AutoNation Inc (AN) 2001 Q1 法說會逐字稿

Ladies and gentlemen thank you for standing by. Welcome to AutoNation's first quarter earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session. Instructions will be given at that time. If you should require assistance during the call, please depress '0' then '*'. As a reminder, this conference is being recorded. I would now like to turn the conference over to AutoNation. Please go ahead.

Good morning ladies and gentlemen, and welcome to AutoNation's first quarter conference call. My name is John Zimmerman, AutoNation's, Senior Vice President, Investor Relations. I'd like to remind you that this call will be recorded and is available for replay at 800-475-6701, access code 582-802, through May 9th, 2001. Leading our call today will be Mike Jackson, Chief Executive Officer of AutoNation. Joining Mike will be Mike Maroone, President and Chief Operating Officer, and Craig Monaghan, our Chief Financial Officer. At the end of their remarks, we'll open the call to questions. I'll also be available by phone to address any followup issues. Before we begin, please let me read our brief statement regarding forward-looking comments. Certain statements and information on this call will constitute forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks, which may cause the actual results or performance to be materially different. Additional discussion of factors that could cause actual results to differ materially are contained in the company's SEC filings, and now let me introduce AutoNation's Chief Executive Officer, Mike Jackson.

Thank you John, and good morning everyone. Happily, as the largest player in the auto retail category by orders of magnitude, AutoNation can confirm what you've been hearing from the others in our sector. Overall performance in the first quarter of 2001 demonstrates that auto retail has resilient business with multiple profit opportunities. In truth, we believe that these characteristics make auto retail a specialty retail category, distinct from that of the manufacturer and original equipment suppliers. We believe this distinction justifies a multiple more in line with this reality, and now let's go to some financial highlights from the quarter. As anticipated, revenue in the quarter declined versus last year commensurate with a slower pace of unit sales. However, we were able to partially offset the 6.6% revenue decline by generating increased revenue and margins in our parts, service, finance, and insurance operations. We had net income of nearly 60 million in the first quarter or ¢17 per share, which was nearly flat with the same quarter of a year ago when the industry experienced a record sales rate. In the interest of perspective, I'd like to point out that AutoNation's net income of 60 million in the quarter compares with a net income of about 32 million for all the other publicly traded auto retailers combined. Taking it to the bottom line, our net income margin this quarter is not only the best in the business, it's more than 60% better than the average of the entire competitive set and about 23% better than number two. And now for more detailed review of the quarter, let's turn the call over Craig Monaghan, our Chief Financial Officer. Following Craig, Mike Maroone, our Chief Operating Officer, will share some operating highlights from the quarter. I'll then close the call with some final remarks, and we'll open up for Q&A.

Thank you Mike. As Mike mentioned, AutoNation enjoyed a solid first quarter. We improved our store performance margin, reduced inventory, and generated strong cash flow, 188 million of EBITDA, all of which allowed us to reduce our debt while continuing to repurchase shares. Reviewing some of the details of our performance, revenue for the first quarter 2001 was 4.9 billion or 6.6 below Q1 2000 revenue of 5.2 billion. This decrease is primarily due to lower new vehicles sale primarily in our domestic product lines, which represent approximately 63% of our unit volume. Despite the revenue decline, our gross margin increased to 15.1% in Q1 2001 versus 14.4% in Q1 2000, a 70 basis point increase. The gross margin expansion was primarily driven by a shift in mix of our revenue to our higher margin businesses, but also reflects increased margins in our parts and service business. Store SG&A was flat at 509 million, and our store performance margin increased by 10 basis points to 4.7%. In addition, corporate SG&A was reduced by 6.7 million or 14% in Q1 2001, primarily as a result of the continued disposal of excess properties. In the quarter, we made significant progress in the area of new and used vehicle inventory day supply. On a trailing 30-day basis, our new vehicle inventory at the end of Q1 reflected a 63-day supply, a 20-day improvement compared to 83 days as of December 31st. Reduction in day supply resulted from curtailing our new vehicle orders by aggressively managing to local conditions. We closed the quarter with used vehicle inventory of 35 days, down 8 days from our December 31st level of 43 days. We also made substantial progress in our over 60-day used inventory with only 3.7% over 60 days. As a result of reduced inventory levels and declining interest rates, floorplan interest expense was down $1.6 million or 3.4% versus Q1 2000. Floorplan debt was down 159 million for the quarter from year-end 2000. We continue to see reductions in our vehicle debt as well, which decreased 25 million for the quarter and 201 million since Q1 2000. Capital expenditures were 24 million for the quarter. We repurchased 12 million shares of our common stock, for 98 million, and ended the quarter with 336 million shares outstanding. The impact of the share repurchase on first quarter 2001 earnings per share was less than ¢1. Of the Board's currently authorized 500 million share repurchase program, we have remaining authorization for $169 million. We have not repurchased any shares since March 30th of this year. However, we still think that our stock remains an attractive investment alternative and will continue to evaluate this as an option for utilizing our cash flow along with reinvesting in our stores and making selective acquisitions. Now let me turn you over to our Chief Operating Officer Mike Maroone.

