Good morning, ladies and gentlemen, and welcome to Monro Muffler Brake's Earnings Conference Call for the Fourth Quarter and Fiscal 2017. [Operator Instructions] And as a reminder, ladies and gentlemen, this conference call is being recorded and may not be reproduced in whole, or in part without permission from the company. I'd now like to introduce Ms. Effie Veres of FTI Consulting. 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 the Private Securities Litigation Reform Act of 1995, I would like to call your attention to the risks and uncertainties related to these statements, which are more fully described in the press release and the company's filings with the Securities and Exchange Commission. These risks and uncertainties include, but are not necessarily limited to, uncertainties affecting retail generally, such as consumer confidence and demand for auto repair; risks relating to leverage and debt service, including sensitivity to fluctuations in interest rates; dependence on and competition within the primary markets in which the company's stores are located, and the need for and costs associated with store renovations and other capital expenditures. The company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events, or circumstances after the date hereof, or to reflect the occurrence of unanticipated events. The inclusion of any statement in this call does not constitute an admission by Monro, or any other person that the events, or circumstances described in such statements are material. Joining us for this morning's call from management are John Van Heel, President and Chief Executive Officer; Brian D'Ambrosia, Chief Financial Officer; and Rob Gross, Executive Chairman. With these formalities out of the way, I'd like to turn the call over to John Van Heel. John, you may begin.

Thanks, Effie. Good morning and thank you for joining us on today's call. We are pleased that you are with us to discuss our fourth quarter and fiscal 2017 results. Today, we will start with a review of our results and update on our growth strategy followed by our outlook for fiscal 2018. Then I'll turn the call over to Brian D'Ambrosia, our Chief Financial Officer, who will provide additional details on our financial results. Looking back over fiscal 2017, our business was impacted by challenging economic conditions facing our customers coupled with unseasonable weather particularly in the fourth quarter which led to a decline in comparable store sales for the fiscal year of 4.3%. As we have in the past, our company responded to this difficult environment by capitalizing on attractive acquisition opportunities allowing us to grow our total sales for the fiscal year by 8% to a record $1,022,000,000 while limiting our earnings downside through effective cost management. Importantly as we entered fiscal 2018, our fiscal 2017 acquisition which includes 71 stores and approximately $150 million in annualized sales growth over fiscal 2016, they set a strong foundation for future sales and earnings growth. Additionally, our significant Greenfield expansion added 30 more stores in fiscal 2017 providing us with greater store density and sales in our core markets at very attractive cost. I will provide more details behind our 2018 in a moment but first I would like to recap our fourth quarter and full year fiscal 2017 results. Total sales in the fourth quarter increased 10% on strong acquisition growth despite a decline in comparable store sales of 8%. Following a strong December which posted positive comparable store sales of 11% in the month led by tires, we saw weaker top line trends in the fourth quarter.…

Thanks John. Sales for the quarter increased 10% and $23 million, new stores defined as stores opened or acquired after March 28, 2015 added $40.8 million including sales of $35.1 million from fiscal 2016 and 2017 acquisition. Comparable store sales decreased 8%, additionally, there was decrease in sales from closed stores of approximately $1.6 million. There were 90 selling days in the current quarter and 91 in the prior year fourth quarter, adjusted per days comparable store sales decreased 7%. Year-to-date sales increased $77.9 million and 8.3%. New stores contributed $124.3 million of the increase including a $102.5 million from fiscal 2016 and 2017 acquisitions. Comparable store sales decreased 4.3% additionally there was a decrease in sales from closed stores of approximately $8.1 million. There were 361 selling days in both fiscal year 2017 and fiscal year 2016. At March 25, 2017 the company had 1,118 company operated stores and 114 franchise locations as compared with 1,029 company operated stores and 135 franchise locations at March 26, 2016. During the quarter on March 2017 we added 24 company operated stores and closed four stores. For the full year 2017, we added 105 company operated stores and closed 16. Gross profit for the quarter ended March 2017 was $93.2 million or 37% of sales as compared with $91.9 million or 40.1% of sales for the quarter ended March 2016. The decrease in gross margin for the quarter was primarily due to the sales mix shift from recent acquisitions as well as the impact of negative comparable store sales. During fiscal 2016, we acquired certain tire and automotive repair locations to serve commercial customers and wholesale players to customers for resale. These locations conduct higher and automotive repair activities that are similar to our retail location, other than with respect to the…

