Monro Inc (MNRO) 2010 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Monro Muffler Brake Fourth Quarter and Full Year 2010 Earnings Conference Call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. (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 now like to introduce Ms. Jessica Greenberger of FD. Please go ahead.

Thank you.

Hello, everyone and thank you for joining us on this morning's call. I would just like to remind you that on this morning's call, Management may reiterate forward-looking statements made in today's release. In accordance with the Safe Harbor Provisions of 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 to debt service, including sensitive it to fluctuations in interest rates, dependence on and competition within the primary markets in which the Company 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 mornings 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'd like to turn the call over to Rob Gross. Rob, you may begin.

Thanks, Jessica.

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

We are very pleased with both our fourth quarter and full year results, as both set new Company records. The positive momentum that we have experienced over the last two years continued through the end of fiscal 2010 which we think proves that our Company operated business model delivers solid results in both favorable and challenging economic times. As we have closed out our fiscal 2010, I want to acknowledge each of Monro's 5,077 employees. Our performance is a direct result of our employees great execution, dedication, and consistent excellent service to our loyal customers.

I'll begin with our fourth quarter results. Our comparable store sales increase of 8%, on top of an 11.2% increase last year, continues to be among the highest, if not the highest, in our industry and exceeded our previous estimates. In addition, we are very pleased to have increased our total sales by 25.7% to a record $147.2 million compared with $117.1 million in sales for the prior year fourth quarter. Our three recent acquisitions combined to deliver an 11% comparable store sales increase during the quarter, which surpassed our expectations and helped drive our strong top line performance during the quarter.

We also continued to generate very strong growth in both operating income and net income. Operating income for the fourth quarter increased 73.8% to $10.5 million. This translates to an operating margin of 7.1% compared with 5.1% in the fourth quarter of last year. While our fourth quarter gross margin results reflect an expected product mix shift towards lower margin tires as a result of our recent tire store acquisitions, we are also realizing benefits to our operating margin as we scale our business and leverage our cost structure. As a result of our sales and operating margin improvement, net income increased 92.8% to a record $5.9 million. Our earnings per share which came in $0.03 higher than our previously expected range increased to $0.28 on a base of $20.9 million shares outstanding from $0.15 in the prior year quarter.

Customer traffic which remained strong through the quarter had a 3.2% increase, and our superior in store execution once again drove the strong results across our business. We are extremely pleased that many of the positive industry and macroeconomic trends that we have been experiencing over the past two years continued into the fourth quarter and we are seeing many of these same trends thus far in fiscal 2011.

Moving on to our product categories. Comparable store sales increased approximately 15% for tires, 11% for alignments, 6% for exhaust, 5% for brakes, 4% for maintenance services, and 3% for shocks. We are especially pleased with the comparable store sales increases 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 all stores, including 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. Importantly, scheduled maintenance increased 11% during the fourth quarter and 11% in our third quarter.

This significant increase combined with increases in categories such as exhaust and shocks speaks to very important industry dynamics that we continue to see benefiting our business. People are holding on to their vehicles for longer periods of time. There has been nine million fewer new vehicles sold over the last two years as compared to the previous two years and as a result, the number of miles being driven on older vehicles has increased significantly. The average age of the domestic car or light truck is now over ten years and it is predicted to increase to 12 years by 2013. As drivers continue to delay their purchases of new vehicles, projected SARs is a weak 11.5 million units for this year and they maintain their vehicles for longer periods, they are increasingly investing and maintaining and repairing these vehicles and looking to Monro to help keep them safely on the road. With new vehicle sales not expected to recover for years, this momentum could become a longer term trend.

