Asbury Automotive Group Inc (ABG) 2016 Q4 法說會逐字稿

Good day, and welcome to the Asbury Automotive Group Q4 year-end 2016 earnings call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Matt Pettoni. Please go ahead, sir.

Thanks, Operator, and good morning, everyone. Welcome to Asbury Automotive Group's fourth-quarter 2016 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 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 2015, 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.

In addition, certain non-GAAP financial measures as defined under SEC rules may be discussed on this call. As required by applicable SEC rules, we've provided reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on our website.

It is my pleasure to hand the call over to our CEO, Craig Monaghan. Craig?

Good morning, everyone.

This morning we announced adjusted earnings per share of $1.56 for the fourth quarter, a 19% increase over last year. While we continue to operate in a challenging new and used margin environment, our ability to drive incremental sales volumes, enhance F&I PVR, and grow parts and service enabled us to deliver same-store gross profit growth of 5%.

The fourth quarter caps off a solid year for Asbury. Let me touch on a few highlights for 2016. We generated $6.5 billion of revenue, we retailed over 180,000 vehicles, we grew same-store parts and service growth profit 7%, we delivered an adjusted operating margin of 4.5% and adjusted earnings per share of $6.08.

In addition, we exited the Arkansas market and redeployed the capital into an attractive ROI accretive acquisition in the Indiana market. Later this month, we expect to complete our Atlanta Nissan realignment with the opening of our coming Nissan ad point. And finally we repatriated over $200 million to our shareholders and reduced our share count by 14%.

In summary, our adjusted results represent another fourth-quarter EPS record and our 30th consecutive quarter of EPS growth. In addition, we were able to deliver adjusted EBITDA growth of 5%.

For 2017, we anticipate a stable SAR environment, margins stabilizing at around Q4 levels, and rising interest rates. However, we believe the operational initiatives we have underway will offset these headwinds and enable us to deliver low single-digit EBITDA growth.

Our EPS will be further enhanced by capital deployment. Due primarily to the timing of our divestitures and acquisitions, we expect first-quarter 2017 EBITDA to be in line with first quarter of 2016. Before I end, I want to thank Keith for his valuable service to Asbury over the last 13 years. He has been a pleasure to work with and we wish him well in his next endeavor.

Now I'll turn the call over to Keith to bring us through our financial highlights.

Thanks, Craig, and good morning, everyone.

This morning we reported EPS of $3.08 for the fourth quarter. Adjusted EPS was $1.56, a fourth-quarter record and a 19% increase from last year.

As you saw in our release this morning, it was a busy quarter for Asbury from many aspects, which led to several adjustments to earnings. First, the sale of our Arkansas stores resulted in a $45.5 million pretax gain. Second, we received pretax legal settlements of $6.6 million.

Third, the closing of two Q auto stores resulted in a $500,000 pretax real estate impairment charge. And finally, we had $900,000 of discrete tax benefits, resulting in an effective tax rate of 37.2% compared to 38.1% rate without these benefits. In total, these adjustments increased EPS by $1.52 for the fourth quarter of 2016.

Adjusted net income for the fourth quarter of 2015 excluded a $13.5 million pretax gain on divestitures, or $0.34 per diluted share.

Turning to expenses, our SG&A as a percentage of gross profit for the quarter was 69.3%, down 120 basis points from last year. As we have discussed in previous quarters, increased enrollment in our employee medical insurance plans put pressure on our overall personnel expense. However, solid execution in managing our advertising spend and reduced rent expense resulting from recent lease buyouts enabled us to drive down our SG&A ratio during the quarter.

For the full year of 2016, the SG&A ratio was 69.2 %. We expect our SG&A as a percentage of gross profit to be in the range of 69% to 70% for 2017. We may be at the high end of this range in the first quarter of 2017, as we anticipate that the seasonality of the business will bring lower sales volumes and that the higher employee medical insurance costs will continue to be a headwind into the first part of 2017.

Our floorplan interest expense totaled $4.9 million in the quarter, up $800,000 primarily due to the increase in the LIBOR rate. In terms of capital deployment, during the quarter we repurchased $50 million of our common stock or 4% of our outstanding shares. For the full year of 2016, we repurchased $212 million of our stock or 14% of our outstanding shares.

