Zaheed Mawani - IR Tom Greco - CEO Mike Norona - CFO George Sherman - President

Simeon Gutman - Morgan Stanley Scot Ciccarelli - RBC Capital Markets Chris Horvers - JPMorgan Seth Sigman - Credit Suisse Matthew Fassler - Goldman Sachs Seth Basham - Wedbush Securities Greg Melich - Evercore ISI Michael Lasser - UBS Dan Wewer - Raymond James Bret Jordan - Jefferies Carolina Jolly - Gabelli Tony Cristello - BB&T Capital Markets

Good morning, and thank you for joining us on today's call to discuss our first quarter results. I'm joined this morning by Tom Greco, our CEO; Mike Norona, our Chief Financial Officer; and our President, George Sherman.

Before we begin, I would like to remind you that our comments today contain forward-looking statements we intend to be covered by and we claim the protection under the Safe Harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address future events, developments, or results and are subject to risks, uncertainties, and assumptions that may cause our results to differ materially.

Our comments today will also include certain non-GAAP measures including certain financial measures reported on a comparable or adjusted basis to exclude the impact of cost in connection with the integration of General Parts International and the recurring amortization of General Parts’ intangible assets. Please refer to our earnings press release and accompanying financial statements issued today for important information and additional detail regarding these forward-looking statements and the reconciliation of the non-GAAP measures referenced in today's call.

The company intends these forward-looking statements to speak only as of the time of this conference call, and does not undertake to update or revise them as more information becomes available. Now, let me turn the call over to Tom.

Thanks, Zaheed, and good morning, everyone. I’m delighted to be here with you on my first call since joining the Advance Auto Parts team.

Since I walked in the door on April 11, I’ve been working very closely with the leadership team. Importantly, I spent most of my time out in the field speaking with customers and team members to get a deeper understanding of our capabilities, challenges, and opportunities.

I’ve been in my role for just over a month, so admittedly, it’s very early. Having said that, based on what I’ve seen so far and what you saw in today’s earnings release, it’s clear we’re facing real challenges.

The good news is I have tremendous confidence that we have an extraordinary opportunity to create value going forward even more than I thought before I joined the company. On today’s call, I’ll share my initial observation on the business and the quarter.

Then I’ll turn the call over to Mike to address first quarter performance before coming back to discuss the overarching themes that will guide our path forward. We’ll leave plenty of time at the end for questions.

Allow me to start with a bit of context on why I decided to join Advance. I wasn’t looking for just any CEO position as I transitioned from a great role in another great company.

I was looking for a CEO position in a company with scale, a company in a growing industry, and a company filled with potential, a company with a terrific opportunity where I could help dramatically improve performance and value. Without question, Advance hits on each of these objectives.

First, scale. Not only is Advance a large company based on revenue and market cap, we also have over 70,000 team members and a comprehensive North American footprint.

Over the past few weeks, I’ve been consistently impressed by the quality and commitment of our field team in both our store support center and in the field. Given this context, Advance provides the opportunity for me to do what I enjoy most, lead a large team and put tremendous focus on meeting the needs of our customers, engage directly with team members to develop and execute plans to meet those needs, and ultimately to drive financial and marketplace performance as well as shareholder value.

Secondly, growing. We operate in a very large and attractive $100 billion plus industry with strong growth rates.

Candidly there are very few industries that offer the compelling growth rates that exists in our space. And finally, filled with potential.

As many analysts have delineated Advance has enormous upside potential. In particular, we have a tremendous opportunity to improve our customer service and competitiveness in the marketplace to accelerate growth.

In addition, I know, we can drive significant productivity and capability improvements in our supply chain and throughout Advance. And without question, we can do a better job of attracting, developing, and retaining talent in our company.

Each of these by themselves will contribute upside in our performance. Together in the context of a large and growing industry, they’ll generate meaningful value for shareholders.

The past several weeks have fully validated the perspective I had as I was considering the opportunity. There is no question, we have work to do.

But it’s clear the Board and my leadership team are prepared to take decisive actions on a number of fronts to create real value for shareholders over time. Allow me to briefly touch on our Q1 results and outlook.

Our comp performance in the quarter was disappointing. We continue to experience shortfalls on execution, driven by availability and service levels.

From my perspective, as a new CEO coming to Advance, it’s clear these challenges are within our control and can certainly be addressed. We’ve been outflanked on supply chain, outperformed on core productivity metrics, and out executed on customer service.

As a result our growth rate and profitability have been below that of our peers for several years. Recently, this is partly due to our focus on the Carquest integration.

The integration has been a necessary but distracting agenda for our entire team. It’s caused us to be internally focused versus externally focused.

The sum of all of this resulted in continued challenges in Q1 with negative comp sales of down 1.9%. While these results are unacceptable from our standpoint the entire Advance team and I are excited by the areas where we see room for substantial improvement.

We can and will make the necessary changes that will improve our value proposition and service levels for our customers. Clearly, we are not where we need to be in terms of competing at the highest levels to earn more trust from more customers to accelerate growth.

My team and I are in the midst of a deep dive on our business and current performance, but we still have work to do. We have a view of the challenges facing the business and where we’ve fallen short.

We’ve developed short-term action plans to address these challenges and that begins with consistently meeting the needs of our customers. In fact, we’re all very passionate about this.

