AutoNation Inc (AN) 2011 Q2 法說會逐字稿

Thank you for standing by, and welcome to AutoNation's second-quarter 2011 earnings conference call. At this time all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. (Operator instructions)

Today's conference call is being recorded. If you have any objections, you may disconnect at this time.

I will now turn the call over to Ms. Cheryl Scully, Treasurer and Vice President of Investor Relations for AutoNation. Ma'am, you may begin.

Good morning and welcome to AutoNation's second-quarter 2011 conference call. Leading our call today will be Mike Jackson, our Chairman and Chief Executive Officer; Mike Maroone, our President and Chief Operating Officer; and Mike Short, our Chief Financial Officer. Following their remarks, we will open up the call for questions. Kate Keyser and I will also be available by phone following the call to address any additional questions that you may have.

Before we begin, let me read our brief statement regarding forward-looking comments and the use of non-GAAP financial measures. 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 differ materially from expectations. Additional discussions of factors that could cause actual results to differ materially are contained in our SEC filings.

Certain non-GAAP financial measures as defined under SEC rules may be discussed on this call. Reconciliations are provided in our press release, which is available on our website at www.autonation.com.

And now I will turn the call over to AutoNation's Chairman and Chief Executive Officer, Mike Jackson.

Good morning. Thank you for joining us. Today we reported record earnings per share from continuing operations of $0.49 for the second quarter, a 29% increase on a per share basis as compared to $0.38 adjusted EPS for the same period in the prior year. Gross profit for all of our major categories -- new, used, finance and insurance, parts and service -- improved compared to the second quarter of 2010, and our expense structure remained very disciplined.

Second-quarter 2011 revenue totaled $3.3 billion compared to $3.1 billion in the year ago period, an increase of 8%, driven primarily by higher new and used vehicle averages retail selling prices. Based on CNW Research data, in the second quarter, total US industry new retail vehicle unit sales decreased 2%. In the second quarter, AutoNation's total new vehicle sales were flat and on a same-store basis declined 4%.

This quarter, once again, demonstrated that our diversified business model is the right strategy, as well as our ability to rapidly adapt to change and execute effectively in a changing marketplace. In light of the Japanese supply constraints, we adjusted our operating plans to optimize our inventories and maximize gross profit. We drove impressive results in the second quarter, increasing total gross profit by 10% over the prior year due to an increase in gross profit on both new and used vehicles. On a per vehicle basis, gross profit increased 26% for new and 11% for used. We applaud the efforts of our Japanese-based partners as they worked nonstop to rebuild and bring production back online. We estimate that the vehicle shipments from the Japanese manufacturers were approximately 40% below planned levels in the second quarter and that by September they will be approximately 10% to 15% below planned levels. While the improved supply environment may mitigate the peak that Import PVRs experienced in the second quarter, we expect that Import margins will remain strong in the third quarter. We expect the new vehicle sales environment will begin to normalize in the fourth quarter of 2011.

I now turn the call over to our Chief Financial Officer, Mike Short.

Good morning, ladies and gentlemen. For the second quarter, we reported net income from continuing operations of $73.3 million or $0.49 per share versus adjusted net income of $62.1 million or $0.38 per share during the second quarter of 2010, a 29% improvement on a per share basis. Our second-quarter prior-your results exclude $12.1 million after-tax or $0.07 per share of expenses related to debt financing costs. There were no adjustments to net income in the second quarter of 2011. Adjustments to net income are included in the reconciliations provided in our press release.

During our last quarterly conference call, we indicated that we expected to recognize approximately $4.5 million of operating income in the second quarter related to performance-based manufacturing incentives on Premium Luxury vehicles previously sold. Due to delays in construction projects, the favorable impact on second-quarter gross profit and operating income was only $1.4 million. We expect to recognize the remaining incentives under this program in the second half of 2011.

Second-quarter revenue increased $232 million or 8% compared to the prior year, and gross profit improved by $54.1 million or 10% for the quarter. SG&A as a percentage of gross profit was 71.6% for the quarter. This represents an 80 basis points sequential improvement excluding the benefit from the Premium Luxury performance incentives in both quarters.

