Good day ladies and gentlemen, and welcome to the Monro Muffler Brake Third Quarter 2009 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct the question-and-answer session and instructions will follow at that time. (Operator Instructions). And 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. I would now like to introduce Ms. Caren Villarreal of FD. Please go ahead.

Thank you. Hello everyone and thank you for joining us on this morning’s call. I would just like to remind you that on this morning’s call management may reiterate forward-looking statements made in today’s release. In accordance with the Safe Harbor provisions of 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 related 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 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 reflects events or circumstances after the date hereof 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 statement or material. Joining us for this morning’s call from management are Rob Gross, Chairman and Chief Executive Officer and Cathy D’Amico, Chief Financial Officer. With these formalities out of the way I would like to turn the call over to Rob Gross. Rob you may begin.

Thanks Caren. 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 2009 performance. After reviewing our quarterly performance, I will provide you with an update on our business as well as our outlook for the fourth quarter. I will then turn the call over to Cathy D’Amico, our Chief Financial Officer, who will provide additional details on our financial results. We are very pleased with our results for the third quarter and the continued strong performance of our business, especially in light of the ongoing challenges in the economic environment. Our comparable store sales increase of 5.9% exceeded our previously estimated range and was our third straight quarter of mid-single digits industry leading comparable store sales increases. We generated total sales increase of 5.5%, achieving a record $118.7 million in sales compared to $112.5 million in sales for the prior year third quarter. Comparable store sales for our former ProCare stores increased 9.3% from the third quarter. Net income for the third quarter grew 5.2% to a record $5.6 million and includes a 400 basis point increase in our effective tax rate versus last year. Our pre-tax income increased 12.6% to $8.4 million. In addition, our earnings per share grew an impressive 12% to $0.28 over the prior year earnings per share. As always the strong trust relationships we have with our customers continues to be the key to our ongoing success. We have found that especially in these difficult economic times, our customers need us for valuable and reliable service and are confident that they can depend on us, to keep their vehicles running. Moreover, we've taken quite an aggressive stance on advertising and marketing in recent quarters and have been successful in generating…

Thank you. (Operator Instructions). And I will turn the conference back over to our speakers while we wait for our participants to queue up for questions.

Well, we know the questions will be coming, so we will wait a few minutes. First question comes from me. How did I get so good looking and intelligent? I don't have an answer.

And we do have a question from Scott Stember with Sidoti.

Thank God. Scott Stember - Sidoti & Company: You know I have some questions for you, Rob.

Absolutely, Scott. Scott Stember - Sidoti & Company: You talked about some of the other line items, exhaust, and how they performed during the quarter, and maybe just give a breakout comp-wise by month in this quarter?

Sure, comps for the month were, October was up 4.4, November was up 9.2, December was up 3.1. Scott Stember - Sidoti & Company: Okay.

And as far as other categories, third quarter exhaust was down 3, third quarter shocks were down 14, front-end was up 5, and I think you have all the other major categories. Scott Stember - Sidoti & Company: Okay. And as far as the advertising, you touched on the last couple of quarters about like net advertising, buying keywords on search engines. You rolled up all of your markets using this or is there something to be expected, continue to feather out through the first half?

They will continue to feather out. Obviously, this year was our first foray. We are satisfied with the results, we'll tweak them. And leading into next year, we will do more internet advertising than we did this year probably close to double that amount. Scott Stember - Sidoti & Company: Okay. And I think last couple of quarters, you gave an indication of the level of advertising, I think it's in terms of sales, do you have that figure this year?

I think in total we're going to run, hang on I got it right here 3.7% of sales. Scott Stember - Sidoti & Company: That was for this quarter.

Correct. Scott Stember - Sidoti & Company: What was the last?

3.3. Scott Stember - Sidoti & Company: Okay. And just going back to Black Gold, could you quantify the out performance of Black Gold stores versus the non-Black Gold?

