Good morning. My name Latasha, and I will be your conference operator today. At this time, I would like to welcome everyone to the O'Reilly Automotive First Quarter 2013 Earnings Release Call. [Operator Instructions] I will now turn the call over to Mr. Tom McFall, CFO. Sir, you may begin.

Thank you, Latasha. Good morning, everyone, and welcome to our conference call. Before I introduce Greg Henslee, our CEO, we have a brief statement. The company claims the protection of the Safe Harbor for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as expect, believe, anticipate, should, plan, intend, estimate, project, will or similar words. In addition, statements contained within the earnings release and on this conference call, that are not historical facts, are forward-looking statements, such as statements discussing, among other things, expected growth, store development, integration and expansion strategy, business strategies, future revenue and future performance. These forward-looking statements are based on estimates, projections, beliefs and assumptions and are not guarantees of future events and results. Such statements are subject to risks, uncertainties and assumptions, including, but not limited to, competition, product demand, the market for auto parts, the economy in general, inflation, consumer debt levels, governmental regulations, the company's increased debt levels, credit ratings on the company's public debt, the company's ability to hire and retain qualified employees, risks associated with the performance of acquired businesses, weather, terrorist activities, war and the threat of war. Actual results may materially differ from anticipated results described or implied in these forward-looking statements. Please refer to the Risk Factors section of the annual report on Form 10-K for the year ended December 31, 2012, for additional factors that could materially affect the company's financial performance. These forward-looking statements speak only as of the date they were made, and the company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable laws. At this time, I'd like to introduce Greg Henslee.

Thanks, Tom. Good morning, everyone, and welcome to the O'Reilly Auto Parts first quarter conference call. Participating on the call with me this morning is Tom McFall, of course, our Chief Financial Officer; and Jeff Shaw, our Executive Vice President of Store Operations and Sales. David O'Reilly, our Executive Chairman; and Ted Wise, our Executive Vice President of Expansion, are also present. I would like to begin today's discussion by thanking our 56,000 Team Members for their continued hard work and dedication to our company's success. As we expected heading into 2013, the first quarter was a challenging quarter to drive robust sales growth increases due to the difficult comparisons to 2012. To remind everyone on the call, in the first quarter of last year, we delivered a 7.4% comparable store sales increase, driven by the pull-forward of spring business into the first quarter as a result of the early warm weather in most of our markets and the 1.3% benefit from Leap Day. In addition to the weather-related headwinds, the expiration of the payroll tax holiday and the timing of Easter falling into the first quarter of this year versus the second quarter of 2012 made it tough to generate strong comparable store sales increases. Despite these significant headwinds, through our team's continued focus on superior customer service, we were able to sustain the solid sales trends from the fourth quarter of 2012 into this quarter and generate a positive comp of 0.6%, which was within our comparable store sales guidance range for the quarter of flat to 2%. We estimate that the impact from the calendar shift in the first quarter for both Leap Day and Easter negatively impacted our comps by approximately 1.5%. So on an adjusted basis, our team delivered a 2.1% comp on top of…

Thanks, Greg, and good morning, everyone. I'd like to join Greg in thanking Team O'Reilly for their performance in the first quarter and for their unwavering commitment to providing the best customer service in the industry, day in and day out. The environment in our business was tough in the first quarter, just as we expected it would be. And when business is tough to come by, the service you provide to both the DIY and professional customers becomes even more critical. We have always believed that staying true to our discipline of going the extra mile for each and every customer develops the long-term relationships that allow us to continue to grow our business, even in tough times. This commitment to the customer was at the heart of our decisions last year to both add inventory to enhance our store in-stock position and also maintain our store staffing levels to ensure excellent customer service. It was this commitment to the customer that we believe allowed us to grow our business in the first quarter, even in light of the difficult comparisons. The first item I'd like to highlight today was our SG&A performance for the first quarter. During the difficult macroeconomic environments we faced in recent quarters, we've remained very focused on expense control. But I want to emphasize, and this is a comment we've made for the last several quarters, that we'll be prudent in managing our expenses and under no circumstances will we make cuts that will endanger our ability to provide the top-notch customer service that develops those long-term relationships. SG&A delevered 93 basis points in the first quarter of 2013 based solely on the tough comparisons to last year, including the 15 to 20 basis point benefit in 2012 for Leap Day, which had no…

