Sonic Automotive, Inc.
Q2 2010 Earnings Call Transcript

Published: 29 Jul 2010

[Operator:]

Welcome to the Sonic Automotive second quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions) As a reminder ladies and gentlemen, this call is being recorded, today, July 29, 2010. Presentation materials, which management will be reviewing on the conference call, can be accessed on the company's Web site at www.sonicautomotive.com by clicking on the 'For Investors' tab and choosing webcast and presentation on the right side of the monitor. At this time, I would like to refer to the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. During this conference call, management may discuss financial projections, information or expectations about the company's products or markets, operating strategies or otherwise make statements about the future. Such statements are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those statements. These risks include without limitations economic conditions in the market in which we operate, new and used vehicle industry volume, the success of our operational strategies, the rate and timing of overall economic recovery or further decline and other risks and uncertainties detailed in the company's annual report on Form 10-K for the year ended December 31, 2009 and quarterly reports on Form 10-Q for the quarter ended March 31, 2010 and our other filings with the Securities and Exchange Commission. Please refer to slide number two in the presentation materials for more information regarding forward statements. Certain non-GAAP financial measures as defined under SEC rules, maybe discussed on this call. Management uses non-GAAP financial measures to analyst the underlying operating trends in our business. Reconciliations are provided in our press release and in our earnings conference presentation materials, which are available on our website at www.sonicautomotive.com. Thank you. I would now like to introduce Mr. Scott Smith, Co-Founder and President of Sonic Automotive. Mr. Smith, you may begin your conference.

[Scott Smith:]

Great. Thank you. Good morning, ladies and gentlemen. I am Scott Smith, Co-Founder, President and Chief Strategic Officer. Welcome to Sonic Automotive's second quarter 2010 earnings conference call. Joining me on the call today are the company's Vice Chairman and Chief Financial Officer, Dave Cosper; and our Executive Vice President of Operations, Mr. Jeff Dyke; our Executive Vice President, Mr. David Smith; Greg Young, our Vice President of Finance. Today, I will discuss an overview of the quarter, and then turn I will the call over to Dave Cosper for a detailed financial review. Jeff will follow Dave and give an update on our operational trends, and I will then summarize and make closing comments. Please turn to the next slide. Overall results Q2 2010; we had solid operating quarter with strong results in every area of our business. The combination of some economic stabilization key areas of our footprint along with the continued execution of our operational playbooks resulted in 16% growth in total revenue. Our new vehicle revenue was up 19% and our used vehicle revenue was up 23%. Our used vehicle playbook continues to drive consistent performance in this area. Jeff will go into more detail but let me give you little color and highlights. Our used to new ratio was at 1 to 1 for the quarter. We have previously stated our goal of averaging 100 used vehicle sold per store for a month. Our store averages 75 vehicles in the second quarter. Our used vehicle playbook continues to also drive growth in parts and service in F&I areas. Our F&I revenue grew by 18% over Q2 of last year, which was driven largely by an increase on our vehicle sales volumes. Jeff will provide you more color on the more recent roll out of our playbooks in other areas of our business. The SAAR came in at $11.3 million for the quarter which is right in line with our expectations. We continue to build our plan on the $11 million SAAR for the full year. Our balance sheet continued to improve as we completed our refinancing of our senior subordinated notes and also continue to repurchase debt in the open market as we move forward our goal of further de-levering the balance sheet over the next several years. We are beginning to see the results of our interest rate as costs were down $3.3 million for Q2 from last year. With that I'll turn the call over to our Chief Financial Officer, Mr. Dave Cosper. Dave?

[Dave Cosper:]

