Asbury Automotive Group, Inc. (ABG) Q4 2015 Earnings Report, Transcript and Summary

Good day and welcome to the Asbury Automotive Group Q4 Year-End 2015 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Matt Pettoni. Please go ahead. Matt Pettoni - Vice President & Treasurer: Thanks operator and good morning, everyone. Welcome to Asbury Automotive Group's fourth quarter 2015 earnings call. Today's call is being recorded and will be available for replay later today. The press release detailing Asbury's fourth 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, David 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 other 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. We're pleased to announce another record quarter. We delivered adjusted earnings per share of $1.31, a 22% increase from last year's quarter. The fourth quarter caps off a solid year for Asbury. Let me touch on a few records we set in 2015. We grew revenue to $6.6 billion. We retailed over 188,000 vehicles. We generated over $300 million in income from operations. We achieved an operating margin of 4.6% and we delivered adjusted earnings per share of $5.57. In addition, we invested for the future by deploying over $100 million in land and buildings, including a four-store realignment in Georgia, which enables us to launch an open point in 2016. And finally, we repatriated over $300 million to our shareholders and reduced our share count by 13%. Despite all these achievements, there's growing concern across the industry regarding margins on new and used vehicles. As a company, we began to experience margin erosion early in 2015. As the year progressed, this pressure continued and had a material impact on our fourth quarter results. As always, we will continue to seek opportunities to become a stronger and more efficient company. We will continue to focus on growth opportunities in used vehicles, F&I and parts and service. For 2016, we are planning our business for a low-$17 million to mid-$17 million SAR. Going forward, we will continue to execute our two-part strategy: driving operational excellence and deploying capital to its highest returns. Now, we'll turn the call over to Keith to bring us through our financial highlights. Keith? Keith R. Style - Chief Financial Officer & Senior Vice President: Thanks, Craig, and good morning, everyone. This morning, we reported record fourth quarter adjusted EPS from continuing operations of $1.31. This represents a 22% increase from last year. Income from continuing operations for the fourth quarter of 2015 was adjusted for a $13.5 million pre-tax gain on divestiture, or $0.34 per diluted share. Income from continuing operations for the fourth quarter of 2014 was adjusted for a $31.9 million pre-tax loss on extinguishment of long-term debt or $0.66 per diluted share. During the quarter, we experienced a favorable tax rate of 37.2%, compared to 39% in the fourth quarter of 2014. For the full year of 2015, our effective tax rate, adjusted for items disclosed earlier this year was 38.3%. Going forward, we expect our effective income tax rate will be between 38% and 39%. For the quarter, same-store revenue increased 7% and same-store gross profit increased 4%. The declines in new and used vehicle margins during the quarter put pressure on our cost structure, resulting in a 50 basis point increase in SG&A as percent of gross profit to 70.5%. For the year, SG&A as a percent of gross profit came in at 68.8%. However, for 2016 planning purposes, we believe it will be more appropriate to utilize our SG&A ratio over the second half of 2015, which approximated 70%. Obviously, this ratio will fluctuate quarter-to-quarter based on seasonality of the business and our ability to generate gross profit in each reporting period. In terms of capital deployment, for the full year of 2015, CapEx totaled $72 million. Our expenditures included $54 million associated with our core annual CapEx plan and $18 million on recent renovations of recent acquisitions and construction which enabled us to move out of leased facilities. In addition, this year, we spent $30 million for property purchases in anticipation of future dealership relocations. For 2016, we are planning for $80 million of CapEx which includes $45 million associated with our core annual CapEx plan and $35 million of CapEx associated with acquisition renovations and construction, which will enable us to move out of leased facilities. In addition, we will continue to seek opportunities to purchase real estate currently under lease and acquire properties in connection with future dealership relocations. With respect to divestiture activity during the quarter, we sold four franchises, representing approximately $120 million of annual revenue. This resulted in a $13.5 million pre-tax gain and approximately $30 million of cash proceeds. This was part of the strategic realignment with one of our manufacturing partners and enabled us to reallocate the capital to higher returns. Turning to share repurchases, during the quarter, we returned $44 million to our shareholders through share repurchases of approximately 571,000 shares. For the full year of 2015, we reduced our share count by 13%, and at its meeting last week, the Board reestablished our share repurchase authorization to a total of $300 million. During the quarter, we issued $200 million of additional debt by adding on to our 6% Senior Subordinated Note due 2024. The effective rate of the add-on was approximately 5.25%. After this issuance, we ended the quarter with total leverage just under three times. The bond add-on improved our liquidity position with the majority of the proceeds being invested in our floor plan offset accounts and used to pay down our used vehicle line. From a liquidity perspective, we ended the quarter with $3 million in cash, $137 million available on floor plan offset accounts, $88 million available on our used vehicle line and $165 million available on our revolving line of credit. Going forward, we are committed to remaining within our targeted leverage range of 2.5 times to 3 times and 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: Thanks, Keith. In an increasingly competitive market, during the fourth quarter, we increased total revenue 9%, grew total income from operations 6% and delivered an operating margin of 4.2%. For the balance of my remarks, I would like to remind you that everything I will be covering with respect to operational highlights will pertain to same-store retail performance compared to last year's fourth quarter. New vehicle revenue increased 6% and our new vehicle unit volume increased 5%. Our new vehicle gross profit declined 4% due to a 60 basis point drop in our new vehicle margins to 5.5%. We have been experiencing margin pressure since early 2015. The pressure began mainly in midline import brands which were primarily impacted by a shift in consumer preference from cars to trucks and lower gas prices. The shift continued into the second half of the year and spread to both domestic and luxury brands. The demand shift has resulted in a buildup of sedan inventory. We believe that until supply and demand are balanced, we will continue to experience margin pressure. We ended the fourth quarter with 739 million of new vehicle inventory or a 62 day supply on a trailing 30-day basis. Though our overall inventory levels are in line, our car-truck mix is not where we would like it to be. Turning to used vehicles, retail unit volume increased 4% and retail gross profit declined 3% due to a 70 basis point drop in our used vehicle margins to 7.5%. We believe we can maintain used vehicle margins at these levels. Our used vehicle days' supply is 30 days which is at the lower end of our targeted range of 30 days to 35 days. Turning to F&I. Our fourth quarter F&I revenue grew 9%. F&I per vehicle retail for the quarter was $1,426, up $55. The lending environment remains favorable. Turning to parts and service. In the fourth quarter, our parts and service revenue grew 7% and gross profit also grew 7%. This was driven by a 5% increase in customer paid gross profit, a 12% increase in reconditioning gross profit and an 8% increase in warranty gross profit. Our parts and service margin remained essentially flat at 61.9%. For the next year, we believe we can continue to grow our parts and service gross profit in the mid-single-digit range. Finally, we would like to express our appreciation to all of our teammates in the field and in our support center, who continued 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 to the call over to the operator and take your questions. Operator?