Thanks, Jeff. Now we'll take a closer look at our results and add some color to our guidance. Comparable store sales for the quarter increased 0.6% on top of prior year's comps of 7.4%. Excluding the impact of Leap Day in both periods, comps were 1.9% for the first quarter of 2013 on top of 6.1% in 2012. As Greg has discussed, our first quarter comparable store sales calendared through tough comparisons and came within our guidance expectations with March marginally impacted by the late spring weather, which left us in the bottom half of our guidance range. We would view this as solely related to the timing of the initial spring business and it has not changed our guidance expectations for the full year 2013 we set in January. For the quarter, sales increased $56 million, comprised of a $9 million increase in comp store sales, a $50 million increase in noncomp store sales, a $2 million decrease in noncomp, nonstore sales and a $1 million decrease from closed stores. The acquired VIP stores are included in noncomp store sales due to the significant change in the business model and classification issues with historical data. We will begin including these stores, sales and comps -- excuse me, in our comp base on January 1, 2014. Gross profit for the quarter increased 59 basis points over the prior year. Our gross margin performance came in slightly better than we expected, primarily as a result of more favorable mix on the difference in spring business between the years. As Greg previously mentioned, we are pleased with the progression of our margin on a sequential basis, and we expect for gross margin to trend within our previous expectations for the balance of 2013. But we are slightly raising our full year gross…

[Operator Instructions] And your first question comes from the line of Matthew Fassler from Goldman Sachs.

First question I want to ask, as you think about both the normalization of some of the weather factors that impeded your business late in the first quarter and you think about the comparisons that you're cycling, the easier comparisons that you're cycling over the next several quarters, as you see the business pick back up from low singles to mid-singles or better, should that pickup come in DIY, in commercial? Or would it be spread evenly across the franchise?

Well, Matt, I think it will come in both. I think because while the DIY customers work on their cars in their driveways and outside and so forth, that having the late spring weather that we're having this year should push some of that DIY business further into the year. And then also some of that business is related to the spring cleanup, waxing cars, cleaning out the interiors and just doing some minor maintenance and so forth. So yes, we would expect a good pickup in DIY. But at the same time, professional business or commercial business has been doing pretty well anyway, so we would expect that to continue to tick away as it has been.

Got it. And then the second question, just related to the loyalty program. Obviously, gathering that data makes a tremendous amount of sense. One of the dynamics we think about when we consider the utility of the loyalty program is frequency of shop. So what can you tell us about how many visits your DIY customer has to your store at any given year? And how do you think about the accumulation of points and deploying them in your store considering that?

Yes. We don't have a lot of good information on that right now other than just different marketing surveys that we've done and so forth that we would -- based on what we know, which again is just based on selected surveys from different markets, where we've hired companies and done some of own studies to be -- a couple of times a year, we would typically have a shop. Now there's a huge variation depending on the type of customer. And more medium and heavy do-it-yourself-ers, you can have a lot of shops with the same customer. I remember, even back in my history being in the stores, you might see the same customer 2 or 3 times a month, so the kind of person that helps keep their families car running and maybe has an old car that has problems. But on average, if you're taking the very light DIYers that might just come in and change wiper blades, mixed with those customers a couple of times a year. But with this loyalty program, we're going to learn a lot more about that and be able to market to those customers to time coupons or specials that we want to push out to them to coincide with when we would expect them to need to do the kind of maintenance on their vehicles that might be doing based on our historical purchase records.

