Asbury Automotive Group, Inc. (ABG) Q2 2015 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to the Asbury Automotive Group Second Quarter 2015 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Matt Pettoni. Please go ahead, sir. Matt Pettoni - Vice President & Treasurer: Thanks, operator, and good morning, everyone. Welcome to Asbury Automotive Group's second quarter 2015 earnings call. Today's call is being recorded and will be available for replay later today. The press release detailing Asbury's second quarter results was issued earlier this morning and is posted on our website at asburyauto.com. Participating with us today are Craig Monaghan, our President and Chief Executive Officer; Dave Hult, our Executive Vice President and Chief Operating Officer; and Keith Style, our Senior Vice President and Chief Financial Officer. At the conclusion of our remarks, we will open the call up for questions, and I will be available later for any follow-up questions you might have. Before we begin, I must remind you that the discussion during the call today is likely to contain forward-looking statements. Forward-looking statements are statements other than those which are historical in nature. All forward-looking statements are subject to significant uncertainties, and actual results may differ materially from those suggested by the statements. For information regarding certain of the risks that may cause actual results to differ, please see our filings with the SEC from time to time, including our Form 10-K for the year ended December 2014, any subsequently filed quarterly reports on Form 10-Q, and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward-looking statements. It is my pleasure to hand the call over to our CEO, Craig Monaghan. Craig? Craig T. Monaghan - President, Chief Executive Officer & Director: Good morning, everyone, and thank you for joining us today. For the second quarter, we're once again reporting record results with diluted EPS from continuing operations of $1.52, an increase of 28%. Our stores continue to produce excellent operating results despite new vehicle margin pressure. We responded with higher volumes, improved F&I PVRs, incremental service opportunities and continued expense control. In total, second quarter revenues were up 12% and gross profit was up 9%, and we achieved a record operating margin of 4.9%. These results and our strong balance sheet enabled us to continue our balanced capital allocation plan, repurchasing over 50 million of our stock in second quarter and acquiring a Ford and Nissan store with approximately $160 million in combined annualized revenues. Over the last four quarters we have deployed over $425 million of capital through share repurchases and acquisitions. Looking forward to the remainder of 2015, we believe automotive sales will remain healthy and we continue to plan our business around 17 million SAAR. We will continue to execute our two-part strategy, driving operational excellence, deploying capital to its highest returns. We are extremely proud and thankful for our teams' hard work to achieve these outstanding results. Now, I'll hand the call over to Keith to discuss our financial performance. Keith? Keith R. Style - Chief Financial Officer & Senior Vice President: Thanks, Craig, and good morning, everyone. This morning, we reported record second-quarter diluted EPS from continuing operations of $1.52. This represents a 28% increase from last year, and there were no adjustments to earnings for the second quarter of 2015 or 2014. For the quarter, same-store revenue increased 6% and same-store gross profit increased 4%. Controlling our expenses enabled us to decrease SG&A as a percentage of gross profit 130 basis points from last year, to a ratio of 67%. Q auto, our three-store standalone used vehicle initiative, continues to progress in line with our expectations, and resulted in an EPS loss of $0.02 in the second quarter. Looking to near-term expectations, we estimate this initiative may reduce EPS by $0.01 to $0.03 in the third quarter of 2015. We continue to focus on our objective of achieving run-rate profitability for Q. In terms of capital deployment, we invested $12 million in our facilities during the quarter, with year-to-date CapEx totaling $20 million. In addition, during the quarter, we purchased a piece of land for $19 million. This land purchase was the first step in a market realignment plan with one of our major manufacturing partners