Darren Jackson: It affords the opportunity to potentially in fill more around the allied markets and wrap up more of the profit pool.
Dan Wewer (Raymond James): Could you break down the 10.8% comp in terms of change in average order volume versus new customers, price versus units to the degree that makes sense and then new programs and how much benefit you had in the comp from new programs and their maturation versus existing sales programs?
Jim Wade: the comp did come from both our customer count and our average transaction increase. When you look at the two pieces of that, the customer count increase was higher than the average transaction increase. As far as price versus units, we did not see any significant change in pricing strategy during the quarter so it was more about selling more parts which is beneficial to all those metrics that we look at. We did not add any new commercial programs in the quarter of any significance at all, other than just the new stores that we opened last year coming into the comp through the normal process. When you look at the 10% increase, new locations would only be in stores that we have opened the past year that went into the comp during the normal course of business.
Dan Wewer (Raymond James): You had $125 million increase in hard parts on inventory. What are you looking at in terms of net because you are taking out some of the slower moving inventory?
Kevin Freeland: There are two impacts there. We have the new MOOG and Warner program that came in that will lift inventories for the year and as well we are doing the inventory upgrades of $125 million at the same time we are analyzing slow moving products and working to set up returns through our vendors. I believe the total growth in inventory over the growth in sales is expected to be in the $60-$70 million this year.
Colin McGranahan (Sanford Bernstein): How much better the first quarter was in the bottom line than your initial forecast?
Mike Norona: We have shared the guidance of $2.55 and we have also given you a grid of a 1% comp equates to about 10 cents and a 10 basis point in operating margin is equivalent to 3 cents. Although we came in better than our plans in the first quarter, as I look at the balance of the year, that grid still holds true. I would tell you that we feel good about the guidance we gave at the beginning of the year and as we see the rest of the year playing out.
Colin McGranahan (Sanford Bernstein): Do you plan to update that in the second or third quarter or are you going to stick with that $2.55?
Mike Norona: What we shared with you is this company is focused on the longer term and growing value. The only time I would see us making any more statements is if we saw any material differences and at this particularly juncture we do not.
Colin McGranahan (Sanford Bernstein): The DIY sales increase of 15% per store seems like optimistic goal as it would put your sales per store in the $1.7 to $1.75 million range. It does not look like anyone does that revenue per box today, so where that 15% increase per store is rooted?
Elwyn Murray: We do about $1.1 million a year today in DIY and 15% growth if you will over the three to five year window gets you to $1.25. That is going to require turning around what are currently negative trends and getting that to the positive side. Over the course of that three to five year, you are still talking about low single digit growth and we recognize it is going to require both some stop the bleeding with immediate controllable actions but also some transformational thinking around the space in general.
William Keller (FTN Midwest): You mentioned that the bulk of the improvement in gross margin was on the lower supply chain and logistics cost. Can you give more detail about that given the fuel costs and energy costs?
Kevin Freeland: One, we hedge our fuel purchases on the major portion which is the outbound supply chain between our distribution centers and our stores and it accounts for about 80% of the fuel that we use. The changes in fuel have had a smaller impact on that portion of the supply chain than you would expect. Secondarily, there were a series of changes that were initiated last year to improve productivity in the distribution centers and what you are seeing is the impact of those programs this year.
William Keller (FTN Midwest): You talked about the inventory increase for fiscal 2008 and in the first quarter it looked like working capital came down. Is that a onetime thing that will be offset through the rest of the year?
Mike Norona: The change that we see is the additional increases in inventory due to the MOOG and Wagner and the parts availability initiative.
William Keller (FTN Midwest): In the first quarter, working capital came down. Was that a onetime thing in the first quarter, or that trend of working capital improvement may continue for the next few quarters?
Darren Jackson: Our free cash flow was up 43% in the first quarter. We exceeded our expectations in the first quarter in terms of free cash flow and in our working capital management. What you will see is some pressure in the next couple quarters because MOOG and Wagner are just beginning to flow and just getting the inventory on the shelves is going to put some pressure in terms of our working capital investment. That being said, as we look out longer term, we are just in the day one or two in terms of getting into the longer term work that we will be doing in our supply chain.
Tony Cristello (BB&T Capital Markets): There are many initiatives underway and it appears that the majority are geared toward helping the top line growth and overall productivity. Is it fair to assume that most of the cost save initiatives has already been implements and with the goal of now leveraging fixed cost with greater productivity and if that is the case, how much is needs to be accomplished is dependent on your ongoing systems implementations?
Darren Jackson: In any business today you are never done trying to improve productivity, both on the top line and in the cost structure. It just seemed to make a lot of sense to us is that the right place to get started with, whether you look at our sales per square foot, our profit per team member, and the state of our DIY business that our energy was best positioned to start growing this business again. Because when we start growing this business again, a lot of good things happen culturally, a lot of good things happen for our team members in terms of job opportunities and a lot of things happen in terms of creating the environment that we want here at Advance and it is an environment we enjoyed for many years before I ever got here. Inevitably as a part of just responsible stewardship, there will be cost things that as we get into re-architecting the business model, we are going to have to continue to be vigilant in terms of finding not just those incremental opportunities in terms of changing our cost structure, but ones that allow us to step change part of that. Organizationally, we have been purposeful to position the company to go grow again because we know how to grow and we know what that environment will do for our culture and I was purposeful in my language to say, and we have to get back to the operational excellence that we used to enjoy as a company not so many years ago. We have shrink results in our stores; some of those things run at 0.3 and some of them run well over 1. That is unacceptable to have that type of variation. We have got a lot of those type of examples in our company that over the course of the next several years and that does not mean everything is going to take forever, but that we have to just get after in terms of some of the basics around operational excellence.
Tony Cristello (BB&T Capital Markets): Would you say that the initiatives on the commercial or the DIY, one is more dependent on being accomplished through systems or is there enough to do now without relying too heavily on the $30-$40 million you have planned this year, the capital spend you have geared towards systems initiatives?
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