Sure, comp store sales in the Black Gold store were up 8.5% on the quarter for the service stores, non-Black Gold 7.4%. Tire units in the Black Gold stores were up 23%, they were up 10% in the service stores. Tire dollars in the Black Gold stores were up 39% they were up 13% in the service stores. Alignment dollars in the Black Gold stores were up 10%, they were up 4% in the service stores. Year-to-date comp store sales in the Black Gold stores were up 7.9% versus 5.2% for the service stores. Scott Stember - Sidoti & Company: Alright, and just touching on the 15% increase that you've seen so far, you kind of alluded to the fact that you expected tires and maintenance to play a big role against the last quarter, are you basically saying that 15% is staying along on stronger tire versus brake for instance?

Well, sure but obviously at plus 15 everything's doing pretty good, but the lion’s share is tires and obviously we are getting some benefit where the plus six store traffic which we haven’t seen. Scott Stember - Sidoti & Company: Alright. Cathy just a couple of follow-up questions, I think, you mentioned the cash flow from operation, did you say $45 million so far?

Yes. Scott Stember - Sidoti & Company: And could you give out what you expect full-year CapEx to be?

Full-year should probably be around $20 million-$21 million. Scott Stember - Sidoti & Company: Alright and one last question, I know you mentioned what the profit from ProCare was versus last year? I missed that.

Yes, ProCare this year, year-to-date or the quarter? Scott Stember - Sidoti & Company: For the quarter, sorry.

Alright. For the quarter, the pre-tax profit was up $0.8 million, sorry, yes, it was up $0.4 million as compared to $0.4 million loss last year. Scott Stember - Sidoti & Company: And I think you said it was a penny versus a loss of penny last year.

Yes, so we were actually up $8 million, $400,000 profit this year, $400,000 loss last year. Scott Stember - Sidoti & Company: Got you. That’s all I have. Thank you.

Great. Thanks, Scott.

And moving on, we will take our next question from Cid Wilson with Kevin Dann & Partners. Cid Wilson - Kevin Dann & Partners: Hi, Rob. Congratulations on the quarter.

Thank you. Cid Wilson - Kevin Dann & Partners: Yes, by the way I am not sure the operator [it was clear]. We were asking questions; I guess it was on hold. But that is okay from the operator side.

You probably got better answers than. Cid Wilson - Kevin Dann & Partners: Certainly, yes. So, my question is that, given the current economic environment, has there been any change in terms of what your criteria is for an acquisition in terms of the multiples that you look for an acquisition?

The multiples don’t really change, but what certainly changes is the people were looking at earnings. Comps have a tendency to be down, earnings have the tendency to be down. So, I think we have a pretty good model that at least on eight of the nine deals we've done gets us to breakeven in year one and accretive after that with an opportunity to pick up 600 to 800 basis points of operating margin, in all cases. I think the difficulty is, as their numbers decline, maybe their price doesn’t decline along with them. Cid Wilson - Kevin Dann & Partners: Okay. I understood. And also I may have missed this, but what was the depreciated amortization for the quarter?

For the quarter, it was $5 million. Cid Wilson - Kevin Dann & Partners: $5 million. Okay.

$15 million for the year.

Right.

You can expect $20 million for the full-year. Cid Wilson - Kevin Dann & Partners: Okay. And also did you give CapEx for the quarter?

I didn’t. But CapEx for the quarter was about $9 million. Cid Wilson - Kevin Dann & Partners: Okay. Perfect. Okay. Great, thank you very much.

Thanks Cid.

We will take our next question from Tony Cristello with BB&T Capital Markets. Tony Cristello - BB&T Capital Markets: Thanks. Good morning everyone.

Hey Tony. Tony Cristello - BB&T Capital Markets: A couple of questions. One, when you look at you've taken the revenue up, taken the comp range up, but yeah the EPS range is staying flat in spite of what it sounds like to get a little bit of a tailwind from favorable price decreases on your input cost or your product. Is there any rationale, is that just ultra conservatism? Is there something else that’s going on in. I understand last year you had some items that helped the quarter, so in comparison it might look a little bit more favorable? But Rob, can you kind of give a little bit of color on sort of your thought there by taking revenue up, but you had that EPS kind of staying flat?

