Good morning, and welcome to the AutoZone conference call. [Operator Instructions] Please be advised, today's call is being recorded. If you have any objections, please disconnect at this time. This conference call will discuss AutoZone's second 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 presentation 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 25, 2012, 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 2013 Second Quarter Conference Call. With me today are Bill Giles, Executive Vice President and Chief Financial Officer of IT and ALLDATA; and Brian Campbell, Vice President, Treasurer, Investor Relations and Tax. Regarding the second 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. To begin this morning, I want to thank all AutoZoners across the globe for another very solid quarter, in spite of a great deal of volatility across the 12 weeks. We continue to execute on our strategies to improve the customer shopping experience, the initiative we call Great People Providing Great Service! We also grew our Commercial program count, sales and profitability. We expanded 10 additional hub locations during the quarter to take our total remodeled hubs to 77 locations. These remodels entail adding additional inventory into the market that benefits both our Retail and Commercial sales. Additionally, we accelerated our efforts to further leverage the Internet with the closing of our purchase of Autozone AutoAnything in December. We are very excited about having this wonderful business and team join our organization, and we believe their expertise in online retailing will help us grow this category. We believe combining their knowledge and the expertise with the AutoZone E-Commerce team, will create material sales growth in this sector in the future. While we felt we made advances during the quarter, sales have remained inconsistent and below our desires and expectations. On the last call, we noted that the last couple of weeks of the first quarter showed improving sales…

Good morning, everyone. To start this morning, let me take a few moments to talk more specifically about our Retail, Commercial and International results for the quarter. For the quarter, total auto parts sales, which includes our domestic Retail and Commercial businesses, our Mexico stores and 1 store in Brazil, increased 1.9% on top of last year's second quarter's growth of 8.6%. Regarding macro trends during the quarter, nationally, unleaded gas prices started out at $3.43 a gallon and ended the quarter at $3.61 a gallon, an $0.18 increase. Last year, gas prices increased similarly by $0.15 per gallon during the second quarter, starting at $3.37 and ending at $3.52 a gallon. We continue to believe gas prices have a real impact on our customers' abilities to maintain their vehicles, and we will continue to monitor prices closely in the future. We also recognize that 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. Miles driven were up in both October and November, 0.4% in October and up 0.8% in November. December showed miles driven were down 2.8%. For 2012, miles driven were up slightly, plus 0.3% from last year. The other statistic we highlighted, the number of 7-year-old and older vehicles on the road, which continues to trend in our industry's favor. Another key macro issue facing our customers today is the reinstitution of payroll taxes back to historic norms. This reduction in our customers' take-home pay just began at the beginning of the new calendar year, and at this point, combined with the delay in income tax refunds, it is hard to objectively quantify the ramifications of this change. For the trailing 4 quarters, total sales for auto parts store…

Thanks, Bill. We are pleased to report our 26th consecutive quarter of double-digit earnings per share growth and reported EPS growth rate of 15% for our fiscal second quarter. Clearly, our sales performance has not met our expectations as we had experienced softer sales over the past few quarters. In large part, we believe it has primarily been attributable to macro factors. Now regarding current sales trends, we report our earnings 2.5 weeks after the end of our quarter. Historically, we've had a practice of not discussing our results for the current quarter because it is such a short timeframe. It just isn't prudent to try to assess our trajectory off of such a short period of time. We did attribute our performance in the last 2 weeks to the 2-week delay in tax refunds. The reason we called out that 2-week periods performance was because it was such a significant change. Recently, we have begun to see some of those refunds show up in our performance. But from the information we have, tax refunds are still significantly below the prior year. As an organization, we don't want to be victims of a challenging macro environment, nor do we want to be reliant on strong macro trends to drive our success. We must continue to modify our game plan in order to succeed in good and not-so-good selling environments. We've historically been able to do that, and we're built to do that going forward. Our organization is well adept at quickly altering our activities to appropriately respond to the current sales environment. While doing so, we have also -- we also have a strong commitment to continue to deliver WOW! Customer Service and drive sales. We believe the initiatives we have outlined are accomplishing that objective and our customer surveys…

[Operator Instructions] Our first question today is from Kate McShane with Citi Research.

My question is on the Commercial business. I think you had said during prepared comments that you expect 300 new programs for 2013, is that correct?

That's correct.

