Monro Inc (MNRO) 2010 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Monro Muffler Brake second-quarter 2010 earnings conference call. (Operator Instructions). 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 like to now introduce Ms. Caren Villarreal of FD.

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 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 reflect events or circumstances after the date hereof or to reflect the occurrence of any anticipated events. The inclusion of any statement in this call does not constitute an admission by Monro or any other person that the event or circumstances described in such statements are 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.

Good morning and thank you for joining us on today's call. We are pleased that you're with us to discuss our second-quarter 2010 performance. After reviewing our quarterly performance, I will provide you with an update on our business, as well as our outlook for the third quarter and fiscal year. I will then turn the call over to to Cathy D'Amico, our Chief Financial Officer, who will provide additional details on our financial results.

Our business continued to perform very well during the second quarter, and we are pleased with our ongoing positive momentum and strong results. Our comparable store sales increase of 7.4% on top of a 4.5% increase last year, exceeded our anticipated range and continued to be among the highest in our industry.

Notably, we are on track to deliver our ninth consecutive year of annual comparable store sales increases, which further underscores the fact that our business model is effective in both good and difficult economic times.

In addition, we are delighted with our total sales increase of 13.9% to a record $136.6 million, compared to $119.9 million in sales for the prior-year second quarter.

We continued to achieve stellar growth rates in both operating income and net income. Operating income for the second quarter increased 27.3% to a record $17.5 million, and net income increased 30.4% to a record $10 million.

In addition, our earnings per share increased to $0.49 from $0.38 in the prior-year quarter, as we came in $0.01 higher than our previously expected range. Our earnings-per-share for the second quarter included expense of about $0.01 for due diligence costs related to our acquisitions.

We are very pleased to see that many of the positive trends that we have been talking with you about over the past several quarters have continued in the second quarter. Our strong results reflect -- results continue to reflect our ability to execute on many of the initiatives that we put in place in 2008, and we are delighted that these programs yield ongoing benefits to our business.

As you may know, the strong relationships that we have established with our customers and our unwavering commitment to quality service remain the driving factors behind our success and are the key tenets of our business. As we have mentioned throughout this uncertain economic period, we have found that consumers who may be extra careful with their spending seek a service provider that they can trust in Monro.

As drivers continue to delay their purchases of new cars they are maintaining their current cars for longer periods and look to Monro to help them keep these older cars on the road and operating safely.

Moreover, we are benefiting from favorable industry trends that we continue to capitalize on. As you know, dealerships have been closing at a rapid pace, which has enabled us to attract many new customers and expand our marketshare. Customers are attracted to Monro because our store density makes our locations convenient to the worker homes and our value-oriented services are typically as much as 33% to 50% less expensive.

We continue to expect that reduced or weakened competition stemming from dealership closings will add approximately 0.5% to 1.5% annually to our comparable store sales over the next 2 to 5 years.

We are also continuing to drive traffic with our highly impactful and cost effective advertising or marketing campaigns that we began implementing in the third quarter of last year. We have also continued to actively promote sales in certain categories through programs such as Oil Change and More in which our customers receive free tire rotations and brake inspections with the purchase of an oil change.

The favorable macro trends and effectiveness of our programs are further evidenced by a record same-store traffic increase of approximately 7% for the quarter, assisted by a 10% increase in oil changes.

To put this increase in perspective, you may recall that we are typically pleased with a 2% increase in same-store traffic. This uptick in traffic reflects our expanding base of customers in our core stores, providing the basis for continued sales momentum.

Moving to our product categories, comparable store sales increased approximately 11% for tires, 7% for alignments, 7% for brakes, 7% for maintenance services and 4% for exhaust. We are delighted with the 7% comparable store sales increase for the brakes category, especially given that others in the industry continue to be challenged in brakes, which is typically a deferrable big-ticket item.

Strong sales in the brakes category continue to be driven by our solid trust relationships, as well as positive customer response to our Brakes Forever sales program and intensified training at the store level in this key high-margin category.