Thank you. And we will take our first question from Rick Nelson with Stephens, Inc. Your line is open.

Thanks, guys. Nice results. Question about the margin erosion seems to be the hot button in the sector and it spilled over to domestic vehicles this quarter. If you could comment on how long you think it's going to work through sedan inventory to really right-size and get the inventory more in line with what the customer wants, the trucks, SUVs and crossovers? David W. Hult - Chief Operating Officer & Executive Vice President: Rick, this is David. I'll take the first shot at that. I think as it relates to the domestic, in the fourth quarter, there were some of our OEM partners that kind of shifted their incentive programs to more volume-based, we chased some volume numbers. And I don't think that will continue into 2016. You never know what they're going to do with incentives, but we made the most of it with our volume in the fourth quarter.

And how about getting those sedan inventory reduced and beefing up to used trucks, SUVs and crossovers, you think these pressures I guess, are going to linger through the first half, could they go beyond that? David W. Hult - Chief Operating Officer & Executive Vice President: I think we hear from our OEM partners that they're shifting production more to truck from car. From our perspective, we have a wide array of vehicles. Our day supply in cars can – in some models can be over 100 days, and in some cases with our trucks, we could be under 30 days. We're getting closer to balance, but we're not in an ideal situation yet.

Okay. And divestitures, if we can talk about the strategy there and is there more of that to come? Sounds like you've got some nice gains on those. Is that showing some – freed up some capital to redeploy? Craig T. Monaghan - President, Chief Executive Officer & Director: Yeah, Rick, it's Craig, that's exactly what had happened. In this case, like Keith mentioned, we're working with one of our manufacturing partners who has a philosophy of trying to cluster numerous franchises in a more of a concentrated area. And in this case, we divested of some franchises where we didn't have that kind of a presence and are actually expanding our footprint. It's here in Georgia where we'll have more of a concentrated presence. We think we will – we think it's a very attractive market for us. It's our home. And we think we're going to be able to generate some pretty attractive ROIs on this group of assets going forward. So it's a good trade from a shareholders] perspective.