in Atlanta, Georgia. This project includes the construction of two new dealerships on a major traffic artery in Metro Atlanta, ultimately allowing us to exit three existing operating leases, and the construction of a new dealership in a high-growth Atlanta suburb, for which we have been awarded an open point. The investments made in this market realignment will position our dealerships in excellent retail locations and provide us with significant growth opportunities across all business lines. We expect to be operational in these new dealerships during 2016. On our first quarter call, we discussed the CapEx budget for 2015 of $65 million, which included $45 million associated with our core annual CapEx plan, with the remaining balances related to renovations of recently-acquired dealerships and construction projects that allow us to move franchises out of currently-leased facilities. With the announcement of the Atlanta market realignment, we are now increasing our CapEx budget, excluding real estate, to $75 million for the full year of 2015. In addition, we will continue to seek opportunities to purchase property in anticipation of future lease buyouts. As Craig mentioned earlier, during the quarter, we returned $54 million to our shareholders through the repurchase of 620,000 shares of our stock. And over the last 12 months, we have repurchased over 12% of our outstanding shares. Turning to the balance sheet, from a liquidity perspective, we ended the quarter with $2 million in cash, $28 million available in floor plan offset accounts, $51 million available on our used vehicle line, and $165 million available on a revolving credit line. With respect to leverage, during the quarter, we drew the remaining $83 million balance on a $100 million real estate facility and swapped it to an all-in fixed rate of 4.8%. In summary, we made progress during the quarter in deploying our available liquidity, resulting in total leverage of 2.6 times, in line with our targeted leverage ratio of 2.5 times to 3 times. Going forward, we will continue to deploy capital on an opportunistic basis. Now I'll hand the call over to David to discuss our operational performance. David? David W. Hult - Chief Operating Officer & Executive Vice President: Thank you, Keith, and good morning. We're extremely proud of our company's performance this quarter. In an increasingly competitive market, we increased revenue 12%, increased gross profit 9% and controlled our expenses, to deliver an operating margin of 4.9%. For the balance of my remarks, I would like to remind you that everything I'll be covering with respect to operational highlights will pertain to same-store retail performance in the second quarter. New vehicle revenue increased 5%, but gross profit decreased 7% compared to the prior year. Our new vehicle retail unit sales were up 5%. More importantly, in the face of declining margins, our stores managed their overall front-end gross profit, which is a combination of new, used and F&I gross to be essentially flat with the prior year. Turning to used vehicles, our used vehicles performance is critical to the health of our dealerships. During the quarter, we drove our sales volume up 6%, while maintaining healthy inventory levels. In pushing volume, we sacrificed some margin, but this was more than offset by our incremental F&I opportunity and our robust reconditioning growth. Our used vehicle day supply was at 36 days, which is slightly above our targeted range of 30 days to 35 days. Turning to F&I, our second-quarter F&I revenue grew 8% compared to the prior-year quarter. F&I per vehicle retail for the quarter was $1,373, up $42 on a year-over-year basis. The lending environment remains favorable. Turning to parts and service, in the second quarter, our parts and service revenues grew 8% and gross profit grew 10% compared to the second quarter of 2014. Our customer pay business, which represents approximately 54% of our parts and service gross profit, increased 5% from the prior year. In addition, reconditioning work was up 15% and warranty work was up 26%. Finally, we would like to express our appreciation to all of our teammates in the field and in our support center, who continue to produce best-in-class performance in many areas. Our company continues to deliver record results and this is a direct reflection of your passion and dedication. Again, thank you. We will now turn the call over to the operator and take your questions. Operator?