And just a final follow-up to that. Is that more frequent shopper, you think, shopping parts as opposed to chemicals and other consumables?

Yes, more parts. They're people who work on cars. They're helping friends put on tie rod ends and change belts and hoses and stuff like that.

And your next question comes from the line of Michael Lasser from UBS.

Matt knew all the answers to that because he's in the stores about twice a month anyway. But the question I wanted to focus on was on gross margin. It was -- you said it early in the script that the gross margin improvement came from shrink and distribution efficiencies. And then later, it sounded like you may have seen some mix benefit. So can you clarify that? And if it's possible, maybe you could provide a quantitative breakdown as well.

Let me make a comment, then I'll let Tom do the quantification part of it. But our shrink and distribution costs, we've had some benefit from both of those areas that we expect to continue to see. When I spoke to the mix difference, we're speaking to the fact that we haven't seen as much of this light maintenance stuff that you would typically have in the spring and the cleanup. And maybe some oil changes and stuff like that, had a little bit of decrease in that stuff. And the thought was that some of those products, because they're promotional in nature to some degree, would carry a little lighter gross margin than the hard parts business that we're driving our gross margin with currently.

Mike, it's Tom. What I would add to that is Greg's comment early in the script were focused on the year-over-year change. And my comments on the mix later in the call, where we were different from where we thought we would be from a guidance standpoint. So when we look at the improvement over our guidance, it was mix-related. And as Greg mentioned, that shift in the type of business we did in the spring had that impact.

That's very helpful. And the second question is on the idea that there's a lot of pent-up demand due in part to how the weather has unfolded over the last 12 to 15 months. As you talk about seeing improved trends in April, is any of that driven by some of the replenishment categories that have gotten hit particularly hard? Or is it just too early to tell?

Well, it's a little too early to tell. We're seeing -- what we're seeing right now is typical spring business, where we're selling a lot of cleanup chemicals, oil changes, maintenance on things like belts and hoses that people put off, what we saw a lot of in the first quarter. And we did really good, for instance, in batteries and cooling systems, which are more -- it can be more weather-related. Cold weather causes cooling system issues, hot weather causes cooling system issues as it causes battery issues. And those categories did pretty well. So I think what we're seeing right now is just more typical spring product demand. And my speculation would be that there has got to be some pent-up demand for this spring-type business that we would have normally experienced by now. And I know for years of being here at O'Reilly, we didn't talk much about weather just because it's the weather, there's not much you can about it. But this is really an unusual comparison in our first quarter to a quarter last year, where we had just an incredibly early string. It was just very unusual, as many of you all know. And then this year, in the middle part of the country, we have had -- we really don't have spring yet. We've had -- just up until this week, there were many markets that really haven't had much of a spring yet. Even up in the Upper Midwest, they're having snow right now. And it's just an unusual comparison. But the spring weather that we would typically have that creates the demand that we would typically expect in the spring has yet to happen in some markets, so we would expect that to be a driver of comps in the second quarter.

And your next question comes from the line of Chris Horvers from JPMorgan. Christopher Horvers - JP Morgan Chase & Co, Research Division: Wanted to just clarify, I thought in the first quarter you talked about SG&A per store up 1% to 1.5% for the year and you just mentioned up 0.5%. So was there a change? Or is there something I missed in my notes there?

When we talked on the first quarter call, we were talking excluding VIP. This quarter, we decided to just go chain-wide. The VIP stores are lower volume and lower cost-based at this point. Christopher Horvers - JP Morgan Chase & Co, Research Division: I got you. Following up on the previous question, would love to hear your thoughts on what you're seeing in brakes and rotors and rotating electrical and some of the things underneath the car. And how does that really illustrate or inform the situation around the debate between the industry slowing down versus the weather impacts?

