, comp store sales change on the low-end and the high-end. And if you look at that versus the sort of $0.075 for every 1% comp for the year, you'll basically get $0.06 or $0.07 in that (38:18).

Got it. Thanks for that color, John. Also, I'd like to ask you about these tire price increases, so you said some of the manufacturers are trying to put through mid-single digit growth. Do you think those types of increases, do they stick? And if you could talk about your ability to pass those on to the consumer?

Sure. They certainly stick a lot less with the company that's growing their tire unit purchases by 25% like us. And the other thing is, we'll see what happens to commodities going forward. The increases in commodities kind of accelerated late in the calendar year. So, we'll see if that continues. In terms of passing them along, I think there's two things I would say is first, we will certainly try to pass any increases that we're seeing along, and I would expect competitors, particularly smaller competitors, to need to do that, given the choppy and more difficult operating environment. So, what we're looking for is if our costs go up less than theirs, and you try to pass it along, maybe we get some help from the margin side. But we'll have to see. In the past, if we were putting through price increases, we might be able to pass half of that along historically or half of the announced increases along. And if we do better on our increases, we'll look to protect first our gross profit in terms of dollars per tire, and then we'll look to see if we can manage cost to get some benefit there. But it will be a pressure that certainly wasn't there when we had this call in October.

I think back in October, you had talked about a $1 per unit cost advantage per tire.

Right. I mean, in this case, I'm not issuing guidance or maybe that might be more or like the best result as opposed to the base result going forward. I don't know, We'll certainly update at the end when we issue guidance for fiscal 2018. And we're working hard to make sure that our increase in unit purchases is going to pay-off for us and our stockholders.

All right, great. Hey, thanks a lot and good luck.

Thank you.

Up next from Oppenheimer, we'll hear from Brian Nagel. David Bellinger - Oppenheimer & Co., Inc.: Hi. This is David Bellinger on for Brian. I have a few quick questions. So, first on the January accounts being down about 7%. How should we interpret that, that bascially sales slowdown? Did a strong December shift sales at a January? And basically, how meaningful is January in terms of Q4? Are tires or other categories more pronounced versus other quarters?

Yeah. So, sure. I think the short story on January is that we were up against a big comp in the prior year, driven by some recovery of sales last year from a weak third quarter. And this year, we, certainly, had a big spike in December, and came in and saw some warmer weather throughout our markets in January. We haven't had much snow. And so I think running up against the high conflict we had last year, it's just – we gave most of that back. So, I think what's important as we pointed out is the February and March comparisons get much more favorable. February has started out in the first week at plus 1%, and so I expect that our trends should improve as the quarter goes forward. I talked about the brake category being positive, on positive sales last year. And I would expect we have some tire unit opportunity, particularly with some snow as the quarter moves on here. David Bellinger - Oppenheimer & Co., Inc.: Okay. And then just following-up on that. So, clearly a normalized winter ahead of – no real help to December comps. Just when you stacked it up to past winters, with the colder temperatures. I know it's tough to quantify. But in your opinion, could that December and winter period been harsh enough to propel and sort of a longer tail for auto services demand into the coming spring and summer months ahead?

Well, I think our comps were weak at the beginning of this fiscal year. So, we've at least gotten some winter weather during this winter. Not enough of it. Certainly, it would have been great had it come in November as well because that is the biggest tire selling month of the year. So, before I make predictions about next year, I would hope that we continue to see some cold weather and some snow, which gets plows out on the road and creates potholes. That really helps lay the groundwork for a strong first half of the year. I think regardless, I'm optimistic about the first half of the year next year, given the very favorable comparisons that we'll be up against. David Bellinger - Oppenheimer & Co., Inc.: Got it. I appreciate you taking my questions. Thanks, John.

Sure.

We'll go next to Matt Fassler of Goldman Sachs. Matthew J. Fassler - Goldman Sachs & Co.: Hello, and good morning too. I want to first revisit the question that Rick asked about EBIT margin, implied EBIT margin in the fourth quarter. We're just trying to process some of the guidance that you gave in interest and taxes and such. But it looks like you've got EBIT margin implied down about as much as you had it down in the first and second quarters during which period the comps were down substantially more than you're guiding down in Q4 in the March quarter. So, is there – and I know when you spoke about the acquisitions that have kind of different P&L geography, you suggested that they kind of have a similar operating margin end game. So, is there anything else that could be pressuring the operating margin relative to sales compared to the trends that we saw earlier in the year?

Yeah. I think there are a couple of things. First of all, the fourth quarter is the lowest sales quarter, and that's a piece of it. We – and the acquisitions are dilutive. It will be much more dilutive than the first two quarters. We purchased McGee and – during the first quarter, and then we purchased the much larger Clark business in this – where the results came in to our results for the first time in the third quarter. So, I think if you look at those, those really bridge the gap. Matthew J. Fassler - Goldman Sachs & Co.: And as you think about the seasonality of the tire business relative to (46:30) is obviously where the acquisitions are tilted relative to the rest of the business, is it more weighted away from Q4?