Thanks Craig, and good morning. Overall we are very pleased with our performance in the quarter. We successfully launched a 3-year strategic plan that strongly emphasizes the non-cyclical higher margin areas of the business. While we experienced a challenging environment in Q1, we were able to deliver a 10 basis point improvement in our store performance margin on a total store basis year-over-year and were able to maintain our new vehicle gross margins year-over-year in a market characterized by oversupply. Our e-commerce business continues to be strong, and our local branding efforts are on track. During the quarter, our management team continued to work toward expanding margins. As Craig touched on earlier, we attribute the decline in our total revenue to a reduction in overall unit sales primarily of new vehicles, which account for the lowest margins in the revenue mix. The decline in unit sales was partially offset by the increase in sales of higher margin business, namely parts and service and finance and insurance. Looking at revenue for total stores in the quarter, we experienced a reduction of 9.2% on new vehicles, a reduction of 2.6% on used vehicles, an increase of 2.3% in parts and service, and an increase of 4.4% in finance and insurance revenue, compared to one year ago. The decline in revenue from new vehicles compared with the best ever quarter of Q1 2000, was extenuated by our industry weighted mix which is nearly 63% domestic, and includes many high volume Ford, Chevrolet, and Dodge stores in large metro markets. These domestic stores were impacted by a reluctance to pursue select, unprofitable new vehicle segments. Our import and luxury stores continue to perform in line with, or above, the market. Turning to gross margin, we are pleased with the improvement of 70 basis points of 15.1% this quarter. Our parts and service gross margin for total stores improved to 42.9% this quarter, a 90 basis point improvement. We attribute this improvement in large part to the continued progress in installation of group pricing which is a structured, disciplined process that enables our stores to effectively manage pricing and cost of sale to market conditions. We expect to sustain and improve our parts and service margins as we continue to utilize this pricing tool, along with other customer friendly initiatives. The foundation of our profitability remains our outstanding service absorption, which for the quarter was almost 80%, as compared to the most recent NADA average dealership with 55%. Turning to finance and insurance, our gross margin per vehicle on a total store basis increased $88 this quarter to $641 per vehicle, an impressive increase of 16%. We credit the rollout of a full disclosure menu process with the significant improvement in our F&I revenue in gross margin in Q1. The menu offers customers full disclosure of base payment, rate, term, and all protection products in a low-pressure selling environment. This is supported by dedicated F&I trainers who provide ongoing support and training and ensure process compliance. Our e-commerce business continues to reach new milestones. We delivered 17,200 vehicles in the quarter to customers originating from the Internet, up nearly 12% from 15,400 in Q1 2000. At the close of the quarter, our response time was 42 minutes, a 30-minute improvement compared to a year ago. We also enjoyed a Q1 closing ratio of approximately 10%. Our partnerships with America Online and Microsoft Carpoint have greatly expanded the reach of our 100,000 vehicle online inventory. Today AutoNation operates in channels that reach more than 40 million online consumers. In the month of March alone, we experienced 470,000 unique visitors to our website, and we believe that we're well on the way to achieving our revenue target of $1.75 billion in 2001, via the Internet. Finally, we continue to be pleased with the progress being made in our branded markets, Denver, Tampa, South Florida, and Las Vegas, and are looking forward to establishing our local market brands in Houston and Jacksonville in Q2, Orlando in Q3, and Memphis and Los Angeles during the fourth quarter of this year. Our AutoNation team has adjusted well to a changing market and understands clearly that we have the strategy, resources, and talent to achieve our 3-year plan. We remain committed to delivering expected results in a more difficult new vehicle environment. Now I'd like to turn the call back to Mike Jackson.