Thanks for that, Craig. Also I would like to ask about Q Auto. If you can – you've been at it now for a while, if you can share any of the economics and growth plans there? Craig T. Monaghan - President, Chief Executive Officer & Director: Yeah, Rick, it's – Q Auto lost $0.02 in this quarter. It's – I would – it had been losing somewhere in that $0.01 to $0.02 range, so we're kind of at where we thought we'd be. I would say it continues to be something that we feel very good about. It is a laboratory and we shouldn't kid ourselves, we continue to learn. We've been changing some of our marketing efforts at Q. We've co-branded one of the stores with the local regional name, but we – I think we need some more time. I think this is the year for Q, 2016, where we – our internal objective is get it to the point where those stores are generating attractive ROI. There's three stores, one of the stores is doing much better than the other two at this point. Our larger format store is actually the store that's giving us the most challenge. But we think there's still an opportunity there and it's something we're going to continue to pursue.

Great. Thanks a lot and good luck. Craig T. Monaghan - President, Chief Executive Officer & Director: Thank you.

We will take our next question from Brett Hoselton with KeyBanc Capital. Your line is open.

Good morning, everyone. This is actually Irina Hodakovsky on for Brett Hoselton. How are you? Craig T. Monaghan - President, Chief Executive Officer & Director: Hi, Irina. David W. Hult - Chief Operating Officer & Executive Vice President: Hi, Irina.

Hi, guys. I wanted to ask you a little about the Toyota announcement recently. You have a sizable exposure to that brand. There are supply disruptions that some are saying from the Toyota themselves that they may be larger and worst disruptions than the 2011 earthquake. Anything you can give us in terms of expectations there and how we should anticipate the flow of product from Toyota? David W. Hult - Chief Operating Officer & Executive Vice President: Hi Irina, this is David. We haven't heard that from our partners yet. We are anticipating some delays, but certainly not to that magnitude at this point.

Thank you very much. Any news on the Carter announcement, they increased the number of airbags, the Euro also issued a statement to its retailers in terms of liability, anything you can give us on that? David W. Hult - Chief Operating Officer & Executive Vice President: The Carter airbag issue has been out there for a while. They've certainly increased it recently with the actuators and it's affected Honda as well. We anticipate that that will probably be a 45-day to 60-day issue before we get the parts and we can start replacing them.

All right. Thank you very much, great job. Craig T. Monaghan - President, Chief Executive Officer & Director: Thank you.

And next we will go to Bill Armstrong with C.L. King & Associates. William R. Armstrong - C.L. King & Associates, Inc.: Good morning, gentlemen. Just going back to the gross margin pressure on the domestic brands; you mentioned that some of the OEMs had put in some volume-based incentives and you don't think this will continue. Have they already been discontinued, these particular incentive programs, or is that something that you expect to happen in the near future? David W. Hult - Chief Operating Officer & Executive Vice President: What we're seeing right now is more in line with what we've seen in the past. So, I would say it's stabilized and not what we saw in the fourth quarter. William R. Armstrong - C.L. King & Associates, Inc.: Okay. And then conversely on the midline imports, obviously that's where you saw most of the gross margin pressure through the first nine months of the year. And then the year-over-year decline in the fourth quarter was actually pretty small. Anything to call out there? Are we maybe finding a floor perhaps in margins on the midline imports? David W. Hult - Chief Operating Officer & Executive Vice President: Yeah. It certainly feels that way. I also think their car and truck is getting more in a line as well and we all do better with truck than we do with car. That helps? William R. Armstrong - C.L. King & Associates, Inc.: Got it. Okay, thank you.

Next we will go to Steve Dyer with Craig-Hallum. Your line is open.

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

When you look at the off-lease vehicles, you expect to have coming back this year obviously a lot more the last year, how do you see that sort of playing into things, new and used margins? David W. Hult - Chief Operating Officer & Executive Vice President: We see it as a good opportunity. Most of them will be CPO vehicles for us. They'll come mainly over a six-month period, and we look at that as an opportunity for us.

Okay. And then as you look at acquisitions, obviously private sellers tend to get the news or adjust their valuation expectations probably later than the stock market does. What are you seeing out there in terms of valuations, and with your stock down this much sort of where does the focus on capital allocation look to you to be directed? Craig T. Monaghan - President, Chief Executive Officer & Director: Steve, it's Craig. It's – I mean you made the right point, with our stock trading where it is today, buying our stores via share repurchase becomes a pretty attractive option. And you're right, sellers typically are looking at selling their stores off of trailing 12-month earnings and typically are looking at where valuations have been over the past 12 months to 24 months. I'd just come back to is in this environment where our stock's now trading at EV-to-EBITDA multiples that are lower than we've seen in quite some time, by our own stores, seems like a pretty attractive alternative at this point.