In addition, as we've said in the past, a challenging economy, GM and Chrysler bankruptcies, dealer uncertainty and closures that have taken place over the last two to three years have allowed us to attract many new customers and expand our margin share. The trusting relationships we have established with our customers and our unwavering committment to quality service have enabled us to maintain this growing base of new customers as they seek convenient, value priced alternatives to a declining dealership base. We expect the decline of the dealer base to continue to the next several years. This, coupled with the continuing weak new car sales is why we have seen our sweet spot expand to four to 12 year old vehicles from what used to be six to ten years. Our high impact cost effective advertising and marketing campaigns also continue to drive traffic throughout fiscal 2010. We are continuing to promote sales in certain categories through specific 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, and Brakes Forever in which we guarantee brake pads for the life of the car and replace pads for only the cost of labor. The success of these value oriented programs as well as the favorable macro environment is evidenced in the same-store traffic increase of more than 3% for the quarter supported by a 3% increase in the number of oil changes and a 5% increase in brake sales.

To briefly review our fiscal year results we're pleased with our full year net income increase of 38% to a record $33.2 million from $24.1 million in the prior year. We significantly improved our earnings per diluted share which came in at $1.61 compared with $1.20 for fiscal year 2009, even with an increase in share count. Comparable store sales grew 7.2% on top of a 6.7% increase last year and marked our ninth consecutive year of comparable store sales increases. In addition, we achieved a total sales increase for the year of 18.6%, reaching a record $564.6 million compared to $476.1 million for the prior year. Gross margin expanded 70 basis points for the year despite a significant shift in sales to lower margin tires category due to the acquisitions. Total operating expenses decreased to 30.5% of sales versus 31.1% of sales in fiscal 2009.

Now, for an update on our growth strategy. We are focused on increasing our market share through same-store sales growth, expanding our product offerings, continuing new store openings in existing markets and acquiring competitors at attractive valuations. As you know, at the start of the third quarter we acquired forty-four Tire Warehouse Central and Midwest Tire Auto & Repair stores. As a result of the Tire Warehouse acquisition in the fourth quarter we converted an additional fifty-four Monro Service Stores in New England to our Black Gold format which should provide nice momentum in those markets heading into 2011. More specifically, we would expect these stores to run 3% higher comps and three percentage points higher store contribution than the non-Black Gold service stores.

In addition we acquired 26 auto tire stores in the first quarter of the year. In all, we added approximately $90 million in annualized sales, which translates to approximately 18% top line growth from these recent tire store acquisitions, and we are pleased to report that these acquisitions are running considerably ahead of plan and contributed $0.03 to earnings in the fourth quarter of fiscal 2010, historically, our weakest quarter of the year. We continue to be on the look out for value price, opportunistic bolt on acquisitions to further fill out our footprint. An example is our purchase of the five store, $10 million annualized sales import/export tire chain in Pittsburgh, Pennsylvania, in April 2010. It increases our Mr. Tire brand to 12 stores from seven and our total number of stores to 57 in the Greater Pittsburgh market, providing excellent store density in this important market.

As I have previously noted, we continue to believe that economic pressures put on our competition large and small and uncertainty regarding potential tax increases on sellers can lead to excellent acquisition opportunities for Monro. We remain poised to take advantage of such prospects. Finally, I am pleased that we are able to increase our quarterly dividend by 29%. This increase underscores Monro's strong financial position and cash generation, consistent earnings growth, confidence, and committment to enhancing shareholder value. As always, we're pleased to be able to return value to our shareholders through our quarterly dividend without compromising our ability to pursue acquisitions and organic growth opportunities.

I'd now like to briefly discuss our outlook for the first quarter and fiscal 2011. As I've discussed, our business continues to perform well and we expect that the positive momentum that we have been experiencing will continue in the first quarter. We are also encouraged by our comp store sales thus far in the quarter which are up approximately 5%. In addition, we expect that the favorable macro conditions that we have been experiencing will continue for at least the near term. While we remain optimistic about our prospects going forward, we realize that we are operating in a difficult environment and uncertain times and will remain vigilant going forward.