CapEx for the year excluding real estate purchases totaled $81 million. In addition, we purchased $20 million of previously leased property and $11 million of property for future expansion. We now own approximately 70% of our real estate portfolio, which we believe provides us with operational flexibility and long-term value for our shareholders.

For 2017 we are planning to invest $70 million in CapEx, which includes $10 million for construction of a new facility, as we plan to terminate an existing lease. Going forward, we will continue to seek opportunities to purchase real estate currently under lease and acquire properties in connection with future dealership relocations.

From a liquidity perspective, we ended the quarter with $3 million in cash, $71 million available in floorplan offset accounts, $91 million available on our used vehicle line, and $241 million available on our revolving credit lines.

Our total leverage ratio stands at 3 times. On a net basis our leverage ratio was 2.4 times, which is slightly below our targeted range of 2.5 to 3 times. However, after adjusting for the Indianapolis acquisition in the first quarter of 2017, we are in the middle of our range. Going forward, we are committed to remaining in our targeted leverage range while maintaining flexibility to deploy capital on an opportunistic basis.

In closing, after more than 13 years, it is time for me to say goodbye to Asbury. I'm grateful for the opportunities Craig has provided for me over the years and for the confidence the Board of Directors has placed in me. I'm thankful for the support of the entire finance organization and the partnership of the operational leadership team.

Mostly, I will miss my coworkers, who after 13 years have become like family. I look forward to watching the many years of success Asbury's future holds. Now, I'll turn the call over to David to discuss our operational performance. David?

Thanks, Keith, and good morning, everyone. My remarks will pertain to our same-store performance compared to the fourth quarter of 2015 unless otherwise stated.

We delivered a strong quarter. We outgrew the market in new vehicle sales, grew our used vehicle sales 7%, drove our total yield back up to over $3,200 per car, grew our parts and service gross profit 9%, reduced our SG&A by 150 basis points, and reduced our days supply of new and used vehicles.

Turning to new vehicles, the fourth quarter was a strong selling quarter, with SAR reaching $18.1 million, up 1% from the prior year. Our new unit volumes were up 2%.

From a margin perspective, luxury grosses improved, but both import and domestic margins declined. We experienced new vehicle margin pressure due to a combination of lower manufacturing incentives and aggressive sales objectives. As a result, our margin was down 50 basis points to 5%. For 2017, we anticipate continued margin pressure.

Turning to our new vehicle inventory, with our more disciplined approach to inventory management, we were able to reduce our new vehicle inventory by 11 days from last quarter to a 61-day supply on a trailing 30-day basis. Our new vehicle inventory totaled $721 million and was not materially impacted by stop sale vehicles.

Turning to used vehicles, we increased our unit sales 7% in the quarter. However, our used vehicle retail gross profit was up only 1%. This was due to a combination of margin pressure and our decision to trade margin for volume. I will speak to the benefits this had on our F&I and reconditioning business shortly.

Our team also did a great job growing our CPO business 10% in the quarter. We continue to believe that there was additional opportunity to grow our used vehicle sales and maintain our margins around the fourth-quarter levels.

Turning to our used inventory, our team did a great job reducing our used vehicle inventory by 10 days from last quarter to a 30-day supply on a trailing 30-day basis, which was at the lower end of our targeted range of 30 to 35 days. Overall, our business was not materially impacted by stop-sale inventory, which stood at 5% for the quarter. We feel like we are well-positioned for the first quarter.

Turning to F&I, our team continues to deliver strong results by growing our new and used vehicle sales, combined with a $60 increase in F&I per vehicle retailed, enabled us to increase F&I gross profit 8%.

Now for parts and service. Over the past couple of years we have focused intently on growing our parts and service business by building out our leadership team, implementing business processes, and integrating technologies to enhance the customer experience.

These results -- these efforts have resulted in consistent growth in our parts and service business, which continued in the fourth quarter, with our team delivering 9% gross profit growth including 9% customer pay growth. Our strategy to grow used vehicle sales was the primary driver of our 9% reconditioning growth. Looking forward, we believe we can continue to grow our parts and service gross profit in the mid single-digit range.

Turning to our new acquisition, we would like to welcome our new teammates at Hare Chevrolet. We are very excited to have all of them on board and look forward to the future.

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. Again, thank you.