In order to return the company to a substantial growth trajectory, we must deliver improved fill rates, availability, and in-stock. In addition, we need to dramatically simplify the business and remove obstacles for our field teams, so they can execute with excellence.

These focus plans are now in motion. The reality is performance improvement won’t happen overnight.

Our Q1 comps were down primarily due to the internal challenges I outlined a moment ago, notably our shortfalls with availability and service levels. We also experienced accelerated declines on demand, particularly in our colder weather markets late in Q1 and that has continued into Q2.

Based on this trend, we believe it’s prudent to take a conservative approach and revise our assumption for annual comp sales to range between down 3% and down 5%. In addition, we’re no longer targeting the 12% adjusted operating margin rate for 2016 that we previously communicated.

Make no mistake, we can and will do better, but we must be thoughtful regarding our expectations to ensure we set ourselves up for long-term growth and margin expansion. Right now, we’re maniacally focused on what we can control, availability, customer service, productivity, and performance.

We’re redoubling our efforts around accelerating growth, reducing cost, and driving efficiencies throughout the organization. At the same time, we’re confident in our business, our people, and the opportunity that lies ahead.

In fact we see significant sales growth and operating margin expansion opportunities over time. We’re going to be very disciplined about how we drive growth and profitability.

I’ve tackled this kind of challenge more than once in the past and I’m extremely confident this business can deliver operating margins well above 12% over time. The reality is that achieving the target this year would prevent us from creating the platform we need to enable sustainable growth and operating leverage.

For the balance of the year we’ll sharpen our focus on execution and ensure we’re responding to customers by delivering the parts they want, where they want, and when they want them. Well it won’t take place overnight; we’re committed to making significant improvement on this critical metric.

In a few minutes I’ll highlight three overarching themes that will guide our path forward. Before I turn the call over to Mike for some brief comments on the quarter, I want to say a few words about the CFO transition we announced earlier today.

First, I want to thank Mike for his eight years of strong financial leadership during a time when the company more than doubled its market cap. Mike’s played a key role in developing a strong finance team and building a capital structure to support our future growth.

I'm very appreciative of Mike's willingness to support our transition with his leadership, passion, and experience. We’ve commenced an external search for a new CFO and I've agreed with Mike that he will stay on until a successor has joined and an orderly transition has taken place.

We've not set a time frame to complete the search as it has just begun, but will move as expeditiously as possible to bring in the best person for the role. With that, let me turn it over to Mike.

Thanks Tom and good morning everyone. Before I get into my comments in the quarter I want to say it has been an absolute pleasure to be part of the Advance team for the past eight years.

While I’ve decided that now is a good time to make a transition, I remain confident in the company's future and look forward to working with Tom and the rest of the team to ensure we have a smooth transition. Now turning to the quarter.

We delivered adjusted cash EPS of $2.51 for the first quarter primarily driven by softer than expected sales. Turning to sales, overall as Tom said, we were disappointed with our results as first quarter comparable store sales were down 1.9%.

These declines were partially offset by positive growth and comp performance from WORLDPAC, CARQUEST Canada, and from our store conversions and consolidations. As Tom touched on top-line performance reflected continued challenges with availability and lack of execution to improve service levels.

We are intensely attacking these areas with urgency to make the needed improvements. With regards to external factors we saw a continuation of the milder winter weather that we experienced in Q4 that negatively impacted our sales, with lower demand towards the end of the quarter, as we experienced a late start to spring primarily in our colder weather markets where approximately 40% of our stores are located.

Seasonal categories with the largest impact during the quarter we see in batteries and hard parts categories which were partially offset by continued strong results in our break business across both commercial and DIY which saw high-single-digit growth during the quarter compared to mid-single-digit growth in the third and fourth quarters of 2015. In our commercial business, the comp sales declines were more pronounced in our Northeast and Great Lake markets.

The softness in seasonal category sales were partially offset by a modest increase in our commercial ticket size and the strength I noted in our break business. We continue to expand our customer base with our national account business and TECHNET which partners with independent repair shops also continue to add new members in the quarter.

Within DIY we continue to see strong break results, but that only partially offset softness in our battery and battery accessory as well as other seasonal categories. Our gross profit rate declined 58 basis points was primarily the result of supply chain expense deleverage due the comparable store sales decline.

Our first quarter adjusted SG&A rate decreased 100 basis points year-over-year driven by our continued cost reduction initiatives and disciplined efforts to lower administrative and support costs offset by fixed cost deleverage of our comparable store sales decline. All in first quarter adjusted EPS increased 5% compared to last year and adjusted operating income increased approximately 2.2% to $315 million and adjusted operating margin increased 43 basis points over the same period last year to 10.6%.

Operating cash flow for the first quarter was approximately $75.3 million versus $102.2 million last year driven by a decrease in our AP ratio to 74.8% versus 76.5% last year. This decrease was principally driven by transitional inventory growth resulting from strategic investments in availability, the new WORLDPAC DC, and lower than expected sales.

Our adjusted debt to EBITDAR 2.5 times at the end of the quarter and we remain at our maximum stated leverage ratio of 2.5 times. We are committed to maintaining a balanced and disciplined approach to capital allocation to drive shareholder value while preserving our investment grade ratings.