As we detailed in our press release this morning, we expect first quarter comparable store sales growth in the range of 4% to 6% versus 6.2% in the prior year. We expect first quarter earnings per share to be in the range of $0.58 to $0.62 which compares to $0.46 for the first quarter of fiscal 2010, a 35% increase at the high end of our range. For the full year, we expect total sales in the range of $625 million to $640 million and comparable store sales growth in the range of 4% to 6%. Gross margins should be down slightly due to the tire store acquisitions and the resulting sales mix shift to lower margin tire sales; however, operating expenses should continue to decline 100 to 150 basis points due to the resulting leverage. Additionally, we anticipate fiscal year EPS of $1.92 to $2.

Before I turn the call over to Cathy, as we close out fiscal 2010, I'd like to give a brief update on our five year operating plan. As I've discussed last quarter, when we first developed our plan two years ago, we set out to grow the top line 15% annually which would be 10% through acquisitions, 4% through comps, 1% through Greenfield Stores. Additionally, we had a goal of 12% to 13% operating margins or 200 to 300 basis points of operating margin improvement. I am pleased to say that we are ahead of plan and continue to see no reason currently that 2011 won't continue to move us forward.

With industry trends in our favor, we remain focused on capitalizing on opportunities to grow the business both organically and through acquisitions. We continue to challenge, improve upon, and execute against operational initiatives, protect our position as a low cost operator, and consistently provide excellent service to our loyal customers. We are excited about the opportunities for further market share expansion in fiscal 2011 and remain confident that customers will continue to turn to Monro as their trusted service provider.

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

Thanks, Rob. Good morning everybody.

As Rob said sales for the quarter increased 25.7% with comparable store sales increasing 8%. There was an increase of $22.6 million related to new stores of which $21.2 million came from the 2010 acquired stores such as Auto Tire Midwest and Tire Warehouse purchased this fiscal year. Partially offsetting this was a decrease in sales from closed stores amounting to $1.9 million, and, as Rob said, the comparable store sales this quarter compared to comparable store sales increase of 11.2% in the fourth quarter of fiscal 2009. Year-to-date, sales increased 18.6% with comparable store sales increasing 7.2%. New stores added $63.9 million including $58.5 million from the fiscal year 2010 acquired stores, Auto Tire Midwest, Tire Warehouse. Partially offsetting this was a decrease in sales from closed stores of $7.6 million, and this all compares to a comparable store sales increase of 6.7% for the 12 months ended March 2009. At March 27, 2010, the Company had 777 Company operated stores, as compared with 710 stores at March 2009. During the quarter, ended March 2010, the Company added three locations and closed six. Year-to-date the Company has added 79 locations and closed 12 underperforming locations.

Gross profit for the quarter ended March 2010 was $57.4 million or 39% of sales as compared with $45 million or 38.4% of sales for the prior year quarter. The increase in gross profit for the quarter ended March 2010, as a percentage of sales, is due to several factors. First, distribution and occupancy costs, which are included in Monro's cost of sales, decreased as a percentage of sales from the prior year as the Company, with improved sales, was able to better leverage largely fixed costs. There was a decrease in labor cost as a percent of sales due partially to a continued shift in mix to tire sales as well as improved labor productivity.

Total material costs including outside purchases increased as a percentage of sales as compared to the prior year quarter. This was due to margin pressure caused by a shift in mix to the lower margin categories of tires and maintenance services from the higher margin categories of breaks and exhaust. The fiscal year 2010 acquisitions, which were all tire stores, have resulted in a more pronounced shift in mix this quarter. Partially offsetting this was a, were selling price increases as well as a decrease in the cost of oil and the sell-through of some lower cost Chinese tires. Gross profit for the 12 months ended March 27, 2010 was $231.2 million or 40.9% of sales, up from 40.2% of sales for the prior year. The increase in gross profit for the full fiscal year was due to the same factors as affected the fourth quarter of fiscal 2010.