Thanks Mike. When the first quarter began, there was a great deal of uncertainty regarding the sales rate, but as the quarter played out, became clear that retail demand was better than expected and was still down from the start quarter of a year ago. For the full year, we anticipate an overall decline in unit volume for the industry in the range of 6% to 10%. We're therefore maintaining our estimate of 2001 earnings in the range of ¢85 to ¢90 per share and our estimate for the second quarter in the range of ¢21 to ¢23 per share. As investors come to recognize that the auto retail category is in fact different from the manufacturing category and as AutoNation continues to perform well as the leader in the auto retail category, I am confident that investors will see that we are an attractive investment opportunity. And with that, I open the call to questions.

Thank you sir. Ladies and gentlemen if you wish to ask a question please o depress the '1' on your phone. You will hear a tone indicating that you have been placed in queue. You may remove yourself from queue at any time by depressing the 'pound' key on your phone. If you are using a speakerphone, please pick up your handset before pressing the numbers. One moment please for the first question. And our first question comes from Jordan Hymowitz with Robertson Stephens. Please go ahead.

Hey guys, can you hear me okay?

Hey Jordan. Sound good.

First I congratulate you guys on having the best quarter since probably September of '97, so, I ...

Thank you Jordan.

You really ... turning this thing around. I have one numbers question and then a general strategy question for Mike. Specific question is the corporate megastore carrying cost, how much is that and what line item is it in?

Jordan this year that's going to be less than $10 million ... in the SG&A line.

And tell me, how low was it this quarter?

Corporate SG&A. Megastore carrying cost this quarter, I'll come right back to you with that.

Okay. And second, Mike talk a little bit about some of the strategies on the service and parts because what you're really trying to do is improve the return on investment on a dealership-by-dealership basis and to do that what are some of the initiatives you're doing on our service and parts side to do that?

Yeah, Mike, this is Mike Jackson. Mike will go into some detail, but the basic foundation of the initiative is that in our high margin business, which is used cars, finance, insurance, service and parts, where the margin run up to 60%, that's where we'll want to invest our capital, that's where we want to invest our time and energy. We will always do a fist rate job for the manufacturers on the new car side, but we are realistic that that is a business that is dominated, controlled by manufacturers, but if you look at the number that Mike Maroone quoted of 80% service absorption that AutoNation has already achieved, leading at the gross margin from service and parts is covering 80% of our fixed cost, that's the insight as to how we can achieve these earnings despite the cyclical nature of the new car market, and Mike I'd asked you to talk specifically about the initiatives we have underway.

Great, thanks Mike, and good morning Jordan. As you probably know, we have dedicated fixed ops people in all of our districts, and what we're doing is we're rolling out a production system called APS. We've actually been doing it for about a year. That's a more efficient production system. We've also introduced grid pricing into all of our stores so that we're very competitive on items that we need to be competitive on. We're also focusing on the customer promises. We have a Fast or Free guarantee that guarantees that on 13 very common maintenance items, if we don't complete them on time, they're free to the customer. We have Price Match Guarantee. So we have both marketing and production initiatives underway that we think can drive this business to the next level. In addition, we are piloting in a couple of select markets some very unique service programs and collision repair programs that we hope to introduce to a wider group of stores in year 2002. So we're very enthused with the effort of our fixed ops team, and again, as Mike said, our 80% service absorption is excellent. We think there're even better results to come.

And going just real quick on the property carrying cost, first quarter about $3 million.

Okay. And it was in SG&A is it?

Yes, corporate SG&A.

Corporate SG&A. So let me just ask a followup on that, and it looks like the corporate went up a couple of million dollars from last quarter. Is there any other one-time thing in that line item, or is that the number to use going forward?

No. Jordan that's, you are right on. It is up a little bit. That's primarily related to some one-time legal expense that we incurred in the first quarter. You should not expect that roughly that small increase to continue through the rest of the year. We should stay right on track. We're still targeting that line to come in at about the same level that it was last year, with the exception of this first quarter slight overage.

So then to carry that to its logical extreme, let's say it was 32 million, to round off last quarter, it's 36. If you exclude the 3 of the 4 million from that, it's 4 million tax affected 345, so that's another penny per share in one-time expenses.

I don't think it's going to round quite to a penny, but you're going to approach a penny.