Yeah. Craig T. Monaghan - President, Chief Executive Officer & Director: That doesn't mean we don't talk to people. We're still talking to potential sellers. But the bogey for us is it always starts with what investment opportunities do we have within the existing stores, then there's a share repurchase that hurdle. If we can beat those hurdles with acquisitions, we'll go after them. But right now, that's a tough hurdle to beat.

Is there any consideration in terms of looking at acquisitions to balance the mix a little bit with domestic – more truck SUV business? I mean does that change the way you think about multiple or not? Craig T. Monaghan - President, Chief Executive Officer & Director: Oh, absolutely. The last three oppositions we've done have all been fairly sizable Ford stores. The domestics have been trading at a discount to other franchises in the market. And those are very attract – and we were able to purchase those stores at significant discounts to where we traded, so those acquisitions made sense. But since that time, our model has come off substantially. And it causes us to pause when we think about whether or not we chase an acquisition versus buying our own stores, but we will be opportunistic, like Keith said. If we find transactions that make sense, we'll go after them. We've got an infrastructure in place here where – that we're very happy with. We integrate acquisitions very quickly. We've got centralized back-office shared service environment that enables us to bring synergies. So acquisitions, when they're priced right, make sense and they're always of interest to us.

Got it. All right, thanks, guys.

Next we will go to Michael Montani with Evercore. Your line is open.

Hey, guys, good morning. Just had a few more housekeeping questions and then a few strategic ones. One was I don't know if you've shared in the past, but could you break out the split that you have today between SUV, truck and sedan? David W. Hult - Chief Operating Officer & Executive Vice President: Yeah, we're – as far as our sales or inventories?

I guess the sales that you would have now. David W. Hult - Chief Operating Officer & Executive Vice President: Sales is roughly 50/50.

Okay in terms of unit split, okay. Then if I could on subprime, what would the penetration be both for the new side as well as the retail used? David W. Hult - Chief Operating Officer & Executive Vice President: Overall, subprime represents about 10% of our business.

Okay, great. One follow-up, on the used margin side, it sounded like there is some view that perhaps those are stabilizing a bit, but then also there's potential pressure from the off-lease vehicles to ASPs. So can you just help us to understand the outlook there as we move through the rest of this year and what could give conviction that maybe we're getting some stability on those margins? Craig T. Monaghan - President, Chief Executive Officer & Director: Maybe I could start with that because I think we need to put it in perspective. We're essentially traders. If we're only taking – we're trying to only hold those vehicles for 30 days to 35 days. And if we can turn them quickly, where the broader market goes with respect to pricing is not that big of a concern to us. The game for us is to get the car, get it reconditioned, get it back on the frontline and move it quickly. In some cases, it means getting it to the right store. But if the entire market is moving up and down reasonably slowly or on just normal seasonal trends, where those prices go are less important to us than it is our ability to turn it quickly. So, I would just put that perspective in place first. And then beyond that is, if there's additional product coming to market, that obviously can create supply and demand pressure, but it also can create an opportunity for us to see a more attractive car than we might see otherwise. David, you've got anything to add? David W. Hult - Chief Operating Officer & Executive Vice President: No, I agree. I mean these are all going to be CPO cars for the most part for us and that's a good value proposition for our customers and a good opportunity for us.

Okay. If I could, a quick one for Keith, which is just on the interest line item between floor plan and other interest had a decent spike there and obviously you guys had an issuance there, so I get that. But just moving forward, is there anything you can share? How should we think about those interest line items moving forward? Keith R. Style - Chief Financial Officer & Senior Vice President: Yeah, obviously we're carrying the additional $200 million of bonds, so that's going to increase our interest expense, and Matt can work with you offline and make sure you have that accurately reflected. As far as floor plan, we do have a little bump in rate here. Our inventories on a dollar basis were up a little bit. So there will be a little more carry in the floor plan. In addition, I know you're aware of this Mike, but we parked a lot of our available cash in our floor plan offset accounts and our ability to do that over time depends on our cash balances, so that will also have an impact going forward. So that's something you have to model in over the coming year as well.