Moving on to operating expenses for the quarter, they were $46.9 million or 31.8% of sales down from the prior year of 33.2% of sales. Within operating expenses, selling, general, and administrative expenses for the quarter, ended March 2010, increased by $7 million to $46.1 million from the prior year quarter and were 31.3% of sales as compared with 33.3% for the prior year quarter. Over $4.5 million of the increase this quarter in operating expenses is directly attributable to the acquired stores' operating expenses. The Company gained leverage as a percentage of sales in many of the components of SG&A both in storage erect and store support costs, because of strong comparable store and acquisition store sales, costs control, and the lower operating cost structure of the tire warehouse stores.

For the 12 months ended March 2010, operating expenses increased by $24.1 million to $171.9 million from the comparable period of the prior year and were 30.5% of sales down from 31.0% of sales for the fiscal year 2009. SG&A expenses for the 12 months ended March 2010 increased $21.5 million to $169.9 million from the prior year and were 30.1% of sales as compared to 31.2% of sales. Intangible amortization for the quarter ended March 2010 increased by approximately $0.1 million to $0.2 million from the comparable period of the prior year and were flat as a percent of sales. The dollar increase is due to the amortization of intangibles acquired, such as customer lists and trade names, associated with the fiscal year '10 acquisition. For the full year intangible amortization increased by $0.5 million to $0.9 million from the comparable period of the prior year for the same reason.

Loss on disposal of assets for the quarter ended March 2010 increased $0.8 million from a gain of $0.2 million for the quarter ended March 2009 to a loss of $0.6 million for the quarter ended March 2010. The increase is due to the timing of proceeds from a number of sales of property in one quarter versus another as well as the closure of underperforming stores. For the full year, loss on disposal assets increased $0.2 million from a gain of $1.1 million for the 12 months ended March 2009 to a loss of $1.1 million for the 12 months ended March 2010. Operating income for the quarter ended March 2010 of approximately $10.5 million increased by 73.8% as compared to operating income of approximately $6 million for the prior year quarter, and increased by 200 basis points as a percentage of sales from 5.1% for the quarter ended March 2009 to 7.1% for the quarter ended March 2010. Operating income for the full year of approximately $59.2 million increased by 35.7% as compared to operating income of approximately $43.7 million for the prior year-ended 2009 and increased as a percentage of sales from 9.2% to 10.5% for the 12 months ended March 2010.

Net interest expense for the quarter ended March 2010 increased by approximately $0.4 million as compared to the same period in the prior year while it's relatively flat as a percentage of sales for the same period. The weighted average debt outstanding for the quarter ended March 2010 increased by approximately $2.1 million from the prior year quarter primarily related to the addition of capital leases related to the FY10 acquisition. partially offset by the pay down of the Company's revolving credit facility. In addition the weighted average interest rate increased by approximately 150 basis points from the prior year due to the addition of the capital leases. For the 12 months, net interest expense of approximately $6.1 million was relatively flat as compared to the same period in the prior year and decreased as a percentage of sales from 1.3% for the 12 months ended March 2009 to 1% for the 12 months ended March 2010.

The effective tax rate for the quarter ended March 2010 and March 2009 was 33.4% and 36.2%, respectively, of pre-tax income. The difference in rate relates to the accounting for uncertain tax positions under FIN48, which may vary from quarter to quarter and year to year. The effective tax rate for the 12 months ended March 2010 and March 2009 was 37.9% and 36.8%, respectively, of pre-tax income. At this point, we would expect fiscal year 2011's tax rate to be approximately 38%. Pre-tax income for the quarter of $8.8 million and year-to-date of $53.4 million for the period ended March 2010 increased by 85% and 40% respectively over the prior year period. Net income for the quarter ended March 2010 of $5.9 million increased 93% over net income for the prior year quarter. Earnings per share on a diluted basis for the March 2010 quarter increased 87%, even with share count increasing by 727,000 shares with more stock options being in the money due to the appreciation of the stock price since last year. For the 12 months ended March 2010, net income of $33.2 million increased 38% and diluted earnings per share increased 34%.