Well, certainly we're very pleased with plus 15 in January. We are on the heels of a real solid November plus 9. It's difficult to know exactly what's going to happen, but certainly at least, for the next three to six months, the shift to maintenance services and tires is going to put some pressure on margin, which we have been overcoming and would expect to. It's just difficult to know where sales are going to be. We are comfortable with the numbers, obviously we are going to get more sales. Margin last quarter was up 40 basis points, it's going to contribute in. And in this environment I would much rather come out in three months and has beaten rather than doing the performance we are doing and have a risk of missing. So if that is conservative, I'd rather err in an uncertain market and being conservative and I think we see help coming in 2010, because the cost side of the business and oil and tires is going to be working in our favor all year. But Q4, we are not expecting to get any help until March or April, which is obviously toward the end of the quarter. Tony Cristello - BB&T Capital Markets: Fair enough. And I guess for the macro backdrop that's kind of a place to be. Maybe shifting gears a little bit, you talked about having 190 stores by the end of Q4 on the Black Gold program. Can you kind of remind me where your tire mix is today, where you ultimately see that going, the number of stores you have dedicated to tire, versus the number that are service, but with Black Gold focus?

Sure. I think in total, we have approximately 145 tire stores. In addition to that currently, we have 168 Black Gold stores. So for the third quarter of this year brakes are 19% of the business, exhausts is 6% of the business, tires are now 33% of the business and maintenance services are 31% of the business. Now that's for Q3, we would expect certainly tires and maintenance service continue to go up, but Q3 will always be our highest percentage sale tire month just inherently, remember November is a very big tire month, especially in our markets leading into the winter driving season. For year-to-date 2009, maintenance services are 31.1%, tires are about 29%. So, you can see the spike up in our Q3 on the tire category, which historically will put more pressure on margin than any other quarter we are running. Especially leading into next year, where we expect to see some cost decline. Tony Cristello - BB&T Capital Markets: [And in tire], November being a pretty good bump there for you and I saw the miles driven for November came out today and down over 5%, which I guess I was a bit surprised by given what seemed like more favorable trends. And maybe is there now a little bit of a disconnect between the declines in miles driven and people now simply having cycled through everything they can defer, and are just having to get things fixed when they needed to get fixed in regardless of how much driving they are doing. Some element of that control is no longer there.

I think if we get a couple more data points in February and March and the trend appears to be higher, I think that would certainly be supportive of what you're asking, it's just difficult without a little bit longer period to know what the run-rate is going to be in and if dealer closures and people trading down in this economic environment I know are helping us. I don't know specifically how much, what you are saying absolutely could be an additional piece of why things have been relatively good. Let's see what our numbers look like in the next month or two, and we'll also probably get some data points from some of our competitors and how well they are doing. Tony Cristello - BB&T Capital Markets: And I guess one follow-up to the mix on the tire side. Is this a business where you would like to see tires represent 40% or 45%, or are we going to see tire mix in the low 30s or mid-30s? How should we be thinking about the growth opportunity across your system and network?

Well, I think we can get three times bigger and not leave our current footprint, and we have more service stores and tire stores. The opportunity for the next set of acquisitions you see will be on the tire store side, which inherently then will push the overall mix up. I would see tires moving their way closer to 35%, 40%, so they will continue to beat that pressure or that help on the cost of goods side going into next year and beyond. And if we can run plus six, plus seven comps and tires become a bigger piece of it, I am happy where the market share gains and I would be with the plus three comps and have tires even though it's putting pressure on margin, not driving the business. Tony Cristello - BB&T Capital Markets: Okay, and one last question, I left this for Cathy, when you look at your distribution cost or maybe as a percent of revenue, fuel expense obviously what gas prices have done you self distribute. I am just wondering, is that savings that we can see throughout this year as well to maybe help gross margin some and is it material?