Okay, thank you. And the last one I had was just in terms of the expense management side, AutoNation had mentioned the desire to cut back a little bit on advertising spend in an effort to better manage that for the environment. I guess I'm wondering how you guys think about the trade-off between kind of market share versus kind of expense management and just how to think about that given the GPU environment that we're in today? Craig T. Monaghan - President, Chief Executive Officer & Director: Mike, that's a great question. I'd start that question off and say that our philosophy has always been one of continuous improvement and cost discipline. And I would argue that that's reflected in our margins. We try to run a lean shop. So when the environment that we're in today where we've got this margin pressure and we will double down again and we will go back and look at every dollar we spend on advertising, we'll look for every opportunity we can find to be more efficient in everything we do. But then again, as we said earlier, we think we're on a path to sell somewhere close to 17.5 million cars this year. That means that we're going to have to have the manpower to do that and the systems in place, everything else that we need to do so. So it's -I wouldn't say that we're sitting here, by any means, getting ready to initiate a major restructuring or a major slash in our advertising spend. We'll be disciplined with it. You'll see it continue to shift to more of a digital spend. But I don't think you should expect any major shift in the way we go to market with our brands and our product.

Great. Thank you guys, and good luck. Craig T. Monaghan - President, Chief Executive Officer & Director: Thank you. David W. Hult - Chief Operating Officer & Executive Vice President: Thank you.

Next, we will go to Rod Lache with Deutsche Bank. Your line is open.

Good morning guys, it's actually Mike Levin on for Rod. Just wanted to follow up again on – I know these are recurring questions here, but when you're talking about continued margin pressure, do you sort of see the year-over-year declines kind of staying in this kind of same magnitude we saw in the fourth quarter, at least through the first half of 2016, or are we talking about sort of more stabilization at these levels? Craig T. Monaghan - President, Chief Executive Officer & Director: Mike, it's Craig. Let me start, maybe David or Keith wants to jump in. But I think we would argue that fundamentally, our margins are a function of supply and demand. And right now, there's tremendous demand for what we classify as trucks; there's less demand for cars, and that's causing this pressure. Until that supply and demand balance is corrected, we believe we'll continue to see the kind of pressures that we're seeing today. I think once we come into more of a balance, I think there's a chance for these margins to possibly even recover, but that could be a quarter or two away. It's – now we're getting into the bigger issues of what's the state of the global economy, the housing market, employment, production levels, et cetera. So it's a lot bigger than us. We don't have a crystal ball allows us to that far into the future. So what we do is we just keep our noses to the grindstone and try to control the things that we can influence.

Got it. On the used cars coming off lease and in trade-ins, sort of my concern is maybe less on the volume coming back in, but more the mix. So over two, three, four years ago, the mix was much more shifted towards cars. So the used vehicles you're going to see coming back on trades and off lease are probably skewed more towards cars than the current demand environment could possibly support. Is that going to exacerbate any mix problems you might have in terms of used margins from here? David W. Hult - Chief Operating Officer & Executive Vice President: This is David. I would say you're directionally correct and I would look back and say we've been seeing that for a while. We're taking in a lot of cars now, more cars than trucks and we're having to turn them. And you're seeing a little bit of pressure on margins because of it. And it's pretty much why we said we're going to maintain those levels because we don't see that shifting much in the near future.

Got it. David W. Hult - Chief Operating Officer & Executive Vice President: The mix.

Okay. Thanks for your help, guys.