Turning to the balance of the year. As Tom mentioned, we now estimate our annual comparable store sales to be in the range of negative 3% to negative 5%.

Our highest priority and focus is to accelerate our top-line sales momentum. Despite deferring our 12% target we remain committed to improving our profitability which must be driven by sales growth and also continuing to simplify our business and remove cost furthest away from our customer along the organization to be more efficient and effective.

As outlined on our fourth quarter call, our integration activities this year are focused on two main areas. One development and testing work to enable us to combine our AP and CARQUEST supply chain and store systems into one network; and two, the continued execution of CARQUEST market conversion programs.

With that, let me turn it back to Tom.

Thanks Mike. I would like to provide some perspective on the path forward based on what I’ve seen and heard over the past few weeks.

There is three themes which come to mind as I reflect on this. Appreciate the past, acknowledge the present, and anticipate the future.

Let me start by appreciating the past. I spent considerable time with the people who built this business over the years.

These leaders have provided me with some timeless fundamental principles that remain true to this day. The late Arthur Taubman started Advance Auto Parts way back in the 1930s in the middle of the Great Depression.

I have watched videos and read speeches, he delivered. He had a simple mantra, trust and listen to your customers and treat your employees like family.

His son Nick Taubman shared some of his perspective on Advance with me directly. Perhaps the most inspiring was when Nick told me that best part of the Advance Auto Parts story is ahead of us.

Temple Sloan Jr. was way ahead of his time when he founded General Parts and ultimately CARQUEST.

He decided to focus on the independents and major in the commercial parts business back in the 1970s. His son Temple Sloan III met with me recently and reinforced the key levers of success on the commercial side.

Making the right merchandizing decisions, gaining acceptance and trust of commercial people in our stores, along with the owners and technicians they serve, and taking care of our people. Both Nick and Temple were maniacally focused on serving their customers and enabling their people.

I cannot agree more with the advice I’ve received from Nick and from Temple. In addition, I would like to personally thank the Taubman and Sloan family for being so incredibly welcoming to me as I’ve assumed this responsibility.

Others like Jim Wade, Garnett Smith, and Darren Jackson could not have been more accessible and helpful in my onboarding. I intend to keep the communication lines open with those built this business.

While it’s important to know where we come from to intelligently plan for where we must go, it’s also clear that we must be willing to continue to adapt and improve. Turning to the present, make no mistake.

I entered this role with eyes wide open and an expectation that there were going to be many areas for improvement. As such I’m going to call it as I see it.

There are many areas that need attention and has substantial room for improvement. That’s what got me excited about this opportunity and I believe that our near-term challenges provide an even greater mandate to materially improve the business operations.

We are in the midst of a deep drive on operational diagnostics and areas for improvement. Over the next few months, we will be highly engaged in a thorough assessment of our business and current opportunities.

My intention is to come back to you later this year with our long-term vision for the company, along with specific goals and strategic imperatives necessary to achieve our vision. We’re very hard at work.

We need to understand precisely what’s working, what’s not working and the lessons learned surrounding our performance over the past few years. In the short-term, we will ensure all of our team members are taking actions that propel our business forward.

With an appreciation for the past and an acknowledgement of the present, our focus is on anticipating the future and the role Advance will play in shaping our industry and delivering results going forward. Allow me to reinforce.

We have a tremendous opportunity to create value at Advance much more than I envisioned when I joined the company. Over the coming weeks, we will construct a multiyear strategic business plan to get after our biggest opportunities.

This process is well underway and I already know one thing our framework will contain three primary chapters. First growth, we develop a demand based growth strategy that puts the focus squarely on customers and getting the right parts to the right places at the right time, predictably, reliably, and consistently.

Secondly, productivity. We’ll instill our relentless focus on productivity while ensuring that we build new capabilities as we reduce waste and cost in our system.

We’ll reinvest some of these cost savings in future growth with much of the savings also dropping to the bottom-line. People and culture, our people strategy will support our business strategy and faster diverse culture which mere’s the market and empowers our people to win in the marketplace every day in every way.

Allow me to provide a little more detail. On growth everything we do starts and stops with the customer.

We’re going to make certainly understand precisely what’s important to commercial customers and to DIY customers. To improve our customer service we need to elevate our operating intensity and customer responsiveness.

We also need to increase the pace at which we make decisions and execute them. Bottom-line we need to become much more externally focused and in doing so; we’ll get the right part to the right customer faster and more efficiently.

This leads to my second point around improving productivity. Our relentless focus on productivity necessitates establishing a clear defined productivity pipeline that will reduce cost and remove waste, while building new capabilities.

This pipeline will be built around investing in those tasks that matter most in meeting customer needs and eliminating those that do not. We’ll also focus on our thorough assessment of our DC network, fleet, procurement, store productivity, and zero-based budgeting.

Productivity will be the engine that fuels our growth. Finally, nothing is more important than mobilizing our team members across all of Advance.

We have an incredibly talented and committed team across the country and we must listen to them, much more than we have, empower them to act, and provide them with the tools and technology they need to win in the marketplace. Our team members who are closest to the customers know them best.

