nasdaq: mnro 1 - monro.com · 13 source: apaa aftermarket factbook, lang report and analyst...
TRANSCRIPT
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Statements contained in these materials regarding Monro’sexpectations with respect to future operations and otherinformation, which can be identified by the use of forwardlooking terminology, such as “may,” “will,” “expect,” “project,”“anticipate,” “estimate” or “continue” or the negative thereof orvariations thereon or comparable terminology, are forwardlooking statements. Several factors, including certain risks anduncertainties, could cause actual results to differ materially fromresults referred to in forward looking statements. There can beno assurance that Monro’s expectations regarding any of thesematters will be fulfilled.
Forward Looking Information
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• Largest chain of Company-operated undercar care facilities in the United States
• As of September 27, 2014, the Company operated 1,003 stores in 24 states
Company Overview
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Geographic PresenceService TireStores Stores
Connecticut 36Delaware 2 6Florida 35Georgia 9Illinois 5Indiana 8 31Kentucky 33Maine 14Maryland 12 65Massachusetts 43 9Michigan 17Missouri 22New Hampshire 11 17New Jersey 14 31New York 123 11North Carolina 5 33Ohio 113 40Pennsylvania 112 24Rhode Island 9 3South Carolina 1 17Tennessee 3Vermont 1 4Virginia 14 56West Virginia 8Wisconsin 13TOTAL 542 468
Total Company owned stores as of October 19, 2014: 1,010
MAINTAINING DOMINANCEIN THE NORTHEASTERN U.S.
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Brakes Exhaust Steering Maintenance* Tires
*Includes state inspections, lube, oil, filter, engine cooling service, scheduled maintenance and other.Note: Monro’s fiscal year end is March of each year.
FY14 FY14-Q2
Service Mix
Gross Margin %
Brakes and Steering = +15
Maintenance and Exhaust = baseline company margin
Tires = -15
FY15-Q2
FY13
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Competitive Advantages
Operating Model• Company-operated stores
– Faster, Better, Cheaper– Centralized purchasing and distribution– Efficient marketing (database mailing, email, direct mail
and internet) – Superior customer service
• Pricing power and fixed cost leverage– Low cost operator
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Customer Value Proposition• Monro establishes relationships with customers based on TRUST• Direct marketing to customers fosters repeat business and long-term
relationships• Company-operated store model enhances customer experience through:
– High standards of customer care – Lower turnover of store managers– Consistent execution– Investment in business– Significant discount vs. dealer prices– Store density provides more convenience– Best price guarantee
Competitive Advantages
What’s important to DIFM customers?
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High Customer SatisfactionMonro Website Internet Paid Ads
http://www.monro.com/CustomerSatisfaction.aspx
95%
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Monro operates in $158 billion “Do-It-For-Me” segment of $202 billion U.S. automotive aftermarket industry
Do-It-Yourself:1999 - 25.7%2009 - 22.0%2013 - 20.7%
Do-It-For-Me:1999 - 74.3%2009 - 78.0%2013 - 79.3%
Source: 2014 Lang Report
Industry Overview
U.S. Automotive Aftermarket Industry
Source: 2014 Lang Report
Service Bay Population Changes: 1999 – 2013
Total Bays / Mkt Share %(000’s)
2008
338/28.3
340/28.5
199/16.7
73/6.1
125/10.5
119/9.9
1,194/100
2013
352/30.0
285/24.3
220/18.7
81/6.9
125/10.6
111/ 9.5
1,174/100
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Average Vehicle Age
Source: November 2012 Lang Report, 2012 Wall Street Journal, June 2014 Lang Report and Lang estimate.
Average Age of Car and Light Truck on the Road
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Approximately 245 million vehicles on road Increasing age of vehicles (11.7 years) Number of vehicles 5 years and older increasing Significant average annual miles driven per vehicle Decreasing number of service outlets and bays Increasing complexity of vehicles Favorable demographics Ability to raise prices (most recently service sales categories)
Headwinds :― Consumer
Favorable Industry Trends
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Source: APAA Aftermarket Factbook, Lang Report and Analyst estimate.
