Good morning, and welcome to the AutoZone conference call. [Operator Instructions] Please be advised that today's call is being recorded. If you have any objections, please disconnect at this time. This conference call will discuss AutoZone's third quarter financial results. Bill Rhodes, the company's Chairman, President, and CEO, will be making a short presentation on the highlights of the quarter. The conference call will end promptly at 10 a.m. Central Time, 11 a.m. Eastern Time. Before Mr. Rhodes begins, the company has requested that you listen to the following statement regarding forward-looking statements.

Certain statements contained in this press release are forward-looking statements. Forward-looking statements typically use words such as believe, anticipate, should, intend, plan, will, expect, estimate, project, positioned, strategy and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments, and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: credit market conditions; the impact of recessionary conditions; competition; product demand; the ability to hire and retain qualified employees; consumer debt levels; inflation; weather; raw material costs of our suppliers; energy prices; war and the prospect of war, including terrorist activity; availability of consumer transportation; construction delays; access to available and feasible financing; and changes in laws or regulations. Certain of these risks are discussed in more detail in the Risk Factors section contained in Item 1A under Part 1 of our annual report on Form 10-K for the year ended August 27, 2011, and these risk factors should be read carefully.

Mr. Rhodes, you may now begin.

Good morning, and thank you for joining us today for AutoZone's Fiscal 2012 Third Quarter Conference Call. With me today are Bill Giles, Executive Vice President, Chief Financial Officer, Store Development and IT; and Brian Campbell, Vice President, Treasurer, Investor Relations and Tax. Regarding the quarter, I hope you've had an opportunity to read our press release and learn about the quarter's results. If not, the press release, along with slides complementing our comments today, is available on our website, www.autozoneinc.com. Please click on Quarterly Earnings Conference Calls to see them. We are pleased to announce another quarter of strong financial and operational performance. For the third fiscal quarter, our earnings per share increased 18.6%, and our domestic same-store sales increased 3.9%. This marks the 23rd consecutive quarter of double-digit EPS growth. Our sales grew 7% in total and our operating profit increased by 8.7%, driven by our continued growth in retail sales, strong performance in our Commercial business and ongoing growth in our Mexico, ALLDATA and E-Commerce businesses. Over the course of the last few years, we've grown total sales in the auto parts segment in the high single-digit range while growing our other businesses in low double-digits. The credit for our stability in performance belongs to all AutoZoners across our organization. Their focus on continually striving to improve customer service is what differentiates us, we believe, in the eyes of our customers, which ultimately leads to our strong financial performance. Our strategies remain consistent this quarter, and we remain committed to our game plan heading into our all-important fourth fiscal quarter. This quarter is important from the perspective that the summer selling season generates the highest average weekly sales. The summer months tend to put more pressure on components of the electrical coolant systems and other systems. In…

Thanks, Bill. Good morning, everyone. To start this morning, let me take a few moments to talk more specifically about our retail, Commercial and Mexico results for the quarter. For the quarter, total auto parts sales increased 6.7% on top of last year's third quarter's growth of 8.5%. This segmentation includes our domestic retail and Commercial businesses and our Mexico stores. Regarding macro trends during the second quarter, nationally, unleaded gas prices started out at $3.52 a gallon and inched up, finishing the quarter at $3.79 a gallon. Last year, if you recall, gas prices increased $0.83 per gallon during the third quarter, starting at $3.14 and ending at $3.97 a gallon. We're encouraged by the recent declines in gas prices as the reduction in prices at the pump can materially help our customers' discretionary spending. At the same time, the gas prices remaining at these overall high levels, we continue to communicate through our marketing messages to our customers the steps they can take to improve their gas mileage. Miles driven showed some improvement in January, February and March, up 1.6%, 1.8% and 0.9%, respectively. These increases marked the largest year-over-year increases in miles driven since the fall of 2010. The other statistic we highlight is the number of 7-year-olds and older vehicles on the road, which continues to trend in our industry's favor. We also recognize the impact of miles driven on cars over 10 years old, the current average, is much different than on newer cars in terms of wear and tear. For the trailing 4 quarters, total auto parts sales per square foot was $265. This statistic continues to set the pace for the rest of the industry. This metric is up 2.9% over last year's third quarter. This is the highest level we have achieved…