Okay. Which sounds in line with what you did in 2012, so I was just wondering, with your investment -- your emphasis on investment in Commercial in the hub system and the sales force, why we can't see an acceleration in the program growth this year?

Yes, actually, it's going to be down this year, but that's consistent with our plan. Last year, we opened 400 programs, this year, we're saying we're opening roughly 300 programs. We want to make sure that we -- the most important part of opening a Commercial program is to make sure that we have the right resources in place and particularly, the right people resources. One of the things we learned last year when we opened 400 programs, it was a strain to make sure that we had the right people in place to start those programs. This year, we decided to back off a little bit, but opening 300 programs is still a pretty aggressive growth trajectory. We just want to make sure that we can do it right. We're in this for the long term, and we think 300 program growth, which is over roughly 10%, is pretty aggressive.

Okay. And can you comment, at all, on any changes that may be different in the competitive environment in Commercial this year versus last year?

Yes. I don't think that there's any significant competitive changes in the Commercial environment. I think everybody's out there fighting in a pretty tough environment, particularly in the Northeast and the Midwest. What we hear from our customers on the Commercial side is, car counts are down. It's a tough business right now and so everybody's out there, we're out there trying to give our best to make sure we provide them great service.

Our next question is from Matthew Fassler with Goldman Sachs.

A couple of questions. First of all, obviously, lots of other retailers from Walmart to many restaurants and others have discussed tax refunds. But this is not the first time, I guess, in the history of your business that we've seen tax refunds fluctuate in the environment. So is there anything that you see about ticket or the kind of transaction that you're witnessing that would suggest to you that beyond the environmental influences, that this is actually the culprit for the recent drop off?

Yes. Matt, first of all, as you know, I've been in this business for 18 years. I've never seen this, what we experienced in those last 2 weeks. Now we've always known that we had this huge ramp, typically, in the last 2 weeks of our quarters. So we've always been, frankly, pretty darn nervous. Always saying, "What happens if that ramp doesn't mature at some point in time?" Well, guess what? We found out this year, and it hurt us. Fortunately, we had very effectively managed our business before that point in time, and we still delivered pretty reasonable results considering the sales environment. Yes, in the last 2 weeks, we saw material degradation in the ticket because people are not doing the kind of jobs that they typically do when they get that flow of money, which is their tax refunds. That's the only reason we've ever been able to appoint for the reason our sales spiked so much in those last 2 weeks, and so I think we found out this year.

Understood. And then, a second question, if you look at your Commercial sales per store from peak to trough, you probably have seen a bit of a bigger dip in growth rates than you have in DIY? And as you think about the maturation of your roll out, you think about the fact that the incremental stores you're opening might be in regions we've already achieved some initial penetration. What's your up-to-date thinking on the white space that you have and the ability to continue to comp in Commercial, say, once weather normalizes as a factor in your business?

Yes. I'd first of all say, we opened the most productive programs first. So as we get deeper in the cycle, those store -- programs, they're in the markets that don't have the same kind of potential as the ones we did in the first part. Now we still think they have great potential and we still have 2.5% market share, so we think that white space is amazing as we look out. Look, we -- our performance in Commercial has been disappointing. We've gone from growing 20% to growing roughly 9% this quarter, 10% when you adjust for those days. But what we've seen is, we're continuing to grow pretty significant market share in Commercial. We think we have a long-term plan to grow it, and we're going to be able to do just fine.

And just lastly, I have to clean up. You obviously have the regional differences. If you could just update us, if you look at cold-weather markets versus the rest of the country, whether the Commercial DIY relationship is different in those 2 groups of markets.

Yes, it is not different. The numbers are different because as you highlighted, the growth trajectory at Commercial has been different. But directionally, the trends are very, very similar.

Our next question is from Dan Wewer with Raymond James. Daniel R. Wewer - Raymond James & Associates, Inc., Research Division: Bill, you had noted that your productivity per program is 40%, 50% lower than some of your competitors, but there's not any inherent reason for it to run at that big of a discount. When we talked with some of the technicians and asked them, why do you choose AutoZone or why do you choose some of your competitors? The one pushback that we hear on AutoZone is the quality of the parts that are available and delivery times. Certainly, AutoZone has not had made the same investment in distribution as some of your competitors have with the exception of the hub stores. So when you think about closing that productivity gap, is it going to require a significant capital investment on the part of AutoZone?