Thank you, Scott and good morning everyone. Overall I am pleased with the results for the quarter. We saw a good revenue growth as Scott mentioned in all parts of the business. Total revenue was up 16% and gross was up 10%. Adjusted profit for the quarter was $15.6 million, up 41% from a year ago. Adjusted earnings per share were $0.27 for the quarter. On our last call I mentioned I was comfortable with the low end of analyst expectations for the year, specifically $0.90. I continue to believe $0.90 is appropriate. Seeing the results for Q3 and Q4 it will be about equal $0.24 to $0.25 in each of those quarters. Next slide please. This slide shows EBITDA for our business together with industry SAAR and it really highlights how resilient the business model is. We generated solid cash even with an industry decline of over 30%. We continue to believe that we can achieve 2007 cash generation at an industry volume of above 13 million units. Next slide please. Adjusted SG&A as a percent of growth was 79.9% for the quarter. We've been working on cost and I am pleased with the improvements from the first quarter with the reduction of 340 basis points. We are up 70 basis points from last year and I am comfortable with this, given the several significant business initiatives we have underway that offer great profit potential going forward. We expect to see SG&A at 80% to 81% for the balance of the year. Next slide. This slide shows our liquidity position which has really improved substantially in the past six months. We have readily available cash of $137 million. During the quarter as Scott mentioned we brought back (inaudible) primarily our 8 5/8% coupon bond. Further, we've called in an additional $20 million of our 8 5/8 bonds and those will be taken out next month. Obviously this will reduce our interest cost going forward. As we've stated many times, we remain focused on reducing our debt level over time. One exception is mortgage debt. As we move on our strategy to own more of our properties, we will substitute mortgage debt from leases. We expect to own much more of our land and buildings going forward especially as we approach lease end dates. Next slide please. Very quick slide here, just to show that we are comfortably compliant with all of our debt covenants even with the covenant step ups that occur through our facility through 2012. My last slide here is our capital spending. Spending for the net of mortgage proceeds was $12.5 million for the quarter and $19 million for the first half. Net spending for the year is projected at about $40 million. As I'd mentioned on previous calls, we are spending on two very large projects that had been on hold during 2009 and we've resumed work on those facilities and hope to finish them up later this year or first part of next year. With that I will turn the call over to Jeff.

[Jeff Dyke:]

Great, thanks Dave, and good morning everyone. As mentioned on our previous calls, our attention to associate satisfaction, associate retention and our ability to execute our eSales and pre-owned playbooks continue to contribute to the success of our new vehicle sales. Total new retail volume was 24,850 units, a year-over-year increase of 15.2%. As you can see on the slide our new vehicle revenue was up 19.3%, and our new vehicle gross is up 20.1%. On a quarter to date basis new vehicle margin was 7.1%, up 10 basis points from prior year and flat with first quarter. We continue to manage all new car inventory ordering on a centralized basis and are proud to report our new car day supply is in outstanding shape at 49 days, significantly better than last year's 62 days. We are down from first quarter of 54 days as see inventories tighten through better manufacture, and due to our inventory management practices. I am proud to announce, we have just completed the first draft of our new vehicle playbook, which we planned to be introducing our stores in late Q3 of this year. We've worked hard to develop this playbook both based on the successes that we had in pre-owned and with pretty similar results on the vehicle side of our business. We continue to believe that there is substantial upside to our new vehicle volume levels, regardless of the SAAR, as we continue to take share and execute our processes. Next slide please. We continue to gain momentum in our pre-owned business, as we posted our strongest used car revenue and volume and gross quarter in Sonic's history. This marks our fifth straight quarter of double-digit growth, as our pre-owned team continues to execute to our playbook. It is important to know that we have been able to sustain this level of growth on top of double-digit growth, last year in Q2. Simply outstanding performance by our pre-owned team. We grew used vehicle revenue just over 23% for the quarter, and grew our used vehicle volume by 20%. The great news is that in July we looked strong again, as we are tracking up 25%, for the month as we continue to grow our used vehicle business, even more comping against double digit growth, from prior year. As we discussed in detail in previous quarters, our used called gross margin percentage has stabilized as we projected our margin percentage was about 7.7%, for the quarter, and you should expect our margin percentage in gross per unit to remain relatively flat throughout the remainder of 2010. As Scot) mentioned earlier used to new ratio was one to one, for the second straight quarter as we continued to work towards our goal of achieving a sales average of 100 pre-owned units per store per month. We ended the quarter with an average of 75 units per store. We are very excited about several different processes we are adding to our used vehicle playbook and look forward to sharing them with you in the coming quarters. The one particularly we made here around last quarter was that we are in the beginning stages of developing our buying organization that we call CBS, our Central Buying System. We established CBS purely out of necessity to support our volume needs and are beginning to add more brands and regions to this process. As of today, we have 12 buyers in CBS that are buying a total of about 700 units per units per month and we obviously expect that to grow. Our certified pre-owned mix was 34% for the quarter, that's right in line with our target. Inventory ended the quarter at 29 days, a little wider than I would like for this time of the year but we do not feel it has cost us any business. We are just getting better replacing our inventory on a weekly basis and we expect inventory levels to be in this range for the remainder of the quarter. Next slide please. We are also very excited about our fixed operations business, we are in the second year of our playbook roll out of fixed operations and the results are improving with each quarter. As you aware we designed our playbook to combat reductions in warranty gross and help deal with lower SAAR levels and these moves were all paying off us. As you can see on the chart overall our fixed operations revenue was up 4.8% while our gross was up 3.3% to last year. Our customer pay revenue was up 2.1% and our customer pay gross dollars were up 0.3%, while our margin customer pay gross was 56.5%, down 100 basis points from last year and flat with Q1. The margin reduction can be attributed to an aggressive tire campaign that we have implemented and will comment on it in a minute. Warranty revenue was down 7.7%. Warranty continues to be in the 16% range as a percent of our total fixed revenue. Our internal and sublet gross from fixed operations was up a combined 23% or $10.4 million for the quarter. This increase is a direct result of our used car playbook and the significant increase we're in used vehicle volumes as manufacturers continue to cut warranty times and support is imperative for Sonic to drive revenue and gross per customer pay increase volume in used cars and we are doing just that. Our fixed operation teams continue to improve and we are very excited about the growth opportunities that we have. We made you aware last quarter of the progress that we are making in our Body Shop business. We are in year one of Body Shop playbook rollout and experienced our first quarter year-over-year growth in quite sometime. We are up around 5.1% in revenue and continue to improve this very important area of our fixed business. We've also established a new tire program as I was talking about that we are in the beginning stages of building out and we believe that tires are great way to attract non-warranty customers, pay customers to our shops and are aggressively selling tires in our services drives. We've increased our tire business year-over-year by 29% and look to continue to use tires as a way to generate incremental business to our stores allowing us to bring back the shopper that has traditionally liked to shop with mom-and-pop at chain service centers. We'll have more detailed update for you on our progress here in the coming quarters. Before I hand the call back to Scott, I like to thank all of our Sonic Automotive associates for their hard work and dedication in execution of our objective of making associate satisfaction our number one priority. Our turnover continue to track be in the range of 25% for the year, which will mark a third straight year of significant improvement and associate satisfaction and supports our mission to create one of Americas greatest companies to work and shop. Thank you very much, team. Scott?