We achieved this improvement despite approximately $5 million or $0.02 per share in costs related to hail storms, which impacted some of our stores in several states during the quarter. These SG&A results were achieved in a quarter with a SAR of approximately 12 million units, highlighting the current benefits of our shared service center and low-cost platforms. The last time our SG&A as a percentage of gross profit was below 72% was in the third quarter of 2007, which was prior to the recession. Our cost structure can further benefit as we continue to implement best practices and technology tools and as volume recovers.

Net new vehicle floorplan was a benefit of $3.4 million for the quarter, a decrease of $1.3 million compared to the $4.7 million benefit in the second quarter of 2010, primarily due to higher floorplan interest expense driven by higher inventory levels compared to the prior year period. Non-vehicle interest expense was $15.9 million for the quarter, an increase from the $14.7 million we reported in the second quarter of 2010 due to higher debt levels and increased spreads related to our refinancing in April of 2010.

During the quarter, we borrowed $110 million under our revolving credit facility, resulting in $275 million of outstanding borrowings under the revolving credit facility at the end of June. Our second-quarter non-vehicle debt balance was $1.45 billion, an increase of $77.7 million compared to the second quarter of 2010. LIBOR rates were 11 basis points lower on average compared with the second quarter of 2010.

Provision for income tax in the quarter was $45.1 million or 38.1%. During the second quarter, we repurchased approximately 3.4 million shares for $110.9 million at an average balance of $33.04 per share. We ended the second quarter with 145.7 million shares outstanding.

In May our Board of Directors authorized an additional $250 million under our existing share repurchase program, and at the end of June, $314 million of board authorization was remaining for future share repurchases.

Capital expenditures for the quarter were $39 million. Our CapEx estimate for the year remains at approximately $140 million net of proceeds from related asset sales. Floorplan debt was approximately $1.67 billion at quarter end, an increase of approximately $21 million from March 31, 2011, in line with inventory levels.

Lastly, Standard & Poor's upgraded AutoNation's corporate credit rating to investment grade as a reflection of our strong operating execution, diversified business model and disciplined financial management. Our robust balance sheet continues to be industry-leading, and we will remain well within the limits of our financial covenants. Our leverage ratio at June 30 was 2.39 times or 2.1 times on a net debt basis, including used floorplan availability compared to the limit of 3.25 times.

Our quarter-end cash balance was $82 million, which, combined with our additional borrowing capacity, resulted in a healthy total liquidity of approximately $482 million at the end of June. We again demonstrated the agility of the auto retail model and our leadership position as we navigated successfully through the Japanese supply constraints. We continue to operate the business with a solid balance sheet and strong cash flow generation and remained focused on actively allocating capital to maximize shareholder returns.

Now let me turn you over to our President and Chief Operating Officer, Mike Maroone.

Thanks, Mike, and good morning. We are very pleased with our performance in the quarter. The resiliency of our strategic operating model, coupled with strong operating execution, allowed us to remain nimble and manage through the Japanese product description, to deliver revenue and gross profit increases in all areas of our business, along with an impressive operating margin of 4.3%.

Turning to detailed results, I will begin with our segment performance. At $134 million, total segment income for the second quarter grew 15% or $17 million compared to the period a year ago with increases across all three segments.

I will note that at $66 million the Import segment income increased $13 million or 25%, driven in large part by increased new vehicle gross profit. It was the result of intense efforts to optimize our Import segment inventory in response to the supply constraints.

As I continue, my comments will be on a same-store basis unless noted otherwise.

AutoNation retailed 50,000 new vehicles in the second quarter, off 4% for same-store as compared to the period a year ago. Unit increases in Domestic and Premium Luxury were offset by Import volume declines from limited supply. For total stores AutoNation was flat year over year compared to the industry being down 2% at retail according to CNW.

Looking at various geographies relative to retail volume, Texas continues to be our strongest market, while markets in California and Florida are experiencing a more uneven recovery. New vehicle same-store revenue increased $33 million or 2% to $1.7 billion, driven by increased revenue per vehicle retailed, particularly in imports due to supply and demand, as well as increase for both Domestic and Premium Luxury units sold.

Gross profit for new vehicle retailed increased $543 or 26% to $2642 with increases in all three segments as follows. Imports increased $676, Premium Luxury was up $538, Domestic up $107.

A significant contributing factor to gross profit PVR lift was a solid tactical plan implemented across the enterprise for Domestic, Import and Premium Luxury segments with particular focus on optimizing the Japanese brand inventory while maximizing gross. This included developing a proprietary web-based pricing tool to capture various market pricing metrics and establish targets and floor prices for each model in every brand.