When we empower them and provide them the right tools, they can make decisions that improve execution and drive sales. We’re a company comprised of 5,200 hyper local businesses in any given market were only as good as the talented district managers, general managers, commercial parts pros, and commercial account managers, and the rest of our team members in each market that help serve our customers every day.

We intend to meet the needs of our local teams and delivering for their customers. Our field teams have told us that Advance has been too reliant on the store support center to make decisions and instill processes.

We are listening George and the rest of the Advance team are implementing a much more field centric organization where our team members are empowered to make decisions and held accountable for their actions. I know this by itself will expedite our transition as we provide local leaders the tools, training, and technology required to succeed and win in the marketplace.

In closing I’m humbled and honored to lead this great organization. We have a strong foundation upon which to build, to grow, and to thrive in a terrific industry.

We’re in the early days of developing and implementing a disciplined and comprehensive path forward and you will see more later this summer. Until then, our organization remains focused on delivering near-term commitments and business initiatives.

Without a doubt we have a lot of work to do. At the same time, I have tremendous confidence that overtime we’ll deliver superior execution for our customers and outstanding environment for our people and ultimately will drive increased profitability and shareholder value.

Before we open it up to questions, I’d like to take a minute to thank all of our team members for building this business to what it is today. I’m excited to work together with my new team to help Advance reach its full potential.

With that let’s open up the call for questions. Operator?

Thanks, good morning. Welcome Tom and best of luck, Mike.

My first question Tom I know it’s early and you haven’t laid out a strategic plan yet but in assessing capabilities and in diagnosing some of the service availability issues, anyway you have an instinct whether there is more of a process issue or an infrastructure issue at Advance?

Hey, good morning, Simeon. I think my first reaction I’ve been around to several distribution centers, meeting with people in the field, in our stores, I think it is more execution related.

I mean the key metrics that are important to drive growth for us availability, fill rate, customer service. Those are the things where we’re not entirely happy with the metrics surrounding those and we’re going to be very focused on improving those key metrics.

I don’t know that it’s something that will take place overnight but we clearly can address them and we’re going to focus on making real progress on that over the next couple of months.

Okay. And my follow-up regarding the comp forecast, I’m just curious how much it reflects the exit rate of the business whether there was some national account noise in there or is it further disruption that you expect the business to be under just from some of the changes that are going to take place?

We obviously spend a lot of time debating that. I’ve been here for five weeks and our business in the last six weeks has been a step down without really an obvious reason, it’s possible that the tailwind of an extraordinarily mild winter, we feel we may have pulled forward some of the business earlier in the year resulting in less hard parts business in the spring.

But I won’t blame it on the weather or count on the weather to help us. So I see a lot of areas inside our business where we aren’t performing, executing, or strategizing as well as we should and certainly not as well as I expect.

So we’re going to act and plan to improve our business and execute better to improve our performance with an even greater sense of urgency. It could be that this is a short-term blip versus a trend but we’re not going to count on that and we’re going to run our business based on the guidance that we gave you, we can’t just hope for weather to get better.

Hope’s just not a strategy.

And it doesn’t sound like then there was a big like there was a big account loss at the national level causing some of the extra disruption or choppiness?

No, there was not.

Okay, thanks. Best of luck.

Thank you.

Good morning guys. Just following up on Simeon’s question.

So Tom just to clarify, are you assuming that weather is not impacting the business and the 3% to 5% negative comp is just -- what -- if you just kind of ran at the current run rate through the balance of the year?

I’m not going to say this is not impacting it. I do think that some business may have been pulled forward earlier in the quarter and we smoothed it out obviously over the entirety of the first call it 20 weeks of the year.

So it’s clearly impacting but it’s short-term, right, this is short-term up and down associated with weather, it happens in many industries and certainly in ours. But the ongoing trend that we see is the one that we guided to and we obviously hope to improve on that as we go through the balance of the year as we start to get focused better on execution and improve the metrics that we control but we want to be conservative in our estimate as we indicated in the release.

But to get to the midpoint of the negative 3% to 5%, you basically have to run negative five for the balance of the year and I suspect that the business is probably comping down 5% now. But are you assuming it just kind of runs at that same run rate for the balance of the year and there's no improvement I guess that's what I'm trying to figure out?

Yes, I mean you’ll be able to do the math. I mean the net of it is we're being conservative, and we're going to make sure that we focus on the execution drivers that will driver business forward.

We don't -- we're not counting on an overnight fix though Scott on some of these things, and that's why we've been conservative. Having said that, the entire leadership team, George and our field team is focused on beating that forecast by the widest margin possible.

But for the purposes of our guidance we want to make sure that we're were reflecting the trends that we see at the moment.

Well, you're new in the seat, so that makes sense. I appreciate it.

Thanks Tom.

Thanks and good morning. Tom curious if you could compare the culture that you've seen in Advance versus what you’ve experienced at Frito-Lay and Pepsi.

What do you think are the big gaps, and do you think there's a culture gap between what you see at the corporate support center and what you've seen in the stores?

Well, first of all, the culture here is really an impressive one, it's a proud culture, it’s a winning culture, historically it's one that served customers and been incredibly focused on customers. We've got the -- we want to inspire our people out there in the field.

We're trying to grow our business. I will say that and George has been addressing this over the last several months.

We've got to a point where the center is making many more decisions than we feel is appropriate. I think the biggest contrast would be the front line organization at Frito-Lay, the front line organization here is essentially how we drive our business.