Moving on to the balance sheet, our balance sheet remains very strong. The current ratio at 1.3 to 1 is comparable to, though slightly lower than, last March. The decrease is due in large part to our very deliberate and close working capital management whereby we were able to increase vendor payables and reduce bank debt throughout the year. For the 12 months ended March 2010 we generated $87 million of cash flow from operating activity as compared to $49 million for the same period last year. We spent approximately $21 million on CapEx and $46 million on acquisitions. Nonetheless, we were still able to pay down approximately $16 million of debt during this fiscal year. As a result of the debt pay downs, our debt-to-capital ratio dropped to 30% from 34% at March 2009 even after accounting for the new capital leases in fiscal year 2010.

As a reminder, we have a $163 million revolving credit facility with a group of lenders that has committed through January 2012. The agreement bears interest at LIBOR plus a spread of 50 to 150 basis points. We currently are paying LIBOR plus 75 basis points, but we expect it to drop to 50 basis point the over labor by the end of July. The very favorable agreement permits us to operate our business, including doing acquisitions without bank approval, as long as we are in compliance with debt covenants. Those terms as well as our current availability of $108 million give us a lot of ability and flexibility to get acquisitions done quickly as we did this fiscal year. We are fully compliant with all of our debt covenants and have plenty of head room to do more acquisitions without any problems.

During the first 12 months of this year we paid approximately $5.5 million of dividends and received about $5.8 million from the exercise of stock options. Depreciation and amortization totaled $23 million year-to-date and $7 million this quarter. Inventory is up a little over $14 million from March 2009 due to the inventory added related to the fiscal year 2010 acquisitions. Terms were slightly improved as compared to last year. That concludes my formal remarks on the financial statements, but I wanted to mention to you some planned selling activity that we expect from directors. A few will be selling up to a total of 200,000 shares at some point prior to calendar year-end for tax and estate planning purposes.

So with that I will now turn the call over to the Operator for questions.

(Operator Instructions). Our first question is from Tony Cristello with BB&T Capital Markets.

Hi, Tony. How are you today?

Good, good quarter, thank you.

Thank you.

One of the questions I wanted to start off with, Rob in your prepared remarks you mentioned product offering expansion and I'm just curious as far as what you were alluding to on that? Is it just more of offering alignments or some of that where they might not have that up in the New England acquisition or is that something different?

Sure, I'm -- the Black Gold stores that are now available in the New England area, remember the Tire Warehouse stores don't sell anything but tires, so as opposed to most Black Gold stores that shift, really tires are the opportunity for Block Gold stores. Well, now, all these 54 Black Gold stores in New England have the opportunity to sell alignments to Tire Warehouse customers, brake services that isn't normally the same opportunity, so we would hope these Black Gold stores outperform what we've done with other Black Gold stores.

But I think it also comments to right now air conditioning is only in 40% of our locations. We can expand upon that. The market is going to change and there are going to be opportunities for additional services like there was a few years ago with tire pressure monitoring systems, so as the market changes, whether it's hybrids, electric cars, anything that comes around, at our size with our capital base, it's very easy for us to get involved, train our people, and use that as an opportunity to expand our business.

How often does someone come in that is buying tires and then also would that get an alignment? What is the percentage of that out of curiosity? Is that something you've disclosed in the past?

We haven't been necessarily. The 25% of our tire unit sales end up with an alignment on them.

Okay,

If you look, then, on the customer retention side, I think you said traffic was up 3%. Is that a mix both of new and existing customers or are you actually seeing your existing customer base coming in on a more frequent basis for repairs and service?

No. While it's a mix, it relates to new customers coming in.

Okay.

And again, you can speak to that; the fact that we said our old sweet spot used to be six year vehicles to ten year vehicles, while the ten year vehicles, the end of it is moving to 12 years because of the weak new car sales. We are also seeing cars earlier move into our sweet spot which we've now said starts at four years and those are dealer customers that are choosing us, totally new customers. And you can see that with the scheduled maintenance business increasing 11% comp in both Q4 and Q3.

Okay.

When you look at that extending to 12 years, do you also think the vehicles today are just being made better to where that tail will be a 20 year old car instead of maybe being a 15 year old car before it's scrapped?