Yes. At this point in time, we think our strategy is fantastic. The biggest thing that we're working on is the continued evolution of these hub stores. Yes, in-local market availability is critical to our success, frankly, in Commercial and Retail. And so what we're trying to do is leverage our hub stores so that we can have the best in-local market availability in the industry. And we think when we do that, we'll be fine. Daniel R. Wewer - Raymond James & Associates, Inc., Research Division: Okay. And then, just as a follow-up question, your comments about the weakness in brakes and rotors and the other 3 cold-weather markets is consistent with your competitors. But can you draw a link between what happened with warmer weather last February and March to why brake replacement rates would be dropping so quickly in that region of the country? I mean, after all, the changes in gasoline prices are about the same in the North as they are on your sunbelt markets. Miles driven is not significantly different in the North than in the Sunbelt markets. You would think that the failure rate or the replacement needs for brakes would be almost identical?

Yes. Intuitively, I would have thought that as well, Dan, and I have never seen this kind of an issue in the past. But as we've gotten out and talked to our AutoZoners, who were talking to their customers and talked particularly to our Commercial shops, what we're hearing is the road conditions had a big part of that last year, that the lack of salt and brine and the things that they do to deal with high levels of snow put less wear and tear on those brake components. The fewer holes and the potholes on road, the less wear and tear in chassis components and the like. And it's been remarkable how significant those -- how significantly poorer those categories have performed just in the Midwest and the Northeast. And so at this point in time, that's our best thinking. And as we've said before, we're going to know in April. Frankly, if we kind of get to April and they're not improving, we were wrong and we've got to figure out what it's going to take to grow in the future. Daniel R. Wewer - Raymond James & Associates, Inc., Research Division: Are you working on a contingency plan now if sales still don't come back in April?

No. As you talked about, everybody's saying the same thing. So I don't think we're standing on this island by ourselves.

We'll move on to the next question, Gary Balter with Crédit Suisse. Simeon Gutman - Crédit Suisse AG, Research Division: It's Simeon for Gary. You mentioned inflation in the prepared remarks, I think you said some cost increases for next year at a slower rate. In the past, we've also talked about innovation driving the ticket and granted that the recent trends are obscured by weather. But can you talk about where we are in that cycle? Is there more innovation coming through product so that when we see the maintenance repair or some of the deferred maintenance pick back up, you could get a bigger inflation or innovation lift?

Yes, I think that's a good way to think about it, Simeon. I mean, we have not seen a lot of inflation and our expectation is that we will not see inflation, certainly, from a commodity-based product standpoint. But from an innovation standpoint, we continue to see that. As the newer cars continue to work their way through from an aging perspective, we continue to see some -- I'd hate to call it inflation, but inflation in the pricing from an innovation standpoint. So our expectation is that -- and it's very consistent with our model over time, is that traffic has been down consistently over time in this industry for a very long period of time, and we continue to see either commodity book price inflation, which we're not seeing a lot of now or product innovation inflation which we continue to see. But our expectation is that will continue in the future. Simeon Gutman - Crédit Suisse AG, Research Division: Okay. And then, following on to the question that was asked about infrastructure, I think Bill Rhodes mentioned that the speed to market and the end-market availability is important. And I think the speed-to-market that AutoZone delivers is pretty good, but what about the selection? Does the hub model give you the ability to go as deep as you want or as you can in terms of product selection?

Yes, Simeon, and we spend a lot of times looking at that. And if you look at the sales trends of the SKUs, the percentage of sales that we get in the high velocity SKUs versus the tail SKUs, it's remarkable how quickly that tail goes down, how slow the slower-moving products turn. But we have to have those slow-moving products because we need them to be able to build a relationship with our customers. So we believe the thing that we need to do is continue to build out our hub stores. As I've said in our prepared remarks, we now have 77 hub stores that we've expanded the size of so we can significantly increase the assortment. And as we continue to build those larger expansions, we go deeper and deeper so that we can find where that sweet spot is. Simeon Gutman - Crédit Suisse AG, Research Division: And are you able to track -- if you don't have a product because it's either not carried, is that a number that you track? And is that number -- is it small number or trending down?

Yes, absolutely, we can track it. And as we continue to improve these hub stores, yes, it goes down in those hub stores. Our hub penetration continues to grow and frankly, meet -- exceed our expectations.

Our next question is from Greg Melich with ISI Group.