Thanks John. Sales for the quarter increased 10% and $23 million, new stores defined as stores opened or acquired after March 28, 2015 added $40.8 million including sales of $35.1 million from fiscal 2016 and 2017 acquisition. Comparable store sales decreased 8%, additionally, there was decrease in sales from closed stores of approximately $1.6 million. There were 90 selling days in the current quarter and 91 in the prior year fourth quarter, adjusted per days comparable store sales decreased 7%. Year-to-date sales increased $77.9 million and 8.3%. New stores contributed $124.3 million of the increase including a $102.5 million from fiscal 2016 and 2017 acquisitions. Comparable store sales decreased 4.3% additionally there was a decrease in sales from closed stores of approximately $8.1 million. There were 361 selling days in both fiscal year 2017 and fiscal year 2016. At March 25, 2017 the company had 1,118 company operated stores and 114 franchise locations as compared with 1,029 company operated stores and 135 franchise locations at March 26, 2016. During the quarter on March 2017 we added 24 company operated stores and closed four stores. For the full year 2017, we added 105 company operated stores and closed 16. Gross profit for the quarter ended March 2017 was $93.2 million or 37% of sales as compared with $91.9 million or 40.1% of sales for the quarter ended March 2016. The decrease in gross margin for the quarter was primarily due to the sales mix shift from recent acquisitions as well as the impact of negative comparable store sales. During fiscal 2016, we acquired certain tire and automotive repair locations to serve commercial customers and wholesale players to customers for resale. These locations conduct higher and automotive repair activities that are similar to our retail location, other than with respect to the…

Before I turn the call over to the operator, I want to announce that our Board of Directors has approved the change in our corporate name to Monro, Inc. Our business has moved well beyond exhaust but not worse with the number of brand names under the Monro Corporate umbrella. In true fashion we believe that simple is better and that this change to our corporate name is a reflection of the significant growth and improvements our company has undergone since it was founded. The name change will apply to our corporate entity only and will be voted on by shareholders at our Annual Meeting in August. If approved, the name will become effective that same month. It is appropriate that this change also marks our 60th anniversary and the year in which Monro crosses the $1 billion sales mark for the first time. While we still maintain at the bottom line, it is more important than the top line this is a significant achievement for our entire team and I want to congratulate and thank them for all their hard work in getting our company to this point. We look forward to the next 60 years of growth. And with that, I will turn the call back over to the operator for questions.

[Operator Instructions] We will go first to Brett Jordan with Jefferies.

Hi, good morning guys. No savings and signage from the shortened name?

That would be pre-Munro fashion move.

I guess question on the current quarter, the April, May trends. Could you talk sort of more granular about sort of the regional performance obviously maybe sort of central state, North East versus South East you talked about a couple of very strong markets but maybe give us some more correct information. And then product lines, I think you said tires were up too but is that pricing or units?

Tires average ticket, brakes is up high single digits that is some units in some tickets and those are the big categories moving in the first quarter. In terms of regional performance, we pointed out those strong markets and as I said both in north and the south are comping positive, the south is comping slightly positive and our weakest areas are in the sort of central more western states.

On the private label card, the Drive Card is there - you talked about sort of volume growth with the loyalty, is there any margin impact as you promote around that card?

We freed up some dollars in getting that card as a private label card, so we've got that - we got fundings for some of the offers that we're putting out here. What we're looking for here is more returns business and we should see higher ticket because this will be a dedicated card for our customers to help prepare that card.

And then last question, as we think about card maybe is the wholesale tire category, obviously we thought about volume pick up and giving better buying power but is that probably not going to be flowing through to incremental margin leverage in the near term, it seems like we're seeing maybe some negative EBIT impacts in addition to the gross impact?