[Scott Smith:]

Thank you, JD for the operational update. In summaries we describe last quarter, we budgeted in 2010 for us $11 million SAAR and end of the second quarter that's where we are. There are still many analysts and industry leaders projecting a higher SAAR and if that occurs, obviously we will have upside to our current goals for the year. We are optimistic that we are seeing a slow, new vehicle recovery and we are pleased to take advantage of the growth opportunity as the recovery continues. We are very excited about the introduction of our new vehicle playbook at the end of Q3 and expect similar results and success as to what we have seen in our pre-owned. We expect the second half of the year to be fairly evenly split in between Q3 and Q4. We expect our central buying system team to continue to strengthen as we improve our processes and add more regions and brands. Our used vehicle revenue, volume and gross continue to grow at a double-digit pace and we don't see that slowing down. Our fixed operations continue to have terrific upside as we get better at the execution of our playbooks. Our F&I business is strengthening on the execution of our F&I playbook and increased volume levels, were up nearly 19% in gross as we work to achieve our two products per vehicle sold. We would like to thank all of our Sonic Automotive associates for their hard work and dedication to the execution of our objective and making associate satisfaction our number one priority. Our turnover continues to track to be less than 25% for the year, which marks the third straight year of significant improvement in associate satisfaction in reductions and turnover and supports our mission to create one of America's greatest companies to work and shop. Thank you team. It's an honor and privilege to lead our company and at this time, we would like to open the call for your questions.

[Operator:]

(Operator Instructions) Your first question comes from the line of John Murphy with Bank of America/Merrill Lynch.

[John Murphy:]

Maybe if I start with a, first one is a sort of longer term question. If we look at the lease rewards coming up maybe over the next couple of years, and the opportunity you are taking to own real estate as opposed to leasing it, what could be the impact on SG&A over time and what percent of your real estate, do you think you may ultimately own?