I have a housekeeping question and a bigger picture follow-up. The AutoAnything acquisition, how much does that add in terms of sales in the quarter? Or help us back out how much that ALLDATA and E-Com line was, excluding the acquisition?

Yes, I think AutoAnything was probably sub-$20 million for the quarter, overall, in sales. And from an earnings perspective, it was negligible impact overall.

Okay. So if I just -- just backing out a little, if I put in $15 million, that ALLDATA and E-Commerce line, back that out, maybe 5% or 10% growth? Is that about right?

Yes, it would be probably in the neighborhood.

Okay. And then second, maybe a little bigger picture is, I think in the release and Bill, on your prepared comments, you talked about getting back to a more normalized volume. What would you consider normalized volume?

That's a great question, Greg. Obviously, over the last 4 years, our industry had seen significant strength and you've certainly seen it in our same-store sales performance over the last 3 years before the last 12 months. I think there were clear industry tailwinds during that period of time that benefited all of us. I think right now we've got some pretty significant industry headwinds. So my personal point of view is that it's probably somewhere in between.

So if we were to say normalized volume was slightly positive still, 1% or 2%, would you -- [indiscernible] up on that, some normal inflation?

Yes. I think the normalized volume is definitely positive. And I think on the DIY business, the components of that may be that customer count continues to be pressured, but is offset by the structural increases in average ticket due to the technological advancements in parts and the innovation that Bill Giles was talking about a few minutes ago.

Great. And Bill, maybe on the inflation, a follow-up....

Greg, I can't hardly hear you, I don't know if you can speak up.

I'm sorry, just a follow-up on Simeon's question on inflation. Just as a reminder, what was it a year ago? Right now it's basically flattish, was it a couple percent a year ago?

Yes, I'd say it's probably just a couple of percent a year ago, maybe a little bit less than that. And I think the year before that, it was much higher.

Our next question is from Aram Rubinson with Nomura.

A question just around the types of vehicles that you're seeing. Is there a way to look at the business by class of vehicle, or SUVs versus sedans or age of vehicle? Just trying to get a sense on the shifting vehicle population effect on the business. And then, I had a follow-up.

Yes. We don't look at it that specific on those things -- the thing we do look out the most is the age of the vehicles, but we don't see any material shift as you've seen from AAIA's numbers, that the average age of vehicles continues to eke up a little bit, I think it went from 10.6 to 10.8. So I don't think there's any material changes in the mix of products we're selling.

Okay. And then, as a follow-up, I had once thought that ALLDATA could be kind of a useful tool in getting into the Commercial business, which you've kind of got your network kind of installed in the garages already. Can you talk about how you either decided to use that or not use that, and whether or not it's been effective, or maybe it wasn't quite as I -- as it laid out?

That's a good question. I mean, we think that ALLDATA is a stand-alone business and it's been very effective for us. They've got a very high market share from a repair and diagnostic standpoint, and they continue to add additional products, whether it be shop manager -- market, et cetera. So they've done a great job and continuing to penetrate it. We continue to seek opportunities to be able to bridge some of the synergies that exist between ALLDATA and our overall Commercial business. They're not probably as problem as you would think intuitively because they're very different businesses and they're providing different things to the shops, very different sales force, very different skill set from the sales force perspective. So I would say that there are some synergies, probably, not as high as you're thinking.

Our next question is from Chris Horvers with JPMC. Christopher Horvers - JP Morgan Chase & Co, Research Division: I did want to just follow up a bit on the past 2.5 weeks, the commentary that you said, Bill. It looks like tax refunds have flattened out here in the past couple of weeks. So should we interpret that these weeks look a lot more like the first 10 weeks of the quarter you just reported? Or how should we think about that?

Yes, I'm going to go back to what I've said in the prepared remarks. I don't want to -- we called out those specific 2 weeks because they were in the quarter and they were vastly different than our other experiences, and we felt like we had a good handle on what drove it. But this time of year, there is such volatility in our business because the weather patterns change day-to-day and week-to-week. What we see is that the overall tax refunds are still substantially behind last year, and we don't necessarily know what the trajectory of how people are going to spend those tax refunds are. I don't want to get in -- any further into that 2.5-week period of time except to say, clearly, we're not running the negative 8 that we called out before, but they're still a lot variability in our sales at this point. Christopher Horvers - JP Morgan Chase & Co, Research Division: Fair enough. So is there a way to say -- or how are you thinking about what you get back from these deferred refunds? So is there a way to say, is it simple enough to say, hey, discretionary is x percentage of sales this time of year and that's what we could potentially forego? Or how do you think about it?