Thank you. Today's question-and-answer session will be conducted electronically. It appears our first question comes from Rick Nelson with Stephens, Inc.

Thanks. Like to ask you about the margin pressures, both new and used, particularly on the new side, if there's any brands that are specific to those pressures? And any light at the end of the tunnel where we might see margins stabilize? Craig T. Monaghan - President, Chief Executive Officer & Director: Rick, it's Craig. Maybe I'll start with that question and David or Keith may have something they want to add. But overall, I would say that we saw an increasingly competitive environment in the second quarter. It was most intense in the midline import sector. And midlines alone represented about two-thirds of our decrease in gross profit. And we believe that was largely attributable to the impact of very low gas prices. It hit particularly hard in the car segment as opposed to SUVs. But we also saw, as you see in the numbers here, we saw some pressure in luxury as well. And what we sense there is it's a shift in consumer preference to lower-priced vehicles. I don't know David, you have anything. David W. Hult - Chief Operating Officer & Executive Vice President: I would say, on the used side, we're very focused on continuing to drive volume there. We see the benefits from our reconditioning growth, I mean our incremental F&I dollars, and feel like we have a pretty good balance offsetting that margin pressure to increase that volume.

Okay. Thank you for that. Also, you had closed kind of couple of acquisitions, a Nissan store, a Ford store. If you could comment on acquisition multiples and what you're seeing out there? Craig T. Monaghan - President, Chief Executive Officer & Director: Yeah. Rick, we're seeing a lot of activity. I would say more than we've seen in years. It's almost as the light switch was flipped within the last three months, four months. I would say, broadly speaking, luxury stores still seem to be expensive. And at the other end of the spectrum of the domestics, which we are finding very attractively priced, I mean we've bought three Ford stores here in the last six months or so. And the Nissan store, we're very happy with. We think, generally speaking, stores are still expensive, but we're optimistic that there's some transactions that we might be able to get done as we move forward.

Okay. Thank you for that. Finally, if I could ask you about the CFPB and new caps at the Honda, you've got quite a representation at Honda. How you see those caps affecting F&I income? Craig T. Monaghan - President, Chief Executive Officer & Director: It's a great point Rick and we saw the same thing with BB&T with this flat fee that they moved to. I would say, our average reserves are going to be in about above the same range of the caps that Honda has put in place, somewhere between 100 basis points and 125 basis points. And we're still learning more about the details of the program. There's some additional funding available from Honda. But I think, from a 50,000-foot perspective, these caps and fees seem to be very much in line with the types of income that we're realizing today. We don't believe it will have a material impact on our business, and we feel pretty good about being able to manage with these programs, and any other programs of a similar nature that may come along.

Very good. Thanks a lot, and good luck. Craig T. Monaghan - President, Chief Executive Officer & Director: Thanks, Rick. David W. Hult - Chief Operating Officer & Executive Vice President: Thank you.

Our next question comes from Bill Armstrong with C.L. King & Associates. William R. Armstrong - C.L. King & Associates, Inc.: Good morning, gentlemen. Just a follow-up on the gross margin questions. On the new side, especially with the Japanese volume imports, as far as the competitive pressure, is there too much product out there? Are they overproducing? Kind of what's driving that really intensive pricing pressure? David W. Hult - Chief Operating Officer & Executive Vice President: Yeah. I would – for us, on a year-over-year basis, our day supply is actually down slightly in the midline imports. I would say it's a supply and demand issue more on the model series. The crossover and SUVs and trucks are very popular right now. The cars have become a little bit more of a commodity and a little bit more intense pressure on pushing them, and sacrificing margin to move them. William R. Armstrong - C.L. King & Associates, Inc.: In terms of like sedans, in other words, as opposed to SUVs or pickups? David W. Hult - Chief Operating Officer & Executive Vice President: Correct. William R. Armstrong - C.L. King & Associates, Inc.: Okay. And then, parts and service margins were very strong. We saw nice increase from Sonic yesterday as well, what's driving that, other than maybe mix? Is that it? David W. Hult - Chief Operating Officer & Executive Vice President: This is David. We're seeing, obviously, a lot of warranty work. Our internal is up significantly. So, that's – most of the rise in our margin comes from those two categories. Keith R. Style - Chief Financial Officer & Senior Vice President: Yeah, Bill. This is Keith. I'll just jump in real quick. Obviously, for us, with how we account for our reconditioning and preparation work, that's 100% margin business in our results. So, as we grow that business at a greater rate than the remainder, we'll have margin expansion. We did see slight margin expansion during the quarter inside the warranty and the customer pay segment as well. William R. Armstrong - C.L. King & Associates, Inc.: Okay. And then, as well, warranty gross profit same-store is up over 25%, how much of that do you think was driven by recalls versus just traditional warranty work? David W. Hult - Chief Operating Officer & Executive Vice President: It's a mix. Most of our increase is in certain lines, and it's a pretty fair mix between recall and warranty work. William R. Armstrong - C.L. King & Associates, Inc.: Got it. Okay. Thank you. Craig T. Monaghan - President, Chief Executive Officer & Director: Thanks, Bill.

Our next question comes from Bret Jordan with Jefferies.

Hi. Good morning. And sort of just following up on that warranty question as it relates to the recall side of it, do you have a feeling sort of where you are working your way through that? There's (17:25) lot of recalls in the last 12 months since – or (17:27) what backlog might be, as we try to sort of forecast that side of the business going forward? David W. Hult - Chief Operating Officer & Executive Vice President: We're keeping up with it now. I mean, with the laws changing and the way the consumers get notified, a lot of times we don't have the parts available when the notification comes out. It seems like every week, there is a recall for something and that continues. It's tough to predict the future, but it's very consistent and we are keeping up with it.