If the front line is delivering out there in the marketplace, we're going to win every day. I would say that at Frito-Lay we do engage and allow the front line to make more decisions than they do here and that's why George has evolved this model to more of a field centric or more customer centric model, I think that’s the biggest difference.

And I think over time we can certainly address that. We've got great field leaders, we have no lack of talent out there, but we've got to remove obstacles for them to compete and win in the marketplace and we're very, very focused against that.

Understood. So as a follow-up I guess playing devil’s advocate, it sounds like you broadly think it's a -- as someone else mentioned a process challenge not necessarily a strategy challenge.

So is that because you haven't had the time to actually get into the details of what the supply chain strategy is, what the -- what the integration strategy is, what's going on at Carquest or is it truly your perspective that we just need to come in here and basically work harder and enable the stores to drive the business?

Well, I think Chris - I mean there are strategic opportunities, let me be clear with that. I think that a better more clear assessment of prioritization and the demand itself that’s out there in the market, and finding better ways to meet the needs of our customers through a more holistic integrated supply chain strategy is all part of our agenda.

We've already kicked off strategic planning process as I mentioned in our prepared remarks. The leadership team is excited to go through a deep dive, looking at the future, anticipating where we think the industry is headed, and really looking to better meet the needs of our customers going forward.

I wouldn't say it all process. I mean there are significant strategy opportunities and it will enable us just back to your earlier question remove some of the activities that we're doing out there in the field and ensure that we're very focused in our agenda.

So that there is a -- it is a combination of strategy and execution. I don't want to just tie it all up to operating opportunities although that’s where we’re immediately focused, but we're going to do a deep dive on the strategy part of the business, and make sure that we're really, really starting to impact things that matter most to our customers going forward.

Thanks very much and best of luck.

Thank you.

Thanks good morning guys. So a question regarding the 12% target previously there were a number of drivers today mostly on the cost side and it seemed like a lot of that was in motion.

Obviously we saw good SG&A leverage in the quarter, but as you think about the outlook now shortfall seems mostly related to sales. But is there a component here where we should be assuming higher spend going forward to address some of the issues you mentioned earlier?

I don’t think it’s possible for me to answer that question right now Seth, I think it’s still early, we’re still going through how we’re going to manage out the rest of the year. Obviously we want to take a very close look at the cost line, if we really believe this 3% to 5% outlook which is what we’ve guided to, we’re going to have to look very diligently at the cost and make sure that we maximize our profitability in the short-term without compromising customer service.

Okay, got it. So that means I guess there was a comment earlier that you remain committed to driving profitability this year.

Is there anything more you can provide on that comment as we think about modeling out the rest of the year?

Yes, that may be let me give you a little color. I think Tom has been very clear and the management team is very focused on the first priority is, we’ve got to get the sales line going, because that will help the bottom-line.

We’re really pleased with the progress we are making on cost and we’re going to continue to look at cost to make ourselves more efficient and simplify the business and those are things we can control. The challenge we have when we don’t have at the top-line is we’ve got a pretty high fixed cost model.

And when you have high fixed cost model, when the sales come in softer, you just deleverage. So I think those two work together, you get the top-line going again and we expect to see better leverage on the bottom-line but and the -- the other fact is while we’re going continue to take cost out, there is going to be some reinvestment required, as we look at this different parts of the business and reigniting our sales base, so there will be a balance there but I think the primary focus is getting sales going that will give us the leverage to improve our profitability.

Okay, thank you. That’s helpful.

One more follow-up if I may is, as you think about the store footprint over time I realize it’s early but any thoughts on how the complexion of the top-line needs to change overtime to improve profitability, i.e. closing stores and how we should be thinking about that?

Yes, Seth, this is George. We continue to keep everything on the table, so we clearly look at store opportunities whether it would be closings or new store openings, you’re well aware we closed roughly 80 in the fourth quarter of last year that was we thought was the initial opportunity, we’ll continue to look at profitability store by store.

From a portfolio standpoint we will continue to move into more new markets like Dallas and getting further west.

Thanks so much and good morning. I’ve got two questions and the first Tom is for you, I guess at this point you are the third CEO in the past 10 or so years in addition to two interim CEOs.

I know that everyone has meant well in terms of their intentions for the business. If you picking the uncomfortable position about talking about yourself a bit, if you think about how you think you’re coming at this differently and what you bringing to bear these and perhaps the organization has lacked in the past to get to help it fulfill its potential would be very helpful.

Well, I think Matt I had experiences like this in the past. I’d been assigned to essentially three underperforming businesses in the past 15 years with my previous company in both Canada and the U.S.

When I started each of those roles, the businesses lack growth and we were losing share and we did not have a robust productivity pipeline. When I left each one we are growing faster, we are gaining share, and we had a very robust productivity pipeline.

We also had a great leadership team in place that continued the business on. So I actually feel very good about this position.

Now that I have been here for month I think the opportunity is far greater than I thought even when I got here. So I can’t speak to my predecessors but I’m very confident that overtime we will grow faster, we will gain share, and we will build a robust productivity pipeline that drives margin expansion overtime I have no doubt about that.