You may recall that Brakes Forever is the program in which we guarantee brake pads and shoes for the life of the car, charging only the cost of labor upon replacement. We find that this program not only assists with the sale of brakes, but keeps our customers returning to us periodically for other services when they needed their pads and shoes replaced.

We are also especially pleased with the comparable store sales increase in the alignment category, which is a high-margin category, closely tied to the sale of tires. Tires also increased significantly this quarter with strong unit sales in both our core tire and Black Gold stores.

You may recall that our Black Gold program is designed to maximize the sale of tires and related services in our service stores. Additionally, we saw a 17% increase in scheduled maintenance services, which in many cases stems from the business that we gained from closed dealerships.

Another driver of our success has been our ability to leverage our two store formats, tire stores and service stores. Our Black Gold program, combined with strength and in-store sales execution and employee training, has helped us to expand our marketshare and balance our total sales mix. In fact, our 195 Black Gold service stores continued to outperform non-Black Gold service stores during the second quarter.

Our Black Gold stores showed a 24% comp increase in tire sales for the quarter versus a 13% increase for non-Black Gold service stories. As we mentioned previously, we intend to expand the program to 50 existing Monro service stores in the Northeast, following the initial integration of the Tire Warehouse acquisition.

Finally, we are pleased with our continued expansion in gross margin, which increased 110 basis points to 43.1%. As we anticipated we benefited from a reduction in cost of goods during the quarter, although we have seen some trading down and shift in sales mix towards lower margin products. We expect that we will continue to see gross margin expansion in the second half of the year as lower-cost tires and oil flows through as inventory turns.

Now for an update on our growth strategy. I will start with an update on our recent acquisitions. At the beginning of the third quarter we bolstered our footprint in five key New England states with the acquisition of Tire Warehouse Central, which we completed in early October. We continue to expect Tire Warehouse to be slightly accretive in the first 12 months following the acquisition, and $0.06 to $0.08 accretive in the second 12 months.

The integration is proceeding as planned and the business is performing slightly ahead of plan. We are looking forward to a strong third quarter for Tire Warehouse, driven by the strength of snow tires sales during the fall and early winter season.

In addition to Tire Warehouse we made a smaller four store acquisition in Indiana by purchasing Midwest Tire and Auto Repair, which we expect will breakeven in the first 12 months under our ownership. Taken together these two recent acquisitions represent about $60 million in sales.

Moreover, our acquisition of the 26 store Autotire chain in the first quarter represents another $30 million in sales and expanded our footprint into the St. Louis, Missouri area.

In addition to driving sales and growing our marketshare, these acquisitions have also served to boost our buying power through the addition of more than 600,000 tire units, an approximate 50% increase, which we expect will benefit margin in the quarters to come.

As we integrate these three businesses into our low-cost and highly efficient operating model, we continue to seek value priced acquisitions, and remain positioned to capitalize on additional opportunities as they arise.

As we have said previously, economic pressures faced by our competitors can lead to excellent growth opportunities for Monro, and we look forward to taking advantage of these prospects to further expand our marketshare.

I would now like to briefly discuss our outlook for the third quarter and fiscal year 2010. As I mentioned at the start of this call, our business is performing well and we are continuing with the positive momentum that we experienced over the recent quarters.

Moreover, we are encouraged with recent trends of September up 10% comp and October comparable store sales up approximately 12.5% on top of 4.4% growth last October. We expect that the trends that are positively impacting our business will lead to the continued strong performance of our business throughout the remainder of the third quarter and full fiscal year.

That said, while we were optimistic about Monro's prospects, we will remain vigilant as we recognize that we are operating in uncertain economic times and that consumer confidence remains weak.

As we detailed in our press release this morning, we expect third-quarter comparable store sales growth in the range of 6% to 8%. We expect third-quarter earnings per share to be in the range of $0.32 to $0.35, which compares to $0.28 for the third quarter of fiscal 2009.

For the full year we now expect total sales in the range of $553 million to $563 million, up from our previously expected range of $515 million to $530 million, and comparable store sales growth in the range of 6% to 7%.