Well certainly early on in any acquisition we get operating margin pressure and we're seeing that here. So this is the toughest timeframe for that acquisition which we added in September. What I will tell you is that additional volume will help us do a better job I believe than others in keeping tire costs increases in check.

Okay, great. Thank you, guys.

[Operator Instructions] We will go next to Rick Nelson with Stephens.

Thanks, good morning. A follow-up on the guidance, as I look at EPS growth rate for the first quarter 8% to the mid-point of the guidance, full year 19% of the mid-point and if we take out that extra week we're looking at 14% growth. So a step-up by I guess for the remaining quarters and if you could comment on that and would you see as the drivers?

Sure. If you look at the timing of the acquisitions that we made last year for the fiscal 2017 acquisitions - they as all acquisitions they are dilutive in the first six months, so they were dilutive last year or in fiscal 2017 in the last six months and validate overall will contribute all year that will grow during the year and will obviously be up against those weaker numbers of resolution in the third and the fourth quarters. So I think that is the biggest piece of it there.

Sure. If you look at the timing of the acquisitions that we made last year for the fiscal 2017 acquisitions - they as all acquisitions they are dilutive in the first six months, so they were dilutive last year or in fiscal 2017 in the last six months and validate overall will contribute all year that will grow during the year and will obviously be up against those weaker numbers of resolution in the third and the fourth quarters. So I think that is the biggest piece of it there.

Also these tire price increase of 3% to 14% how do you see the industry's ability to pass on some of these cost increases, it sounds like your scale and your buying power are you able to mitigate some of the pattern costs, what you see happening in retail?

Yes. You can see that were up - our average ticket on tires is up 2% in the first quarter. So we're seeing some ability to pass that along already in the first quarter. And I would expect that tire retail prices, consumer prices would need to go up later in the year to account for the cost increases taking hold more generally without increasing volume in our scale again what I would expect is that our cost will go up less than others and that to the extent that we're able to pass through some additional above the cost increases that really represents some upside for us where our base budget is with the 2% hurdle rate accounting for us passing basically that increase and as tire costs increased during the year, that will be a help to comp later in the year that additional tire pricing.

Yes. You can see that were up - our average ticket on tires is up 2% in the first quarter. So we're seeing some ability to pass that along already in the first quarter. And I would expect that tire retail prices, consumer prices would need to go up later in the year to account for the cost increases taking hold more generally without increasing volume in our scale again what I would expect is that our cost will go up less than others and that to the extent that we're able to pass through some additional above the cost increases that really represents some upside for us where our base budget is with the 2% hurdle rate accounting for us passing basically that increase and as tire costs increased during the year, that will be a help to comp later in the year that additional tire pricing.

Do you use your cost advantage to drive volume or to expand margins?

We will look to expand margins while making sure we drive some units but we've never been the low guy out there, so we will make sure we remain competitive and try to make some money.

We will look to expand margins while making sure we drive some units but we've never been the low guy out there, so we will make sure we remain competitive and try to make some money.

And finally if I can ask any update on the DC in the south or more likely the Greenfield are there acquisition opportunities?

Yes I said that we need to be over 100 stores in Florida for that to make sense. We are obviously still not there and I would look for us to be at that level somewhere north of 100 stores before we put that DC in.

Yes I said that we need to be over 100 stores in Florida for that to make sense. We are obviously still not there and I would look for us to be at that level somewhere north of 100 stores before we put that DC in.

Great, thanks and good luck.

We will go now to Brian Nagel with Oppenheimer.

Good morning. Thanks for taking my questions. First off not to be too granular here but if you look at the sales cadence in the first couple of months here of the new fiscal year. So 3% in May, I'm sorry 3% April, 2% in May, is there anything to read into that modest deceleration more than just more difficult comparisons month-to-month?