[Scott Smith:]

Yes John, it is an interesting question, I mean today we have got about a $120 million of mortgages, it's a little over 10%, maybe 12%, and we have got of leases coming up in the next five years, and then there is opportunistic things that happened that we take advantage of. I hadn't thought about so much of it. I just read today, a total is 8.3%, of SG&A and of course, all it does is move it from SG&A down into interest, but one of the principle reasons we do it is, because its lower cost financing, plus all the operational benefits of putting improvements on to something you own versus somebody else owns. So I would guess, if we get to 50% owned, may be there is an other three, four points, that would come out of SG&A. That isn't the principle driver for us, it is really about improving our balance sheet, having better control of our assets and our stores and the financial benefits are pretty significant $1 million to $2 million net present value improvement for each store. So we like it and that is our plan, we are going to stick with it.

[John Murphy:]

Got you. Second question just on inventory running at 49 days of supply on the new vehicle side, that is pretty tight, especially considering that sales are relatively depressed, I was just wondering if there was any constraint on your ability to deliver or would like more inventory in certain segments so there is opportunities to make more sales if you had them.

[Jeff Dyke:]

Hi, John. This is Jeff Dyke. Actually, I feel pretty good about where our inventory levels are. That's not to say there is some high line brands that we wouldn't like to have more inventory of 5 Series for BMW, et, cetera, but I think the manufacturer is doing a much better job of managing inventory and so are we and I really don't think it's costing us any business whatsoever. It's close to Obama as you can get it in terms of day supply. It could be mix and few model lines. Could we use a little more inventory here there? Sure, we could. Like I said on a 5 Series, but other than that, I am very comfortable with where we are.

[John Murphy:]

Great thing to hear from the industry. Then on the CPOs, obviously, you guys are doing a good job there. That business is through the roof. I was just wondering, as you see those customers come in on as used vehicle the prices are increasing, the CPO prices are increasing, do you foresee a period of time soon where they may start flipping into just buying a new vehicle and buying less CPOs? I am just trying to understand the balance of the consumers looking at the value proposition in CPO versus a new vehicle currently?

[Jeff Dyke:]

You've got some situations, where your nearly new vehicle or CPOs approaching monthly payment that's more than a new car. So, yes, I do. I see that opportunity existing. I don't think it's going to make a lot of difference in our used car business in total, because it only represents about 30% of the total mix and we have been able to make it up in other areas, so I think for a period of time as the off-lease cars shrink and they've been shrinking, but they are really going to start shrinking as we moved closer to Q4. So for a period of time inventories are going to get tighter. It's going to push margins down and the selling prices up. So, yes, that opportunity certainly exists to sell more new because of that.

[John Murphy:]

Then just lastly on parts and service. Just wondering if you could remind us the breakdown between warranty customer pay in internal sales just as a percentage of growth?

[Dave Cosper:]

I can tell you parts and service, we were down 7.7%, and warranty represented 15.9% of the overall mix, customer pay was 45.8% and was up 2.1% for the quarter. Wholesale was up 12.3% of our overall mix and we were up 8.6% for the quarter. Then the internal, when you combine sublet and internal about, 8.19% and we are up 23% for the quarter.

[Operator:]

Question comes from the line of Rick Nelson with Stephens.

[Rick Nelson:]

I'd like to ask you about the growth rate in used cars same-store. I know you mentioned that July was up 25%, we also began to bump up against some really tough comparisons and given what you were just suggesting about this potential switch out from used to new, what sort of growth rate do you think is sustainable that obviously is a big driver to the internal within service and parts too?

[Dave Cosper:]

We think that the third quarter is going end up in somewhere to the second quarter maybe even a little better, just because cash for clunkers last year pushed down the used vehicle volume so far last year, so that might expand that increase. Then in the fourth quarter, I don't see any difference. I think we're going to be able to continue in the range that we are at for the remainder of this year, and we'll see going forward, but I am very, very comfortable with the level that we are today and I think we'll continue that on through the end of the year. There's still just so much upside in the used car business for our company, it's unbelievable. Like I said, we ended the quarter selling 75 units per store, we fully expect to sell 100 units per store and so all that upside is there for us to go get. We just got to get better executing our processes.

[Rick Nelson:]

Also, I want to ask you about SG&A, we saw sequential narrowing this quarter, at 79.9%, still higher year-over-year and the items you talked about was 80% to 81%. Is there some expenses coming back into the financials that are pushing that ratio up or expected to push the ratio higher?