Well, there's a lot -- we have a lot of information on this, as you can imagine we would. And when you look at our product sales by category, it's hard to form conclusions. But I can give you kind of some information that I have and kind of the way I look at this. In the first quarter, for instance, batteries were really strong, and I think that's directly related to the fact that we had some winter weather in a period from a comparable standpoint that we really didn't have winter weather last year. Cooling systems performed really well from a comp store sales perspective. These are things that if you have a problem with them, you've got to fix them. If your car's overheating from the cooling system failing or if your battery's shot and your car won't start, you've got to replace them. Rotating electrical did very well. Again, if your alternator or starter doesn't work, if you want to drive your car, you've got to replace it. Things that didn't do as well, for instance, from a comparison perspective, are things like refrigerant. One factor there is that refrigerant costs less this year than it did last year. But from a demand standpoint, it's easy to speculate that there isn't as much demand for refrigerant in a cold spring as there would be in a hot spring like we had last year, so refrigerant was down. Brakes are down. And I think that's something that we hear across the industry. And I think there could be several factors that affect that. But one of those is, is that many times when you have a brake job done, it's not because your brakes stopped working. It's because the friction material, the brake pads or shoes, depending…

Tom, you want to take that one?

Yes. Let me look through my data here. And in the first quarter, we would have been pretty historical norm, between 1% and 1.5%. And we'd expect to be there for the remainder of the year. When we look at last year, so last year, it was a little bit of a less of a help last year, and would be consistent throughout the year. Christopher Horvers - JP Morgan Chase & Co, Research Division: Consistently less of a help?

Correct. Christopher Horvers - JP Morgan Chase & Co, Research Division: And did you have any quarter with deflation?

Well, if you look at our change in our LIFO reserve, I think you'd see that small amount each quarter.

And your next question comes from the line of Scot Ciccarelli from RBC Capital Markets.

So a little bit of a follow-up on Chris' question, I guess. I think we all understand weather has been a challenge. And obviously, you guys have been a pretty consistent share gainer over the years. But I guess, my question is kind of a bigger picture. As new car sales continue to rise, is there any reason to believe that this industry just doesn't go back to being kind of a 1% to 3% comp industry, which is kind of what it was before the new car sale implosion back in '08?

I think that over time, Scot, it could, depending on new car sales over the next few years. We're talking, I don't know, what do we have up to now, maybe 14 million new car units expected to sell this year, maybe a little more than that. 241 million vehicle population, so it takes of few years for that really have a big effect. The thing I would say is that the cars that are still out there are older. And that's going to continue to be the case. And I think that through the recession and through people's experience with some of the later model cars that are better engineered, there's just -- and I feel like I'm repeating myself because I know I've said this many times before. But these later model cars, and those of you that drive cars realize this, the drivetrains in these cars are solid and they can be driven at really high mileages. But that doesn't prevent all the things that all the aftermarket has always been about, from continuing to have to be replaced, things like brakes and chassis parts and belts and hoses and fluid changes and filters and just ignition parts. And in the future, emission parts, all the sensors that feed the computer system that helps run the fuel injection and the air intake systems and all these things. But yet when those things have problems, it's hard for a consumer to say that, "Well, that's a reason to get rid of the car, that's a reason to trade the car because the engine transmission and differential and the interior and the bodies of the car are still in pretty good shape." And given the option of driving a car for another year or something or taking on a $400 a month car payment, they choose to drive the car. So I think there's going to be -- I think the older vehicles on the road is going to offset for some period of time the increasing level of new car sales that we're seeing. And Tom, do you have a comment?

What I would also add to that is that we've had a number of very, very good years in high SAAR years. Our focus really is less on the SAAR and more on the total number of vehicles on the road and the total of number of miles driven. Our expectation is as the economy improves, the SAAR will improve. And the number of vehicles on the road have flattened out over the last 2 or 3 years, that we'll get back to seeing an increased number of vehicles on the road. And as unemployment declines and people go out and feel more confident, we're also going to see a higher employment rate and we're going to see more miles driven, which is going to be a driver of demand in our industry. So we don't look at a -- we look at a rising SAAR as a positive because it says that our consumer has more money on their pocket, more people are working and we have more opportunities for parts to wear down.