I got ¢0.7 to be exact.

Yeah, that sounds about right.

Okay.

And ladies and gentlemen if there are any additional questions or comments, please depress the '1' at this time. Michael Prober from Cramer Rosenthal, please go ahead.

Hi guys. I have a quick strategic question for Mike. Could you talk a little bit about acquisitions in this environment, and I know we spoke about acquisitions in your core markets more than new markets. The stock price has come up to a point where now the arbitrage between what you can pay for acquisitions and where you're selling is pretty wide, especially since, my assumption is that the acquisition prices have come down. Are you at the point now operationally where you can now layering in acquisitions, either within your markets or to buy a large new dealer in the new market.

Michael first your observation is right on. We're now right on the razor's edge between share repurchase and acquisitions. We are definitely out there looking at acquisitions, but we want to be very reasoned in our pricing. We do not want to go back to the days where there was an overly aggressive acquisition phase that drove up pricing. So we're taking a very prudent and cautious approach, and we'll definitely be making those acquisitions that meet our return on investment standards.

What are the purchase prices roughly for acquisitions now?

I would say that we have not seen a significant decline, yet, in purchase pricing, but I think that will change as we go into the year. You're looking at, on an after-tax basis, multiples somewhere between 7 and 10.

7 and 10. Okay. And is it fair to say that you're first going to look for acquisition in your core area or are you going to look outside?

We've been looking in our core market since the day I arrived, and we have made opportunistic acquisitions in the core markets. We are now out looking in new markets also, as well as the core markets.

And last question, in terms of acquisition and also if you could talk a little bit about mix. Given your large exposure to the Big Three, are you going to look to change the mix over time to where you're more 50-50?

I think if you looked and you raised the question, strategically long-term you need a balanced mix. You cannot create a $20 billion enterprise and want to grow it and say you're not going to have a balanced, diversified mix of the brands. Certainly on a year-to-year opportunistic basis, we'll look at what we would pay according to how we see the future of that brand and factor that into our pricing. But I think at the end of the day over time we're going to have a very diversified portfolio. And I think what is a very significant point here for the first quarter is that obviously the domestics are down significantly, relative to the others. But if you look at the performance of AutoNation, it clearly shows that not only did we outperform all our competitors who have a dramatically different mix, we can still be very profitable with the service parts and used car businesses in those same domestic stores. So we will continue to have a diversified portfolio. I maintain you can't be a $20 billion company looking to grow and not have a diversified portfolio.

Thank you.

And our next question comes from Susan Quilty with Morgan Stanley. Please go ahead.

Thanks. Hi everybody. Two questions, one on the used car side, it looked like the margins were a little bit soft year-over-year, could you talk about what you saw in the used car business in the first quarter, and maybe what you're expecting for the balance of the year there? And then also if you could give us if there was any kind of significant regional flavor to the sales in the first quarter, we were wondering, in particular, if you saw any weakness in California? Thanks.

Susan it's Mike Maroone. Good morning. Our used vehicle margins were in the neighborhood of $1650. We actually increased our F&I, so if you add both the front and the backend together, we were pleased with our used car margin. We find the used car business strong. It is. For regional it's more strong, in certain regions, but we're pleased overall with our efforts there. In terms of the regional nature of the business, overall, we probably enjoyed more success in the South West in Las Vegas and Phoenix. We also had a strong market in South Texas in Houston and Austin. And the Seattle market was a pretty good market for us. On the weak side, the North, both Cleveland and Chicago, were more competitive; Denver, on the new vehicle side, was more competitive; and Florida was more competitive. But we did have some very strong markets, and we had some markets that were a little bit more challenged.

Okay. Thanks a lot.

And our next question comes from Dana Telsey with Bear Stearns. Please go ahead.

Good afternoon or good morning. Can you talk a little bit...

Good morning Dana.

Good morning. Can you talk a little bit about the branding initiative in Denver, Tampa, and Las Vegas? What you're seeing there in terms of market share, and also just the performance and day's inventory of imports versus domestics?

Dana, it's Mike Maroone.

Hi.