Thank you, Bill. In wrapping up our thoughts on the quarter, I know many listeners are concerned about the future and where our industry sales trends are headed. Let me stress, we remain bullish on the health of our industry. We're excited about our sales opportunities heading into the fourth quarter. As previously mentioned, we have experienced unusual weather patterns for the last several months, and our sales have fluctuated positively and negatively, which isn't highly unusual. Our company has been successful over the long run because we remain patient and thoughtful on our execution, especially our execution at the store level. We remain committed to providing exceptional customer service in order to earn our customers' business every day. Before we conclude, I want to reiterate our team's commitment to our culture and our customers. Although our industry's performance has been strong, we believe our efforts have contributed significantly to our success, as evidenced by our sales and share growth in both retail and Commercial. We remain committed to continuing to improve our business model and our operations. We believe our business model is healthy, and we have material opportunities for further improvements from this point. For the fourth quarter of fiscal 2012, we will continue to focus on our key priorities: Great People Providing Great Service!; profitably grow Commercial; leverage the Internet; and finally, our hub strategy. Our financial and operational performance has been strong for the first 3 quarters of our fiscal year. I want to again thank and congratulate our entire organization for their dedication to our customers, fellow AutoZoners, stockholders and communities. Our approach remains consistent. We're focused on succeeding in the fourth quarter of fiscal 2012, and we are optimistic and excited about the remainder of the year. Now we'd like to open up the call for questions.

[Operator Instructions] Our first question today is from Gary Balter with Credit Suisse. Gary Balter - Crédit Suisse AG, Research Division: It's Gary and Simeon. I'll ask questions, and then Simeon will ask the follow-up or whatever the rules are. You commented, Bill, on the fact that business fluctuates, and we appreciate that. But could you -- what happens like -- and you could -- maybe you haven't seen this type of period, but it's such a mild winter, is there a concern that, that business in the spring will stay weaker into the summer because you just didn't do the damage to the cars that you normally do in winter? How do you think about that?

Yes, I think your point's an excellent point, Gary. And I'm not sure that we have a well-defined answer for it. I don't remember a weather -- a winter where the weather was as mild as it was and when spring came as early as it did. Clearly, and we said this on our second quarter call, our failure-related businesses did not perform as well during the winter as they have historically. What I don't know is if we get significant heat in the summer like we typically do, will we have increased rate of failures or lower rate of failures? I think that's yet to be seen. And I don't have a good proxy for assessing how we've done it in the past. Simeon Gutman - Crédit Suisse AG, Research Division: Okay. And it's Simeon for a follow-up, 2 parts. To the extent there is a pull-forward, can you look at regions in which weather changes were not as dramatic and has there been more consistency? And then the second question, the Commercial programs, as you mentioned, are still relatively immature. But in some of the older rollouts, say on the 3-year side, can you talk about the balance of growth between the new customers versus increasing share with the existing ones?

Sure. I'll take both parts of that, Simeon. Yes, in places where we have more normalized weather patterns, we have definitely seen more normalized sales patterns. And that's happened for during this whole period, both during the wintertime, during the early spring and during the later spring. As far as the older Commercial programs, one thing that I think is important to highlight, and if you looked at the productivity of our Commercial programs, they haven't -- they weren't necessarily as strong in the quarter. Some of that gets into how -- when in the quarter we're opening those programs, so I wouldn't read too much into that. What I will say is we continue to be very pleased with the performance of our older programs as well as our newer programs. And you must understand that on the older programs, as we're opening some of these new programs, we are taking -- cannibalizing some of the sales of the older programs, but we're frankly quite happy with the progress that we're seeing on that front so far. And as far as specific customers, we continue to grow new customers. We continue to accelerate the growth rate of retained customers. And we unfortunately do lose customers, but we're losing them at a slower rate than we have historically had. So we feel good about all 3 of those metrics at this point.