Yeah, I think because our distribution costs are relatively low overall, we do it pretty efficiently, you won't see a huge improvement, but clearly though it will help us with diesel prices coming down. Tony Cristello - BB&T Capital Markets: I mean, is it 20, 30 basis points, to that magnitude?

Maybe 10 basis points because as a percent of sales, our distribution costs are only about 1% to 2%. Tony Cristello - BB&T Capital Markets: Okay, fair enough. Okay, thanks guys. Good quarter.

Thank you.

Thanks, Tony.

We’ll take our next question from John Lawrence with Morgan, Keegan. John Lawrence - Morgan, Keegan & Company: Good morning.

Hey, John. John Lawrence - Morgan, Keegan & Company: Rob, first of all would you just go through, obviously the numbers on the traffic side, is there anyway to look at the advertising, dig through that. How much of that 6 and 15 comp will we see in cars for the first time as you look at the dealer shift and all that kind of stuff, can you quantify that at all?

We’re obviously getting a trade down from the dealers and again I’d much rather have another quarter of information before, we certainly two out of last three months have been very satisfying and we just rather have a little bit, more data points before everyone starts extrapolating everything out, but that being said, we know 29% of our business in November came from new customers. John Lawrence - Morgan, Keegan & Company: 29% in November?

Right. Which is higher than normal, if you remember we usually talk about kind of 85, 15 split. John Lawrence - Morgan, Keegan & Company: Okay. So, obviously the response rates to level of advertising have moved up?

The response rates are good and the challenge for us next year is to expand what's working and then test other things to replace what didn’t work this year but keep the advertising levels very similar. John Lawrence - Morgan, Keegan & Company: Right and secondly, on the cost on the inputs, can you speak a little bit to the discussion with the vendors of how that goes and I know you are still working on some of those. But when you look at longer-term contracts here, how are those discussions going as you move through looking to next year?

Yes, I think we want to keep the flexibilities so we can get the best deal from the vendor. Certainly we've very loyal customer offerings being equal but we have an obligation to our company and are constantly looking for the most attractive alternatives whether it's in tires and oil. The conversations with the vendors goes something like, you know, look if we had $140 oil now it's at $40, how come the prices are coming down. We were slow to raise the prices in the last couple of years, there was a bunch of additives in this and, our capacity, issues, and all the stuff that I don’t want to hear and you are going to want to hear from them if you own them. So, our objective is, as one of the few guys that’s growing their business and we are growing in total that we would expect more help than we've been getting and I think they understand that, and it's their job to hold them as long as possible and it's my job to get the best deal for the company and you know, if I need to move the business, someone is going to be more aggressive and values us more, we will. John Lawrence - Morgan, Keegan & Company: Alright. Great quarter. Thanks for your help

Thanks, John.

And we will move on to take our next question from Gerry Heffernan with Lord Abbett.

Hey, Gerry.

Hey. How are you doing, Rob?

I am doing good.

Good. In regards to discussion on acquisition. Number one, I am certainly happy that you are maintaining a very good sort of a stake return to the capital that you have and not going after anything just because you feel pressured to add something on. The discussions with the opportunities that you have met with in the last couple of months, the change that you see to the business, is it in some way similar or in someway fearful. What took place at ProCare, where you got into a thinking that I am going to have a certain amount of revenue degradation, but degradation was just much more and just puts you in a much more difficult position to turn that business round and make it an accretive acquisition?