Cars and Light Trucks in Service
Source: September 2013 Lang Report and September 2014 Lang Report
Growing Independent DIFM Product Share (vs. Dealers)
Lig
ht
Ve
hic
le D
IFM
Pro
du
ct
Sh
are
Source: 2012 Lang Report, Zacks.com
.
U.S. Annual Light Vehicle Sales
Source: October 2012 Lang Report and September 2013 Lang Report , 2014 Lang Report.
Vehicles per Service Bay
Favorable Industry Trends
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% Change 178% 24% 17% 17% 22% 17% 12% (4)% 3% 20% 34% 35% 17% (22%) 27% 11%-17%
•Adjusted for three-for-two stock split paid to shareholders of record as of October 21, 2003, September 21, 2007 and December 13, 2010.•Note: Monro’s fiscal year end is March of each year.
EPS Trends
’99 ’00 ’01 ’02 ‘03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ‘11 ‘12 ’13 ’14 ’15E
Est.
$1.8
5 -$
1.95
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Historical Financials
(Dollars in millions except per share data) 2nd Quarter2015
2nd Quarter2014
Fiscal Year2014
Fiscal Year2013
Fiscal Year2012
Sales $221.3 $205.3 $831.4 $732.0 $686.6
Sales Growth (vs. prior year) 7.8% 16.3% 13.6% 6.6% 7.8%
EBITDA $ 37.8 $ 31.7 $127.7 $101.5 $115.5
EBITDA Margin 17.1% 15.4% 15.4% 13.9% 16.8%
Operating Income $ 28.9 $ 23.9 $ 95.3 $ 73.7 $ 91.4
Operating Income Margin 13.1% 11.6% 11.5% 10.1% 13.3%
Net Income $ 16.3 $ 13.6 $ 54.5 $ 42.6 $ 54.6
Net Income Margin 7.4% 6.6% 6.6% 5.8% 8.0%
EPS (Diluted) $ 0.50 $ 0.42 $ 1.67 $ 1.32 $ 1.69**
EPS Prior Year * $ 0.42 $ 0.36 $ 1.32 $ 1.69 $ 1.44*
Comparable Store Sales Growth (Adjusted for days)
* Adjusted for three-for-two stock split paid to shareholders of record as of December 13, 2010
** 53 week year, with extra week, full year comps positive 2.0% for fiscal 2012 added $.07 to earnings.
(2.0)% (2.1)% (0.5)% (5.5)% 0.1%**
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Balance Sheet HighlightsFiscal Q/E
September 27,2014
Fiscal Y/EMarch 29,
2014
Current assets $197,815 $168,116
Property, plant & equipment, net 310,648 281,883
Other non-current assets 395,628 309,957
Total assets $904,091 $759,956
Current liabilities $158,407 $136,741
Capital leases and financing obligationsOther long-term debt
128,283151,017
81,199105,841
Other long-term liabilities 21,046 20,191
Total liabilities 458,753 343,972
Shareholders’ equity 445,338 415,984
Total liabilities and shareholders’ equity $904,091 $759,956
Debt-to-capital (includes capital leases) 39% 32%
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Increase market share through same store sales growthAcquire competitors cheaplyContinue new store openings in existing markets
– Approximately six to ten stores per year
Growth Strategy
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Building Tire Store Category
Combination of 30 acquisitions in the last 13 years - 508 stores- $620 million revenue
Could have up to 1,300 tire stores and 1,300 service stores in our 25 states- Creates market dominance and pricing power- Diversifies risk- Expands pool of acquisition candidates at attractive prices- Concept unique and difficult for competitors to replicate
Should afford opportunity to expand operating margins and further improve business model- Share inventory- Advertising, logistics, operations- Gross margins lower but SG&A absorption better
Acquisitions and Opportunities
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Kramer Tire (April 2012) Enger Tire Center/Enger Auto Service (December 2012)• 20 stores in Virginia • 12 stores in Ohio• 2011 sales - $25 million • 2011 sales - $9 million
• Purchased real estate for eight locationsColony Tire (June 2012)
• 18 stores in North Carolina Tire King (December 2012)• 2011 sales - $25 million • 9 stores in North Carolina
• 2011 sales - $11 millionTuffy/Car-X (August 2012) • Purchased real estate for four locations• 17 stores in Wisconsin (13) and South Carolina (4)• 2011 sales - $9 million Curry’s Auto Service (August 2013)