Okay. And then, on lease penetration on the quarter, is seeing the higher pressure on the midline import and, I guess, the strategies to move that volume, where are we on leasing as a percentage of the volume? David W. Hult - Chief Operating Officer & Executive Vice President: It's approximately 20% of our overall business. That's up about 5% over the prior year.

Okay. Great. And then one last question, on your used day sales and inventory at 36 days, how much of that is related to the Q auto strategy that you're intentionally building for the used sales, or is that just building up a bit for other reasons? Craig T. Monaghan - President, Chief Executive Officer & Director: There's only – we just have to keep in mind, there's only three Q stores.

Correct. Craig T. Monaghan - President, Chief Executive Officer & Director: That inventory build would have very little to do with the Q stores. They're running at inventory levels that are pretty much in line with what we do at our core stores. So, I think that's just a build in the core stores. It's just a little bit higher than what we would normally expect. So, we don't see that as being unusual in any way, shape or form. David W. Hult - Chief Operating Officer & Executive Vice President: This is David. I would add, we're also in the heat of our selling season, July and August, some of the bigger months, so carrying that excess inventories is a strategic and smart move, I think, on our part.

Okay. Great. Thank you.

Our next question comes from Brett Hoselton with KeyBanc.

Good morning, gentlemen. Craig T. Monaghan - President, Chief Executive Officer & Director: Good morning, Brett.

I guess, just to begin with, on the gross profit per unit, on the new and the used side, what's your outlook for both of those? Do you, at this point in time, kind of anticipate that these levels are kind of sustainable? Do you think they might improve for some reason? Do you think they might deteriorate for some reason, and again, both new and used? Craig T. Monaghan - President, Chief Executive Officer & Director: I think, I'll start with new and maybe David can talk a little bit more about used. But I think it's actually quite difficult for us to forecast these margins. It is – like David said earlier, I think it's very much a function of supply and demand. It's a function of how much inventory we see in our stores. And to a certain extent, right now, on I think the new margin, we're somewhat reacting to what we're seeing happening in the marketplace. It does make it difficult for us to forecast from here. David, I think the used situation is a little different, maybe David can talk about that. David W. Hult - Chief Operating Officer & Executive Vice President: I would say, on the used, at least for now, it's tough to predict the future. We are focused on our reconditioning work and we feel that that's a value add. So, when we increase the cost into the vehicle, it's certainly going to depress some of the margin, but we feel it's a more than a fair trade-off and we've been happy with our results so far.

Okay. And then switching gears, just on the leverage, Keith, do you happen to know – and you may have done the math, if you were to go to the upper end of your range at 3 times from the current 2.6 times, how much – what is that – what's that amount? What's available? Keith R. Style - Chief Financial Officer & Senior Vice President: Yeah, we – I mean, big broad strokes, we produced about $300 million in EBITDA, let's just take that as a round, and you're talking about a half a turn, so like quick math, about $150 million.

Okay. And then, how do we think about capital deployment going forward that $150 million-plus, your free cash flow. Should we think of you as just kind of treading water in the 2.6 times range, maybe go up and down a little bit based on acquisitions and so forth? Or are you thinking, you know what, let's kind of push this to the upper end, up to that 3 times range? Craig T. Monaghan - President, Chief Executive Officer & Director: Brett, I think we want to be opportunistic. If we see transactions or opportunities that we find extremely attractive, we would be very comfortable going to the 3 times range. If there is nothing in the marketplace that makes sense, we're very comfortable at the low end of the range. I think that over time opportunities will come our way. Philosophically, the way we think about the business is we work hard every day to make this a better and better company. Making it better company positions us to take advantage of opportunities as they come down the road. But we can be patient if that's the smart thing to do. We're not going to let that capacity burn a hole in our pocket.

