Lithia Motors Inc (LAD) 2002 Q1 法說會逐字稿

Good afternoon ladies and gentlemen, and welcome to the Lithia Motors Incorporated sponsored first quarter 2002 earnings call. At this time, all participants have been placed on a listen only mode, and the floor will be open for your questions and comments following the presentation. Before we begin, ladies and gentlemen, the company wants you to know that this conference call contains forward looking statements. These statements on this subject and actual results could differ materially due to certain risk factors.

These risk factors are included in today's press release, and within that company's filing with FCC. Now I would like to turn the floor over to Sid DeBoer. Chairman, and Chief Executive Officer for Lithia Motors Incorporated. Sir, the floor is yours.

Good morning everyone. I guess good afternoon in some parts of the world. I'd like to thank you for joining us this morning for our first quarter earnings release and conference call. With me today is Dick Heimann our president, CEO, and Jeff Deboer our CFO, and our Investor Relations Manager. Obviously we are more than pleased with the quarter.

We released our first quarter 2000 early this morning which showed earnings per share of 42 cents. A 68 percent increase over the 25 cents earned in the same period last year on a comparable basis. This gain was on 12 percent more shares outstanding. The of the quarter exceeded by five cents, or 14 percent, our recently raised guidance and by 35 percent our original guidance for the quarter. Net income on a comparable basis increased by 87 percent. We also posted record first quarter sales of 524 million dollars. An increase of 25 percent over the same period last year.

New vehicle sales increased 24 percent, used vehicle sales 29 percent. Parts and service increased 15 percent, with finance and insurance sales increasing 30 percent. Total sales had increased 25 percent with the inventories for the same year, on year period, increased only six percent. Demonstrating our discipline regarding inventory. New and used vehicle level and are currently at the lowest levels they have been at in the last five years. Our new vehicle business was strong, showing the greatest strength in March. The counter cyclical parts and service and used vehicle business lines continued to perform, demonstrating similar strength what we saw all of last year.

Finance and insurance business, again, posted the strongest year over year gain. As we continue to improve the important side of the business. per unit this quarter was $954 per retail unit. That is compared to $860 in the first quarter of last year. And $933 for the full year of 20001. Compared to the first quarter of last year, FNI penetration improved from 74 percent to 75 percent of vehicle . It is worth noting that over 29 percent of our stores have FNI penetration rates in the 80 percent plus range.

That's five percent higher than just six months ago. Demonstrating again in the continued integration improvement in all our stores. It's important to point out that the cash flow figures were very strong for the first three months. Operating cash flow improved 69 percent to $14.7 million from $8.7 million for the same period last year. For the quarter, cash flow per share measured at net income, plus depreciation and amortization with 52 cents per share as compared to 37 cents recorded in the same period last year.

Cash flow per share was 24 percent higher than earnings per share for the quarter. for the quarter was $16 million versus $13.8 million a year ago. Our sales mixed by state for the quarter, with Oregon with 20 percent, California at 19, Washington 19, Colorado 14, Idaho eight, Nevada six, Texas six, South Dakota five, and Alaska three. for the quarter, and this is real good news considering the environment, increased 1.4 percent.

We did not see the drop off in new vehicle sales that many had predicted following the zero percent financing in the fourth quarter. In our stores, new vehicle sales are healthy in the first quarter, and most notably in March. As a result, new vehicle same store sales were up 3.3 percent year over year. For comparison, industry new vehicle sales were down about four and a half percent. While we are pleased with of the same store , Colorado continued to be a weak spot for Lithia.

As sector in that market continues to be an issue in the first quarter. Additionally our Colorado Springs Chrysler Jeep store has suffered from a large highway construction project that is going on around over the store. Access to the store has been virtually cut off. And this has seriously affected the sales. But the good news is, that we will be moving to a new facility by the first of September. It's currently under construction. Excluding this store, total same store retail sales for Lithia would have been three percent instead of 1.4 percent under terms of .