[Dave Cosper:]

I don't think so, Rick. I think it's 79 to 80 and I give myself a little slack and I tend to be conservative anyway.

[Rick Nelson:]

Do you see additional opportunities from an expense standpoint to perhaps deliver better than your estimates?

[Dave Cosper:]

Yeah, I mentioned some investments we are making and that's probably what's bumping us up a little bit versus last year and of course in those investments we are expecting growth in gross. That's what going to drive the ratio more than cost cuts or increases from this point. I mean we are always looking a costs, I think there's a few efficiencies, I mean there's always efficiencies. So we are investing in some very interesting things to drive volume and pricing. That's where the real leverage for the bottom-line is.

[Rick Nelson:]

Dave the add backs in the quarter, the debt restructuring charges in particular. What debt restructuring was accomplished this quarter that we would have these continuing add backs.

[Dave Cosper:]

Yes and hopefully they are not going to be added back like that, there's $7 million. Remember we issued some 9% notes which mature in 2018 and we bought out, 200 million of the 8-5/8 that will do in 201. There was the 2.4, some odd percent freight call premium on those notes, and so that's what we paid. I mentioned, recalling 20 million of the bonds, and we will take those out next month and the call premiums as it steps down to 1.4%, something like that. So it will be just a few hundred thousand that would hit in this quarter, in this third quarter. So its fairly small are going forward. That was our charge, kind of an cab insurance premium to help insure liquidity, for our business.

[Operator:]

The next question comes from the line of Colin Langan.

[Colin Langan:]

Just following up on the special charges; in terms of the interest on the swaps, is that on. I mean, is that going to continue or is that really one-time in nature?

[Dave Cosper:]

Colin, this is Dave. It is really a mark to market adjustments, we have some hedge ineffectiveness, related to the way we have reduced the business, restructured our facility and we just had some swaps we couldn't match up and it is a non-cash charge, it bounces around over time, based on interest rates movements, and over the life of the swap, it comes back to zero. So there is no cash, no impact on the business over the life time of the swap, and that is why we are calling it out and it is unpredictable based on interest rates.

[Colin Langan:]

The new Swap expires on…

[Scott Smith:]

Middle of 2012, its been going or guess has given word that interest rates are, it is going to come back, the other way, and we will call it out and not take credit it for it at that point.

[Colin Langan:]

You also commented on earnings for Q3, Q4 being $0.24 or $0.25, why the sequential decline this quarter? So why would Q4 actually be stronger than Q3 since normally it was a seasonality effect?

[Dave Cosper:]

Yes. You know, a $0.01 for us is a $1 million of pretax profit. It's kind of tough to call. The signal I am sending is they are going to be close to equal. When I stare at what people are saying, they have got Q3 very high and Q4 very light versus what I think and I think those should be closer together for $1 million or $2 million, I can't call it frankly in this business.

[Colin Langan:]

So should Q3 being down from this quarter. I mean, I thought Q2 and Q3 are pretty similar?

[Dave Cosper:]

Yes, they are, but I don't know. 25, it's kind of too close to call. We'll see how we do.

[Colin Langan:]

From a sales perspective your sales unit growth wasn't as high as the US industry as a whole. I mean, is that a function of geography or brand mix or?

[Greg Young:]

Hi, Colin. This is Greg. I think it's a combination of those two things. I think the bigger of those two really is the geographic mix. Our footprint really is in some of those markets that really took a very sharp decline last year like Southern Florida and some of the area, especially for the domestic stores in California. We put together pretty interesting analysis. If we go back to second quarter of 2008, before the downturn started, and if you look at just units for everybody for second quarter of '10 compared to '08, there is about four of us in the peer group that are right in that 77% of 2008 volumes, so we've all come pretty much back in line with each other. It's just that we didn't go down quite as far in the second quarter of last year and we did the same analysis on used side, and we are well above. We are about 134% of where we were for 2008 unit volumes in used, so I think you can buy in that 2000 or the new and you combine the used together, I think our sales folks really did a fantastic job this quarter. I think some of it's also, there's a couple of analysts out there that are still north of a 12 million SAARs. So, when you look at us versus some of the models that are out there, I think that some time over the second half that these models have got to start to adjust to what everybody thinks the SAAR is going to be, and so we expect some of those models to begin to adjust here in the next couple of months.