Okay. And then, kind of switching gears, again Q auto, can you just give us a brief update on Q auto, kind of the impact in the quarter? And then, where are you at in terms of developing Q auto and your kind of assessment of where it's at? Craig T. Monaghan - President, Chief Executive Officer & Director: Yeah. That's – I mean I just recapped, we think Q auto has the potential to be a huge business for us, but we've got to solve the riddle. And I think we're very much in the mode today of solving that riddle. We think the three-store format is an ideal way to go about it. And we've got a medium, a small and a large format that are in three different markets. It allows us to experiment with a lot of different things, including technologies. We've got a major piece of technology that we're actually rolling out in the stores as we speak. We think it will significantly improve our customer experience, make our employees in the stores more efficient. I'd also point out that we take about 35,000 cars a year to the auction and we see this is a way to retail some of those units. But it's not easy. If it were easy, there would be many others out there selling used vehicles in a standalone format in a big way. We know that's not the case. So, it takes some time. It takes some commitment. We feel like we're making very good progress. We lost $0.02 this quarter. Our objective is to drive this thing to profitability before we take the next step. And we feel like we're on that path.

Okay. Craig, Keith, David, thank you very much, gentlemen. Keith R. Style - Chief Financial Officer & Senior Vice President: Thank you. Craig T. Monaghan - President, Chief Executive Officer & Director: Thanks you. David W. Hult - Chief Operating Officer & Executive Vice President: Thanks, Brett.

Our next question comes from John Murphy with Bank of America Merrill Lynch.

Good morning, guys. Craig T. Monaghan - President, Chief Executive Officer & Director: Good morning, John. David W. Hult - Chief Operating Officer & Executive Vice President: Good morning.

Hey. First question on just overall operating margin of 4.9%. I mean as far as I look back, I see an all-time high for you guys and probably better than anything AutoNation's put up. So, you're really scraping against the ceiling, at least it appears. I mean, in an environment that we're in right now, it sounds like it might be a little bit tougher or maybe not. Do you think there is room to eke out more upside on operating margin, whether it be through gross profit balancing out or optimization or SG&A leverage? Keith R. Style - Chief Financial Officer & Senior Vice President: Hey, John, this is Keith. Yeah, it is in fact a record for us, 4.9% is a record for the company. We've done – over the last five years really we've done a lot of work on our infrastructure. We've done a lot of work on shared services and it goes without saying that our operators are incredibly disciplined inside the stores as far as managing their expenses. So, it's been a lot of work in a lot of different areas. We're in a pretty good place. We finalized our shared service build out in the second quarter. There's some enhancements to come from that, but in large part not a ton. I would also say that you see some of our capital dedicated to continue to buy out leases, which reduces our rent (25:34) expense over time and we'll continue to deploy capital on that, in that fashion. But largely speaking, the infrastructure is in place, it's sound. And we'll continue to add assets and grow the business and that will allow us to increase the operating margin from here. But it will be at a more stated pace.

Okay. That's great. Well, congrats for getting that, because that's pretty impressive. A second question, I mean, obviously, the gross profit question's been sort of beaten to death here on the new vehicle side. But if we take another angle to it, I mean, if you kept your gross profit flat on new vehicles on a year-on-year basis, do you think you would have lost tremendously in the market on the volume side? David W. Hult - Chief Operating Officer & Executive Vice President: This is David, John. I'll take a shot at that. That's difficult to answer. There is a balance in our eyes. We want to be good partners with our OEMs, keep up with our market share, keep the throughput through our fixed operations. It would be tough to quantify what that would be.

Okay. But when you're making that decision or when you're allowing gross profit to go down, because you can always manage this, I mean, you really are looking at the three other legs of the stool to offset this, right? I mean, this is not just something it is being forced upon you. I mean, it is a calculated decision that it will help drive used vehicle trade-ins, F&I and then ultimately parts and service down the line. I mean, that is part of the equation as you're accepting this $200 decline? David W. Hult - Chief Operating Officer & Executive Vice President: Well, absolutely, and that plays into our 4.9% margin. We have really good operators that are really – when they're structuring that deal, they're looking at all the different avenues and how to maximize their opportunities. And I think the results show they balanced it well.