And same store new vehicle sales would have increased to 4.3 percent. Excluding a weak Denver market, as a whole, total same store retail sales would have increased to 6.2 percent. And same store new vehicle sales would have increased to 7.9 percent. We feel the Colorado market has stabilized, and will continue to improve throughout this year. But as you can see, our business outside of Denver is very much on the growth rack. In fact, Oregon and California which currently represent approximately 50 percent of our same store sales, were up 14 percent. Beginning in the fourth quarter of 2000, and carrying through to the third quarter of 2001 when we saw four straight quarters of same store sales decline.

In the fourth quarter of 2001, same store sales spiked, abated by our zero percent financing. And that has continued during the first quarter of 2002. We continue to feel like we have seen at least a leveling off, or stabilization in the economy to the west and Pacific Northwest where we do most of our business. Our regions may, in fact, lead the recovery as demonstrated by Lithia being, currently, the only public company, so far at least, with positive same store sales comps for the first quarter of 2002.

I'd like to stress an important point about Lithia's operating model. Though the economic climb has been weak, especially in Pacific Northwest, Lithia's been able to grow earnings per share in cash flow for the past three quarters. The lower interest rate environment has acted as a cushion to the weaker economy. One might ask what will happen if rates begin to climb, and lose the leverage of lower rates? We see this as a potential positive. If rates begin to decline, then that will be certainly an improving economic environment.

Which would, in turn, be good for sales. Likewise, if we begin to see a pull back in incentives, that again would be a signal of an improving sales environment. And those profit margins should improve as well as sales of, as that growth is experienced. And maybe even more important, one should remember that our parts and service divisions, and our used vehicle sales and finance and insurance parts have performed consistently well in the past. Offsetting much to any decline in new vehicle sales.

In the first quarter, the retail and used vehicle parts and service, and finance and insurance business line represent 74 percent of our gross profits for the company. I'd like to turn it over to Jeff, he'll give you some of the numbers and provide you with more details on these results. I'll come back in a little bit.

Thank you. And good afternoon to everyone. I'd like to break down the quarterly sales numbers a little more. Sid mentioned we had record sales of 524 million dollars, which was 25 percent higher than last year. So 25 percent sales growth. If you look at the mix of our sales for the quarter, the new vehicles were 51 percent, and the used vehicles, on a retail basis, were 28 percent. And the used wholesale vehicles were ten percent. And service and parts were ten percent, finance and insurance four percent, and and other, one percent.

There were no material changes in the prior year of our sales net. Of more importance is the contribution to gross profit by each business line. The new vehicles contributed 26 percent of our gross profits in the first quarter. Used retail vehicle, 21 percent. Service and parts 30 percent. And finances and insurance, 24 percent. For the same period last year, the contribution of gross profits was 27 percent new vehicles, 22 percent used retail vehicles, 29 percent service and parts, and 22 percent F and I.

One other point I'd like to point out is Lithia is a new vehicle sales, 51 percent of our total compares very favorably to the other companies that have 60 percent or more of new vehicles. Which to me, that Lithia has more of a higher margin product, thus resulting in our industry leading gross margin of 16 percent. That's an important point. Our mix is much more weighed to the higher margin businesses within the sector.

Looking at this order specifically, the mix shifted back towards our new vehicle sales this quarter, as we saw in the fourth quarter. And new vehicle sales are our lowest margin business, which resulted in a more normalized gross margins of 16 percent. Our came down in the first quarter as well, which we're very proud of. And the result was an operating margin in the 2.7 percent. In the following quarters, we expected to see both growth and operating margin improvements.

Historically, the first quarter normally has the lowest operating margins of the year. For the quarter, Lithia had a used to new unit sales ratio of one to one. The highest level of the publicly traded auto retailers. This demonstrates Lithia's strategic focus on growing a used car business at all of our stores. Market share in the used business is a wide open field for Lithia. Lithia's sold the total of 28,780 retail vehicles this quarter. Which was 18 percent higher than the prior period last year.

Our sales makeups by brand for the quarter, as a percentage of total sales, was 17 percent Chrysler, Dodge, Jeep. Ten percent General Motors, Saturn. Seven percent Ford. Four percent Toyota. Three percent BMW. And two percent each Volkswagen and Subaru. Just over one percent for Nissan and Honda. Leaving four percent for the other brands. We have a total of 25 brands currently. New vehicle sales represent 51 percent total sales.