Additionally, we now expect fiscal year EPS of $1.44 to $1.48, up from our previously expected range of $1.35 to $1.45.

In summary, we are benefiting from a number of factors, including favorable industry trends, decreasing raw material costs and, of course, continued solid execution. We remain confident that customers will continue to choose Monro for service that they trust.

Finally, we expect to see even more reductions in competition, which will continue to position us to succeed in this difficult economic environment.

Before I turn the call over to Cathy, I want to share some exciting news. As some of you may have seen for the second year in a row and the fifth year out of six, Monro Muffler Brake has been named in Forbes annual 200 best small companies in America. This year we moved up to 115th from 194th in 2008. We are honored to once again be included in this list of high-quality companies, and believe that our position on this prestigious list, especially in these challenging economic times, reflects the strength of our business strategy and the hard work and dedication of all of our employees. We would like to thank them for their efforts.

With that, I would like to turn the call over to Cathy for more detailed review of our financial results.

Good morning everyone. Our sales for the quarter increased 13.9% or $16.7 million. As Rob stated, comparable store sales increased 7.4%. The former Craven, Valley Forge stores acquired in July 2007 and the former Broad Elm stores acquired in January 2008 are now included in our comparable store sales numbers.

Additionally, there was an increase of $10 million related to new stores, of which $8.4 million came from the Autotire stores acquired in June 2009. Partially offsetting these increases was a decrease in sales from closed stores amounting to $1.9 million.

And the comp store increase compares to the comparable store sales increase of 4.5% in the second quarter of last year. There were 76 selling days in both the quarter ended September 2009 and the quarter ended September 2008.

Year-to-date comparable store sales increased 6.8%. Additionally there was an increase of $12.5 million related to new stores, of which $9.6 million came from the Autotire stores. Partially offsetting this sales increase was a decrease in sales from closed stores amounting to $3.9 million. And year-to-date last year comparable store sales increased 5%.

At September 26, 2009 the Company had 739 Company-operated stores compared with 709 stores at September 2008. During the quarter ended 2009 the Company opened the four Midwest stores and closed five stores.

Gross profit for the quarter ended September 2009 was $58.9 million or 43.1% of sales as compared to $50.4 million or 42% of sales for the previous-year quarter. The increase in gross profit for the quarter ended September 2009 as a percentage of sales is due to several factors.

First, there was a decrease in labor cost as a percent of sales due partially to a continued shift in mix to tire sales. Distribution and occupancy costs decreased as a percentage of sales from the prior year as the Company with improved sales was able to better leverage largely fixed costs.

Total material costs, including outside purchases, were flat as a percentage of sales as compared to the prior-year quarter. Margin pressure caused by a shift in mix to the lower-margin categories of tires and maintenance services from the higher-margin categories of brakes and exhaust was offset by a reduction in material costs due to an increase in vendor rebates as compared to the prior year.

Gross profit for the six months ended September 2009 was $115.3 million or 43.5% of sales as compared to 42.2% of sales for the six months ended September 2008.

Operating expenses for the quarter ended September 2009 were $41.3 million or 30.2% of sales as compared to $36.6 million or 30.5% of sales for the prior-year quarter. Within operating expenses selling, general and administrative expenses for the current quarter increased by $4.4 million over the quarter ended September 2008, and were 30.1% of sales as compared with 30.7% for the prior-year quarter.

The Company gained leverage as a percentage of sales in many of the components in SG&A, both in store direct and store support costs, because of the strong comparable store sales and our continued focus on cost control.

For the six months ended September 2009 operating expenses increased by $7.2 million to $80.8 million from the comparable period of the prior year and were 30.5% of sales as compared to 30.6% last year.

Within those numbers SG&A expenses for the six months ended September 2009 increased $6.7 million to $80.3 million, and were 30.3% of sales as compared to 30.6% last year.

Intangible amortization for the quarter ended September 2009 increased from $0.1 million to $0.2 million due to the acquisitions that occurred in fiscal 2010, but was flat as a percentage of sales at 0.1%.

