Welcome to the Advance Auto Parts Second Quarter 2013 Conference Call. [Operator Instructions] Also, today's conference is being recorded. Before we begin, Kevin Quinn, Vice President, Finance, will make a brief statement concerning forward-looking statements that will be made on this call.

Thank you for joining us on today's call. I would like to remind you that our comments today contain forward-looking statements we intend to be covered by, and we claim the protection under, the Safe Harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address future events, developments or results and typically use words such as believe, anticipate, expect, intend, will, plan, forecast, outlook or estimate, and are subject to risks, uncertainties and assumptions that may cause our results to differ materially, including competitive pressures, demand for the company's products, the economy in general, consumer debt levels, dependence on foreign suppliers, the weather, business interruptions and other factors disclosed in the company's 10-K for the fiscal year ended December 29, 2012, and other documents the company files from time to time with the Securities and Exchange Commission. The company intends these forward-looking statements to speak only as of the time of this conference call and does not undertake to update or revise them as more information becomes available. The reconciliation of non-GAAP financial measures mentioned on the call with the corresponding GAAP measures are described in our earnings release and our SEC filings, which can be found in our website at advanceautoparts.com. For planning purposes, our third quarter 2013 earnings release is scheduled for October 31 before the market opens, and our quarterly conference call is scheduled for the morning of Thursday, October 31, 2013. To be notified of dates of future earnings reports, you can sign up through the Investor Relations website. Finally, a replay of this call will be made available on our website for 1 year. Now let me turn the call over to Darren Jackson, our Chief Executive Officer. Darren?

Thanks, Kevin. Good morning, everyone. Welcome to our second quarter conference call. And I'd like to start off by thanking our 54,000 team members for their hard work and dedication as we continue to strive to better serve our customers and grow our business. Joining me on the call today is our President, George Sherman, who'll provide you with an update on our 2013 priorities; and Mike Norona, our Chief Financial Officer, who will update you on our financials. While we are pleased with our nearly 100 basis point gain in operating income rate achieved in the quarter, which resulted from improvement in our gross profit rate and more disciplined expense control, we are disappointed with our comparable store sales performance. As we shared with you on the first quarter call, despite our positive start to the second quarter, our sales outlook remained guarded to ensure the sustainability of yearly trends. Shortly after the call, our sales softened and the weakness continued throughout the rest of the quarter, leading to a comparable store sales decline of 0.3%. Our comparable store sales decline was driven by our DIY business and partially offset by an increase in our commercial sales. While our sales were softer than expected in the quarter, we believe that the long-term fundamentals of the industry remain positive. Some of these factors include the increasing age of vehicles, which are now over 11 years, with 70% of those vehicles over 7 years old, stabilizing gas prices and increasing number of miles driven. However, as we discussed last quarter, we are still dealing with several unfavorable macro factors, including more consumers contemplating the purchase of new vehicles, which creates some short-term volatility as consumers are selective about how much more money to spend on aging vehicles. The economy also remains…

Thanks, Darren, and good morning, everyone. I, too, would like to thank our over 54,000 team members for their commitment to customer service while making strides in our 2013 priorities during the quarter. During my first 90 days, I had the opportunity to visit stores in many markets, visit with Commercial customers and also spend time with our support staff at our offices. I'm excited at the potential I see in our team members and customers. Realizing the potential of each and every team member and customer will be critical to our success in 2013 and beyond. I'll now provide you with an update in our 5 key priorities that support our 2013 objectives of growth and focus on the fundamentals. First, growing our Commercial business through improved levels of delivery, speed and reliability and increased customer retention and share wallet with national and regional customers. Our delivery speeds continue to improve across-the-board, and commercial credit penetration continues to grow as a result of our insource credit program. We're proud to be able to add Goodyear to our growing national accounts base, and we're continuing to grow our national accounts. We also saw double-digit growth in our national and regional accounts during second quarter, which is a critical component of our Commercial growth strategy. While B2B e-commerce business is up roughly 40% in the quarter, and we continue to be pleased with the industry-leading e-services offerings we have for our Commercial customers. As a result of these efforts, we saw positive comp store sales gains in our Commercial sales. When including the acquired BWP stores, our mix of business in Commercial during the quarter grew to 40.3% versus 38.1% during the second quarter of 2012. Second, improving our local market availability. Our work continues to increase the number of hubs…