I certainly think vehicles are being made better today. I think really what's generating that though is a bad economy where people don't want to be spending money on depreciating assets and they are holding their vehicles longer which I think is why exhaust is up for the first time for a year in my 11 years with the Company, which you don't spend a thousand dollars on an exhaust job if you're going to get rid of the car in a year and you don't need exhaust until a car is ten to 12 years old, so it says people are planning on holding their ten and 12 year vehicles longer. Okay, and one last question.

When you look at the advertising and your approach to the market, you've been successful in some of the newer programs over the last six months. Is there any change in how you're thinking about Fiscal 11 in terms of advertising or will you keep a lot of the same programs in place? Well I think for starters, if it's not broke don't fix it, but I think we are looking to invest and expand the internet significantly; and we talked about some tests on prior calls that were conducted during 2010 fiscal year, which have proved successful and we will expand them significantly in 2011.

Okay, perfect. Thanks guys.

Thank you.

Our next question is from Brett Jordan with Avondale Partners.

Good morning, Rob.

Hi, Brett.

A couple quick questions here. One on the current quarter to date comp. How is traffic in the comp versus price?

Very similar. As you know, we've raised our prices every year for the past 11 years. We just implemented in April a 2 to 2.5% price increase, so that will help, along with 2 to 2.5% we put in last September, so that should be flowing in Q1 and Q2.

Traffic continues to be strong. We ran, like we said, a plus three traffic delivering a plus eight comps for the year. We were up 4% in traffic. At those levels that's right where we need it with your price increases.

What we've typically said is we would expect 3% to 4% traffic increase, 4% pricing on the year with ticket average being under pressure in a lot of cases due to the economy and people trading down within our categories from a high end Goodyear tire to a low end Goodyear tire from a low end Goodyear tire to a private label Chinese import.

Okay, great.

As far as the real estate, the acquisition pipeline, is there any expectations there on the next quarter or two? Or do you want to talk about -- the last quarter you did talk about the value of the pipeline. Do you have any color right now?

We had said with the 10 million we got from import/export, we also bought some of the Tire Warehouse franchisees and did a couple of one-off. I think we're at about $14 million additional sales since the $90 million we did last year and if we had timing, more specifically, we might have alluded to it.

We certainly think in this environment and some of the discussions we're having and hoping to have that with the tax changes, all but certain going to the high end starting in January, we would expect activity to pick up for us in Q2 and Q3 next year.

And then, one housekeeping. The total number of Black Gold stores now?

248.

And then one question on the SG&A leverage, talking about a 12% to13% operating margin target with 100 to 150 bips of operating expense leverage this quarter, at what point in the top line growth, the top line expansion are you going to have to add incremental overhead either distribution centers or fixed costs to the model or can you get to 13% essentially on the infrastructure you have in place now?

No, I think getting to the 13% incorporates what would be a normal growth of our business. Incorporated in those numbers and those projections of 100 to 150 basis points -- and that's leverage for the full year, just not Q1 in SG&A -- that already incorporates the expansion of the Baltimore warehouse and any anticipated jobs or expansion to the distribution network that we might need to continue to grow so it's fully baked in and those numbers don't change. They incorporate as we've said in our five year plan that we're growing.

Great. Thank you.

Thank you.

Our next question is from Scott Stember with Sidoti & Company.

Good morning Rob.

Hi, Scott.

Did you give what the average ticket was year-over-year on the increase?

We didn't say but it's up about 5%.

Okay.

For the quarter it was, I'm sorry do you want the full year?

If you have full year too that would be great.

We don't have it handy. We can give it to you.

The ticket average is up because the balance of sale of tires is higher and tires are a higher ticket average. In general, there's pressure on ticket average because every other category -- even tires is a trade down, but as the mix of tires shifted I think this year we ended up at 31% tires. Our expectation next year is we're probably approaching 35% of the business is going to be tires.