No I don't view any of that comp comparisons this coming year as difficult. I think incrementally we're in a better situation that as I said, I still have concerns for the consumer and as we said in our comments, we're getting some price which is driving that, so I feel little bit better about the fact that we're getting some price but really I would look to see that through the end of the quarter to see how that plays out through the end of the quarter and we can give you the full first quarter and the first couple of weeks of July when we come out of the first quarter.

No I don't view any of that comp comparisons this coming year as difficult. I think incrementally we're in a better situation that as I said, I still have concerns for the consumer and as we said in our comments, we're getting some price which is driving that, so I feel little bit better about the fact that we're getting some price but really I would look to see that through the end of the quarter to see how that plays out through the end of the quarter and we can give you the full first quarter and the first couple of weeks of July when we come out of the first quarter.

With regard to price have you the guidance you've given for sales growth for the current year, you mentioned in your prepared comments that's largely driven on price maybe the high-end better traffic. So historically when we see pricing benefits like this do they tend to stick or is there risk around if you are looking over the course say 12 months is there risk that something could change and there is pricing dynamics could become less the driver?

Yes, I think that this is as I just talked about with Rick, this is cost driven and tire costs were up which I think will generally support higher prices through the year, that's very - what's different this year versus last. So I think and for the extent that price isn't pass through by others their earnings are going to be significantly impacted and I think that helps us get acquisitions done if that takes place.

Yes and then just the follow up question with regard to acquisitions, again referring back to the prepared comments, you talked about it seems like the pipeline is still quite good, you mentioned I guess just want to call a risk that with potential tax legislation although that some sellers maybe holding off, question was that are you seeing that right now or is that just a concern that could pop-up?

No I think we're seeing that, I'm not inventing that. No that is being part of discussion with the sellers. Just like last year with various sellers we were looking at sellers that believe tax rates were going to be higher at this time and that is how we get motivation, no one wants to pay the government more the money than they have to especially small business people that have worked hard to build the business.

Brian this is Robert. It's typically on the bigger deals we're looking at where you're seeing that, the 20 store deals are moving forward and are not being impacted by that issue.

Thank you.

We will now take your question from Matt Fassler with Goldman Sachs.

Thanks so much, good morning guys. My question relates to just get some clarity your expectations for traffic growth through the year relative to the 1Q run rate, it seems like prices is a bigger piece of your, it is a bigger piece of the equation and how you're thinking about that in absolute terms and also against the compare you face because you are up against obviously some pretty modest compares for the first couple of months and of the first fiscal quarter?

Yes, as I said traffic at the high end or high end incorporates 1% of traffic growth otherwise 2% to 3% price and as I said I think incrementally we're in a bit of a better place than we were last year at this time but I don't imagine that it was last year. So I think the price is supported by the cost increases and we look to traffic as not as much a part of the low end but certainly more part of the high end.

Yes, as I said traffic at the high end or high end incorporates 1% of traffic growth otherwise 2% to 3% price and as I said I think incrementally we're in a bit of a better place than we were last year at this time but I don't imagine that it was last year. So I think the price is supported by the cost increases and we look to traffic as not as much a part of the low end but certainly more part of the high end.

Understood. And then secondly as we think about weather obviously during the winter, weather can be extremely decisive for you kind of as a current indicator of business for companies that are dealing much more so under the hood than on the tire side, a warm winter can be an impediment to the following summer almost regardless of what the summer looks like. Do you expect any hangover for your business from the winter that we just had and what kind of weather would change or impact your sales outlook real time for the rest of the fiscal year certainly until we get to next one thinking through next fall?

Great, I think that is right. I think the weather impact for us is about winter. So I don't see any other weather impact that were defined in next six months, we've given you seven weeks of data where we have got some positive comps driven by price and I talked about traffic not really being a part of our low end guidance. So I don't think we're looking that as a part of that low end. So I don't see weather as a big differentiator for the next six months.

Great, I think that is right. I think the weather impact for us is about winter. So I don't see any other weather impact that were defined in next six months, we've given you seven weeks of data where we have got some positive comps driven by price and I talked about traffic not really being a part of our low end guidance. So I don't think we're looking that as a part of that low end. So I don't see weather as a big differentiator for the next six months.