Thanks, George, and good morning, everyone. I'd like to start by thanking all of our talented team members for their continued efforts to improve our business and serve our customers as we navigated through our second quarter. I plan to cover the following topics with you this morning: 1, provide some financial highlights from our second quarter of 2013; 2, put our second quarter results into context with our expectations and key financial dimensions we use to measure our performance; and 3, provide some insights on the remainder of 2013. As we shared on our first quarter earnings call, we were encouraged with the strong start we had to our second quarter, and we were somewhat tempered with our sales expectations. Looking forward, as we were unclear of how much of our strong start was the result of a bounceback from the delayed spring versus a fundamental rebound in consumer demand. We are not satisfied with our second quarter comp sales performance, which softened in the final 6 weeks of the quarter after tracking up 2% in the first 6 weeks. We believe this softness was the result of record levels of precipitation in our core markets and a continued challenging macroeconomic environment on our consumer, such as increased payroll taxes. While we are disappointed with negative comps sales, our operating profits grew 15.1% versus second quarter last year and exceeded expectations, driven by both an increase in gross profit rate and disciplined expense management, which led to a 98 basis point increase in our operating income rate of 12.6% for the quarter as we work towards our longer-term operating margin goal of 12%. We remain focused on influencing the things that are in our direct control and positioning our company for longer-term growth and profitability by maintaining our strategic…

[Operator Instructions] The first question today is from Matt Fassler with Goldman Sachs.

I've got, I guess, 1 or 2 quick ones. First, I just want to make sure we understand the impact of the inventory accumulation on gross margin. Some of the companies we've dealt with, including, I think, U-Haul a couple of years ago, from time to time get some benefit from UNICAP when the inventory's up to a greater degree in sales, I guess, having to do with timing of capitalizing versus expensing distribution. Has this been and is it a factor for you as we think about gross margin here in Q2?

Matt, it's Michael Norona. No, it wasn't. If you're referring to LIFO, LIFO was actually a little bit of a headwind, a little bit of an expense for us in the quarter, but it was offset by some of the other things that we adjust prices and things like that. But, no, inventory and LIFO had no impact on our gross margin during the quarter.

True. A fair amount of the inventory build, Mike, is, you got to put into it, Matt, BWP in the quarter. Our new store count year-over-year is up 175 and Remington in the quarter. So I think when you get down to the core Advance inventory growth, it's nominal in terms of inventory growth for the quarter.

Yes, Matt. The inventory growth in the quarter was 14.8% for the areas, primarily driven by the areas that Darren just talk about. And we expect that to normalize throughout the year and the growth at the end of the year will be more modest.

Okay. And my second question relates to costs. Clearly, your operating margin is outperforming expectations, as your sales, to some degree, underperformed, I think, your own expectations. And Darren, you referred in your comments to perhaps some of your cost cuts having weighed on sales. I know you have a 12% margin bogey and that seems to be the driving force behind your strategic direction. Given that the top line is lagging a bit, are you considering perhaps reinvesting a bit more? And do you think incremental expense dollars would help the top line story?

Yes. Matt, that's a natural question. It's certainly a question for us. I would say this -- what's important is staying consistent with our team, as we shared with you and many that we went into this year focused on consistency and profitable sales growth. As you go to achieve that pool, there will be cuts that you make in certain parts of the business. Honestly, where you give up the sales dollar but you save an expense dollar, and that the profitability of the company improves a bit for us. We know we have gaps relative to some of our competitors in the industry. And so we're trying to do that very thoughtfully. And in my comments, there was as many expense dollar takeouts in, what I would say, the store support center, the regional field infrastructure. And as we think about the stores, our field organization, one of our focuses is a proxy organization where do we have productivity opportunities, and that really is location by location and, in many ways, team member by team member. There's no doubt in my mind that, as we make some of those adjustments, and you have to go through that process, we're going to give up some sales momentum in parts of the business. That being said, the other thing that we're growing through is that, in the last 12 months, we've added nearly 300 stores. And so, as you ramp up the new store growth, the core new stores continue to meet or exceed targets in terms of sales growth and profitability. I couldn't be more thrilled with BWP. As Mike talked about earlier, we're balancing bringing Remington up to speed. So there are many places where we continue to invest, looking at the long-term growth profile, hence the 6% sales growth that we saw in the business, and growing Remington, our margin was up 40 basis points in the quarter. But that's a constrained margin, given the cost that we had to overcome in Remington this quarter as well. So as I've said in my comments, we have to strike a balance, so we'll have these quarters where we have the combination. Our seasonal categories, quite frankly, were very tough for us in the quarter; that constrained some of our comp store growth materially in places of the country. And in other places we achieved a total sales growth that we were looking for, too, but it's not lost on me that we have to strike the right balance.