We will now turn the call over to the operator and take your questions.

(Operator Instructions)

We will move first to Rick Nelson with Stephens.

Thanks, good morning. First of all good luck and congrats to Keith. It's been nice getting to know you the last 13 years.

Thank you, Rick. I wanted to ask about margin GPU. Quite a divergence, I guess, between premium luxury and -- we saw the pressures in the midline import and domestic side of the house. David, if you could talk about the inventory levels, the 61 days, and where you might be heavy, where you might be light, and the outlook for margin in those three segments pushing forward?

Certainly, Rick, I will take my best and hopefully if I miss something please remind me that I missed it. From the import and domestic piece, there's a couple different stories there on the domestic side. It literally is the difference in the quarter of 2015 and quarter of 2016 in the lack of incentive money that was there in 2015 that wasn't there in 2016. We were actually pretty happy with the way we held, considering how much less incentive money there was quarter over quarter.

On an import basis, it is just very competitive. We see the benefit of chasing volume a little bit with their stairsteps and incentives that they have. We have to be a little bit more aggressive and did dig a little bit deeper in the hole to actually get those payouts. But as you can see, we delivered overall great gross profit growth in the quarter and that's what we are most excited about.

From an inventory stamp point we are think we are well-positioned at 61 days. I don't think you ever have the ideal mix. You always have too much of something and too little of something. But generally speaking, we're really pleased where we're starting the year off and don't see any headwinds with any of our OEMs or inventory levels.

Thanks for the color. Service and parts, you have been tracking well ahead of that mid- single-digit same-store target there. Is this the type of level you think can be sustained through 2017?

Rick, this is David. I will take first crack and Craig might jump in.

We are still predicting the mid single-digit range. It is still a very choppy environment, how much of it's reconditioning and how much of it's warranty customer pay. Days in the month, days in the quarter all play a factor in it. We've been focused on our initiatives the last 18 months specifically. We feel like we are starting to see the benefits of that through our dollar sales, but we still think we have plenty of opportunity for traffic growth.

Great, finally if I can ask about Q auto and how that performed in the quarter? And any expansion plans for the new year?

Rick, I'll jump in on that one. It's Craig. We're down to two Q auto stores. The results in the quarter just aren't material. I don't think they're worth talking about. I would say philosophically we believe there continues to be an opportunity to go to market with the alternative distribution channel at Q auto to sell cars we would otherwise send to auction.

We've moved to a quality outlet concept. We are doing that in the Tampa market, and we think two stores are all we need to cover that market. I would say it's still an experiment.

The definition of success for us is a business model that generates an ROI that is above our cost of capital. We are not there yet. We're hopeful we can get there. If we can make these two stores work, we'll roll this concept out to the markets where we've got a footprint elsewhere around the country.

Thanks for the update and good luck guys.

Thanks Rick.

We will take our next question from Brett Hoselton with KeyBanc.

Good morning gentlemen.

Good morning Brett.

Keith, congratulations.

Thank you Brett.

A couple of questions here. First of all, how should we think about the pace of share repurchase? Going forward, you seem to be doing somewhere in that $50 million range per quarter give or take.

Brett, I think were going to continue to be opportunistic. We've always been of the view that when it makes sense to buy stores we will buy stores and when it make sense to buy stock we will buy stock. You've also seen there have been quarters where we have sat tight because we thought we were better off to wait to see how the uncertainties of the market play out. And I think that is what you'll continue to see us do going forward.

We are very excited about this acquisition we just made in Indiana. As I mentioned, it's a very accretive transaction for us. If we can find more opportunities like that, we'll jump on them. But we love knowing that we can always fall back on share repurchase if that's the most attractive opportunity.

Along those lines, M&A, can you talk about the level of deal flow and pricing multiples you are currently seeing in the marketplace?

Sure, there is always deals in the market. I would say the deal flow that we see today is pretty consistent with what we have seen over the last 18 months. I don't feel like there is been a major change despite all the uncertainty that is out there.

With respect to pricing, the domestic stores clearly trade at a discount to the premium stores. We look at deals on a EV to EBITDA basis relative to where we trade. I will tell you that the premium luxury stores are still being priced at a premium significantly above where we trade, which makes it a more difficult transaction for us to execute.