Next we will go to James Albertine with Stifel. Your line is open. Jamie Albertine - Stifel, Nicolaus & Co., Inc.: Great. Thanks for taking the question and good morning, everyone. David W. Hult - Chief Operating Officer & Executive Vice President: Morning. Craig T. Monaghan - President, Chief Executive Officer & Director: Good morning. Jamie Albertine - Stifel, Nicolaus & Co., Inc.: It's been about six or seven months since the Honda announcement that they were going to cap their discretionary market fund dealers and we just saw Toyota settle with the CFPB and DOJ this week. Any insights in the last few months of Honda carrying this out and sort of considerations that we should think about with Toyota now jumping in? Craig T. Monaghan - President, Chief Executive Officer & Director: Let me start with that, and again maybe someday else wants to hop in behind me. But we're still learning exactly what the Toyota plan is in detail. We understand it broadly. I would say at this very preliminary level, I don't think it's a whole lot different, it's going to mean a whole lot to us, I'd put it that way. We've managed through the changes that we saw at Honda. Obviously, there have been changes with Ally and some of the other vendors in the marketplace. We're talking about caps that are in the 125 basis point range. In some instances, there can be fees that are passed to the dealers or there can be below-the-line opportunities for the dealers to make additional money. But we've managed through what we've seen so far, I think, well. I think it's reflected in our F&I PBR's that we've managed it well. And I think we'll manage through this Toyota situation in the same manner. Jamie Albertine - Stifel, Nicolaus & Co., Inc.: Great. I appreciate. That's very helpful. If I may ask another maybe housekeeping item and just in the spirit, I might as well ask a margin question since everybody else has. Domestic, I would say – based on what we saw last week from your peer and their domestic operating income was actually quite impressive, I think in general, people were feeling like premium luxury might have been the issue this quarter. So, to see your margins in domestic come in as much as they did was sort of interesting. I know your overall mix of SUVs and trucks versus sedans is 50/50, is there something sort of funky about your markets on the domestic side where you might be over-indexed to Fusions and Malibu's versus F-150s and Silverado's? David W. Hult - Chief Operating Officer & Executive Vice President: No, I wouldn't. This is David, I wouldn't say that James. I would say that we don't have as many domestic stores in major metros like our peers do; the one you're specifically mentioning. And I think we went into the quarter not knowing what weather issues we may or may not have as the month goes and how that can impact the business and you start this quarter off aggressively chasing the volume as best you can. And I think, we didn't hit the weather and we probably were more aggressive than we needed to be. Jamie Albertine - Stifel, Nicolaus & Co., Inc.: Okay. Craig T. Monaghan - President, Chief Executive Officer & Director: And I would – James, I'd just follow it up. I think in the fourth quarter particularly, there were some incentive programs that encouraged us to make sure that we are getting some volume. And as a result like you see, we do, we got the volume, maybe we got a little too aggressive and it had an impact on our margins. Jamie Albertine - Stifel, Nicolaus & Co., Inc.: I appreciate that additional color and then one last one. Look we're living through the shift in sentiment as you all are, and I think with, again your peers announcement at the beginning of January we heard you guys at the Industry Conference in Detroit and we've seen some lenders come out in fact and say that there's some ramping in delinquencies and some tightening on the – if you will the sub-prime side of the market. I just want to understand, I mean, if we need to build in – just for the sake of argument build in a recession scenario, I think, you are a much better company and your peers are much better companies than they were last time we went through recession, how should we think about the sensitization as you go into – if we do go into a recession, what areas should work, what areas should fall off, and how much, so maybe the right way to ask this question is, for a 10% decline in SAAR, what kind of EPS growth can you show or what happens to sort of your bottom line in that environment now, because it feels like you are a lot stronger of a company. Craig T. Monaghan - President, Chief Executive Officer & Director: Well, James, we're clearly a much stronger company than we were last time around. And I mean, you can see in our balance sheet. So let me start with maybe the balance sheet and try to help answer your question. Last time around, we were – we quickly found ourselves looking at leverage that was well beyond five times. We didn't really have much cash. Today we sit here with our total leverage is at three times, and like Keith mentioned we've got a very strong balance sheet and a lot of liquidity that we could put to use. In addition to that I think we are – we have far fewer leases that could potentially burn in us in a downturn scenario. We're getting to the point where the vast majority of our properties are owned. So, I think, the concern about covenants today in a downturn is considerably less than any concerns we would have then. So, I will take that chapter if you would and put it away. Then when you ask, your – then when you look at the operating side of the business, again I think we've built a lot of efficiencies in. We've got a better control environment. Keith and his team have done a good job on our shared services. We have much better visibility into this – into what's happening in the business and we're much – I think we're much more efficient about how we process these transactions to the backend of the stores. So then you kind of get to the core side of the business and as you know our cost structure is highly variable. Essentially everybody in the store is paid on some type of variable compensation whether it's a commission on a salesperson or its piece work in parts and service. So, if you're in an environment where the SAAR drops and the activity level in the store drops, our cost tend to drop as well. They may not drop immediately on a one for one basis, but those costs will drop and we saw about last time around. So again, we – I think, we feel pretty good about where we are. The question about how would you model 1 million SAAR decline or 2 million SAAR or 3 million SAAR, I might leave that to you and Matt Pettoni to talk about. But it's – you've got to make a lot of assumptions other than just what's happening with the SAAR. You've got to make some assumptions about what's happening in used. Our view is that used tends to hold up a little better than new. You've got to make assumptions about how hard parts and service would fall, over what period of time, over what duration. Parts and service tends to be pretty stable. Last time around we saw some decline as the recession got very deep, but if you had a more mild recession, I don't know that you'd see much of a decline at all. You got to make your interest rate assumptions as well. So there's a lot to it, but I'd sum it up and say we're in a hell of a lot better position today than we were last time around. Jamie Albertine - Stifel, Nicolaus & Co., Inc.: Listen I really – I know it was a super broad question, and I wasn't looking for a specific EPS trigger or anything, but I really appreciate that color. It's incredibly helpful and best of luck in the first quarter. Craig T. Monaghan - President, Chief Executive Officer & Director: Yeah, thank you much.