We are adjusting both new and used prices to optimize traffic in sales. New vehicle gross profit as a percent of revenue increased 120 basis points to 7.8%.

At June 30 new vehicle day supply was 59 days or 38,900 units compared to 55 days and 37,500 units a year ago.

Turning to used vehicles, AutoNation retailed 42,000 used vehicles in the quarter, a 3% increase compared to the period a year ago. Our used to new ratio was 0.83 to 1. In the quarter same-store retail used vehicle revenue of $766 million rose 9% year over year, and revenue per used vehicle retailed of $18,400 increased 6% or $1004 compared to the period a year ago. Steady demand and continued tight inventory availability for the industry kept used prices high in the quarter.

Same-store used vehicle gross profit of $75 million reflected an increase of 14%, while gross profit per vehicle retailed at $1800 grew $174 or 11% compared to the period a year ago, both driven in large part by demand in the Import segment where some new vehicle intenders moved to used vehicles. Used vehicle gross profit as a percent of revenue at 9.8% grew 40 basis points. At June 30 used vehicle day supply was 47 days compared to 44 a year ago and 42 days at March 31.

During the quarter we ramped up our used vehicle inventory when the timeline on the Japanese disruption in new vehicle inventory was anticipated to be longer. We are now prudently working through that inventory to reduce our used day supply to better prepare for seasonal pricing adjustments.

Two final items of mention relative to used vehicles. First, during the quarter we moved 10,500 used vehicles from their originating stores to stores where they should have a quick return time and higher PVRs. Second, we now have 26 value vehicle outlets in operation with three more scheduled to open in the third quarter. We created the value vehicle outlets to retail value priced vehicle that we would have traditionally wholesaled. We continue to be pleased with the ongoing growth of this program, which is an important part of our strategy to address industry supply constraints and meet market demand.

For parts, service and collision compared to the quarter a year ago, same-store revenue of $559 million increased $12 million or 2%. I'm pleased to note that our customer pay revenue of $187 million was up $5 million or 3%, making a fourth consecutive quarter of year-over-year increases. Parts, service and collision gross profit of $239 million was flat compared to a year ago with gross profit increases for customer pay service, internal and collision offset by decreases in warranty and wholesale and retail counterparts.

Gross profit as a percent of revenue was off 90 basis points to 42.8% compared to a year ago. We saw a slight shift in mix toward internal, as well as a shift within customer pay resulting from our initiatives to grow tires and maintenance to drive customer retention.

I'll also note that the warranty comparison in the period a year ago had the benefit of the Toyota recalls.

As I've mentioned before, we are focused on growing customer pay revenue in gross and are pleased with the progress on both fronts as we continue to work to improve retail execution in our service drives across the enterprise.

Turning to F&I, total gross profit in the quarter increased $9 million or 9% to $114 million on flat total retail volume year over year. Same-store gross profit per vehicle retail was $1243 per vehicle, an increase of $109 or 10% compared to a year ago. We attribute this primarily to improvement in both rate and product commissions and crisp execution of our best practice processes at our stores. In the quarter we recognized favorable retrospective commissions related to products sold in higher volume years.

We also continue to benefit from our strong preferred lender network, as well as solid product penetration. The credit environment in the quarter was solid and stable both sequentially and year over year, and we noted expanded buying parameters for key prime, non-prime and subprime lenders year over year.

At June 30 our store portfolio numbered 213 stores, 254 franchises, representing 32 brands in 15 states. Reconciling our store count to our Q1 2011 call, we opened add points during the second quarter as follows -- Mercedes-Benz of Coconut Creek in South Florida, Mercedes-Benz of Sanford in Central Florida, Power Fiat of South Bay in Southern California, and Team FIAT Mall of Georgia outside of Atlanta.

We came into the year with an aggressive plan to build new facilities and undertake several major facility renovations. About two-thirds of the projects are completed, which includes the opening of Team FIAT Mall of Georgia and the extensive renovation of Infiniti of South Bay in the second quarter. Seven additional projects are slated for completion by year-end.

Looking ahead, we are actively seeking acquisition opportunities that meet our market, brand and return on investment criteria.