Well, none of the people we're talking to are on the verge of bankruptcy, and none of the people we're talking to thus are going to send letters to all their customers saying that they are going into bankruptcy. So, no. we won't see what was a minus 10 comp in ProCare, go do minus 30 and have to overcome that and have a name change. I think the type of challenges the companies we're talking to, that we're close with are more consistent minus 5 comp, which is inline with what we are seeing from a lot of these private guys. October, November, December, we are reverting to a minus 10 comp. And us wanting some comfort, that minus 10 is going to go back to minus 5 versus stay at minus 10, because if it goes back to minus 5 and it was a couple of months blip, our pricing is right. If minus 10 continues to run throughout the system, I am not scared of a minus 10 in a good company and a good region of the country, but I want to pay minus 10 numbers for the whole thing. And their opinion is that the minus ten is a blip and we are going to be at minus 5 in January and February, and that's great. I hope the case there is a lot of good properties. But that would be the kind of numbers we are seeing and the people that we are talking to that we might be close with.

How long can they maintain their business at minus 10 numbers, and to what extent a Greenfield proposition become a reasonable capital item?

I think the Greenfield proposition with the exception of five to seven stores were historically been opening recently is where you are going to see the Greenfield proposition. Again to your point, I am not going to rush to overpay. Things are only getting worse, but every Greenfield store I open is a [hundred cents on] a $1 replacement cost, versus $0.60 for replacement cost on what I buy, I am going to be much more anxious to spend $0.60 on a $1, get a company with sales that is running good that might have challenges as every retailer is economically, but the sales are in place the employees are in place. I know the real estate's good. Rather than revert to a Greenfield strategy, where for every ten stores I open, I know five years down the road, I am going to close at least one. Even if I am the best operator out there, so I eliminate the real estate risk and are buying cheap assets with a revenue stream that certainly gives me a lot of comfort going forward that spending my capital in a tough market, I have downside protection.

Okay, great. Thank you very much.

Thanks, Gerry.

We will take our next question from DeForest Hinman, Walthausen & Company. DeForest Hinman - Walthausen & Company: Alright, most of my questions have been answered. Just kind of recurring theme, we're obviously maintaining a strong balance sheet, paying down some debt. If we were to do an acquisition in terms of order of magnitude, how much of that you will be willing to put on to balance sheet in this type of environment. Obviously, as past quarter's things have gone a little bit, let's say more pessimistic than they were, so just your thoughts on that.

What did you say about last quarter being more pessimistic than they were, or you talking about consumer? DeForest Hinman - Walthausen & Company: I am saying that probably the consumer is little bit more pessimistic, or just the economy in general seems to be a little bit worse than it was three months ago.

I see. Obviously, we have run the company very conservatively going forward. That being said, in a tough economy with our balance sheet, we think this is the ideal time to grow the business. We are not going to reach for deals, I think we've proven that over the past couple of years, but if there was a $40 million acquisition, that would not be through us from going out and adding $40 million of debt based on, I think Cathy mentioned our free cash flow this year is looking to be $30 million. So we are not going to stretch; we are not going come up post any of our covenant. With the Speedy deal ten years ago, we're at much higher debt-to-cap levels, and we are not going to miss an opportunity where our business is sustaining itself very well. Free cash flow is improving, and we might have a chance to get assets there we will not get during a better time, we will add in this marketplace if the return on capital warrants it, and we would expect that it will. DeForest Hinman - Walthausen & Company: Alright, that is very helpful. That's it. Thank you.

Great, thank you.

(Operator Instructions). We'll go next to [Al Klein] with [Alpachino].

Good morning, gentlemen. The last time I wrote a report on Monro was Monro Muffler in 1958 with one market maker and no conference calls. And [Jerry Soy] at Fidelity, we put together 60,000 shares per head. Well, my question is, are the customers paying cash, or credit at this point?

We haven't seen a significant shift, they pay cash, they pay credit, we are happy as long as they pay. But we have not seen our statistic credit card sales versus cash sales change significantly.

Do you have your own credit card?

No. We have a private label card, but it's through either Firestone or Goodyear, the banks associated with them, and we don’t have any credit risk.

Okay. Thank you, sir.

Thank you.

We’ll go next to Graham Tanaka with Tanaka Capital.

Hey, Rob, how are you?

Good, Graham, how are you?

Congratulations.

Thank you.