The next question is from Dan Wewer with Raymond James. Daniel R. Wewer - Raymond James & Associates, Inc., Research Division: Darren, it looks like the 2-year stack comp sales performance took a turn for the worse in the second quarter. And based on your guidance, it looks like that continues for the balance of the year. It appears that all of this deterioration is due to the weakness in your Do-It-Yourself channel, yet during your prepared comments, and George's prepared comments, all of the discussion was focused on Commercial. Just surprised that there's not a greater level of urgency on resuscitating the Do-It-Yourself business, given it's still 60% of your total revenues.

Yes. Dan, that's -- you're right. We were pleased with the sales gains that we continue to see in our Commercial business. Our DIY business was challenged, again, in the quarter. Organizationally, we looked across the organization, we have the team focused on -- in terms of the DIY business, and we talked about before across all of our organization that growth really is growing the basket. We saw, again, in this quarter, across the industry, units continue to be challenged in the industry. I would say, one of the things that started to weaken our sales trends, because we actually started the quarter in a good place in our DIY business, our seasonal categories in DIY, particularly air conditioning, wash and wax, they tend to kick in this time here. In the south, we saw the wiper business clearly pick up for us, and I continue to believe that for DIY consumer and, again, the way they're recovering in our economy are uneven across the country, too, that, that pressure that's on that core customer in some of our core markets just continues to be higher. So organizationally we're focused on what we can control, which is the customer in front of us and trying to make sure that we're serving them the best and filling that basket in front of them. George, would you like to add anything?

Yes, I think there's a couple of other initiatives on the DIY side of the business. One is around store simplification. I think when you look at our stores, we have a lot of metrics, we have a lot of messages we're saying in the stores, and we're rapidly cutting back on that. So cash management and getting our teams focused on power hours, the main portions of the business day, when our customers tend to come into the -- our DIY retail stores, is a key focus area for us, as long as -- along with the DIY dollars per transaction that Darren mentioned as well. Daniel R. Wewer - Raymond James & Associates, Inc., Research Division: Okay. And then just as a follow-up, Mike, in the past, you had indicated that, that 12% operating margin goal would be contingent on comp sales growth of around 2% based on the reduction in the payroll hours. Are you now thinking you can achieve that 12% EBIT goal with less than a 2% comp?

Yes. So maybe, Dan, what we've said is, in order to get 12%, we really need 3 things. We need to have sales growth. And I think the assumption we've made is in around that 2% growth, and that kind of makes the assumption that the DIY is, on a total basis, is flat, and Commercial is in that 1% to 3%, 2% to 4% range. And we always expect to overperform the market so that's the assumption in how we get to 2%. And absolutely, it starts with -- we have to get the sales growing and I think Darren and George both in their remarks and just now shared that, that is a primary focus for us. The second element is modest margin improvements and we've talked about -- it would make good progress in the quarter, and we continue to see some upside in our margins. And then the other aspect is in terms of our cost. And you mentioned taking hours out. That's not how we actually think about our labor. We actually think about our labor as getting more productive. In the last number of years, we've invested a number of tools around performance management, and we're doing better performance management within our store. And we now have tools to measure individual productivity. And I think we think about it more on improving the productivity, but we need to have all 3. So -- and I think you asked the question around the outlook. One of the things -- one of the reasons we're able to maintain our outlook is the progress we're making on the pathway to 12% and how we're doing with respect to our margins and our cost. And I think the last time, in our remarks that we said we were kind of guided to the lower end of the range, we think we're firmly in the range now, partially because of our beak [ph] during the second quarter and the continued improvements we see coming for the back half of the year.

The next question is from Michael Montani from ISI Group.

One question I had was, if you think about the gross margin rate improvement that you had this quarter, and then rolling out to increase the penetration of national accounts, how are you able to have the conviction that the gross margins could continue to expand in the back half of the year? Maybe if you can expand a bit on some of the initiatives there that you have under way, including Remington. And then, just a follow-up after that.