• 10 stores in Virginia (9) and Maryland (1)Roc City Auto (October 2012) • 2012 sales - $18 million• 5 stores in New York • Breakeven to slightly accretive in first 12 months• 2011 sales - $3 million • Purchased real estate for one location• Purchased real estate for one location
S & S Firestone (November 2013)Tire Barn (November 2012) • 4 stores in Kentucky• 31 stores in Indiana (27), Tennessee (3) and Illinois (1) • 2012 sales - $5 million• 2011 sales - $64 million • Breakeven to slightly accretive in first 12 months• Purchased real estate for 13 locations • Purchased real estate for three locations
Ken Towery Tire and Auto Care (December 2012) Carl King Tire (November 2013)• 27 stores in Kentucky (24) and Indiana (3) and • 6 stores in Delaware (5) and Maryland (1)
Wholesale operation • 2012 sales - $10 million• 2011 sales - $54 million (including Wholesale) • Breakeven to slightly accretive in first 12 months• Distribution center located in Louisville, Kentucky
Acquisitions and Opportunities
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Lentz USA/Kan Rock Tire (June 2014)
• 19 stores in Michigan• 2013 sales - $14 million• Purchased real estate for all locations• Breakeven to slightly accretive in first 12 months
The Tire Choice (August 2014)
• 35 stores in Florida• 2013 sales - $48 million• Purchased real estate for five locations• Breakeven to slightly accretive in first 12 months
Wood & Fullerton (closed in fiscal October 2014)
• 9 stores in Georgia• 2013 sales - $11 million• Purchased real estate for three locations• Breakeven to slightly accretive in first 12 months
Acquisitions and Opportunities
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FY15 Earnings Assumptions• Earnings estimate for FY15: $1.85 - $1.95 vs $1.67 in FY14
– Q1 – FY15: $.52 vs. $.42 Q1 FY14– Q2 – FY15: $.50 vs. $.42 Q2 FY14– Q3 – FY15: $.47 - $.52 vs. $.47 Q3 FY14
• Comparable Store Sales approximately flat for FY15; ‒ Q1 FY15: 0.9% ‒ Q2 FY15: (2.0)%‒ Q3 FY15: (2.0)% - flat
• Gross Sales approximately $900 - $910 million
• Operating Margin improvement of approximately 50 basis points (125 bps excluding FY15 acquisitions)– Depends upon sales and retail pricing environment– Tire costs declining benefitting margins; lapping FY14 product cost reductions in Q3 and Q4– Leverage fixed occupancy costs (included in COS) against higher sales– Improve technician productivity (Sales per Man Hour)– Improvement in SG&A leverage due to higher sales and cost control– Improvements of 230 basis points and 140 basis points in Q1 and Q2, respectively– Fourth quarter improvement limited by healthcare costs (ACA) and lapping FY14 product cost reductions
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• Interest Expense of $10.0 million
• $33 million depreciation and amortization
• $33 million of cap-ex– $22 million in maintenance cap-ex – $11 million for new stores
• EBITDA approximately $140 - $145 million
FY15 Other Assumptions
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Acquisitions Same or contiguous markets Buy right Accretive to earnings in a reasonable timeframe
Pay down debt
FY15 Cash Flow Priorities
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Largest chain of Company-operated undercar care facilities in the U.S.
Wide breadth of product and service offerings
Superior customer service
Favorable industry trends
Leading market position in Northeast, Great Lakes and Mid-Atlantic with a presence in 25 states
Strong balance sheet and cash flow
Low cost operator with superior operating margins
Significant growth opportunity through store expansion and acquisitions
11 straight years of comparable store sales increases prior to fiscal 2013
Nine dividend increases, in nine years, since initiated
Investment Highlights