Good morning. In the initiatives in Denver, you mentioned Denver, Tampa, and Las Vegas, in aggregate, I would say that we're able to maintain share. Denver, although they were up pretty significantly in new vehicles sales, actually enjoyed higher profitability. So we're really confidant that our focus on used and fixed and F&I in those markets has really paid off. Our Tampa market, same thing, we are off on new vehicles, although the share was close, we did make it up in some other areas of the business. So, all in all, we're pleased. Las Vegas was a very strong market for us, but that branding effort is just taking off now, so I really wouldn't want to draw any conclusions to it. All in all, our branding efforts, we think, are paying off, and we're very pleased with them, and as we mentioned, we'll continue to rollout additional markets this year.

Okay. And the days of inventory?

From the days supplied? Obviously our challengers continue to be in the Big Three, but primarily, in General Motors and Ford. Ford, we were north a 70-day supply. General Motors, north an 80-day supply. In Honda and Toyota, Toyota has kept a very modest day's supply. We're very pleased. It's right out on target. Honda and Nissan have crept up a little bit, but they're still in the low fifties, so they're not really a problem at this point in time. So we're working hardest on Ford and General Motors. Our Chrysler is right in line with out targets.

Dana, it's Craig. I might add that, in fact, some of the best products that we've made have been within the domestic area, and we've got very substantial progress in all three of the domestics.

Okay. Terrific. Thank you very much.

Thank you Dana.

Our next question comes from the line of Nick Lobaccaro with Lehman brothers. Please go ahead.

Hey guys, good quarter. I wanted to ask about Chrysler. It seems like they're looking to change some of their reimbursements on new vehicles, and wondering how it might affect your profitability if they go ahead with their plan?

Nick, this is Mike Jackson. Obviously, Chrysler has made a substantial change in the way the business has operated for the last 20-some years, and everybody's trying to, on both sides, are trying to adapt to the new system, and I don't think it's all the way through, it's exactly how it's going to work. But again, our Chrysler stores have excellent fixed operations and used car sales, etc. So the profitability is stable, and we're sure under the leadership of [_______________] that they will work through whatever transition issues they have with the programs.

But, I mean, do you think there'll be a bottom line impact or the other guys might copy the program to a certain extent?

Nick it's Mike Maroone. I would say that the bottom line impact for February and March, which were the first two months of the program, did not have a negative impact. Actually, it came in well. April was more of a challenge, for the Chrysler volume was off. So far, it hasn't had an impact, and I guess what we've noticed is that Daimler is flexible and is really monitoring the situation closely. We have an excellent relationship with them. In terms of other manufacturers mirroring the Chrysler program, it would be my guess that there'll be a wait and see attitude and see if Chrysler can smooth out some of their ups and downs in their new vehicles sales rate, before anyone else will adopt them.

Okay. Great. Thank you very much.

Next question is from Efraim Levy with Standard and Poors. Please go ahead.

Yes. I wanted to know what the mix of cars and truck sales and if that was a factor, and it looks like your retail sales were down at a higher percentage than it was over all market for the first quarter, and also if you can comment on the sharp decrease in comparable store sales on new vehicles.

Efraim, it's Mike Maroone. Let me take the latter part of the question. I don't know that I have a car-truck mix handy for you, although we'll look for it. Our falloff in same store sales really happened primarily in the Big Three, which accounted for about 90% of the falloff, and it happened in the big metro markets, in the high volume Ford and Chevy and Chrysler stores, and we made a conscious decision there to reduce our inventories, and did not pursue those less profitable segments, and I think it paid of for us, because in spite of those same store sales decline, our profitability was very strong in those sales, and the manufacturer has been telling us our profitability is much stronger than our competitive set in those same kind of stores. So we think we made the right decision, but it primarily happened in high volume domestic stores in the big metro markets.

Okay.

Let me cut in. It's Craig Monaghan. Let me come back on the mix with car and trucks. There is some movement. Cars represented 48% of our retail units last year in same quarter. This year they're 49%. So it gives you the sense of what we're talking about here.

Okay. And as far as the rollout strategy, are you going to open up a bunch of dealerships in each market, or how are you rolling that out? For the new, you said you were rolling out into some new markets in the second quarter like Jacksonville and Houston is...

Those are markets that we already have a significant presence in. That was referring to the branding rollout, where we're going to brand to a common name, somewhat as we've done in Denver. From an acquisition point of view, I would, which are new markets, I would see us trying to build similar critical masses to what we've done in our existing markets.

Okay. Thank you.

Our next question comes from the line of Peter Caruso, with Merrill Lynch. Please go ahead.