They're going to be counteracting. Tires are going to raise the average ticket; it doesn't trade the phenomenon of what we're seeing of the trade down.

With regards to new customers, I know maybe a few quarters ago you gave a couple statistics out there of the percentage of people coming through the door you could qualify as new customers. Do you have anything specific around anecdotal just to frame how this year looks versus last year for new customers?

Not really. Our repeat business continues to run about 75% and that's down slightly, which says to people deferring in tough times and maybe visiting us a little less often. If they used to come in three times maybe it's two times, but obviously what that also says is the new customer base continues to increase. Otherwise, we wouldn't see our sweet spot expand to the four to 12 year period from the six to ten.

Fair enough. Rob, you talked about expansion of some of these pilot programs you had in 2010. I imagine you're referring to the keywords on search engines on the internet?

Oh, we've got a number of things planned Scott, but if I told you I'd have to kill you.

Can you just talk about advertising what you're spending now versus the year ago?

Sure, it runs somewhere between 3.3% and 3.5% of sales. Obviously, we continue to put more dollars investing in some of these other programs like the internet, while maintaining what we do on the other fronts, but obviously with back to back years of plus seven comps and layering in all these acquisitions within our current markets we're getting a lot of leverage on that; so while the percentage is holding somewhat steady, we're getting what we feel is a lot more effectiveness and bang for the buck.

So this percentage is pretty much steady over the last year?

Correct.

Okay, got you.

Black Gold stores, you gave the number, but do you have any metrics on how these stores on average are performing versus the non-Black Gold stores?

I think for the full year the Black Gold stores, tire units, were up 12% versus non-Black Gold stores 5%. Tire sales were up 18.3% versus 14.4%. Alignments were up 11.2% versus 7.5% and contribution dollars were up 9.1% versus 7.4%. Average tires sold per day were up three versus up to total. Total three tires per day versus two, about 50% higher.

Store contribution ran about 33% versus 30.5% for the non-Black Gold stores. Do you want more?

I think that was more than enough, thank you.

Last question, Cathy, I missed the cash flow and the CapEx number for the year. Could you just give that one more time?

Sure. CapEx for the year was $23.3 million and cash flow from operating was about $87 million.

And what was the D&A again?

I'm sorry. D&A was $23 million; CapEx was $21.3 million.

Got you.

Okay?

Great. Thanks a lot guys.

Thank you.

(Operator Instructions). Our next question is from John Lawrence with Morgan Keegan.

Good morning.

Hi, John.

Rob, would -- you just you touched on the acquisitions a little bit. Would you go a little deeper dive there, talk a little bit about -- obviously the trick of why these have come out and I know you have good prices, etc., but in the tail wind with the economy, etc., but what is the real idea in the formula that calls the upside in both of the acquisitions?

Well, I think for starters obviously the team executed fabulously on these deals. We were all over them quickly and we bought them at the right time a year ago to help the business. As you know, we typically look for sales of anything we acquire to run down five comp from whatever they were the first six months of ownership.

These deals as a group ran plus 11 comps so obviously the sales were significantly better than we anticipated and really it's the first time in a number of years where we grew the top line base the way we did and got a lot of leverage in the business model so the $0.03 profit for Q4, we were planning on them breaking even in Q4 and they significantly outperformed on the sales line, the bottom line. That is on a standalone basis.

We additionally got all of the leverage that you start seeing coming through in our Q3 and Q4 numbers for the Company as a whole absorbing our SG&A and have the additional benefit on the tire units going from 1 million tire units a year to 1.5 million.

And if you look at auto the tires, obviously, a different model going out of your normal area, how do you view that now a year later and would you look at that kind of model again?

Sure, but again, we bought Auto Tire for less than we usually do, which absolutely helped. We obviously have the headwind of distribution and some of the difficulties -- being it's out of our normal footprint, that might cost us 200 basis points of gross margin, but if you remember, the rents in those locations make up for that hinderance, and thus they performed very well. We basically grabbed number three market share with that purchase.