Thank you, very much, gentlemen.

Thank you.

We will now take our next question from Bill Armstrong with CL King & Associates.

Good morning, gentlemen. I was wondering if you could elaborate on the used unit comps, which accelerated pretty strongly. I know you mentioned in your opening remarks that you wanted to trade margin for volume, so I was just wondering what led to that decision and how you feel about the results you got, and how you might approach that going forward.

Bill, this is David. The first half of the year we are pretty focused on our margin and not as much focused on volume. As we started thinking about it during the year and looking at the total package between our F&I and our reconditioning gross, it just made sense to us looking at the business to push the volume a little bit more to sacrifice margin. We are happy with the outcome. We are going to stay with the current model that we have and hope for the same success going forward.

Okay, great. Another question on the Indianapolis market. I see in addition to the Chevy dealership you also acquired an Isuzu truck franchise which is -- you had gotten out of the truck business a few years back and I was wondering if you could talk about that and what are your plans there.

Bill, it's Craig. The truck business that we got into here is what I would call a medium-range truck as opposed to heavy-duty trucks that we were in before. It's a very different business and one we are comfortable with.

Right, but it's still a commercial truck business as opposed to consumer. Does this signal perhaps a new strategic direction for you? Can we maybe expect you to put more resources into this market?

Bill, I think we will have to wait to see how this goes. This was part of the acquisition. They're successful with that business. I can't emphasize enough it's not an 18-wheeler. It's a delivery truck as opposed to a heavy long-distance vehicle. If it goes well, it's something we would think about, but I think we want to get this tucked in to see how we do that before we make any type of commitment like that.

Just to clairfy, this was part of the Hare acquisition, right? These were not two separate transactions?

That's correct.

Okay, thank you.

We will take our next question from Bret Jordan from Jefferies.

Good morning, guys. You mentioned you didn't have much impact from stop-sale either new or used. Is that because you are seeing a better flow of replacement parts around the Takata issue? And maybe give us an update there, and then one quick follow-up.

Great, Brett, this is David. Yes, they're flowing pretty well. Every month we're reducing the number of dollars we have currently outstanding. So we see that progressing. There is still one-off vehicles that don't have airbags, and we don't have a timeframe for when they will come in. And they could be as far away as the end of the first quarter into the second quarter potentially. But generally it's decreasing every month.

What are you seeing as far as an impact from selling those cars that have been held? Are you seeing any near-term push down on profit as those unit depreciate on your lot for a while prior to sale?

No, not really. In 99% of the cases we are receiving funds from the OEM to depreciate these vehicles. And in a lot of cases they are fairly desirable vehicles coming out that we are selling.

Great. One last question. Was there any meaningful dispersion regionally in performance this quarter year-over-year?

No. Texas has been a little bit of a headwind or a struggle for us, but generally speaking fairly stable.

Thank you, very much.

We will take our next question from Mike Montani with Evercore ISI.

First, congrats to Keith. Good luck in the next move. I just wanted to ask for elaboration from David about the comment to see opportunity to maintain margin in used. I guess as we think about modeling that out for next year. Is that referencing the $1500 a unit in the fourth quarter, or is it taking about the gross margin percentage like the year-over-year decline? Can you just add some color to that?

Sure, Mike. I would say where we are at in the fourth quarter, that $1500 range, as long as we can drive the volume we think that's the sweet spot for us.

Okay, thanks. Also related to that, David. On the CPO side you mentioned the 10% rise. Can you update what percentage of the business that is currently? And given the off-lease supply that is coming back to market, was there any reason that shouldn't sustain for this year?

No, we think -- we are a big fan of the OEM-supported certified programs. We are continuing to look for opportunities to improve with them. But it's a value proposition for the customer and it's a value proposition for us because there's also with CPO vehicles additional reconditioning dollars in service. So we still see a huge benefit there. Is less than 50% of our sales right now. It is typically between 30% and 35% on a monthly basis is CPO.

Okay thanks. On the lease-versus-own mix today of the dealerships, and what kind of opportunity is there to maybe increase that own percentage over time? How are you guys thinking about that?

This is Keith. We made a lot of progress over the years, whether it be through straight-up lease buyouts or constructing facilities near the end of current leases and leases that were terminating.