Our next question is from Chris Horvers with JPMorgan Chase. Christopher Horvers - JP Morgan Chase & Co, Research Division: Following up, can you talk more specifically about the variability during the quarter? The math on your competitor suggested sort of mid-single-digit negative comps in April. And related to that, what you are you seeing in May that gives you confidence that the pull-forward was generally isolated to the month of April?

Yes. We wouldn't comment specifically on our month overall, but we weren't negative in any month during the quarter. So again, as Bill mentioned, April, and I don't think it's unusual for any of the other retailers, was a little bit softer. We attribute a lot of that to the weather. Again, we don't see anything from a macro perspective or the behavior of our customers that would indicate to us that there's been a change in the health of the industry. So we remain relatively positive as we look into the summer months, and we'll continue to execute our strategies. Christopher Horvers - JP Morgan Chase & Co, Research Division: Last year, you had -- there were some negative traffic comps in DIY. Could you just talk about what you saw in this most recent quarter and how you're thinking about DIY growth going forward, just maybe qualitatively?

Sure. As we've talked about over, I guess, about the last year, we have returned to where we've been challenged on transaction count and have had negative transaction counts in our business each of the last 4 quarters. That trend didn't change significantly one way or the other during this quarter. As we've mentioned many times, some of it is structural in nature as the longevity of parts are much longer than they used to be. But the prices for those longer-lasting parts are much higher. So I don't think our point of view on transaction counts has changed any over the last year. Christopher Horvers - JP Morgan Chase & Co, Research Division: Okay. And then final -- just one final one, as you think about 25% of your stores having Commercial programs that are 3 years or younger, what's the waterfall on productivity growth? I mean, do these stores come out at a -- Commercial program comes out at 70% productivity and then ramps up over 4 or 5 years to 100%? Is that what you're seeing?

Yes. Probably a little less than that. And frankly, Chris, I think that we're still monitoring and measuring the model, if you will, of how the Commercial programs mature. When you think about all the things that we've done to our Commercial programs over the last 3 or 4 years between the territory sales managers, some of the technology that we've added in, the hub stores, all the inventory we've put into the hub stores to improve our coverage overall, it's an evolving model. And as Bill pointed out before, our programs are opening up stronger today than they were a few years ago, and they're continuing to ramp. But we don't really know what the maturity curve ultimately will be. But we're pretty happy with the programs that we've opened up to date and the progress that we're seeing.

Yes. Can I build on that for a second, too? I think the most important thing is we don't think our oldest programs are mature. We think that they have tremendous upside from where we are today, so we don't know what the -- where the high watermark will be.

Our next question is from Matthew Fassler with Goldman Sachs.

A couple of follow-on questions on some topics that we've already discussed. First of all, as you think about the impact of the weather and its impact on the DIY business relative to the Commercial business, do you see those segments being impacted differently by the weather developments over the past couple of months?

Not dramatically. I think that both businesses were impacted to some level by some of the activity in April overall. So I don't think that I think we're immune to it. And certainly, segments or 2 businesses were immune to it at all.

And also on the weather issue, as you think about the impact of that business or rather of changes in your business mix on gross margin, I know failure sounds like it was under a little bit of pressure. Can you talk about whether those mix changes impacted grosses or whether you would expect that to be the case over the next quarter or 2?

Well, I don't know over the next quarter or 2, but there's no question that we probably had a little bit of a mix change -- a little bit of a mix impact -- mix impacted our gross margin rate for the quarter. So you're right on that, Matt, that the mix of the products probably put a little bit of pressure on margin. The margin's still healthy and we feel pretty good about the direction it's headed in. But for this past quarter, we'd say mix was probably not helpful.