We would certainly be less inclined to buy a five or ten store chain outside of our market and try and compete on that front where we didn't have significant store density, but other opportunities that might come around in contiguous markets that might not normally be on the radar if the price is right with the same kind of opportunities, we certainly wouldn't shy away from it but pretty much most of what we're looking at currently would fall right within our markets.

Right. Congratulations. Thanks.

Thanks very much.

Our next question is from Robert Straus with Gilford Securities.

Hi, guys how are you?

Good, Robert.

Just a quick question. Rob, did you mention earlier in the call that the alignment attachment rate for tires is about 25%?

Yes.

What is the opportunity to increase that percentage and if you can, remind us of the incremental profit opportunity there?

Well, we are always trying to get better. I don't want to pick an outlandish number. We're at 25% now, obviously the next move would be to try and get to 30% but I don't think the upside is running 50% to 60% alignments. I think it's incremental. I think a good target would be 30%, which would be 20% improvement from where we are. I think the price of alignments run anywhere from $80 to $100 and that's pretty close to 90% margin business.

Sounds good. Congratulations. Thanks so much.

Thank you.

(Operator Instructions). Our next question is from Gary Balter with Credit Suisse.

This is Simeon Gutman from Credit Suisse. How are you?

Hi, Simeon.

Quick question. First of all, great quarter.

I don't know if you subscribe to the two year number or the two year trend, but for your Q4, it was very strong quarter to quarter; but the 5% for Q1 looks like it drops off a bit. I think I'm looking at the right trajectory, just curious if there's anything there -- whether you're cycling some price increase or not or it's just the way it is?

Well, I think if you go back on your two year trend, April was up 5.5%, May was up 7.8%, and June last year was up 5%,so we're up against the 6.2%. I don't know. I might agree with you on the two year trend. I think May is a tougher comp comparison, but if you go back to softer months, as an example in Q4, February was up 4% but it was surrounded by a 9.3% comp in January and an 11.5% comp in March.

November in our Q3 last year was up 1.3% but that was surrounded by an 11.9% in October and December at 10.5%, so I certainly wouldn't say things are necessarily weakening. We're involved in one month; we had -- April was up 8%, May is a little bit weaker albeit, this week in May is above April on a comp basis, so I think we're more a long term focused over the two year period.

We had four months individual months that ran anywhere from plus 1% to plus 3%, surrounded by big comp months. Here we're coming off an 11.5% in March and 8% in April. To date, May is a little bit higher than what we used to come up with our approximately 5% number, but there's a shift in Memorial Day. If I start worrying about the weekly stuff, I'll lose focus on the yearly stuff.

Yes, well -- and if you look at the momentum that the after markets had both on the service side and on just the plain parts side, there's definitely been a resurgence. It's just how sustainable that is and I think this is some data point into the next period to say, "was that very short-term compression of demand or is the rate of that demand going to continue throughout some of the summer months?"

Sure, that's why they pay you the big bucks, but for us, we, obviously, have nine straight years of comps and have made good money. If you look at our compound annual earnings, the last 11 years, so we think being low cost operator at our size, if things slow up we'll buy more acquisitions attractively priced and if we continue to run a 7% comp, if you remember all last year people kept saying, "Boy, you're up against tough comp numbers, it's going to be a tough year for you," so to me, two years is probably more of a trend of performance and aberration. I don't want to pick when comps go to 3% anymore than I want to pick when comps go to 9%.

Sure, well either way, the secular momentum looks good and again congratulations on the quarter.

Thank you.

There are no further questions. Mr. Gross, I'd like to turn the conference back over to you.

Great. Just obviously we're very pleased that our performance, and certainly again want to thank all of Monro's associates who did a great job getting us so where we are and beyond that, we're working hard to continue with similar performance this year and out in the future.

We like our business model. We like our execution and we like the macro trends and look forward to talking to you at the end of July to give you more color on Q1. Thanks very much.

That concludes today's conference call. We thank you for your participation.