The gain on disposal of assets for the current-year quarter decreased $0.3 million from the prior-year quarter, and for the six months it decreased $0.4 million from a gain of $0.3 million for the six months ended September 2008 to a loss of $0.1 million for the current six months. As you recall, this line will vary depending on the timing of property sales during the year.

Operating income for the current-year quarter of approximately $17.5 million increased 27.3% as compared to operating income of approximately $13.8 million for the prior-year quarter, and increased as a percentage of sales from 11.5% to 12.8% for the current-year quarter.

Operating income for the six months ended September 2009 of approximately $34.5 million increased by 24.5% as compared to the prior six months, and increased as a percentage of sales from 11.5% for the six months ended September 2008 to 13% for the six months ended September 2009.

Interest expense for the quarter ended September 2009 decreased by approximately $200,000 as compared to the same period in the prior year, and decreased from 1.3% to 1.1% as a percentage of sales for the same period.

The weighted average debt outstanding for the quarter ended September 2009 decreased by approximately $15 million from the prior-year quarter, primarily related to repayment of the Company's revolving credit facility. However, the weighted average interest rate increased slightly by approximately 20 basis points from the prior-year quarter, primarily due to a shift into a larger percentage of debt under capital lease versus the revolver, which is outstanding at a higher rate.

Net interest expense for the six months ended September 2009 increased by approximately $0.2 million as compared to the same period in the prior year, and remained unchanged at 1.3% as a percentage of sales for the same period.

For the year interest expense should be approximately $6.8 million, and depreciation and amortization about $21 million.

The effective tax rate for the quarter ended September 2009 was 38.1% compared to 38% for the prior-year quarter. And for the six months ended September 2009 the tax rate was 38% compared to 37.8% for the prior-year six months.

Net income for the quarter ended September 2009 of $10 million increased 30.4% over the prior-year quarter. Earnings per share of $0.49 on a diluted basis for the quarter ended September 2009 increased 28.9% over the prior-year EPS of $0.38.

For the six months ended September 2009 net income of $19.4 million increased 25.5%, and diluted earnings per share increased 23.4% from $0.77 to $0.95 for the first six months of this year.

Moving on to the balance sheet, our balance sheet remains strong. The current ratio at 1.4 to 1 is comparable to last year's second quarter and year end. In the first six months of the year we generated $36 million of cash flow from operating activity as compared to $31 million for the same period last year.

In spite of the Autotire and Midwest acquisitions in June and September totaling $9 million, we were able to pay down $17 million of debt during this fiscal year to date. As a result of the debt paydown our debt to capital ratio dropped to 28% from 35% at year end.

As you know, we have a $163 million revolving credit facility with a group of lenders that is committed through January 2012. The agreement bears interest at LIBOR plus a spread of 50 to 150 basis points, and we just recently were able to lower our spread to LIBOR plus 75 basis points. As of today, net of the partial payment for the Tire Warehouse acquisition consummated in October, we have approximately $76 million available under the facility for borrowings for acquisitions or other needs.

During the first six months of this year we have also been conservative with CapEx spending at $8 million, which includes $4 million in this quarter. Depreciation was approximately $11 million in the first six months, and $6 million of that in Q2. And we received $3 million from the exercise of stock options. We have paid about $4 million in dividends year to date.

Inventory is up approximately $7 million from March 2009, due in large part to the $3 million of inventory added related to the acquisitions of Autotire and Midwest. We also purchased a large supply of import tires in anticipation of the tariff that was imposed at the end of September. Additionally, we added inventory in an effort to improve stocking levels and the mix of inventory to reduce outside purchases and buy ahead of cost increases.

I wanted to talk to you about some activity you may see in the stock over the next month. Some of the Directors may be selling stock in connection with their estate planning goals, approximating a total of 125,000 to 150,000 shares.

In addition, some members of the management team have options which expire within the next six or seven months. Several of them plan to sell stock to be able to exercise these options and pay any related income taxes. However, in the case of the management trades you should see a net increase in their holdings by the end of November.