Okay. And then, just lastly, as we think about the Atlanta realignment, Atlanta is a huge market for you guys, so this is a big – this is a big change, which sounds like it's pretty good. It sounds like you're going to be a $10 billion – $10 million CapEx bump from that, what's the payback period as you do programs like this, and what's your expected payback period on that incremental $10 million? Keith R. Style - Chief Financial Officer & Senior Vice President: Yeah, John, this is Keith. First of all, there is opportunity just getting these stores in the right locations. We talked about a major artery and it really is a premier location that's being fully renovated. It's the old GM site here in Atlanta. It's going to be a fantastic location right on 285. The second one is a high-growth market, up a little bit further north of Atlanta proper. We look at – when Craig mentions, deploy our capital to the highest levels of returns, we don't outwardly disclose what our rates are and what our targets are. But we're always looking at what we could do internally. We think that we understand our business, first; and then, secondly, look at acquisitions. And suffice it to say that we expect an excellent return on this investment over the next two years. It will be done – second quarter, third quarter of next year, we'll be completed with the project.

Okay. Great. Thank you very much. Craig T. Monaghan - President, Chief Executive Officer & Director: Thank you.

Our next question comes from Jamie Albertine with Stifel. Jamie J. Albertine - Stifel, Nicolaus & Co., Inc.: Great. Thanks and good morning, gentlemen. Wanted to dig in on the F&I side. It seems you continue to get – eke out steady growth there every quarter. Some of your peers now over $1,500 a unit, suggest perhaps there's some more runway there. But really wanted to get a better sense of where you're seeing the growth. Is it more on the attachment side, the insurance or the product side? Is it more on consumers looking for financing and so forth? So if you could dig into that, that'd be helpful? David W. Hult - Chief Operating Officer & Executive Vice President: Jamie, this is David. I'll take a shot at it. Our focus is on product sales, and we feel like that's what's driving our growth. And tough, again, to predict the future, but we see opportunity to grow more. Rate is not nearly what it used to be, as far as the percent of (29:43) per car, and it's down dramatically. So, it's really all on the product side. As far as finance penetration year-over-year, it's pretty flat. Jamie J. Albertine - Stifel, Nicolaus & Co., Inc.: And I apologize if I missed it in your prepared remarks. Have you talked publicly about an internal cap on the dealer markup that you're sort of pushing throughout your portfolio at all? Craig T. Monaghan - President, Chief Executive Officer & Director: Yeah. Jamie, it's Craig. I'll take that one. We do have an internal cap. We also fix the prices of product we sell in the F&I office. We've got a very aggressive internal audit program that's in these stores constantly and we augment that with an external audit program. So, we feel pretty good about the program we have in place. The ultimate objective is to make sure that we treat all of our customers fairly. I mentioned earlier that, with Honda and BB&T moving to these flat rates, flat fees or rate caps, essentially, if you were to convert that into a dollar basis, that would allow us to generate F&I finance. PVRs that are pretty much in line with what we already see today, so we think that's something that we can manage through, and really don't expect any bump in the business as we continue to move forward. Jamie J. Albertine - Stifel, Nicolaus & Co., Inc.: Okay. And just, since you brought up the Honda and BB&T, if I heard you correctly, announcements, any other OEMs that you're hearing that are pursuing a settlement, or similar kind of – whether it's a rate cap or discretionary cap or whatnot out there? We heard Toyota and maybe Nissan, but wanted to get some insights from you on that, if we could. Craig T. Monaghan - President, Chief Executive Officer & Director: Yeah. Jamie, we've read the same things in the press that you have about those two captives. We don't know, to be honest. But I think what we would say is that if they go – all go the same direction that Honda and BB&T went, that's something that we could be comfortable with. Jamie J. Albertine - Stifel, Nicolaus & Co., Inc.: Understood. Thank you so much, and good luck in the next quarter. Craig T. Monaghan - President, Chief Executive Officer & Director: Thank you. David W. Hult - Chief Operating Officer & Executive Vice President: Thank you.