That’s helpful and then my second question is a bit of a financial question. I know you pulled the free cash flow guidance for the year obviously this business should still generate cash, how you are all thinking about allocating cash flow at this point in time as you think about opportunities like debt pay down, like share repurchase, any other uses that you contemplate.

Yes, thanks Matt. So first of all the first big driver of free cash flow is getting our business going.

When we think about our EBITDA and EBITDAR and our leverage ratios I mean the biggest contributor, there is a couple big contributors there is getting our business going, so that’s first and foremost. Tom has talked about that on this call in his remarks, so that’s the first one.

The second one is managing our working capital that’s the second big driver in this industry as you know. And you saw inventory grew higher than we would have anticipated in the first quarter.

The three big drivers around that were one WORLDPAC their inventory was up, I want to say close to 11% because we’re opening in DC. So that one we’re going to continue to do.

The other big drivers the CARQUEST inventory was up quite a bit as we invest in availability in that business, it will start prior and we did a lot of investments last year. So we’re going to continue to invest in inventory but we anticipate by the end of year, the inventory growth is probably up low-single-digits versus where it was and the other big driver was we delivered lower sales.

So and that drove the inventory up. So we’re going to be focused on improving our earnings and improving our working capital and that’s what we’re going to be focused on.

And then in relation to the deployment of capital as you know first and foremost getting the earnings going, that’s first. And then as we think about that -- as we think about buyback, maintaining our leverage ratio was important to us, so we maintain our investment grade ratings that’s a priority and then after we’ve done that, we’ve done a great job paying down our debt which gives us the flexibility to allocate capital to investing in the business or doing share buyback we currently have $415 million open to buy for our buyback.

Thanks a lot and good morning. My first question is just near-term one on the quarter’s results.

If you could help us Mike in just aggregating the comp performance by region. You mentioned 40% of the stores in the Northern regions big step down there in last six weeks may be some color there would be helpful.

Hey Seth, it’s George. I would say that broadly if you look at our results, we did see a demand drop late in the quarter and I see that that was most pronounced in the Northeast.

On the flip side, our best performance was in the Northwest and the Southwestern markets.

Okay. Any sense of a gap between the performance between the Northeast and those other regions?

Good size outperformed in the Northwest and Southwest.

Okay. And then moving on bigger picture question for you Tom, as you think about the integration of CARQUEST with the Advance business, a key step in that process is supply chain.

I know there is a strategy that’s been laid out supply chain wise; you’ve mentioned holistic view of your supply chain strategy; is therefore the integration of the supply chain being put on hold at this time?

Well first of all just a comment on the integration Seth, I think anytime, I’ve been involved in a couple of these were either an acquisition, an integration, some type of large scale structural change. The complexity associated with the change like this is significant and I think that in my brief time here, it’s clear that the complexity was significant with this change; I think it’s been distracting, it’s caused us to be internally focused, we put obviously necessary resources against it.

But as we go forward, as we move out of this era, I feel terrific about getting focus on the customer and making sure that we deliver the right part to the right customer at the right time reliably, predictably and consistently every single time and Charles and the supply chain team are doing a lot of work right now to really elevate our capabilities there. So I think we’re moving into a very focused agenda on the supply chain side.

We’re asking a lot of questions, we’re turning over every rock; we’re trying to make sure that we simultaneously provide better customer service and improve the cost structure of the business.

Got it. Maybe as a corollary to that is there a timeframe that you have in mind to complete the integration of CARQUEST?

Well I mean the integration is ongoing. We still have work to do there but I think we are definitely at the tail end of the integration and we’re more focused on the supply chain itself and the strategic plan itself to make sure that we’ve got a very clear agenda going forward across our full business not just on the supply chain side from a strategy point of view.

Thanks. I want to just get a little more clarity on how the business is trending now then I have a follow-up on strategy.

The 3% to 5% guide understand it was worse towards the end of the quarter. Could you help us understand the progression on DIY versus the do-it-for-me and if the step function change you thought was less spending from customers you have on the do-it-for-me side or were you losing some of your first call accounts.

Thanks.

Yes, Greg, we don’t think we’re losing first call accounts, we’ve seen again that drop off across both businesses a bit more pronounce on the DIY side. As you again moving to the Northeast it was deepest in that part of the country.

And again both businesses but a little bit of a deeper impact on DIY. As far as our customers if you look at our trends by product category and we would again point towards all great categories as a particular strength of ours which tells us that we’re talking to our primary commercial customers day in and day out so.

Okay, great thanks. And I guess more for Tom understand it’s too early to have too much specifics around it but if you think about the leverage you can pull, what do you think is the bigger opportunity to get the customer back in the reengage.

Do you think it is inventory investment, do you think its labor investment, do you think its capital? Is there any -- can you steer us in one where you think is the biggest opportunity is over the next year or two?

Yes, I think Greg we’re going to take a look at everything to be clear and I don’t know that I can give you much specificity right now. I know the end result and the end result I’m working back from there right.

In the end we’re in garage delivering a part right and then working back from there through the delivery itself, the taking it into the store the fill rate from the distribution center, those handoffs, how do we reduce those handoffs, how do we make sure we have the right assortment in the stores themselves so we get the right parts to the right customer, how we interface with the customer. We’re looking at every single aspect of how we drive growth and we are going to look for ways to think differently about the supply chain leveraging tools, leveraging new processes, leveraging technology to get at that so I’m very excited about it.