In closing, AutoNation adapted well to challenges in the environment by delivering topline and margin growth, as well as record EPS for the third consecutive quarter. This growth occurred while also delivering excellent CSI, low associate turnover and strong sales efficiency. We continue to take a long view by investing in facilities, technology and associate development.

And on behalf of our executive team, I would like to thank all of our associates for delivering an outstanding quarter. With that, I'll turn it over to Mike Jackson.

This quarter we successfully navigated through the challenges presented by the Japanese product constraints, and our record second-quarter results once again demonstrated that our diversified business model is resilient and adaptable. We continue to be optimistic about the long-term recovery for the US auto market and the broader US economy. We continue to use the planning assumption for 2011 full-year US industry sales of mid-12 million new vehicle units.

I would now like to open the call for questions.

(Operator instructions) Rick Nelson, Stephens Inc.

What are you hearing, Mike, from the OEMs about the incentives as inventories begin to normalize?

I think we're still in a disruptive period for July and August, that there will be restraints on marketing activities -- and by that, I mean marketing communications -- and also incentives. And I think you really begin to see normalization of those activities starting in September.

So I think we still face a couple disruptive months that will impact the sales rate. And then, as you build towards the end of the year, I really see everyone who is probably under budget on marketing costs this year try to drive to their year-end targets. And we have thousands of customers who have told us they are waiting for both the specific vehicle that they want and/or different incentives.

So I think they all come back into the market, and we have a strong close with a monthly selling rate moving back over 13 million, and by December it's probably high 13 million, if not 14 million, for the month of September. You average all that out, though, it's still a mid-12 million, in my mind, that we end up with. And the one caveat, of course, is that's assuming that in Washington DC, there is some sort of debt deal that gives roadmap to fiscal responsibility.

Also, curious where you see the consumer today, the weak SAAR that we saw in Q2, how much of that do you think is supply related, the lack of incentives? Do you think the consumer is --

I think it's all related to what happened with the Japanese supply. Because the disruption affected every manufacturer in their marketing plan. And in a way, I think this is a very good indication for the maturity and the adult behavior of the industry rather than unleashing a price war or a market share grab opportunity. Everybody said, let's take the high road here through this and not do anything abnormal.

On the other hand, though, I think we are in a fragile recovery that, if there is something unusual going on, I think it significantly affects sales. There's not enough demand that you can plow through something like this and not have it impact sales.

But it was a supply constrained impact on the sales rate, and that's why I feel that, as that situation normalizes, you have both a mini pent-up demand from the spring disruption, and you have a macro pent-up demand in principle with the number of vehicles that have been deferred over the last several years and the ages of the carpool that says you should have a pretty good selling rate for the second half, for the last part of the second half of the year.

How do you rank the alternatives in terms of capital allocation today? It sounds like acquisitions might be the most attractive place to be at this point.

It is Mike Short. The way we think about our capital allocation model is, number one, the key priority for us always is to have a stellar balance sheet, and we continue to focus on that. Beyond that, our next priority is to make sure that we are allocating CapEx to our stores in a way that makes us proud of the way we serve our customers and gives our associates a great place to work.

And then, beyond that, capital is available to the opportunity with the highest return for our shareholders, whether that happens to be share repurchase acquisitions -- as you know, from time to time, we have even bought back debt when that was attractive as well. But we are really open to anything that generates return for our shareholders.

Can you comment on valuations that you are seeing out there and how the pipeline looks?

It's Mike Maroone. We are in active discussions with a number of parties on potential deals. I would say there still appears to be a gap, although every deal is a little bit different. And, as you know, our game plan is to fill out brands in our key markets, and that's what we are working toward.

Simeon Gutman, Credit Suisse.

Thanks. It's Simeon Gutman. First, can you speak to the comments -- I think in the press release the normalization of new vehicle margins -- just talk to the timing a bit, and I don't know if you will ever comment on anything we are seeing today. But is it naive to think that they can't hold a little longer, especially if we sort of get manufacturer-led incentives and, as you said, you have people waiting already knowing which car they want to buy?

This is Mike Jackson. First, to the comment, the Japanese have made a monumental effort to restore production, moved heaven and earth to make it happen, and we're definitely going to see improved shipments in the third quarter compared to the second quarter, and we're probably 90 days ahead in the recovery from where we thought we would be when all this was laid out. So that's a positive.

I think there will be some moderation on new vehicle margins as the supply improves, but in principle our goal has been to improve front-end margins during the recovery journey from the absolute abyss of a bottom to back toward 15.5 million, 16 million units.