And your next question comes from the line of Michael Montani from ISI Group.

The first one I had was on sort of promotionality and what you're seeing with regards to pricing power. As you look across the market now and just given some of the slowing in the first quarter, would you say it's still rational? And given the gross margin outlook, it looks like you're feeling pretty good about that but just want to get your thoughts.

Yes, I think it's still very rational. I think we're all pretty good at chopping each other these days. And we've seen no significant change related to the pricing strategies of our competitors. It's been some time actually. Now we all still continue to run promotions. And our typical promotions are a variety of things. But oil changes, for instance, there's kind of a volley back and forth between maybe a $19.99 branded oil change and $21.99 branded oil change, but that's been the case for some time. So what I'd say is there's really no change in the strategies that we've seen from either just a fixed pricing perspective or a promotional pricing perspective. We're all trying to run promotions to drive traffic in our stores.

And then with the gross margin outlook being a little bit higher and EBIT margin being consistent, is there anything sort of driving that divergence in the SG&A line, first? And then second, with Affordable Care Act coming up, we've been thinking that could be like a 70 to 80 bps sort of generic headwind for many retailers. Is there any way to quantify that or any numbers that you all can share in terms of things you're doing to offset it?

You talk about SG&A, and I'll talk about Affordable Care Act.

Okay. On the SG&A, we have a slight increase in our margin. And as you said, the EBIT range is the same. The change in gross margin wasn't that significant to drive us to change the number of our operating profit. So I would say that's more of a potential adjustment in the range.

Yes. On the Affordable Care Act, there's still a lot of things to be quantified and determined. And there's even a few things that are changing, like the mandatory enrollment of Team Members into the health plan was recently delayed from January 1, '14. So there's still some -- maybe there's yet to be seen, so it's a little bit difficult to quantify. We've engaged help from outside our company to help us quantify and plan. And our plan is simply to do the things that we need to do to mitigate the expense. So we'll work through doing that. Part of that is just changing or incrementally making a minor change to our part-time, full-time mix, which we've been working to do anyway for some period of time. And then things we can do with our plan to help offset some of the cost that we might be -- that we wouldn't previously have burden. But our effort will be to try and mitigate the additional costs that we would have so that it wouldn't be something that would be recognized as an additional operating expense.

Okay. So what I'm hearing is it sounds like there's things you can do to offset and actually it may not be that large of a step function for you all. Is that sort of fair?

I'm sorry, could you repeat that?

I was just saying, it sounds like there's initiatives you all have underway to mitigate that. And actually the 70 to 80 bps sort of the generic number, that could be sort of high versus what you guys think you can do.

I think if we all just said we're going to keep doing exactly what we're doing and we're just going to take this on the chin. I think that number might be pretty close, depending on the company. There's a lot of variation between companies. My expectation would be that most companies are not going to take this without having some adjustment on what they sell products for, just stay whole from a profit standpoint.

And your next question comes from the line of Sam Reid from Barclays Capital.

We noticed that income tax return data really started to pick up at the tail end of your quarter. I'm wondering if you started to see a corresponding boost to demand during the quarter as customers started to receive their returns back. And then kind of just to add to that, if you see maybe some further benefits of that as you move into 2Q.

Yes. I think there's an uneven comparison when people typically get their tax refunds last year to this year a little later. Unusual in this year is that as people have got these tax refunds, it's not spring yet, even though the calendar says it's going snow on the ground or a real cold weather. So there's a little bit of a distortion there and how we would view that. But yes, the expectation is -- our expectation is that -- and I think we've seen this in our April comparable store sales so far, because they've been pretty good and more reflective of what we would have expected to see in the spring is that there are people that now have tax refunds and are spending money on things that they had deferred. And with spring weather, they're able to do the work that they're needing to do.