We regularly look at opportunities. I mentioned another one. We're building another facility in the coming year for $10 million. And that is to move out of an additional leased facility. So we are always evaluating that. But that is truly opportunistic. We are talking to our landlords all the time and looking for opportunities all the time, but that's on an opportunistic basis. We'll keep -- I expect the progress to continue.

The last two I had. Number one, on the F&I side. I guess back to David, if you can shed some additional light on the opportunities you see to get $1500 up to $1650 plus with some of the peers have. And then finally, on border tax. Auto Nation made comments around potential benefits and tax reform. I'm wondering if you guys could share any thoughts around that as well.

Sure, Mike, this is David. I'll take the F&I and certainly leave that other question for Craig.

On the F&I side we're very happy with the month and where we came out. We think we can sustain these levels going forward. I guess $1600 is always a potential but I struggle to see us getting there in the near future. I think currently where we are at is probably the level we will stay at for a period of time with small lifts here and there. But to us, $60 was pretty substantial.

Okay, the border tax. I will take a shot at that one, Mike. Philisophically, we just don't think it makes a lot of sense for us to try to give you any guidance on what any of these different issues that are up in the air in Washington might mean to us. I point out a couple of facts that -- the number one US content car in the United State is a Camry.

So it's a complex issue. I think most people would think that the heaviest content car in the United States must be a domestic, and that is not the case.

I would also point we're a 30% effective tax payer, one of the highest in the country as a domestic-only retailer. If there is any changes to the tax rates, obviously those will play to our advantage. But then we have got to come back and ask "Will we lose the depreciation tax shield?" "Will we lose the interest rate tax shield?" "Will we lose an interest rate tax shield on floorplan?"

There are just so many unknowns about this and so many variables that we've decided the best thing for us is to keep our heads down and work on the things we can control. We will watch this very closely and we'll start to make adjustments to the extent we can as we get more clarification on what might come.

Thank you.

Sure thing.

We will take our next question from James Albertine with Consumer Edge Research.

Hi, thanks for taking my questions. This is Derek Glynn on for Jamie. Just another follow-up on F&I, we are curious how we should think about this F&I per vehicle retail, assuming we are in an environment where new vehicle sales decelerate and used vehicle sales accelerate. Is it harder to maintain this F&I PVR if used is outperforming new? Thanks.

This is David, I will take the first shot and maybe Keith would want to jump in. Years ago, it would've been because of cost the sale but now the cost of sales has come up so much one preowned vehicles that it really isn't impactful. And we think our fourth-quarter numbers is the number that we can sustain.

Okay, thank you, very much and best of luck.

Thanks.

We will now take our next question from John Murphy with Bank of America Merrill Lynch.

Good morning. This is Elizabeth Suzuki on for John. Looking at new vehicle demand at this point, how elastic do think it is? And would a tariff on imported vehicles or rising interest rates or other potential impacts be likely to put material pressure on demand even if it may be offset by a lower consumer tax rate?

Elizabeth, that's a great question, but one that is difficult for us to answer. We are just a retailer. We run car stores. We look at some of the same economic forecasts that the large banks put together, people like yourselves.

In our guts, we certainly feel that if new car prices are going to go up because of tariffs and we've seen estimates that say they could go up on average of $2000 a car, some much more. Obviously, we think that's going to have some impact on sales volumes. SAR will fall. How far it would fall we don't know.

Like I said earlier, we're just paying close attention to what is happening in Washington, and we'll be prepared to adjust to whatever comes our way.

Great, thanks, that's helpful. How much interest rate exposure do have in your floorplan lines and other debt in terms of what's variable versus fixed?

Hi, Liz, this is Keith. Basically all our long-term debt is fixed effectively, and our new floorplan is LIBOR-based and it's floating. We carry about $800 million of floorplan at the end of the fourth quarter.

Great, thanks very much.

We will now take our next question from Paresh Jain with Morgan Stanley.

Good morning everyone, and congrats, Keith. Craig, a question for you on used. There is this thought that franchise dealers are expected to benefit a lot more than independent dealers from the increase in off lease supply. And if you try to isolate the impact that stop-sale had on used vehicle performance in the last 12 months, are you seeing those benefits of basically having the right of first refusal on the supply? And would you say the impact is more in terms of volume or GPU?