What is the return on invested capital in the tire and the four major categories that are particularly focusing on tire? I am just wondering if you look at the capital employed, inventory in tire is pretty large, are the returns on capital higher to warrant attracting you to that business versus others.

Yes, because the turns are higher Graham, we get a lot more call up below the line the turns are higher. So the return on capital, on the tire stores is strong, which is why if you remember six years ago we started getting into them, forgetting about the market share, store density and some of those competitive advantages, we thought that was a good way to grow our business. We certainly didn’t foresee over the last three years, what was going to occur with cost of goods in that category.

So if you were to rank sort of the major categories that the product there is, which will have the highest ROI?

Oil and brakes will come back and eventually be there strictly due to the inventory turn, on margin basis, brakes, exhaust, shocks are our highest margin categories with tires being the lowest. But remember when we talk about low margin tire business it doesn’t include for example $90 alignment at 90% margin.

Alright, okay. The other thing is on the advertising, I am just wondering how much of the top and the better expected traffic has been, and comps were from strong advertising versus the dealer closures, I haven't focused on the dealer closure, it's hard to figure out that?

It is absolutely at this time, I mean, as we are going through the year. I can tell you we are going to our database and checking out 2006 vehicles that are now coming to us this year versus last. But there are so many moving parts whether it's in fact the gas prices are down now, us being in the East and it being fairly cold. The dealership closures, the threat of the dealership closures, so people are moving away from the dealers. The economy, so people are trading down from the dealers. Our advertising, where we know certainly a plus 6 traffic increase is huge. If some of that, a layover from December. The fact though that as you know, advertising works overtime and the more impressions you get and the more new vehicles you start to include whether it's web based for the first time or radio for the first time, you are talking to a different group of customers that needs a certain number of impressions before they come into the fold, certainly a piece of our comp increases versus competitors is 10%. Price increases we took last year to counteract some of the raw material increases where a lot of people in this economy were saying we don’t think we can justify that kind of price increase to our consumers. We thought we could with value-added services and the free tire rotations and some other things. But a lot of it just comes down to in-store execution. People being comfortable, they were not going to rip them off that will get the job done. And, that makes us way through anenvironment overtime.

Alright. And then, so what do you think the pricing, you had to guess is trending down this year. I got it right or do you think it might not?

Well, I think our cost of goods are going to trend down and we will most likely revert back to our April and September price increases more along the historical lines of 2% to 3%, each period. So, we are not looking -- we have not seen any price resistance from our consumers, we have seen a trading down in, like the tire category, maybe from a brand name to a less weighted tire and getting the work done. But, we feel and our consumers are telling us, with their wallet that they like our convenience, the pricing is at a level that they are comfortable with, that they are not getting ripped off, and they know we're going to be in business and certainly versus the dealers we are significantly less expensive and we're seeing more of that than any trade off or concern on pricing on our end. So, certainly for us the next move on retail prices is going to be up.

What is the dealer closure rate? And what is the dealer market share in the relevant category that we're talking?

I think, in total the dealer market share runs somewhere around 32% of the do-it-for-me category after-market. And you can see some of that while it's just being significantly this year. Here, on the slides we have in our presentation which the old slides are on monro.com. You know, you can get the exact numbers. That will obviously be shifting with what's occurring. I don't think we've seen that work its way through the process yet. It's 32% of the overall after-market. They will continue to grab share at a much slower pace, we and the tire store category will continue to increase its share at a much higher pace than we have in the past, which we was second only to the growth in dealers over the past five years.

Great. Thank you.

Thanks, Graham.

And that does conclude our question-and-answer session for today. I will turn the conference back over to our speakers for any additional or closing remarks.

Great. Thank you, operator. Everyone, thank you very much for your time and attending the call. Obviously Cathy or I are available for any further questions you might have and we will continue working hard in the tough environment to add value. I appreciate your support, have a great day. Bye.

And that does conclude today's conference call. We thank you all for your participation, and you may now disconnect.