And then finally, you spoke about the pace of openings of new Commercial programs in the quarter and the extent to that -- to which might have been diluted your growth in sales per average -- Commercial sales per average Commercial program. Any way to quantify that? Only you guys see the schedule intra-quarter, and I know that I think you opened [ph] a record number of Commercial programs. So presumably the decline or the deceleration in productivity growth for Commercial program was magnified by that. Should we see that, assuming the pace of sales trends or underlying sales trends are equal, should we see that growth number bounce a bit over the summer quarter?

Yes. Here's how I'd address that, Matt. Every segment of Commercial programs that we have is continuing to increase. So our long-term opened stores are continuing to grow average weekly sales at a pretty healthy rate. And our new Commercial programs are coming out faster than they were before, and they're growing more rapidly. So we continue to be pleased on all fronts.

That's fair. But just to parse it a little bit more closely, your DIY sales per store in aggregate decelerated by about 1 point. Your Commercial sales in aggregate -- Commercial sales per Commercial program slowed by about 4 points. It sounds like that overstates the underlying slowdown in Commercial momentum.

I think that's correct. And I don't want to get into any more specifics. But that's generally accurate.

Our next question is from Alan Rifkin with Barclays Capital.

Couple of questions on the Commercial side, Bill. So it looks like, if my math is right, for 13 consecutive quarters, your gross margins year-over-year have actually increased, which coincides pretty well with the point at which you started to accelerate the Commercial desk rollout. Would it be fair to assume that the benefits that you're getting on leverage from distribution costs actually outweigh the detrimental gross margins that are inherent on the Commercial side of the business relative to DIY?

I wouldn't hang it on distribution costs per se, although we continue to get some benefits on all fronts of the components of gross margin. So clearly, as you've heard us talk about over the last several quarters, shrink has been a benefit to us, and we've had some good benefits on that. We've had some benefits on distribution. Gross margin rate over quarters has been relatively healthy. As Matt mentioned earlier, the mix of business probably was a little bit of a headwind on our overall gross margin. But as we continue to grow the Commercial business, it will have a lower gross margin rate than retail. So as it migrates itself to becoming a larger percentage of our overall total business, it will continue to put pressure on gross margin. You just haven't seen it in the last few quarters because we've gotten some benefits from things like shrink, et cetera.

Okay. Bill, with the acceleration of the Commercial desk program in the current quarter, was there any material cost over and above the original plan that was associated with the earlier opening of these desks?

I wouldn't say over what we planned on. I think that we are continuing -- obviously, those programs that are opening are obviously less mature. And so therefore, they do have a little bit of a headwind from an expense standpoint. So there are some incremental costs that are incurred in the startup phase of the Commercial programs but not different than what we anticipated. So we have pretty good line of sight relative to how and where we're spending our money.

Okay. And one last one, if I may, it's somewhat of a follow-up to an earlier question. So if we look at the revenue stream of the 670 desks that have been added in the last 3 years and compare it to the older 2,000-plus desks, where do we stand relatively speaking in terms of the revenue production of the more recent desks that have been added?

Yes. They clearly produce substantially below where the other more mature programs are. But as I mentioned earlier, we're pretty enthusiastic because they're coming out at higher levels and they're growing more rapidly. And the other part of that, that you have to think about is we've opened -- kind of like in the retail sector, we've opened the best programs in the best markets already. So we're going down to the next tier of market potential, if you will, and they're coming in at higher rates and they're growing more rapidly. So we continue to be pretty excited about that. And that gives us greater confidence to continue to open more and more programs over time.

Our next question is from Greg Melich with ISI Group.

Want to dig a little bit deeper -- and thanks, Bill, for all the color around the sales trends. And if you look at it holistically, comparing the fourth quarter -- I'm sorry, the second quarter, the third quarter, how much demand do you think we did pull forward? Could it be 100 basis points that we gave up this quarter? And secondly, if you look at those individual categories, do you think some of that pull-forward we have is still going to be with us in the fourth quarter? Or do you think we worked through most of it in April and a little bit of May?

