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1 Nasdaq: MNRO Updated January 2015

Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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Page 1: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

1Nasdaq: MNROUpdated January 2015

Page 2: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

2

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

Page 3: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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Who We Are

Page 4: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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• Largest chain of Company-operated undercar care facilities in the United States

• As of December 27, 2014, the Company operated 1,017 stores in 25 states

Company Overview

Page 5: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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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.

Page 6: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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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-Q3

Service Mix

Gross Margin %

Brakes and Steering = +15

Maintenance and Exhaust = baseline company margin

Tires = -15

FY15-Q3

FY13

Page 7: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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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

Page 8: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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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?Source: 2014 Lang Report

Page 9: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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High Customer SatisfactionMonro Website Internet Paid Ads

http://www.monro.com/CustomerSatisfaction.aspx

95%

Page 10: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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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

Page 11: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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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

Page 12: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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Approximately 245 million vehicles on road Increasing age of vehicles (11.7 years) Number of vehicles 6 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

Page 13: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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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

Page 14: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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% Change 178% 24% 17% 17% 22% 17% 12% (4)% 3% 20% 34% 35% 17% (22%) 27% 11%-14%

•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

6 -$

1.90

Page 15: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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Historical Financials

(Dollars in millions except per share data) 3rd Quarter2015

3rd Quarter2014

Fiscal Year2014

Fiscal Year2013

Fiscal Year2012

Sales $236.6 $216.7 $831.4 $732.0 $686.6

Sales Growth (vs. prior year) 9.2% 13.8% 13.6% 6.6% 7.8%

EBITDA $ 37.6 $ 35.7 $127.7 $101.5 $115.5

EBITDA Margin 15.9% 16.5% 15.4% 13.9% 16.8%

Operating Income $ 28.0 $ 26.9 $ 95.3 $ 73.7 $ 91.4

Operating Income Margin 11.8% 12.4% 11.5% 10.1% 13.3%

Net Income $ 16.0 $ 15.3 $ 54.5 $ 42.6 $ 54.6

Net Income Margin 6.8% 7.1% 6.6% 5.8% 8.0%

EPS (Diluted) $ 0.49 $ 0.47 $ 1.67 $ 1.32 $ 1.69**

EPS Prior Year * $ 0.47 $ 0.35 $ 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.

(1.8)% 0.3% (0.5)% (5.5)% 0.1%**

Page 16: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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Balance Sheet HighlightsFiscal Q/E

December 27,2014

Fiscal Y/EMarch 29,

2014

Current assets $184,594 $168,116

Property, plant & equipment, net 316,832 281,883

Other non-current assets 407,865 309,957

Total assets $909,291 $759,956

Current liabilities $155,372 $136,741

Capital leases and financing obligationsOther long-term debt

127,748146,549

81,199105,841

Other long-term liabilities 21,242 20,191

Total liabilities 450,911 343,972

Shareholders’ equity 458,380 415,984

Total liabilities and shareholders’ equity $909,291 $759,956

Debt-to-capital (includes capital leases) 38% 32%

Page 17: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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Increase market share through same store sales growthAcquire competitors cheaplyContinue new store openings in existing markets

– Approximately 12 to 20 stores per year

Growth Strategy

Page 18: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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Building Tire Store Category

Combination of 32 acquisitions in the last 13 years - 526 stores- $640 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

Page 19: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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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

Recent Acquisitions

Page 20: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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Lentz USA/Kan Rock Tire (June 2014) Gold Coast Tire & Auto Centers (December 2014)

• 19 stores in Michigan • 9 stores in Florida • 2013 sales - $14 million • 2013 sales - $9 million• Purchased real estate for all locations • Breakeven to slightly accretive in first 12 months• 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 (October 2014)

• 9 stores in Georgia• 2013 sales - $10 million• Purchased real estate for three locations• Breakeven to slightly accretive in first 12 months

Recent Acquisitions

Page 21: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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FY15 Earnings Assumptions• Earnings estimate for FY15: $1.86 - $1.90 vs $1.67 in FY14

– Q1 – FY15: $.52 vs. $.42 Q1 FY14– Q2 – FY15: $.50 vs. $.42 Q2 FY14– Q3 – FY15: $.49 vs. $.47 Q3 FY14– Q4 – FY 15: $.36 - $.40 vs. $.36 Q4 FY14

• Comparable Store Sales approximately flat to a decrease of .5% for FY15; ‒ Q1 FY15: 0.9% ‒ Q2 FY15: (2.0)%‒ Q3 FY15: (1.8)% ‒ Q4 FY15: flat – 2.0%

• Gross Sales approximately $900 - $905 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)– Expect tire pricing environment to improve as Q4 progresses– Fourth quarter improvement limited by healthcare costs (ACA) and lapping FY14 product cost reductions

Page 22: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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• Interest Expense of $10 million

• $34 million depreciation and amortization • EBITDA approximately $145 million

• $33 million of cap-ex– $22 million in maintenance cap-ex – $11 million for new stores

FY15 Other Assumptions

Page 23: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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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

Page 24: Nasdaq: MNRO 1 - Save On Tires & Oil Changes · 2014, the Company operated 1,017 ... FY14 FY14-Q3 Service Mix Gross Margin % ... Source: APAA Aftermarket Factbook, Lang Report and

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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