Okay, thanks.

We will take our next question from Mike Montani with Evercore ISI.

Hi guys, thanks for taking the question. Just wanted to start off like on the credit card side, can you just share some incrementals on who the private label partner is and what the difference is in terms of incremental value that you're offering to your consumer with this versus with the Goodyear deal you had and then what the incremental benefit for you all for making this switch economically?

Sure. The partner is Citibank and the incremental - the offers for our customers are discounted oil changes, so we were offering a discount on any oil change that's put on the card. We think that will be – that will be a big driver of customer loyalty which as you know for us is very important, we want the opportunity to perform that regular maintenance on our customers vehicles. So we can help them understand which shape the vehicles are in, their brakes, their tires get checked every time they are in our stores and we go back and do direct marketing to our great customers after I mean and this offer on all changes will help them be more sticky. We have a service discount over a certain dollar amount of spend which will help our customers pay for any work that's needed that we find during those regular visits and on the tire side, we are enhancing rebates to draw in some new customers. So those are the offers and how they sort of laid across our business and really I guess the difference for us in doing this and having this be our card is that it's exclusive to our brands and we have much more flexibility in everything that I just described than we had under a more national program like a Goodyear program.

Is there any kind of benefits that would accrue to you all if the card was used to third-party retailers or vendors like a process agreement?

No not at this time.

Okay. And the other questions I had was little bit more housekeeping in nature but did you give, what the monthly comp cadence was for 4Q and I just missed it or would you mind sharing it?

Sure, we were down - we were down 12 in January adjusted to down eight per day. Then we were down seven in February and down five in March.

Okay. Also can you share some color about what oil changes did in 4Q in overall traffic versus ticket on the down eight?

Sure, traffic was down five, oil changes was similar and ticket was down three.

And then with the tires being down 11, would the units have actually been down 12 or 13 or can you give color there?

Yes units were down nine and we had 2% some trade down on the ticket price.

Okay. And then what's driven the margin to be positive now on the tire side is basically the fact that you've been able to implement price increases and then presumably better volume over the last two months is that fair?

Yes, we absolutely had much better volume in the last couple of months and we've implemented prices I described to price.

Okay, great. Thanks a lot.

We will take our next question from James Albertine with Consumer Edge Research.

Yes hi thanks for taking my questions, this is Derek Glynn on for Jamie. You provided some details on the prepared remarks on the online progress you're making, how do you see your digital strategy evolving over time, any new initiatives on the horizon we can look to and the pace of investment we could expect in this regard?

Not, I've been talking about the more generally the work we've been doing to enable technology more globally and we're funding that out of some saves I mentioned associated with that, we are getting some higher rebates and lower costs on parts. We're looking to sell fund some of that feed. The advertising and marketing side, we've had a shift over the last couple of years from print primarily to digital and we continue to make progress there. Although obviously broader market conditions and weather can overcome the progress that we're making there but that shift to digital from print and frankly some shift into CRM from print will continue in fiscal 2018 with the advent of our new CRM system and we actually have a new digital agency that's helping us make some additional gains there.

Okay, great. And sorry if I missed this, but can you give us the revenue mix percentage by segment for the quarter?

Sure. Hang on one second. For the quarter, we were brakes 14, exhaust 3, steering 9, tires 46 and maintenance at 30, don't hold me to the rounding.

Okay, thanks very much guys.

And it appears there are no further questions at this time. I would like to turn the conference back to the speakers for any additional or closing remarks.

Thank you for your time this morning. In this choppy market, we remain focused on driving profitable sales, at the same time our team is aggressively expanding our business and scale through acquisition, investing in technology and training to improve our operations and customer experience all laying the groundwork for sales and earnings growth this year and beyond. As always, I appreciate your support and I want to personally thank our team who works to provide outstanding service to our customers every day. Thanks again. Good bye.

This concludes today's call. Thank you for your participation. You may now disconnect.