Yes. Greg, those are great questions. And in all fairness, I wish I could quantifiably answer those with some sense of assurance. But even with hindsight and all the details that we have, I can't tell you exactly how much the third quarter benefited by it -- or the second quarter benefited by it and the third quarter was impacted by it. Something in your order of magnitude seems like it makes sense to me. And then moving into your second part of your question, what does this mean to the summer selling season? If it truly was that maintenance jobs that are normally performed when the weather improves were pulled forward earlier, then that should have no bearing on our summer months. What we don't know is the question that was asked earlier of the milder winter, did it put less stress on parts? Yes. Does that mean it's going -- more parts are going to fail in the summer? Or does it mean fewer parts are going to fail? And I think that's yet to be seen. I think the big thing from our point of view, we had a choppy month. We have those from time to time. We are not altering what we are doing in our business in any material way. We continue to believe that this industry is incredibly healthy. We have tremendous opportunities to control our own destiny. And so we're moving forward with our plans.

That's great. And on the inflation front, last year, we had some pressure in some of the commodity chemicals, et cetera. If you were to compare now to a year ago, what do you think inflation is either in your purchasing costs or going in sell-through?

I'd say on a relative basis less, so I think that we're seeing a little bit less inflation than we probably did a year ago. And keep in mind also that when we talk about prices being higher that's somewhat inflation-related, there's also quality of product. There's innovation and technology enhancements that are being made to the products that create some level of inflation, albeit separate from commodity. But overall, we're seeing probably a little bit less inflation now than we were last year.

Okay, great. And then just lastly, AP to inventory steady at 109%. Is it fair to say that now we've sort of reached a steady state there?

Yes. I think that our inventory turn is relatively flat. I think that we've had good leverage on AP to inventory. And as we have mentioned a couple of quarters ago, we expect it to be around this number. It does have opportunity to improve, but this is probably a pretty good level.

Our next question is from Dan Wewer with Raymond James. Daniel R. Wewer - Raymond James & Associates, Inc., Research Division: Bill, is it okay if I ask a question besides weather?

Yes, that would be fantastic. Daniel R. Wewer - Raymond James & Associates, Inc., Research Division: Okay. I wanted to talk about a competitive issue. O'Reilly has indicated that it is looking to grow its private brand mix, presumably to help improve its do-it-yourself competitiveness. And I think they're around 33% of their revenues today. Can you remind us if AutoZone is still at 50% on your private brand? Or have you been growing that of late?

Yes. We've been growing it but not on a material percentage of the business basis. But it continues to be a very important part of our offering. Daniel R. Wewer - Raymond James & Associates, Inc., Research Division: The other change that O'Reilly was alluding to was expanding the radius around its stores where it measures vehicle registration data, I guess, further enhancing its parts mix for late-model vehicles over a larger number of vehicles. Can you compare that to Zone's strategy in how you're customizing your mix of inventory to target that Commercial customer?

Yes. I think the big thing for us is as we continue to further penetrate the Commercial market, we continue to find opportunities in both our satellite stores and our hub stores to expand the mix. In very few instances have we expanded it to a point that we felt like we went too far. Many times, we expanded only to turn around and come back 6 to 12 months later and expand it again and have just as much upside as we had before. So I think our point of view is the farther we penetrate the Commercial market, it -- we basically increase the size of the market the more we penetrate it. And that allows us to productively add inventory more and more. And the funny thing is every time we add "Commercial or late-model products," we see significant amounts of sales on the DIY side of the business. So it very much helps the productivity of our overall model. Daniel R. Wewer - Raymond James & Associates, Inc., Research Division: And one last question. You were talking about the seasonality of your failure business, and that peaks during your third quarter. Can you maybe give us a little bit of numbers around the failure contribution both on an annual basis as well as to how it shakes out by quarter?

In terms of sales, you're talking about, Dan? Daniel R. Wewer - Raymond James & Associates, Inc., Research Division: Yes.

Our overall penetration of failure and maintenance hasn't really moved too much. So when you think about its contribution overall by quarter, it's been relatively consistent. So that's probably the best way to look at it, if you go back and look at it that way.