That includes my -- that concludes my formal remarks on the financial statements. With that, I will now turn the call over to the operator for questions.

(Operator Instructions). John Lawrence, Morgan Keegan.

Rob, first of all, first question on the mix of -- I guess a little bit of a surprise, the exhaust 4%. Obviously the older cars just staying on the road longer, not trading those off, and some people have delayed that purchase. We will start there?

Sure. Obviously plus 4% in exhaust, which is a category that has over the last 10 years been in secular decline, is positive. Remember, we are down to only 6% of our business is exhaust now, so not significant. I think the reason we included it is just it really shows the strength of the traffic increase and the fact that the older cars are on the road and people are getting that work done.

So I don't think we are looking at those double-digit declines anymore. It has leveled off. It is encouraging to see that we can run a plus in exhaust. And if traffic continues to run where it is, that category will obviously benefit, coupled with the older cars on the road.

Rob, secondly on that, as far as the new cars coming in, what kind of data do you have on -- we are seeing how many cars for the first time or just any kind of frequency data?

Obviously, we are seeing more newer vehicles with what is going on with the dealers. We are not at a point to quote the specifics, but you see a 7% traffic increase, where historically we run 2%. The dealer pieces closing, certainly I think the fact that we quantified it at 0.5% comp to 1.5% comp from the dealer closings, that is all an influx of new vehicles that has a tendency also to skew more towards foreign vehicles being more capable of doing more of that work.

The last question, just to -- as far as Black Gold, the 24% comp, obviously part of that is just the strength, but can you break that down as far as -- I mean, when you introduced that you were talking about a couple of tires a day. Obviously on those kind of numbers for that kind of volume it includes other services. And then at the high-end of those numbers how many tires are we getting additional a day in some of those stores?

Well, I can tell you the Black Gold stores' tire units were up 20% last quarter, while the non-Black Gold tire units were up 5.5%. I think historically we have run in the Black Gold stores a 2% to 3% comp improvement over the non-Black Gold stores. So obviously with the tire numbers we are quoting, the lion's share of that improvement comes from tires.

How long do you think it takes -- is there -- the 50 stores that you add to -- with the acquisition, it is there a curve before you start getting those numbers or is it pretty immediate?

Well, we've got to get that training in place. We've got to get the marketing and place, and get to get the tires in place. I would expect to see similar benefits in those 50 stores leading into fiscal year 2007. So the first job is to get the Tire Warehouse integration completed. Make sure we don't goof that up. Starting Q1 of '11 we will start to convert those stores as long as the Tire Warehouse integration is on track.

All right. I will jump back in. Thanks. Congratulations.

Scott Stember, Sidoti & Company.

Rob, can you talk about the advertising, outside of what you're doing with search engines on the Internet? Is there anything new that you're doing versus the last couple of quarters? And maybe just give us what the percentage of sales spent on advertising this year versus last year.

Sure. As far as what we are doing, we continue to explore and fine-tune our Internet search and purchase of keywords. With some of the things going on with advertising rates, we were are probably doing a little bit more radio. And we continue primarily with our direct mail program, using our database to our advantage.

As far as the advertising spend level, it is up slightly at about 3.7% of sales. We are happy with that as a level. It remains still significantly below a lot of the competition. And obviously, the effectiveness speaks for itself.

As far as going back to Cathy's comments about the Chinese tire tariffs, I know you guys have done some pre-purchasing of tires. What is the timeline there as far as how long that would last you?

Well, we are good for certainly the snow tire season and all of winter, which is really what we were focused on. But I can tell you that at size, with adding 600,000 units to or tire purchases off a base of about 1.1 million, 1.2 million, we will not be paying full boat increases of that purported 35% tariff. And you should not see a significant margin decrease because of what is about 4% of our sales being Chinese tires.

Last question, can you just give some comments on ProCare?

ProCare. What is ProCare? ProCare comp store sales for the quarter were up 5.8%. They are profitable; they are making money. Everything is fine.

All right. That's all I have. Thank you.