Next we will go to John Murphy with Bank of America. Your line is open.

Good morning, guys. Most of my questions have been answered, but I do have one last one, and I think, this is you know, sort of, important on the gross margin. I mean, it seems like everything we're seeing right now is a function of mix imbalances that are creating some excess inventory in luxury on the car side. So, that's largely understandable. But I think there's a lot of concern that there might be some actions that are being taken by automakers to pressure your margins at the expense of them getting better pricing you'll realize to them. And I'm just curious, are you seeing any change in your relationship with the automakers or the way they're delivering inventory or the way you deal with pricing to them or with them? Because that seems to be the big concern that something has changed here, and I think, a lot of automakers hear what you're saying and I very much agree with it that there's a lot of leverage you can pull to offset the pressure on new vehicle grosses. So they may view the world as you guys are doing just fine. You're going to find other ways to make money, so they can pull some of these grosses back and put it in their pocket. So just curious if you're seeing any change in the relationship or the way you deal with them? Craig T. Monaghan - President, Chief Executive Officer & Director: John, it's – I mean, the manufacturers are probably, without question our most important partners. So we're in this together and we have very good relationships. We work hard to maintain those relationships. And I think that's the most important part. I'll go back to what I said earlier: I think, fundamentally this margin pressure is a function of supply and demand. If we don't have the right product on the lot, those inventories will build and we will work to try to move them; move them off the lot. We will take hits as we've seen in this quarter, but we're in it together. We have – one thing I would say is that incentives have become very complex and we're not in the old world where it was if you sold a vehicle there was $300 on the trunk. There's a lot more to it now. Now those incentives are structured in such a way I think to encourage us to be better operators and I'm not sure that's all bad. So bottom line, I think, we've just – fundamentally if we can get the supply and demand balance right, I think as an industry we'll all be in good shape and we'll continue to roll forward.

Okay. And then just lastly I mean on floor plan assistance has there been any change in terms either shortening or lengthening or padding of floor plan assistance to help out with the car inventory? Keith R. Style - Chief Financial Officer & Senior Vice President: No, John, this is Keith, we're not seeing any changes in the normal processes.

Okay, great. Thank you very much.

Next we will go to Paresh Jain with Morgan Stanley. Your line is open. Paresh B. Jain - Morgan Stanley & Co. LLC: Good morning, everyone. And just a couple of broader industry level questions. First on the credit environment and loan terms in particular; we've seen that loan terms have expanded quite a bit in recent years and seems like they will keep on expanding. It's obviously helping volumes today, but is there anything about that trend that worries you and the dealer community in general? David W. Hult - Chief Operating Officer & Executive Vice President: Paresh, this is David. Naturally, we'd like to keep the customer on the shortest cycle we can to see them back again purchasing other cars. With the low interest rates and simple interest loans most people are okay. And even though the loans are longer in length you still have a trade cycle where people aren't far off what it's been in the past. Paresh B. Jain - Morgan Stanley & Co. LLC: Got it. And then a follow-up on the blended GPUs. They are still close to record levels and I'm including F&I in this as well. So despite the decline in new and used, you see them quite high, especially when you compare with pre-recession level. So some of this decline in used and new is obviously cyclical factors that play in a very fragmented market, but are dealers also getting used to higher percentage of F&I contribution that is driving some of this aggression with new and used GPUs? Craig T. Monaghan - President, Chief Executive Officer & Director: I think, if we – I think, you're talking about the number we call total deals. Paresh B. Jain - Morgan Stanley & Co. LLC: Yeah. Craig T. Monaghan - President, Chief Executive Officer & Director: Essentially which is the – for everybody who is not familiar with it, it's the gross that we make on new, used and F&I. That number – we had some pressure this quarter; that number was down. But it has been I would say relatively stable if not improving, like you said over the last 10 years. And what we've done is we have been, as an industry not just us, we've been able to generate incremental F&I PVR to offset some of the long-term pressure that we've seen on both new and used margins. And it's roughly $3,000 a car. That seems like a number that the industry depends on in order to generate the returns it needs on the capital that's tied up in these car stores. And I would expect as an industry that's the kind of a number that we'll continue to see as we go forward. And fundamentally, that's what justifies the investment into dirt and stores that – to make this whole thing work. Paresh B. Jain - Morgan Stanley & Co. LLC: Understood, thank you.