I'm sorry. The... Matthew J. Fassler - Goldman Sachs & Co.: Is the seasonality of the tire business even more extreme than the rest of the business, whether that works against Q4 profitability?

No. I mean, in terms of the tire business, we said that the biggest driver of the tire business within our markets is winter weather, particularly as you hit Q3 and Q4. Matthew J. Fassler - Goldman Sachs & Co.: Yeah.

Q3, I view that as the sort of peak of seasonality related to that business with Q4 sort of close behind there. So, yes, if we get more snow, I expect that to be a positive for the remainder of the quarter here. Matthew J. Fassler - Goldman Sachs & Co.: Got it. Second question, just want to make sure I understand the impact of the day shift, I guess where the Christmas holiday fell. So, it sounds like it was included in that reported comp, though you did disclose the comp X, the extra day, which I guess is about a percentage point lower. It sounds like the month that you gave us, though, were adjusted. So, in other words, the day is out, and then, I guess one of the reasons there might have been a bigger difference between the total on the comp sales number. Would that have driven a bigger difference between the total on the comp sales number, or is that more the acquisitions that would have done so? Because it sounds like...

No. It's really – yeah. It's really the acquisitions. Matthew J. Fassler - Goldman Sachs & Co.: Got it. And...

Go ahead. Matthew J. Fassler - Goldman Sachs & Co.: And then my final question kind of moving past the extra day stuff, which I know can be banal, and I think you touched on this, John, just if you look at some of the government data on tire PPI and CPI, that had been favorable for you, at least theoretically so where you had a bit of a spread that should have been hopeful on margin. What's your expectation for tire margin as commodity costs are to move higher again?

Well, I guess it depends on – you're saying if commodity costs move higher, I guess, I would tell you what we said about the cost increases. If that – to the extent that that drives cost increases, it will drive lower cost increases for us, I would expect, because of our large volume and growing volumes. And we certainly run the business to maintain our margins, so we will certainly look to pass along those increases and maintain our pricing discipline as we have in the past. So I guess, I don't have any specific guidance around that but like everything that impacts the entire market, we ought to see some competitive advantage arise from it. Matthew J. Fassler - Goldman Sachs & Co.: Understood. Okay. Thank you so much. I appreciate it.

Sure.

From Consumer Edge, we'll go to Jamie Albertine. Please go ahead. Your line is open.

Great. Thanks and good morning, everyone. Just a quick housekeeping item. I noticed that your interest expense ticked up a little bit. I just want to make sure to ask you how we should think about that going forward, (50:22) of an elevated interest expense estimate flowing through the model, number one. Number two, more strategically, however you want to define it but, what percentage of your portfolio would you say today is Northeast relative to Mid-Atlantic and Southeast? And how quickly will that change over time with respect to acquisitions? Because it does seem like you always are active in the acquisition market but there are clearly aren't any sort of big one or two transaction items that can really shift that percentage quickly? So, if we were to sit here today and sort of model out the next two or three years, what's the percentage today? And how will that look like, in your opinion, in the coming year or two? Thanks.

Sure. Let me take the second question first. Right now, our comp base is a little over 80% what we call north, and a little under 20% in the South. So, obviously adding the majority of the acquisitions that we made are in the South, so that should probably – that will increase the Southern exposure there. From our perspective, looking out the next couple of years, I like the growth in the South, that's great, but we get so much operating leverage in all of the acquisitions that we complete that I don't want anyone to have the impression that we're not interested in doing acquisitions in any of our markets. That is a key piece of our strategy. But going forward, you should expect us to be active all throughout our markets and with a particular interest in the South, but not some kind of fundamental preference from this point forward. The other point that I would make along with that is when you look at dilution and dilution on the operating margin, in the year with big acquisitions, the basic approach that we have and part of our strategy or one of the results of our strategy is that we continue to add acquisitions and dilute the operating margin and then bring it back up as we integrate those acquisitions. So, this year, you're seeing that more markedly because we're in a year early in these acquisitions in the integration process where they're dilutive, but we have all the sales coming on. So, that is a dynamic that is something that we will continue to see. And I think it's not necessarily a good thing. But it's just a result of what I view as a great strategy that we've been able to execute. So, I want to make sure that – and that is a particular interest as we look at the fourth quarter here. We're going to have acquisitions that are dilutive because we're adding sales early in the integration process. On the interest expense, Brian will take that.

Yeah. So, the interest expense is up. The big driver of that is just the weighted-average debt outstanding that's $99 million higher than it was in the prior-year quarter. Debt, obviously, affected by the acquisitions, the debt that we incurred for borrowings for payment of the acquisitions, and also capital leases that we assumed as part of those acquisitions. So, that is not too difficult to model in terms of our typical pay-downs against future deals will affect the amount that we have outstanding related to that. So, the interest rate was less of an impact on it, only 20 basis points. But we are currently 100 basis points over LIBOR. So, any variability in LIBOR will affect our rate going forward.