Our next question comes from Paresh Jain with Morgan Stanley. Paresh B. Jain - Morgan Stanley & Co. LLC: Good morning, everyone. Couple of questions, first on acquisitions. There certainly is an uptick in your acquisition activity, but when you look at your acquisition pipeline, is it more weighted towards groups with one or two stores or are you open to bigger platform to use as well? Craig T. Monaghan - President, Chief Executive Officer & Director: No, we are definitely open to bigger platform deals. We prefer larger stores over smaller stores. We think they're actually easier to operate. We prefer stores that are in our footprint. We think proximity matters. We run an organization structure, where we allow our general managers to run the stores. But we do have support teams that are there to help them. And if it's easier for those support teams to get to a store, we think there is real incremental value that comes from that. And price matters to us. The basic threshold for us on any acquisition is we're not going to pay more for it than where our company trades. So, typically, we look to pay less and then hope to bring synergies so that we can get real incremental value out of an acquisition. With respect to brand, though, we're pretty much wide open. We're just looking for things that make economic sense. Paresh B. Jain - Morgan Stanley & Co. LLC: Understood. And sorry to follow-up on GPUs again, I know it's been discussed a lot. But midline imports have obviously hurt here, but the overall demand is still pretty strong. Is it now a case of just low-quality demand versus the high-quality recovery we saw in the last few years? Craig T. Monaghan - President, Chief Executive Officer & Director: I think that's difficult for us to say – to talk about the quality of the demand. There has clearly been a shift in consumer preference. Trucks are now 55% of the market. If we went back five years ago, cars would've been 55% of the market. So, we see that shift. I think fuel prices, as I mentioned earlier, have definitely enabled the consumer to think about something that's not quite as fuel efficient. We believe that has put some pressure on the very high mileage midline imports. But to quantify the quality of that demand for us is very difficult. David W. Hult - Chief Operating Officer & Executive Vice President: The only thing I would add to that is the midline imports, when you look at their core cars or their volume products, they're all in the sedan series. So, that is – even though they're not necessarily popular, it's been treated as a commodity and that's really what we're seeing as the largest pressure point. Paresh B. Jain - Morgan Stanley & Co. LLC: Got it. Thank you, guys. Craig T. Monaghan - President, Chief Executive Officer & Director: Sure thing.

Our next question comes from David Whiston with Morningstar.

Thanks. Good morning. I wanted to continue with that pricing discussion on midline imports. You've mentioned a couple of times that sedans are being used as a commodity and I certainly agree with you there. But do you think this pricing is entirely all about cheap gas or do you think the Japanese are also being more aggressive because of the weaker yen? Craig T. Monaghan - President, Chief Executive Officer & Director: We don't have that kind of insight, David. At the end of the day, we're a retailer. Don't have that insight into what's happening within the manufacturers. Obviously, the weak yen plays some part, but I'd point out that many of these Japanese imports have as much content as most of the domestic brands. So, I think it's somewhat difficult to hang it on the yen. I come back to – I do think the market has become more competitive. Everybody's got great product. There is good consumer demand. Everybody wants to take share. And we're just – we're seeing it conform to that in the marketplace.

Okay. And do you have any interest in more exposure to Lincoln or even starting with Cadillac in light of both brands reinventing their product lines over the next few years? Craig T. Monaghan - President, Chief Executive Officer & Director: I'd start with Lincoln. We have a number of Lincoln stores that do quite well for us. We would be more than happy to expand our presence there with that brand. We don't have any Cadillac stores. So, that's something that would be new to us, but certainly something that we'd consider.

Okay. And my last question is, as you know, there has been a lot of press lately about AutoNation and TrueCar. Can you comment on Asbury's relationship both with TrueCar and other vendors like that? Do you have a good relationship with firms like that? Craig T. Monaghan - President, Chief Executive Officer & Director: Yeah, I'd just give big picture; TrueCar is one of our partners. They represent very little of our sales at the end of the day, somewhere in the mid-single-digit range. Unlike AutoNation – and again, we only know what we read, but our arrangement with TrueCar's we do not provide them with any data, so we don't have the data sensitivity that we've read about in the press. The other thing I'd call to your attention is that we allow the general managers to make decisions about whether or not they use TrueCar or even many of the other third-party lead providers. And our general managers will make those decisions based on the returns they see on those investments. And that seems to be working well for us and we'll continue that type of an arrangement.

Okay. Thank you very much. Craig T. Monaghan - President, Chief Executive Officer & Director: That wraps up our questions for today. Yeah. We appreciate you joining us and look forward to talking to you again next quarter.

That does conclude today's conference. Thank you for your participation.