So, while there will be some moderations from the strength of the, let's say, a peak with the Japanese during the second quarter, I think the trendline is such that we see permanent gains in front-end margins. Exactly what they are, I can't say exactly, but we see improvement in front-end margins.

Then, second, on SG&A can you talk about your performance relative to sort of the expectations going into the quarter? The commentary on the last call, I just got the sense that maybe you would even hunker down even tighter. So can you talk about maybe some of the longer-term items you are investing in versus the short-term and how you balance that during the quarter?

It's Mike Short. In terms of the long-term investments that we are making, those are really around two core items or two core components, I would say.

First is best process execution of all of our business processes, including cost control within our stores. And to the extent that those help us grow gross or those help us control those SG&A items, that will result in improved SG&A margin as a percentage of gross.

The second is in our shared service center and shared service center-related capabilities whether that's our payroll center or our purchasing area. And so that, as you know, is a focus item.

Within this quarter, in particular, we did call out a hail item that affected several of our stores that was about $5 million in the quarter of additional spend that we had not expected. So that would adjust that number by almost a point in terms of SG&A as a percentage of gross.

And in terms of taking it out a little bit further, there have been periods in AutoNation's history where we have operated with SG&A as a percentage of gross below 70%. I believe our low point was in the mid-68% range, and our goal is to get back there as quickly as we can.

John Murphy, Bank of America/Merrill Lynch.

Just a question on floorplan expense versus the assistance, I mean in the quarter looks like it was a positive $3.4 million, but you mentioned your inventory was up about 59 days supply. So right around a day's supply where you think -- I guess you want to run around 60 days, maybe. I mean is there anything that you are doing with your inventory and your floor planning that is going to allow for assistance to outstrip expense and you would actually have a positive carry on this going forward?

We do have a positive carry on it now; it's about $4 million. Assistance is generally running around $15 million a quarter, the actual expense more like $10 million or $11 million. So I mean that kind of bridges those two numbers.

In terms of specific actions that we are taking to try and optimize that spread, I think we're going to continue discussions with our lenders. And certainly, the fact that we have recently been upgraded to investment grade status will provide us with additional food for agenda topics in those discussions.

And then just the second question on the Japanese situation, you guys alluded to on the call in your comments that you were able to shift some of those consumers over to used vehicles. That was really the first time we've heard that from any of the dealers making that direct a comment. I was just curious how large that was or if it was just sort of anecdotal, and really do you have this backlog of buyer waiting that is really going to be unlocked as you get this inventory back?

It's Mike Maroone. We pushed our used vehicle inventory up on purpose. We moved over 10,000 units in the quarter. So we worked very hard to make sure that customers coming into our Honda, Nissan and Toyota stores had ample selection. I think there was some shift in the quarter as people did come in with a need. I think there's also customers that held back, waiting for the exact vehicle they wanted at the exact price.

So I think there's a little bit of each, but we purposefully did drive up our used vehicle inventories, moved a lot of vehicles to make sure that those stores continued to have good selection. I think, when you look at our segments, the fact that our Import segment was up 25% in profit with a decline of 12% new vehicle sales, I really think speaks to that effort both on the new vehicle PVRs and used vehicle volume in those segments.

On framework agreements, it sounds like the automakers are getting a little bit more lax with the framework agreements in allowing a lot more acquisitions, particularly by the large public groups. I wonder if you were seeing anything like that, and they are finally recognizing that you guys are strong partners as the sales organizations in the manufacturing arm.

Well, I think the relationship, the respectful relationship between the publics and the manufacturers is probably the best ever, and many points of friction between the retailers and the manufacturers have been resolved. As you know, we are a major opponent of production push and all the things that come with that. And the fact that, in principle, production push has moved into the past and truth, justice and the American way has won has resolved a lot of the friction points between us and manufacturers. And they really respect the professionalism that the publics bring to the table and our ability to penetrate the market and care for the customer.

So it is, overall, a better atmosphere, but the framework is not an I has changed over -- dotting the I's and crossing the T's has not changed, but I would say the mood is much more constructive.