The team is focused on it, we’ve kicked off the work and we’re going to take a very close look at how we get a lot better at the execution side but it is going to require a very deep dive on where we think the future of this industry is headed, where we think demand is going which geographies are going to grow faster than others and integrating that into the supply chain strategy itself.

Good morning. Thanks for taking my question.

Good luck Mike and welcome Tom. Tom, my question relates to some of the conversations that you might have had with the board on managing expectations for how long it will take to effectuate a sustained improvement in the business, can you help characterize that timeline for us?

Well, first of all I feel great about our board. As you saw yesterday Jeff Smith is now the Chairman.

I have gotten to know Jeff over the last several weeks. He has got great instincts on both the business and the people.

He is available 24X7 and he is incredibly engaged in our business as is our board. We just had a full day meeting George was there with his division Presidents walking through the plans.

They obviously ask a tough question and really engage and trying to help us think through the journey ahead. So, they are very, very involved is the first point you should know.

In addition to that they understand the challenges we face. I mean, clearly as all of you on the phone recognize there is a step function improvement that’s required for our business and we’re all committed to the achievement of that and we’re going to lay all that out in the strategic plan.

So I mean we’re going to move as rapidly as humanly possible to get to the -- to get to that level of success and accelerated growth, reduced cost, and much more engaged people out there in the marketplace. So we have a timeframe in mind to get our strategic plan done it should be done by August we’ll talk about it in the fall and we’ll take it from there.

Well, based on your initial observations and some of your diagnosis, you think that this is something we can expect to see improvement in the second half of this year or is it more like next year and the year after that where the bulk of the acceleration and the better outcomes we’re going to have.

Well obviously the focus on execution should impact immediately. Clearly I don’t expect the entire business to change overnight though.

We’ve got some big challenges that have to be addressed. I can tell you we’re going to maniacally focused on availability, on fill rate, on speed of delivery, and on customer service and George and his team are all over that, we’re totally aligned on what the metrics that matter most that we’re going to be doing deep on right down to store number 5000.

So we’re very clear on that part. It’s just a question of the bigger strategic opportunity that we can unlock as a company that will really start to accelerate our growth and get us the kind of market share gains that we’re working for a long term, while we’re taking cost down and expanding margins, I don’t have enough information for you to be specific on that at the moment.

We should be in a position by the fall to talk more about that.

Okay. And let me ask you my follow-up question which is as you been able to do initial assessment on the business, I think the conventional wisdom is that part of what has ailed Advanced Auto is inferior systems, inferior store operating model, and competition formula can make changes with a long-term view in mind, it may require some sacrifice in the near-term, how much sacrifice might you will be willing to make in order to generate better results over the long run?

Thank you so much.

Well, I mean, again the COMPASS is going to be our customer. And in the end we’re going to engineer our solution based on the absolute best possible experience that our customer can have out there in the commercial side and in fact on the DIY side.

So whatever it takes to engineer that, we’re going to do it, we’re going to pull back from there and look at the experience they have with our people in the stores, with our commercial parts pros on the phone, with their experiences online and really try to elevate our focus on improving that experience and earning their business over time. That’s not easy but I do believe that being clear about what that end state is, it’s going to help guide us in terms of what those investments are going to need to be across our supply chain, across our technology and information system, and across our people and then the training that’s going to be required to get our people into a place where they’re really, really focused on the customer.

Thank you. Tom, inventory levels have been elevated for a couple of years, I think we finished this quarter at about 12% per location.

I’m having trouble reconciling that against your comments about parts availability problems. Is it a question that there is a lot of inventory but it’s just been the wrong products or in the wrong locations?

Well Dan that’s a good question, we’ve looked very carefully at that and we’re going to look much more carefully at that. I mean intuitively, your question is spot on and we've got to take a close look at our days on hand across our system, across every parts that we sell, across all of our distribution centers, across all of our stores, and make sure that we’re balancing our inventory levels with availability.

The second question I have in looking at your contract when you joined a company, it talked about you have 12 months to present a plan to the Board of Directors. Do you really think it will take that long to device a new strategy?

No.

What do you think more like six to nine months or do you have a sense what the --

You know we’re working on it right now and we certainly expect to be exiting the year with an aligned position on a strategic business plan for the next five years. So saying let’s call it, September/October, it’s kind of the latest that I would see getting alignment to that plan.

Yes. And then the last question I have for you revolves around Jeff taking over as Executive Chairman.

I know that he's been a proponent of selling WORLDPAC. I know that Jack disagreed with that view when he was Executive Chairman but you think that Jeff taking over that position that Advance will reconsider its thought on WORLDPAC and perhaps putting that up for sale as a way to generate shareholder value?

Well, first of all of Jeff's been very, very engaged in our discussion around the strategic plan, WORLDPAC is a big part of our growth agenda. So that's new to me.

I've not heard that to be candid. And we're very excited Bob doing a terrific job out there WORLDPAC, we're very excited about the prospects to that business.

It's growing nicely for us, it's got great potential, we're very -- we just opened a new distribution center in Dallas. We just met with Bob yesterday, very, very exciting.

So I don't know that whatever you may have heard Dan is still the case.