Bret Jordan, Avondale Partners.

On the tire comp in the quarter what was the unit versus price increase on that 11%?

Hang on. Boy, oh boy. Units were up 9%.

Great. Then I guess as far as what you have seen in the first month of the China tire tariff, it is closing the value gap. Are you seeing marketshare pick up just because you were reasonably reasonably low on Chinese tire as a percentage of your mix? I guess do you think that is a net benefit in this comp driver month-to-date that people are shopping you for branded tire, because the Chinese is less attractive?

Well, certainly last quarter we saw it with tires being our leading category at plus 11%. We haven't broken out October, but you can imagine a 12.5% comp increase tires were leading the way again. And whether that is a function of it being a little bit colder this winter -- in November we are going to be up against a 9% comp, which is another historically strong tire month. I would like to get a little bit further into the quarter and see similar data before I comment definitively, but obviously tire sales are very strong.

One last question. As far as the closed dealerships are you seeing any irrational pricing or increase in price competition as some of those folks try to stay open as service operators?

Nothing that is negatively impacting our business. Certainly, maybe they are going for 50% more than we charge to 25% to 30% more. But inherently if you think of a dealership that used to sell new cars, used cars and provide service, if you take away, call it, one-third of their business model with new cars, and the fixed costs don't change appreciably, and maybe they cut some variable labor, the other thing that occurs is their cost of goods go up because they just can't buy anywhere near the cost that we can buy for 780 stores.

So if they are getting more competitive on price, it just means they are making less money on service than they were before. But a dealership is never going to be competitive with us on price.

Tony Cristello, BB&T Capital Markets.

First question, when you look at the addition of Tire Warehouse, and going into the second half of the year we were looking for a boost on the gross margin side given what was going to be happening, and as you anniversary those costs from last year, how does a tire only business -- or how should we think about the tire only side of that business impacting or weighing on gross margin versus when would you start to get the benefit of the additional 50% increase in those SKUs as vendor rebate or co-op or however that is accounted for?

Well, typically that will take three or four months to flow through inventory turns on the cost of good side. That being said, on the margin pressure side, with sales mix with Tire Warehouse coming into play and it being a significant piece of tire sales, especially in November and December, that is going to put pressure on margin.

However, in the third quarter we would expect Tire Warehouse to be accretive. So while you will see some margin pressure from the addition of Tire Warehouse, you will see no negative impact on the earnings potential.

When you looked in at Tire Warehouse, and I believe it is basically tires only, they don't do anything -- any associated services. Is that correct?

Correct.

How quickly -- or what is the ability for Monro to implement the -- whether it is adding alignments or any other ancillary services that you could add, which are very high margin -- I am not sure if the technician has to be that much more incrementally trained for that type of service or equipment, but what is the -- I'm assuming if they are selling 600,000 tires there is an opportunity for a significant amount of alignment business that could come through and bring not only high incremental margins, but also an incremental revenue lift that -- is that factored in at some point? What is the timing on something like that?

I think the first pass is we just bought it two weeks ago. We don't want to screw it up. So their too busiest months are November, December, which is why we were anxious to buy it as quickly as we did to get the benefit of those two months, being as it is an asset purchase. And we would be looking to -- there are 500,000 tire units a year, and if you think of 500,000 units out of 40 stores, where Monro does about 1.2 million units out of 740 stores, we don't want to do anything to their format that puts at risk the sale of tires.

I think what you'll see in the initial stages is the opportunity that the Black Gold program in the 15 Monro stores that will be converted, potentially we will be able to cross promote and send Tire Warehouses to Monro, not only having Monro be able to sell tires as a benefit from having the Tire Warehouse stores be distribution points, but the Monro stores almost effective immediately will be able to do alignments, brakes, oil changes.

So if anything we would hope the 50 Black Gold/Monro stores outperform what has historically been what occurs in our Black Gold program, because they will now have an opportunity to provide services that Tire Warehouse still doesn't.