I think that we don't have a good way to think about it because we haven't experienced it before. We believe when market flows in the -- when money flows in economy, particularly, through our kind of customers, that they get caught up on a lot of their maintenance and repair work. And I see no reason that, that will happen again this year. But then, you do worry about the timing changes. Hopefully, that will benefit us even more. If we can get some nice breaks in the weather and people want to get out and work on their car, it might be to our benefit. We just don't know at this point. Christopher Horvers - JP Morgan Chase & Co, Research Division: That's a good segue, on the warm weather side, do you think that, that sequential increase into weeks 11 and 12 last year and likely, February and March's, is there -- have you done the analysis to say how much of that just warm weather pull-forward out of that April, May timeframe?

Yes. Clearly, the mix of business that we did last year in those weeks was very different. We were experiencing a lot of -- we talked last year about the fact that we -- a lot of the spring categories got pulled forward into that period of time. But the overall trajectory of the business in weeks 11 and 12 was very consistent with the last 5 or 6 years that we'd had. Now the mix, we might have been selling batteries, while this last year, we were selling brake pads. But overall, we have always seen that significant lift and it didn't happen this year. Christopher Horvers - JP Morgan Chase & Co, Research Division: And then finally, Bill Giles, maybe, could you talk about how you -- the long-term EPS double-digit growth algorithm. I guess, how long would you have to stay flat or negative for that algorithm not to hold true?

I think if you look back historically, I mean, the organization has done a very good job of managing our expense structure in line with our environment that we're performing in. And so I mean, this is a good example of our company and virtually every facet of the organization doing a really good job of assessing their expense structure needs and cutting back where they need to. And so if you look back even before our business took off in '09, we were successful in growing our EPS growth at a double-digit rate and a flat comp. And so obviously, we don't believe that flat comp is in our future. We believe the industry will remain healthy and that we will continue to gain market share. But we certainly believe that we can -- the model that Bill articulated in his prepared remarks is the model that we can operate into the future. And certainly, at a slightly positive comp, we can perform very well.

Our next question is from Michael Lasser with UBS.

Can you provide us with the mix of business between maintenance, failure, discretionary, for the Commercial side versus, I think, you've provided the overall?

Yes, we typically stick with the overall. In fact, I don't even have the Commercial numbers in front of me to give you a view of that. Although, that's going to be, probably, a little bit more weighted towards the failure than on the DIY side. But I don't have the -- we don't disclose those numbers exactly. Clearly, the discretionary side would be way down so that would change that.

When you look at the performance of sales to existing Commercial customers, how did that compare -- how has that compared over time? Has that basically tracked the overall performance of Commercial? Or has that been higher or lower?

I would say, it has basically tracked the overall performance in Commercial. I think that what we're seeing is that we're still gaining good traction out of our existing customers, and more importantly, our older programs continue to perform well. Obviously, we clearly have opportunities, based on this quarter's performance, to improve our overall performance. But existing customers continue to do well.

And then, the last question on that. Are you also seeing -- because you indicated that some of the newer programs haven't been as productive, are you seeing any increases in cannibalization rates as a result?

Yes. I think, over time, we will see some impact of cannibalization. That will probably affect the overall numbers, but the reality of it is, is that, as Bill said before, we've got a very small market share and we've got a lot of work to do in order to capture more and more market share. The one thing I would mention on the newer programs, I wouldn't so much say that the newer programs are less productive, it's that we have a higher percentage of newer programs in the mix. And as a result of that, from a math perspective, it winds up taking down your average weekly sales for the total 3,000 programs.

I would now like to turn the call over to Mr. Bill Rhodes for any closing comments.

Great. Before we conclude the call, I'd like to take a moment to reiterate that our business model continues to be solid. We're excited about our growth prospects for the year. We will not take anything for granted as we understand 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 very successful. We have a solid plan to succeed for the remainder of 2013. But I want to stress that this is a marathon and not a sprint. As we continue to focus on the basics and focus on optimizing long-term shareholder value, we are confident AutoZone will continue to be very successful. We thank you for participating in today's call.

Thank you. This does conclude today's conference. Thank you very much, for joining. You may disconnect at this time.