Our next question is from Aram Rubinson with Nomura.

A couple of things also non-weather-related. Around Commercial, would you mind talking about kind of what would be conceptual limitations to your growth there? For example, your pricing posture against your retail shelf pricing and how you're managing that; private label and how you're finding that, whether that's a limitation to the Commercial customer; availability, of course, I know you've been bulking up on. But just wondering kind of what are kind of the big limitations to reach where the other guys are in terms of penetration, and then I had a quick follow-up.

Sure. Ultimately, I don't think there's any limitations other than limitations we put on ourselves. I'll start with the price notion. Clearly, for our best customers, we have differentiated pricing versus what we have in our retail customers. Our pricing seems to be well-accepted in the marketplace. I don't see that as any limitation. As far as our private label brand penetration, the way I always discuss this is if we had more national brands, we might be able to accelerate our growth faster than we are otherwise today. But the same would've been said in the retail business 20, 25 years ago, that if we would have the national brands, then we would've been able to grow more rapidly. I'm very pleased with the progression that we have in our business. I think our product offering provides great high-quality products at great prices backed by good warranties. And I think the longer we go, the more we see that the market is very accepting of those private labels. What was the third item? I forgot.

Just around availability and...

I think we've addressed the availability thing. And as I've said, the more we address it, the more we realize we have farther to go, particularly with the hub stores. And as I mentioned, we spend a lot of time talking about the hub stores. And the fact that we still have over 50 of them that aren't the size or in the location that we want, that'll be a nice upside for us to be able to help both sides of our customers going forward.

And if I could just follow up with a question on margin. I know you mentioned you're much more margin dollar-sensitive than margin rate, but I'm sure you still look at your competitors on a margin rate basis just for comparison. And both of them are creeping up pretty much near 50%, not very far from where you are. And considering your mix, let's say, is more advantaged both in private label, from the mix of ALLDATA or just for more retail business versus Commercial, I would think there'd be a couple hundred basis points advantage that you might have on rate. Can you speak to that or if you're seeing other competitors that are really keeping you limiting that upside?

Yes. I think trying to look at the specific gross margin rates of competitors is very challenging because there's very different elements in there. You don't know what's going on with shrink, you don't know what going on -- our distribution strategies are different. So looking at the macro number to me is challenging. What we look at is as how is our pricing versus the competitive marketplace. And we want to make sure that we are providing a great value for the price that we're offering our customers. And we seem to see that on both the sectors, we're doing just fine.

Our next question is from Adam Sindler with Deutsche Bank.

Actually, all of my questions have now just been answered.

Our next question is from David Gober with Morgan Stanley.

This is Shaun Kolnick on for Dave. With the record number of programs up in the quarter, did you open any programs specifically in one region? Or was it pretty evenly spread across the country?

It was very evenly spread across the country.

Okay. And then just lastly, is there any update on the new labor system being rolled out this year?

No, I think it's in pilot stages right now, and we're going to -- I'm sure we'll have to make some refinements to it. But then we'll be rolling it out as we move through the quarter and on into the first part of next year. All right. Before we conclude the call, I'd like to take a moment to reiterate that our business model remains solid. We remain excited about our growth prospects for the year. We cannot take anything for granted as we understand that our customers have alternatives. Our culture remains our key point of differentiation from our competition, and we must not lose sight of the importance of basic store execution in order to remain successful. We have a solid plan for the fourth quarter of 2012, and our team is positioned to succeed. But I want to stress that this is a marathon and not a sprint. As we will continue to focus on the basics and never take our eye off of optimizing long-term shareholder value, we are confident AutoZone will continue to be incredibly successful. We'd also like to wish everyone a happy and safe Memorial Day. It is important that we recognize our U.S. servicemen and women who have made the ultimate sacrifice while serving our country and also honor those past and present for their dedicated service on our behalf. We thank you for participating in today's call.

Thank you. This does conclude today's conference. Thank you for participating. You may disconnect at this time.