Next I'd like to give you the gross profit mix by brands for the quarter, and notice that no one brand represents more than eight percent of our total gross profits. So we're very diversified on a profit basis. Chrysler, Dodge, Jeep is our largest at an eight percent total gross profit. General Motors and Saturn is five percent. Ford is four percent. Toyota, two percent. BMW at two percent. And approximately one percent each from Volkswagen, Subaru, Nissan and Honda. Leaving a total of one percent for the other brands.

New vehicle growth profits represent 26 percent of our total gross profits. As I have commented in the past, our domestic brands continue to be our most profitable contributing more to profits than to sales, and earning a higher gross profit per unit than our import brands. We are very excited about General Motors this year. In 2001, at the end of the year, we added two large GM stores in the Seattle market with approximately 150 million in annualized sales. And in the fourth quarter last year, GM represented six percent of total sales. In this quarter they represent ten percent of total sales.

Their truck lineup has been performing well, and they have an exciting product line rolling out this year and into the next two years. Of the three domestics, on a same store basis, GM performed the best, up over 16 percent. Followed by Ford, and then Chrysler. Of the major import brands, Nissan performed the best, up 34 percent. Followed by , Toyota, Honda, and then Volkswagen in that order.

For the quarter, the total of flooring and other interest expense has the percentage of revenue with 0.7 percent, which is points lower than the same period last year. As Sid mentioned, we benefited from lower rates. The flooring interest expense was down 50 percent, and other interest expense decreased 30 percent year over year. This is not only due to the lower rates, but also due to lower inventory levels, and an aggressive program that Lithia put in place last year to refinance all of our fixed rate mortgages to lower rates of floating mortgages.

And these savings resulted, as well as interest savings from the use of proceeds from the offering. Next I'd like to look at the balance sheet. At the end of the first quarter we had $51 million in cash on the balance sheet. Long term debt, including the used vehicle flooring facility, was a $101 million. That's nearly 39 percent less than just the year end of 2001, as we paid down debt with the proceed from our recently completed offering.

Proceeds were approximately $77 million dollars. This gives an improved 21 percent long term debt to total cap ration versus 32 percent just at the end of the year. We now have one of the strongest balance sheets in the sector, and there is clearly room to increase the leverage on our balance sheet as we proceed with our accelerated growth plan. Share holders equity at the end of the first quarter rose by 42 percent, to $289 million from $204 million at the end of 2001.

Due to the offering, and the increase in retained earnings. Retained earnings now total $92 million. We have updated our guidance for the second quarter of 2002 and the full year, and we're raising the guides for the full year to a $1.79 to $1.87. Notice that we continue to maintain our conservative outlook for new vehicle sales. You can refer to our press release for details of the guidance. That concludes the financial summary, and I'll turn things back to Sid for the closing comments.

Thanks Jeff. Whoever likes to comment on our recently completed which Jeff had alluded to, this is the first conference call we've had since that offering. At the end of February we successfully completed that sale of 4.5 million new shares of our Class A common stock at a price of 18 and a quarter share. Net proceeds from the offering used to pay on $77 million of debt on our acquisition and used vehicle credit line. In anticipation of increased growth through acquisition.

During the slower economic environment we have seen more stores now coming up for sale. And more good stores coming into the price range of what we would like to pay. This year we have a forecast of 500 to $800 million in annualized acquisition revenues. This compares to just a little over $340 million in acquisition revenue last year. and environment with which to complete an . The funds from the offering can be used primarily for acquisition. In heightened acquisition pace, and resulting increase in earnings in 2002 and 2003 should more than offset the from the new share.

Additional shares also helped to increase the liquidity of the stock to a more comfortable level for many more shareholders. I'll comment briefly about our acquisitions here today. We have completed acquisitions of now 18 franchises and six stores. Over $200 million in revenue so far this year. Over $160 million of those came from the first quarter, and we are targeting from $300 to $600 more throughout the rest of the year. Our latest acquisition of Village Dodge in Midland, Texas was completed in early April.