There's clearly an advantage that we enjoy because we can sell a CPO unit. And with all these vehicles coming off lease, they fall right into that sweet spot.

Stop-sale has been brand specific with respect to its impact. I feel that to a large extent that issue is behind us. Like David said, we do have some brands -- really, we are down to the point were essentially where one brand holds half of our stop-sale vehicles. So that's causing some disruption, but it's not material to us from an overall perspective.

David, I don't know if you want to talk in more detail about the off lease and how we might move that through the system.

The only comment I'd make is that the inventory is plentiful. To acquire it is easy. Is there a benefit from a large group to a smaller group? There should be, because it gives you the ability to move inventory around between stores and easier access for other stores to get brands or inventory that they maybe wouldn't have access to get.

But generally speaking our goal is to turn the inventory every 30 days, so there are cars that, from an appetite perspective, we might be able to turn but we can't turn them in a timely manner so we don't acquire them. We let them go. But it's a good time to be opportunistic, to buy what you need and what you want, so you can turn it in a timely manner.

Got it, and the follow-up to that, Can you comment on what the difference in GPUs is for a used retail vehicle that was sold through in-store appraisal versus got acquired at an auction?

I can't give you an exact number, I don't have it in front of me, but I can tell you generally speaking, your profits are larger when you take a vehicle in trade than when you acquire one at auction.

When you think about the auction concept there's a lot of competition there. If you leave with 10 vehicles it just means no one would pay more than you would for those 10 vehicles. So naturally your gross profits are going to be better on the cars that you traded at your door.

Thanks for the color.

We would take the next question from Chris Bottiglieri with Wolfe Research.

Hi, thanks for taking my question. This is a question on the divestiture. Is there a way to quantify that helped your SG&A throughput, which is really strong this quarter. Is there any kind of basis point impact you can speak to? And how we can think about that for 2017?

Let me start, and then maybe Keith can get into the details.

On that divestiture we gave up five franchises. There were some body shops in there as well, and essentially we replaced it with one large store. Typically a larger store is going to be much more efficient and we are going to get better flow-through, better net-to-gross, and so the SG&A's going to look better. And philosophically we like that kind of a concept.

Keith, I don't know if you can add any more specific color.

Chris, we disclosed in our release and our financials -- we do SG&A on a same-store and all-store basis. And the improvement of SG&A on a same-store basis was similar in nature to what you saw on an all-store basis and actually even stronger. We've had a great run of SG&A. I think we have a focus here, and it's a cultural focus. It's not just a finance team focus but it's all the way to the operational team. And it starts from the top, and we're always focused on continuous improvement. So we are proud of where we are from a SG&A perspective.

In terms of divestiture, what is it about -- it sounds like you kind of alluded to this with small stores. But you guys are very strong operators, among the highest margins in this space. How do you think about divestitures? What was it about these four stores that made them less profitable? And then two, are there any other -- is there room for potential further optimization for portfolios, or are you pretty happy with where you stand today?

It's Craig. One of the things we do is manage a portfolio of stores. There are sometimes opportunities for us to divest stores at prices that are very attractive and potentially prices that are greater than where we trade. And if we can -- and an asset that like we said earlier we don't think we can necessarily get it to the level of efficiency that we can get some of the larger stores to.

So in this case selling those stores made economic sense to us from a shareholder value perspective. And the beauty of the transaction was we could then turn around and reinvest a portion of the proceeds and buy a store that we think we can run, and currently run at a very attractive level of efficiency. And roll that into the portfolio and be better off.

Got you. One final unrelated question to CPO. 10% is really impressive and it seems like the market industry reported volumes are growing slower. Is there anything structural based on your footprint of brand mix that allows you to grow faster than the market? Small dealers have that lot capacity. What do you think are the factors that attribute to the 10% growth?

Chris, this is David, I don't think those are really factors at the end of the day or at least as it pertains to us. We are lucky to have good operators and people in our stores running the business. They've really got their arms around this and focused on growing the CPO business. And I think it is just a collective effort that we've been focused on the last four months and we just starting to see some of the benefits.

That's really helpful, thank you for taking my question.

Folks, that wraps of our call for today. We appreciate you joining us and look forward to talking to you next quarter.

This does conclude today's conference. We thank you for your participation. You may now disconnect.