Well they started work when they were putting together their white paper back in September and looking at potential catalyst for the stock called out potentially selling WORLDPAC. That’s the reason, I was asking.

Yes, he wants to maximize shareholder value, and I think WORLDPAC is a key component in our ability to do that.

Hi good morning. Following up a little on the last question, some of your suppliers in the second half of last year were saying they were some in-stock issues that they were seeing, and I guess that comes back around at the right inventory on the right places.

Could you talk sequentially whether your availability improved or deteriorated in the first quarter from the fourth quarter or may be as a kind of your ability to say yes, when you get an order out to find a part in the store?

I can tell you our availability deteriorated in the first quarter, and it deteriorated versus the fourth quarter and it deteriorated versus year ago. And that's why we're very focused on improving it going forward.

Okay. And then a follow-up question on the supply chain, I know at the end of the year you were thinking about a web-based POS system may be in the second quarter and then working on the IT to consolidate the distribution software in the second half.

Is that still a timeframe to think about for those particular projects or is that going to be pushed out just given the sort of new eye balls on it?

Yes that’s correct, Bret. We have successfully piloted the new POS system and the new catalogue in a couple of stores.

Early on like the initial results and we remain on track as far as the deployment of that POS system and catalogue and that leaves a sign track for the back half of year trying to align around these recent centers.

Hi, thanks for taking my question. So regarding some of the higher inventory that we spoke of earlier in the call, how do you rework that do you see any opportunity to work with your suppliers to extend terms and may be grow your AP to inventory ratio towards some of your peer averages?

Well first of all Carolina, I poured through your report on the weekend and it was great, appreciate the note. Clearly we want to figure out how to get our inventory levels down, I mean it's always a challenge, I mean getting availability up and getting inventory down is something that you're always going to focus on and that's one of the big strategic challenges as we construct our demand based strategy that informs the supply chain.

And on the payables front I'll let Mike, may be speak to that question, if you want to talk to that Mike?

Yes, I mean may be just related to your question, I mean we have return rights with our vendors. We have credits that we get from our vendors in terms of reserves that we have.

So we feel good about that and competitively we feel so good there. I mean our focus is improving our availability, and making sure we have the right part in the right place at the right time.

And so localized model that we run, so when Tom talked about availability that's what we're focused on. And then you know what we know we have some inefficiencies in our inventories as Tom talked -- just talked about them.

So we're going to work with that make sure that we have the right inventory and that we think there's an opportunity, I think the greatest opportunity to improve our AP ratio will be in our inventory management. We've done a great job with our terms.

I think we're competitive on that front, but the bigger driver will be as we manage our inventory. And I would anticipate this year, I shared it with you earlier we expect our inventory to be up low-single-digits but 2017 is really a year that we would expect to see some real improvements in our inventory.

Hi thank you, good morning. Thank you for taking the time.

I guess Tom the question I have for you is I know you don’t want to give too much in the way of a timeline or how you’re assessing things. But if you could draw upon your experience of similar situations that you’ve been in with the complexity of this sort of integration and such that’s going on today, what was the average time it took for you to accomplish your goals and get to these level of profitability that you ultimately wanted to achieve?

Obviously Tony it vary, but I think the question for me here is given the starting point can we move faster and that’s the big question and I given 30 days in the job, it’s difficult for me to provide that at this point. But I can tell you that I think the opportunity here are far greater than I’ve seen in the previous three times that I’ve been challenged with this type of situation.

So I do believe there is a possibility that we will be able to impact it quicker as George mentioned, we are really focused on driving those customer service and execution metrics right away. But we want to make sure we get the strategy right and that’s why you’re seeing the numbers that that you’re seeing from us.

The strategy and driving the value of this company through the roof over the next five years requires us to have the right approach for multiple years and that’s why we are being very thoughtful, deliberate, and disciplined about how we approach the short-term guidance and then also our strategic plan which is going to be as we said earlier on the call completed sometime in the fall which will give me a much clear idea of what we’re speaking about here. The ability to impact Q2, Q3 I don’t know at the moment we talked about our sales trends.

We talked about the need to improve execution how quickly that will impact short-term results is an unknown for me right at this point. But I do know this strategic plan that we pull together for the fall will be something that will enable us to really unlock big growth, big productivity and really gets shareholder value moving.

But and then I guess that’s good color and I guess what I’m trying to understand is this any different from a complexity standpoint that could say, hey this might be a two or three year strategy that we may this fall versus historical you’ve seen things you turn quicker or take a longer period of time. I guess I’m just trying to hit a baseline for how this may differ from what you use to in your past experience.

Yes, I know I would say that it is not different and if you look up and which you could past experience that was not two years. I would say us impacting much before that.

So obviously I want to thank all of you, for your questions. In closing, allow me to reinforce we’re extremely well positioned.

We have tremendous scale as a company, we’ve got a passionate and motivated team there is no doubt we’ve got many areas to improve. But the exciting opportunity ahead is to transform this business into the leader it should and needs to be.

You can count on us to listen to our customers, you can count on us to be a customer driver culture, you can count on us to enable our team members to win in the marketplace. And ultimately we’re all very confident that this will lead to increased value for all of our shareholders.

So thank you for joining us today. And this concludes our call.