This store had annualized revenues of about $35 million. So far in 2002 we have acquired five stores and approximately $183 million in annualized revenues within the West Texas market alone. As we continue to diversify our geographical mix there. The combination of cash on the balance sheet, a largely unused acquisition credit line of a $130 million. And the free cash flow, we have more than enough capital to acquire approximately two billion in additional revenue. It should nearly double our current .

Looking ahead, our growth plans are solid. We'll have some periods that are slower than others, but on the long terms, the same basis, we are still targeting a growth and a goal of 25 percent for earnings per share. And that will be done through a five percent internal growth, and a 20 percent growth from acquisition. We think the market is just starting to realize some of the benefits that our model provides, such as the support received from our manufacture partners. It's almost unequaled in other retail sectors.

Lithia has provided substantial incentives and support on the customer dealer advertising and inventory levels. Manufacturers also provide us with low cost financing for working capital and acquisition. And on top of all that, Lithia is involved in one hundred percent of the product side. Including the cyclical used cars. And the counter cyclical service and parts businesses. That concludes our presentation portion of this conference call. I'd like to open the floor to your questions. Tim, go ahead with the questions.

Ladies and gentlemen, the floor is now open for questions. If you have a question or a comment, you can indicate so now by pressing number one followed by four on your touch tone phone. If throughout the duration of the cue, your question has been answered, you may remove yourself from the cue by pressing the pound key. Questions will be taken in the order they are received. And we do ask when you pose your question, that you please utilize your hand sets to provide optimum sound quality. Our first question is coming from of Morgan Stanley. Venay, your line is live.

Hi thanks. Two questions. First, can you talk about the used car market, and any changes in any of the dynamics? Potentially giving some recent efforts from some of the larger retailers. And second, in terms of the new vehicle department, can you just talk a little bit about some of the indicators that you look at, to sort of gauge whether or not that's going to be flowing with large factor impacts?

As far as the used car market, is it Vinney?

Venay.

Nice to meet you again, Venay. And thanks for joining our call. market generally, our same store sales were just pretty flat on used car, and not good compared to the other larger retailers. So hopefully that's a sign in that the areas we're doing business in are doing better. But if we think generally at this time, we're doing better as a used car retailer.

The market itself is, we sold a little higher priced used car in the quarter. There is some pull back in support for financing for low credit people, back out of that to an extent and that affected our bills of sales, some of those lower priced cars. We'll hopefully find some other finance sources for that, which . But there's always a shifting going there. And I think that basically the used car market's about what we predicted it would be.

As far as the new vehicle market is concerned, we're looking for a same store sales into the future. Because we just don't know, it's not certain. All the factors are there for that not to take place. And we have very low interest rates. We got very high levels of affordability, we've got a high rate. You know, and there is a growing population now that states the base for car sales is much bigger than it was ten years ago. We think it's probably $60 million in the run right now, and . So we're going to see some variation there over the next six months.

And, you know, we have to predict about three months ahead as far as inventories go. I do a week, a monthly report to all our stores. I'm the company economist. I do my best to try to forecast what they should do. And I think we've done a fairly good job of managing that. If anything we're on the conservative side, because we're certainly uncertain yet that the recession is behind us. We do not think it will accelerate. We think we can hold at these levels. Does that get you there?

Yeah. And just one follow up question in terms of that service and parts. What kind of correlations have you seen between certain new and used vehicle sales and service and parts?

Well generally, you know, service and parts is a real stable, it's awful hard to get a . It really doesn't, I mean, we think that it increased slightly when new car sales were down, and used car sales were because people tend to keep the cars longer. But it's such a steady business that it's not dramatic, those shifts. So it's a great business. We certainly want to continue to expand it, and it's a great opportunity to add to the franchise. So we're a provider for all that warranty work that goes on.

And then those service contracts that we sell, we do all the work for those. And lifetime oil changes that uniquely sell, you know, continue to build, that side of the business. But I don't think you can put a real definition that you get marked increase in certain parts, if new, if car sales were down. If they're down for a long time, yes.

Okay great, thanks.

I would like to add, from the very high rate we've had the last couple years, there are a lot of vehicles out there for service. And that is a big, big positive. And also with domestic stores, there is a lot more service business, I mean generally. And we have, you know, a there which is very positive for our profits, on the domestic service side with the trucks and all. I mean, the market trucks, which also require a lot of service and the higher priced parts. So that's all positive trend on that business side.