Yes, sure. Charles, why don't you talk about gross margin improvements going forward and I'll take the national accounts.

Yes, I mean, as we look through the quarter, we continue to see benefit from product acquisition costs. Some of that pricing work that we continue to drive through. So while we planned for our margins in national accounts, and as we -- the team had done a great job in expanding that business. We built that entire plan for Q3 and Q4, so we've got good visibility to what we see the impact of mix is going to be and we feel comfortable with the guidance that we put out there.

Yes. And like Mike said on national accounts, to be honest, the way we look at it is gross margin dollar productivity. And so those national accounts, as I said in my prepared remarks, what we're pleased about is we're growing our business with Monroe, again, this quarter. Goodyear has awarded us first call in parts of the country. And those businesses tend to be growing those national accounts. For us, they're growing at double-digit rates. And they tend to be a higher average ticket. And so if you think about the economics of Commercial, when you have a higher average ticket, a higher average truck rule, that can be a very profitable transaction versus just chasing margin rate on some of the low end. I think we've talked before and I tried to highlight in my comments that think about it, this is a business that you stand in line and earn your way up first call status. And so you earn your way up, the reward tends to be a higher basket and you end up, in some cases, as you serve those larger customers, you may give up some rate at the bottom end, but you certainly add more profit dollars to the overall organization.

And then a housekeeping question, which is really -- if you could quantify the sales dollars of BWP this quarter? And then, obviously, with the great progress on national accounts, should we think about that as mid-single-digit percentage of the business? Is there a way to help sort of contextualize that there?

Yes, I'll take the first part and then I'll let Darren take the second part. So Mike, we're not going to quantify -- we've integrated BWP as we think about it as part of our growing our Commercial business. I will hum a few bars, we're extremely pleased with that acquisition so far. The quality of people we have, the capabilities around Commercial, we're learning a lot from that business. And also we're very pleased with what we've been able to do in the stores to retain our customers, and we think they're going to provide us with a lot of benefits looking forward at helping us build out our commercial capabilities. But we think about that as embedded in our -- we had a positive commercial growth in the quarter. They don't count towards our comp yet. They're in our total sales growth of 6.1%, and we're very pleased with how that acquisition has started off.

Yes. And Michael, I would say this, is that if you look across all of national accounts, we're still well below a double-digit penetration as a company. We don't give out specific targets for competitive reasons, but it has been a focus area for growth this year, and we continue, quarter in and quarter out, to make double-digit progress in terms of the growth of that business.

Okay. And if I could just say one last question, which is I think key to the investment thesis, is really, when you look at the comp guidance, it seems to imply that you all could go positive in the back half of the year, despite, you mentioned, sort of negative trends in the last 6 weeks. Is there anything specific that you could point to, to sort of inflect the comp in the back half as the compares are easy but sort of similar? And is there initiatives that you have going on that you can point to specifically or just help us form your view and thought process?

Yes. So Michael, a couple of things. So as we get to the back half of the year, a couple of things happen. One, as we said in our prepared remarks, we certainly like the turnaround that we've seen in the friction business. We like the bounce back that we saw in the ride control business. The other thing that becomes important to us as we begin the fourth quarter, we begin to anniversary some of the new store growth that we focused on last year. So we're going through a full year of ramping up new store growth, which tends to put pressure on the comp because when you're opening stores in new markets, that will put a little pressure on the comp. You don't have the benefit yet of anniversary-ing those comps. We'll begin to anniversary those comps in the fourth quarter of this year. They tend to have been new store growth in cold-weather markets that tend to hit their stride as you're going into the back half on the Commercial side of the business. Now we all take a step down seasonally in the back half, but we have been positioning those maintenance categories, new store growth and, as we talked about, seeing some signs of that deferred maintenance cycle, particularly in the brake business start to -- start to life again, which tends to be better for us, particularly, in those colder weather markets, which were tough a year ago.

The next question is from Scot Ciccarelli with RBC Capital Markets.

I guess, one of the questions I have is, you've been trying to make a lot of changes to the business over the last couple of years. Is there anything structurally or maybe even just philosophically that you've made to the business as you focus more and more on Commercial and maybe it's had an adverse impact on the DIY segment?