Got it. Thank you, gentlemen, for both those answers. And just if I may, a quick follow-up on the strategic question, John. Can you provide an update, I know in prior calls we talked about how you're fulfilling your stores in the Southern part of the country, this was the Georgia and Florida markets from quite a distance. Can you just give us a little bit of an update as to how you're looking at investments into may be Southeastern distribution, or how we should think about the impact related to that in the coming quarters from whether it's a COGS or SG&A perspective, or a combination thereof that the impact to operating margin ahead of your potential investment in a closer distribution facility? Thanks.

Sure. You're right. We are distributing from a distance to those stores. As I've said previously, we are taking a look at opportunities for distribution centers somewhere potentially in the Florida market. And we said we were looking at that in the back half of this fiscal year. We're doing that. And I would – what I don't want to do is get out in front of that if we're going to be making an acquisition that might have some redundant warehouse space or availability there. So, we want to give some time for that. And I think what I've said previously is still the case. We're certainly not maximizing the cost of goods benefits, but I still believe that we need to be over 100 stores for a distribution center down there to pay-off. And so, we will be looking that over the next several months and updating as we issue our guidance for fiscal 2018.

Okay. Great. Thanks, again, and best of luck for the next quarter.

Thank you.

Moving on to Michael Montani of Evercore.

Hey, guys. Thanks for taking the question. Just wanted to ask if I could on the third quarter. Can you split out what's in the tire comp of plus 6%? What did you see in terms of price versus units in the quarter?

Sure. Units were up 8% and average ticket was down 2%. And that was...

Got it.

...mostly – it was mostly trade down some price.

Okay. Thank you. And then one quick one on Fair Labor Standards Act, which looks like we're able to avert, I guess, in December. Is that going to have any ongoing negative headwind because you all would have communicated that or are you able to avoid that potential expense step-up?

No. We did not roll out any changes there.

Okay.

We were – we want to see what any final rules are before we go changing pay plans. We don't like to change pay plans on people.

Got it. And then, I guess, the last one was a bit of housekeeping, but just can you give us a mix of percentage of revenue by category for the quarter?

Sure. For the combined – for the company, brakes was 12%, steering was 9%, tires was 52%, and maintenance was 26%. The difference is exhaust, but it should be about 2%.

Got it. Thank you.

Yes.

From KeyBanc, we'll go next to Brett Hoselton. Please go ahead.

Good morning, gentlemen.

Good morning.

Could you please comment on your tire mix shift to lower margin tires? Is that a management strategy, or is that simply a result of consumer preference?

It's really consumer preference. As we've said in the past, what we've done over the last couple years is broaden our assortment. And we've done that in part with increased lines of import tires. But, we broaden that assortment to provide consumers choice, good value for them where we are able to make good gross profit dollars per tire. And really, more than anything, it's consumer choice.

And then on the tire pricing front, to-date, you haven't seen any impact of tire pricing in the most recent quarter and through January. Is that a fair statement?

You mean retail?

Yes. Yeah. Well, in terms of – tire pricing in terms of the sell-in.

Yeah. At retail to consumer, we haven't seen any significant changes really from recent trend. In terms of sell-in to dealers or to tire dealers in the industry, I would expect January sell-in there, so many manufacturer sells to maybe reflect the fact that that some companies, including ours, are trying to make sure that they buy ahead of any cost increases that are coming to them.

Okay. Fair enough. Thank you, John. I appreciate it.

Sure. Thank you.

Moving on to Carolina Jolly of Gabelli. A. Carolina Jolly - Gabelli & Co.: Good morning. Thanks for taking my call.

Sure. A. Carolina Jolly - Gabelli & Co.: I know we had spoken about in the past that some of your acquisitions cannibalized some of your revenues. Is that built into your current comps?

I think that is the dynamic that we see in specific markets where we're buying businesses that – and we really saturate the market. Certainly, it wasn't a huge impact in the past quarter. In the past quarter, I think what we said is that our business in the winter reacts to snow, and that was sort of proven in spades in the quarter. A. Carolina Jolly - Gabelli & Co.: And then also -

Yeah. This is Rob. Carolina, we're not going to blame weak comps, on facility and grabbing market share, making more money in a market. It's just an edge on but if you add 10% of the acquisition growth, one year, and additional 10%, a year before, and knows they're working their way into the system and operating margins, it's going to have some slight negative drag. A. Carolina Jolly - Gabelli & Co.: Okay. Thanks.

But we own our weak comps.

And that does conclude today's question-and-answer session. At this time, I'd like to turn the call back over to Mr. John Van Heel for closing remarks.

Thank you all for your time this morning. In this choppy market, we're focused on driving profitable sales. At the same time, we're aggressively expanding our business through acquisition, laying the groundwork for sales and earnings growth next year and beyond. As always, we appreciate your support and our team who works to provide outstanding service to our customers every day. Thanks again, and have a great day.

And again, that does conclude today's conference. We thank you all for joining.