And then just lastly, on share buybacks, obviously you got a new addition to your authorization, which is pretty large. Is there anything that restricts you in your RP baskets or anything like that, in covenants in your loans, that would restrict you from buying back shares, or are we just looking at the leverage ratios as the ceiling first? And then as we think longer-term, is there anything else out there that we should think of as restricting your share buybacks other than you just generating cash flow and buying back shares over time? Just trying to understand how that will progress.

Yes, no restrictions.

Short-term or long-term?

There's nothing out there on the horizon that looks like it is problematic in terms of our ability to buy back shares.

Himanshu Patel, JP&C.

This is Vivek Juneja for Himanshu Patel this morning from JPMorgan. I had a couple of quick questions, one on used vehicle sales. It seems that used vehicle sales slowed down in the quarter, and that is partially understandable given the overall softness in consumer demand that we had in the quarter. But do you have any (inaudible) on July used vehicle sales? Maybe you saw some sequential improvement?

Secondly, did you see -- do we expect any growth as we move forward, and what kind of growth should we expect as we move into second half?

It is Mike Maroone. I think the used vehicle business slowed down as the new vehicle business did, slightly. And really it was slower growth. We did go on a same-store basis of 3% in volume with 14% in gross. So I think that it did move in line with the new. I think the used vehicle business will continue to be strong. It's an excellent alternative for value-conscious buyers, and we continue to invest in that segment.

In terms of the July business, we generally don't comment on the current quarter. But I will tell you the business is holding up well, and we are very pleased with our 14% improvement in gross.

Secondly, I may have missed it, but did (inaudible) patterns (inaudible) revenue growth into individual buckets, warranty customers, etc.?

We do. And from a gross point of view, our customer paid business was up 1, warranty was down 6, collision was up 5.

And finally, on your used vehicle gross margin in the second half, do you see some pressure on used vehicle prices as we move into the second half as new vehicle sales pick up? Do you expect some pressure on your used vehicle gross margins?

I think the reason that we try and keep our vehicle inventories around a one-month supply or a little bit more is to deal with those kind of situations. There's always some seasonal adjustments in every summer. Toward the end of the summer, you see the market change a little bit, and I think we will be ready and be responsive to that change. So I don't think you will see anything abnormal this year, but certainly there is seasonality in used vehicle pricing.

Patrick Archambault, Goldman Sachs.

Actually, just building on the used question, the used to new ratio is quite high. Clearly, that market plus the efforts you have had, you have put into it in terms of building inventories and capabilities, have worked. Can you tell us a little bit about how you expect that ratio to perform going forward? Clearly, as new recovers, there is going to be some share taken away from new, and one would expect that business to slow. But then again, you have all those things that you have done that position you better in that business relative to a year ago. So just kind of thinking about the trade-off there.

It is Mike Maroone. We are confident that we can continue to drive volume on the used vehicle side. Our current quarter was 0.83 to 1. A year ago we were 0.78. I think the real difference is the growth we have had in what we call the VVOs, the value vehicle outlets. So we are really looking to retail more and wholesale less, and I'm confident we can sustain that trend so that there's a lot of pieces to the used car business. But the certified preowned is also an important segment that generally runs about a third of the business. And so we are pushing that segment across all brands, as well as running the VVO locations that are now up to 26, and we will continue to expand that.

So I think you will continue to see us push on that number. I think there is some more upside. It is really about retail execution and the ability to get the right products at the right price at the right time.

And just one more, I guess your SG&A as a percentage of gross was 71.6%, I believe. I think you said that the hail, if I understood you correctly, was maybe about a point on that. So you would have been closer to 70.6%.

Thinking about -- what did you guys do kind of on a temporary basis to help you bring that down, in the face of all the Japan-related stuff, in terms of cutting advertising and things like that, that may come back in subsequent quarters, or is this kind of a level that you guys can further build on? I mean I know you said that ultimately down the road you could even be below 70%.

Mike Short. We look for continued improvement in this ratio going forward. It is one of our core strategies to maintain this level of disciplined financial management, and we will certainly continue to do that and leverage some of the fixed costs within SG&A as time goes on.

I would say, in terms of temporary things, I think there were some areas where we pulled back in certain areas of advertising. But, by the same token, there were other areas where we spent a little bit more. So I would not characterize the nature of anything that we did in the quarter as kind of short-term cuts that are going to come back in the future. I think it's just part of the ongoing strategy for AutoNation.

Everyone, thank you for your time today. We very much appreciate it. Thank you.

This concludes today's conference. All parties may disconnect at this time.