And next we will go to David Whiston with Morningstar Equity. Your line is open.

Thanks, good morning. Craig T. Monaghan - President, Chief Executive Officer & Director: Good morning, David.

Question for you on in particular premium luxury sedans. Keep hearing about how there's a lot of obviously the inventory issue, but also concerned is there a consumer confidence problem with the typical E-Class 7 Series best-class customer? Are they just not feeling confident to buy that type of vehicle or lease that type of vehicle right now? Keith R. Style - Chief Financial Officer & Senior Vice President: David, I'll start, and then I think David Hult might have more to add, but I think there's a broader issue that's happening here, and if we were back – to go back 12 months to 24 months, a lot of these premium luxury vehicles were difficult for us to get. A lot of production was going to China and some of the other developing countries. And – I mean, we don't have go back very far. There was – we were being scrutinized as an industry to make sure that inventory from the United States wasn't leaking out and ending up in China. The world has changed. There is no – there are very few inventory shortages now in the premium luxury side. Vehicles that we had a difficult time getting supplier for are now readily available, not only in our store but in stores of our competitors and that has pressured margins. And I think that may have more to do with the margin pressure than anything else. I don't know David might have a different view. David? David W. Hult - Chief Operating Officer & Executive Vice President: Keith, the only thing I would add is the only thing that's changed over the years is the luxury brands have brought a lot more entry vehicles into the market which skews their overall margin because these are lower end margin vehicles and they're more in volume. And those will certainly play a role in it. And naturally there is the refreshing. I mean the E-Class is coming out. We are in a society that we are refreshing cars faster than we ever have and the consumers demand it. So, I just think it's the balance of the new models and the timing.

Okay. And over to Q auto, Craig you've said several times that 2016 is – this is the year for it, but in the unlikely event that we do have a recession and I'm not expecting that, but just in the unlikely event things get a lot worse very quickly, would you be willing to give Q auto more time beyond 2016? Craig T. Monaghan - President, Chief Executive Officer & Director: I think, we need to see where we are with Q auto. I can tell you that one of the things that we have learned at Q auto is that we do a fair amount, the majority of the vehicles that we're selling in Q auto are subprime. If that came under tremendous pressure we'd have to see exactly what it did to those stores. It – like I said earlier, it's very intriguing what we're doing with some of our digital advertising at Q is really having some interesting impacts. We don't have a lot of capital tied up so we're especially in the two if you would smaller format stores. So, it makes it easier for us to get to the point where we can get a decent ROI. We'd be – I would put it this way. We're not going to walk away from it if we think we're close to hitting that magic breakeven point. And I think, it's going to boil down to our ability to get an incremental 25 or 50 cars sold in a given store. That's what we are very much focused on.

That's helpful, thanks. Since you mentioned a lot of subprime business there, can you describe the lending environment for those customers? It's still no problem getting them financed? Keith R. Style - Chief Financial Officer & Senior Vice President: No. Craig T. Monaghan - President, Chief Executive Officer & Director: We haven't seen any issues whatsoever.

Okay. Thanks, guys. Craig T. Monaghan - President, Chief Executive Officer & Director: Thank you.

Next we'll go to Brett Hoselton with KeyBanc Capital. Your line is open.

Thank you. This is Irina Hodakovsky, and thank you for taking another one of my questions. Can you tell us a little bit about developments in Texas, how that market is doing relative to the rest of the country? Is there any sequential slowdown or decline in that market? David W. Hult - Chief Operating Officer & Executive Vice President: Texas represents about 10% to 15% of our business, and we are starting to see some headwinds in Texas.

Can you speak to the magnitude of that slowdown? David W. Hult - Chief Operating Officer & Executive Vice President: It's minimal at this point.

Got you. Thank you very much. Craig T. Monaghan - President, Chief Executive Officer & Director: Irina, I'd just add that we only have one store in Houston, so this impact that David is talking about is an impact that we're seeing in Dallas, but there is – like David said, there's some impact. It's undeniable, we'll just have to see where it goes.

Got it. Thank you very much. Craig T. Monaghan - President, Chief Executive Officer & Director: Most welcome. Well that concludes today's discussions. We appreciate all the questions. We think these are great questions. We thought we had an opportunity to talk to you about the business, where we've been, where we're going. And we look forward to talking to you again in end of the quarter. Take care.