As far as converting Tire Warehouse, you will never see Tire Warehouse -- at least at this juncture, in my opinion, it is not envisioned that they are going to sell brakes or oil changes. This is a high-velocity, volume tire business that has been a very successful format. The last thing we want to do is do anything to hurt that momentum.

When we look then -- you have made multiple acquisitions now, and as we look down the road, I am assuming the environment is still right for you to continue to make acquisitions. I guess what I want to know is from an infrastructure standpoint how are you positioned to continue to add incremental acquisitions on to what you already have on your plate at this point?

Well, Autotire, remember, we bought in June and effectively we are four months into that. That is at our plan, writing great. So that is integrated. The four store deal is in Indiana, a valuable addition, but insignificant. And the Tire Warehouse, again, we bought it the beginning of October. That gives us October, November, the beginning of December. You certainly won't see us do another deal in November.

What comes up in December, I certainly wouldn't throw that out as we are worried about from an infrastructure standpoint not being able to get it done. But you have to take these as they come when the seller is ready and you can buy something at the right price. And I would say anywhere from December through March we will be ready to go with the next one, if it is available.

Great, thanks guys.

(Operator Instructions). [Jamie Wyland], [Wyland Management].

Great quarter, fellows. A couple of questions. Tire Warehouse did not do alignments in a big tire operation like that? That seems amazing.

Correct, none. (multiple speakers).

Is it hard to retrofit the stores to be able to do that?

It is not something we want to do during the busiest two months of the year. And again, obviously, we bought the Tire Warehouse for -- the Tire Warehouse operation, which is profitable, running very well without us screwing it up. We do get the benefit of significant increase in tire units, and we do get the benefit of the 50 Black Gold stores, so at least for the first six months, I think we just, again, want to keep it rolling, get the synergies and accretiveness of the Tire Warehouse stores themselves. But certainly wouldn't preclude us from evaluating it down the road. But that is down the road, and I think the next six months we are going to be very pleased with what we have just by doing what we have.

You increase your tire volume by 50% or so. What does that mean in terms of vendor rebates, how much can you really save? And how big a player are you now in the tire purchasing world?

We got a lot bigger because of the 1.6 million, 1.7 million units we buy. We got a lot bigger because in executing our plan we are the fastest-growing guy out there and we get some leverage from that. As far as the specifics of how the vendors are going to appreciate our growth and reward us for that growth, over the next month or two, or certainly by the time we talk about the next quarter, maybe we can get more specific.

Lastly, as far as -- obviously, the stores have plenty of capacity to increase their volumes. What did the highest-volume stores do for your tire stores or for your service stores versus what the average is?

I think the highest volume tire stores run about -- and not many of them -- about $3 million.

What is your average?

$1.3 million.

How about service?

Service, the highest stores run about $2 million and the average is about $550,000 to $570,000.

Okay, great job fellows. Thanks much.

[Steve Hall], Cumberland.

Thanks for taking my call. I am interested to learn a little bit more about the dealer closings and what impact they are having on your business. First of all, can you give me an idea maybe of how many dealers have closed so far versus how many are yet to be close?

I guess sort of as a follow-up, when a dealership is closed, do you have a sense for how many of those customers are going to the next closest dealer and how many are now going to a Monro or a Midas?

We certainly know what we are getting from dealership closures based on how many times they have come to us before and the age of vehicles. We haven't commented on that. As far as specific numbers of dealers closing, what we have said is last year there were 21,000 dealers doing about 28% of the aftermarket. In five years -- which is how we view it, as a long-term decline -- we figure there is going to be about 16,000 dealerships. So you can do the math from there.

Do you know how many have closed thus far? Do you have a sense?

No.

Thanks very much.

Having no other questions in the queue at this time, I will turn it back to management for closing remarks.

Great. I just want to thank everybody for their support. I certainly want to thank the whole Monro team for the great job they have done in executing and incorporating three acquisitions in four months. And looking forward to continued movement forward for the Company. And thank everybody for joining us on the call. Bye now.

Ladies and gentlemen, this does conclude the Monro conference call. We thank you for your participation.