Thanks. Michael Jackson correct me if I'm wrong, but did your total business slowdown at the end of the quarter, and if it did, can you comment on whether or not your used car business also slowed down in tandem with that, and so far, going into the current quarter...

No. For us, Peter, the quarter closed strong, with an uptake, both new and used. Why, I can't explain, but that's how it went for us, and now we're into April.

Okay, and then a question for Mike Maroone. Can you be specific as to how the change to a branding strategy is potentially going to increase operating margins in those areas?

Well certainly Peter. I believe that speaking in one voice, with one name, it'll allow us to be much more efficient in our advertising. It'll allow us to combine same brand stores in advertising, and allow us to operate as one common business. What we're hopeful of is that as we deliver on our customer promises both in sales and service, that customers will give us hire purchase consideration as they change brands, because, as you know, there is not a tremendous amount of brand loyalty, especially in younger buyers. So we see it as a big opportunity. We see ourselves being more efficient and being able to get hire purchase consideration, which is what's already played out in the markets we've branded.

Okay. And then lastly, did you see a slowdown in the year-to-year rate of growth of cars delivered via Internet?

No. Actually our Internet business has picked up. It's a greater share of our business than it's been in prior years, prior quarters.

Okay. Thanks. Good luck in the next quarter.

Thanks Peter.

Our next question comes from the line of Eric [_______________] Asset Management. Please go ahead.

Thank you. Good morning gentlemen. I had a question that was partially answered earlier. Just want to get a little bit of clarification. Are you able, at this point, to identify markets for new acquisitions outside of your current core markets?

Yeah. We have, but we're not going to announce them. But we're primarily a Sunbelt company, enjoy the sunshine, and there're plenty of attractive markets that are still in the Sunbelt that we're looking at, but we're not specifically saying which markets.

Okay. So with you being primarily a Sunbelt company, we wouldn't anticipate or may not anticipate, as it may be, any additional acquisition say in the Midwest or Northeast?

Yeah. You can safely say we're not going into Manhattan. That's for sure.

Understood. Thank you.

And our next question comes from the line of Trent [_______________] from BNP Paribas. Please go ahead.

Hi. Congratulations again. It looks like a sort of across-the-board for all the Big Five retailers. You've all shown fairly impressive progress in F&I penetration or per unit F&I. I was wondering, clearly some of that comes from a focus on F&I, but I was wondering if there was a more macro trend going on, like a contraction in credit availability for lower credit quality consumers?

Trent it's Mike Maroone. I think the key here is that we've found a process that we think is the best practice that provides a customer a full transparency into products and pricing and rate. There's also been a real emphasis on selling the whole product offering and not focusing on interest rate which doesn't add value to the customer. So we've really taken that best practice and begun to standardize that. It was actually our first standardized practice in the company, and I think it's paid off nicely for us, and I don't think the F&I growth really is a reflection of the credit market.

I got you. What's a reasonable target for, you're at 641, so do you think you can get as high as say 900 per retail unit, or are you not saying?

I don't think we can, and I think as you look at all the public companies that are reporting, they're reporting kind of apples-to-oranges numbers because some put in finance company profits, some put in accessory profits. Ours are pure F&I product, and I do believe we can continue to grow that business, but I do not think it will be approaching $900 in the near future.

Okay. I got you. Thank you.

Our next question comes from Jon Evans with MacDonald's Investments. Please go ahead.

Yeah. Could you talk a little bit about the trends and all that you saw in April just since, you know the Big Three came out yesterday, and I think GM said that they thought they saw the conditions soften? Can you talk a little bit just about April used cars and new car sales?

I can't give you any details on April other than what you see reflected in our broad statement, that we said from beginning of the year that sales will be down up to 10%, and April is certainly confirming that that is probably where they're going to. So for the whole year, sales will end up down 6% to 10% versus last year, and certainly, our business levels that our stores reflected the national numbers that were announced yesterday.

Can you, from a seasonality standpoint though, what April, May, and June should pick-up just seasonally from, kind of, the March levels, right?

Typically Jon, April is a little bit of a tougher month. You've got less selling days. May and June are typically good months.

Okay.

Relative to April.

Thank you.

And once again, if there are any additional questions please depress the '1' at this time. And no one else has queued-up.

Ladies and gentlemen thank you for very much for all your support. Thank you for joining us today.

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation and using AT&T executive teleconference. You may now disconnect.