Well, I think, more broadly, Scot, I mean you asked about a philosophical change. I think it is certainly getting ourselves squarely wrapped around sales and service as the key outcomes in the store. I mentioned we've sent a lot of messages to stores, and sometimes that begins to cloud what's most important. We're eliminating tasks, we're eliminating reports, we're eliminating metrics. We are changing our focus in getting our teams squarely focused on sales and service every day. Outcomes, not inputs. So that is work that we've been working on with the field team over the last couple of weeks. That messaging is being cascaded across our stores. Our teams want to hear it. It leeches [ph] them on sales, so I do think that there's going to be an orientation change as to how we run our business, which is a more of a field-centric led organization. Having great dialogue market-by-market on what we need to do to drive our business while really getting our team focused around selling.

In previous conversations with the management team, I know you haven't been privy to all of these, but my sense was that the company is -- that there's certain structural parts of the business that are just fundamentally different from commercial versus retailer. And I guess my question is have any of the changes that you've made, as you try and really refocus the company on being a commercial provider, had an adverse impact in any way, shape or form on DIY segment?

Well, if you get all the way down the store level, Scot, you think about a general manager 5 years ago, what we asked that general manager to do is virtually exclusively focus on the DIY side of the business. So today, as that general manager puts together their schedule, what they have is more intense focus on making sure we have the delivery drivers in place, engaging with that CPP in a different way. And you can see it, as we've talked before, that you got to earn your way up in relationships. So when you're asking the general manager to go do visits to commercial customers 5 years ago, 6 years ago, we wouldn't have had that level of intensity and I tend to think about -- and part of the reason the changes that we've made, as you listen to George, is that, how do we now bring that consistency across all the stores and continue that cultural journey and so the Commercial business, unlike the Retail business, doesn't turn on and off based just on marketing and based on just seasons. It works based on relationships and we're asking that general manager and the sales teams to work together in a different way to continue to build the relationships with those key customers over time. And whenever you ask somebody to do something and to actually focus on something a little different than it was before, you do pay a little bit of a price in other parts of the business. But given the size of the commercial market and its growth profile, I'll go back to what we said, our original mission is to see this business to reflect the overall market as well.

Our final question today is from David Gober with Morgan Stanley.

Just wanted to focus a little bit on the productivity gains that you saw in the stores. Could you give us a little bit more color on what really led to that? Was it just the changing in labor hours in the store or anything more specific that you can give in terms of color there?

Maybe I'll start and then George can talk about specific measures. Over the last and, I think I mentioned it earlier, over the last couple of years, we've put some tools in that now allow us to measure individual productivity and then performance managed. So it allows us to -- and the whole idea of this is improving sales. So it allows us to set goals by individual team member, and it allows us to measure productivity. And that's been one of the opportunities in our company, and it's been a key focus for us. So what we saw during the quarter is record labor productivity, as measured by our sales per labor hour, so that's how we measure productivity, in terms of sales per labor hour. So I think we said in our remarks that we saw record labor productivity, which we're pleased at. And one of the things that we've spoken about and our pathway to 12% in our costs, one of the big areas that we've said there that has to improve is our labor productivity. So we're actually pleased with the actual measurement and the performance of our field teams and maybe, George, you can talk about some of the things we're doing to improve that.

Yes, Mike. I mean, I think we look at labor productivity that we experienced during the quarter and, in general terms, we're happy with that. On balance, we feel that we're taking expense out of the right places. With that said, anytime you try to trim out some expense, you always run the possibility of hitting some muscle and we're clearly open-minded that may have done that in some cases. So that's going to be something that we look at, but to Mike's point, we've seen increased productivity. That is a key metric for us. That is something that we have to do, is to get better sales productivity in our stores, and we're seeing that.

Yes. And David, you would expect us to also balance that in terms of what the customers satisfaction levels are. We get those by store -- IMR does research on the commercial side. In the second quarter, we saw those metrics improve. And so there's a delicate balance between cost and service levels. And it really goes back to the team because they have to balance those, so in the quarter, we are very pleased with our IMR scores, we were pleased with our NPD stores and our internal scores in the quarter.

I will now just turn the call back over to Kevin Quinn for any final comments.

Thank you, operator, and thanks to our audience for participating in our second quarter earnings conference call. If you have additional questions, please call me at (540) 561-6454. Reporters, please call Shelly Whitaker at (540) 561-8452. That concludes our call.

Thank you. That concludes our call today. You may now disconnect. Thank you for joining us.