[Colin Langan:]

Then just one last one. Can you talk a bit about the impact from the direct recall on parts and services, and maybe your outlook for parts and services, obviously it is a pretty strongest quarter. Is that sustainable for the rest of the year? I mean there is lot of talk about the fewer vehicles out there it will be harder to actually keep servicing them?

[Jeff Dyke:]

Tom, Jeff Dyke. The impact from Toyota was less than 1%, so not a big impact at all, and I think that our parts and service business we got so much upside. As Scott mentioned in his notes, I think that whether we grow at 5% or not, that's huge growth and outstanding quarter is yet to be seen, but we should positive growth moving forward from here on. There is just too much upside. The tire program that we are doing and the amount of customers that we are driving in, our average car coming through our service drive right now is about five years, and when you look at that and the upside that we have there along with the growth that we are projecting for used cars, there is tons of used car business out there to have, and if we're going to run up 20% then that internal is certainly going to be there for. So we expect to have nice positive growth in fixed operations for the remainder of the year.

[Operator:]

(Operator Instructions) Your next question comes from the line of Jordan Hymowitz with Philadelphia Financial.

[Jordan Hymowitz:]

I have a question. Increasing numbers of studies have showed that the domestics are starting to take share back from the foreign manufacturer. Can you extrapolate that on for you guys in the quarter either for the D3 in general or and even better if you could break it out between your each individual brand, how the growth is comparing.

[Scott Smith:]

Jordan, for reason, the question you asked kind of got broken up. Can you ask that again?

[Jordan Hymowitz:]

Sure.

[Dave Cosper:]

There you go, we can hear you better now.

[Jordan Hymowitz:]

There have been a couple of articles out recently that says customer preference is starting to shift towards the domestic from the foreign manufacturers. My question is two part, one, are you seeing that and two, can you quantify how your D3 growth was in the quarter versus your foreign exposure?

[Greg Young:]

We can. Sure. First of all, let's start with the mix, our luxury and import mix is about 85% of our total revenue contribution. So…

[Jordan Hymowitz:]

So you are including Cadillac in that luxury and import mix, Greg?

[Greg Young:]

We are including Cadillac in the luxury mix. If you take it out, our Cadillac is about 5.6% of the luxury piece, of the total. So if you take it out, maybe it's 80% to 85%. So when you look at that, total luxury business, unit volume increase for the quarter was 17.7%. I think the industry was somewhere in the 17% range. We are seeing a little bit of, I mean, obviously domestic business is growing, it's taking share but it's such a wide part of our overall mix that we don't have the exposure of that some of the other companies in our sector do. So it's very difficult for us to comment on the domestic brands that we have. Obviously they do very well, but in terms of the overall picture, it is such small percentage of our business, it's really hard to comment and answer your question.

[Jordan Hymowitz:]

Okay, and would you be increasingly interested in purchasing Ford's dealership at this point or not necessarily?

[Jeff Dyke:]

Yes probably not, but we nothing against them. Its more of, our focused at the moment is on reducing leverage, and improving the base business, there may be small acquisitions here and there but nothing substantial.

[Scott Smith:]

Jordan, Jeff and I have been out on the road, virtually all year, and we think that there is literally above 100% upside in the operations, that we currently have. If we can just get all of our dealerships operating at a level that are top 10% of our stores we are operating at, we will have some great earnings calls.

[Jordan Hymowitz:]

Okay, thank you.

[Scott Smith:]

Thank you Jordan.

[Jordan Hymowitz:]

What number is that by the way, what level is the top ten, presently that your dealers are running at?

[Scott Smith:]

In terms of..?

[Jordan Hymowitz:]

Well how do you want to define it, operating margin I would say?

[Jeff Dyke:]

Scott was referring to some of our operating initiatives that we have out there, the hundred used cars per store per month, the two F&I products per car, a 100%.

[Jordan Hymowitz:]

So if that all comes under profitability for those top dealerships, what is the top performance in your group operating at?

[Dave Cosper:]

In terms of profit to sales, or?

[Jordan Hymowitz:]

That is as good a metric as any.

[Dave Cosper:]

7%, 8%, our big stores are running in the 7% to 8% range, net of sale, I mean the upside is unbelievable.

[Operator:]

At this time there, there are no further questions. Presenters, do you have any closing remarks?

[Scott Smith:]

We don't have any more. Thank you.

[Operator:]

Thank you. This concludes today's conference. You may now disconnect.