Awesome. And then one follow-up. Any updated thoughts around your expansion in Florida? This may have been covered. But just anything that you guys have that might be incremental would be helpful.

Well, we're putting stores down there. Our plan is to continue to expand down there. We've been -- we feel like we're doing a good job gaining market share. We've got a really solid team down there. The distribution center, of course, underway, which is a ways away from being completed. But we've got hub operations down there and we're incrementally gaining share. And it was one of the contributors to our store growth for the quarter. I think we opened an additional 5 stores down there during the quarter. So we continue to grow down there and have big plans for having a significant presence in Florida over time.

And then next question comes from the line of Jack Willows [ph] from Focus Research [ph].

I was wondering if your technology is enabling you to perhaps better match the population of stores -- of cars around the store with the inventory that you have at the store itself so that there are fewer times when someone comes to the store and you're out of the part that they're looking for.

Yes. Jack [ph], that's a big deal for us. The car population is so diverse and there's such a difference between, for instance, Seattle and Orlando or even Springfield, Missouri, where we're at, to Houston, Texas. Well, we don't have a lot of four-wheel drives here because sometimes you have winter weather. In Houston, they really don't have winter weather, so while there's a lot of pickups in SUVs, most of them are two-wheel drives, and around here you have a lot more four-wheel drives. And then you just have the brand differences, where on the coasts you just tend to have more European and Asian imports, whereas in the center part of the country, you have less. So deploying inventory in our stores is completely dependent on the vehicle population that surrounds that store. That's one of the key pieces of criteria that we use when we put inventory in a new store. And then as we do our ongoing adjustments of those inventories, as new products become available or as demand starts to tick up, one of the key factors is how many of the cars that this part fits exist in that market. So that's something that is -- computers have become completely prevalent in running our business that we've been able to leverage technology and use databases that we buy from outside the company to help us drive what we put in our stores and do a better job of managing our inventory.

That's very good. The other thing I'm wondering about is e-commerce and the Internet. To what degree can your customers go to other websites and buy parts directly? And when they do that, what is the comparison of the prices they pay?

Well, there's some pretty -- no question, auto parts are available on the Internet. There's a couple of -- there's several websites actually that have access to inventory. Some of these companies stock a little inventory, many buy from -- they have dropship agreements with warehouse distributors and others that have inventories. Typically speaking, an e-commerce company, and I would reference a couple, maybe like a U.S. Auto Parts or RockAuto or something like that, they would try to sell below us brick-and-mortar guys just because they have to do something to try and get someone to agree to wait to get a part as opposed to being able to drive a few blocks and get it. In most markets, and I'm not talking about the rural areas because there are people who live out in rural areas where there's not a parts stores, but where there's many parts stores in the U.S., there's a convenience factor here. And most people live pretty near a parts store. But the Internet is lower-priced than what our stores are priced. And then there's the additional factor of the frustration of ordering parts that you're not sure you need and trying to deal with returning them. So our business is not as inclined to do a lot of volume e-commerce-wise as a lot of businesses are, mainly because of those factors I mentioned, and then just also the technical expertise it takes to determine what's actually wrong with a car. Many times when a customer walks in our store, they know they've got a problem and they think they know what they need, but we'll end up selling them something else as a result. So it's a factor, but not a huge factor for us.

We have made our allotted time for Q&A. I will now turn the call over to our host, Mr. Greg Henslee, for closing remarks.

All right. Thank you, Latasha. We would like to conclude our call today by again thanking our 56,000 members of Team O'Reilly that are committed to providing the best customer service in our industry. It is your hard work and dedication to serving our customers that drives our success. I would also like to thank everyone on the call for their time this morning. We look forward to reporting our second quarter results in July, and we'll talk to you then. Thank you.

This concludes today's call. You may now disconnect.