Our next question is coming from of . Gary, you're line is live.

Good morning. Just a question. Do you guys break out supplier and can you give us any indication as far as ?

Gary, we don't. It's a fleeting figure, generally. People have all kinds of matters to figure that. And on the ground, the in transit, it all mixes. And we've decided not to give those numbers.

Yeah, we did make a statement, we have the lowest supply we've had over the last five years right now.

Okay.

Both new and used.

I guess maybe, if this is really what I'm looking for. I mean, you know, about 50 percent. And you guys commented that was due to management. Beyond just the lower rates. And obviously relative to what, you know, your floor plan system would inventory, you know, management techniques were contributing to it? Does that make sense?

Well Gary, you realize that the flooring interest credit does not go to the interest line. It goes to gross profit margin.

Right.

So it doesn't have any impact in lowering our interest. Our interest costs are the true interest costs without the rebate from the manufacturer. So that may help you that way. And, in other words, we don't have lower costs if we buy more cars. We get those to gross profit. And it only goes to gross profit in our book keeping when we sell the car, not when we purchase it.

Okay.

It's the most conservative method of dealing with it, and I'm sure everyone does.

Yeah, I think everyone's been doing it kind of a little bit different. But I was just trying to make sure in terms of, you know, where it is, how much of that was due to lower rates. I guess you're saying all that, because you had .

Right, I think, so it's, you know, as I said, we do have a lower interest rate environment. But obviously it doesn't affect our operating margins.

Okay. Thanks.

Our next question is coming from of . Rick, your line is live.

Thank you. Hi.

Hi Rick.

So could you, I don't know, tell us why you're for so much longer than everybody else in the industry? Is it geographic, is it brands? What is driving that? And as a corollary, you know, why do you put service and parts sales growth as an average?

Basically I'll answer the first question first, Rick. In terms of new vehicle sales. You know, we did have a really accelerated decline in the first quarter of last year. So we've got very competitive comps. And I know our regions are improving faster than the rest of the country. I know on our we emphasized that we were early in in the recession, hopefully we're early out. And this may be demonstrating that. It's too early to know for sure.

And the second part of that, in terms of service and parts, we had unequalled date of order, and a couple things missing in service. And Easter ended up in March instead of in April. And that impacts our costs and our sales rates. And it's enough to make that difference. We're very satisfied with service and parts growth.

And any comments, Sid, on April trends? Are you seeing the same sort of growth?

No comments, it's really too early to tell. It's on track, certainly. Not exciting.

Does the new '02 guidance assume the acquisitions that you discuss?

Yes.

It does.

Does that complete your question, Mr. Nelson?

I guess that's, one follow up to on Denver. Did you discuss that in detail? I was wondering if you could comment on operating profits year over year in the first quarter?

The profitability there actually had improved, because as you see the decline of new vehicle sales, the mix shift that there were some parts in used cars. And so profitability is better, but sales were down as we indicated earlier. And I think had the same thing. Their profitability there was up, but the total market is down substantially, so.

Great.

Things have improved. We are seeing signs of an improving April. And we've done a lot there, too. We're integrating those stores, you know, on a full faced basis now that stepped aside in operations. And we got our teams in charge there. And I think we'll see marked improvements as some of our systems kick in, too.

Thank you, sir.

Thank you, and our next question is coming from of . Your line is live.

Good afternoon, guys.

Scott.

Afternoon, Scott.

One of my questions has been answered, but maybe you could just give us a flavor on the incentive environment, if that's going on, obviously a lot less than what was going on at the end of last year. Many people were worried that sales from, I guess, the future. It appears it . How much would you say discounting is going on right now as opposed to the fourth quarter of, on a percentage basis, if you could somehow quantify that. And also which of the are more than the other?

Well Scott, the incentive climate, you know, really didn't change materially from the fourth quarter. We really have it about the same incentives that we had in the fourth quarter. They've been refrained in different ways. I would say the most aggressive right now is Chrysler. I mean, they're really stepping on the pedal. They're doing whatever it takes to match GM. And that's pretty much just strategic decision on their part.

So anything that GM does, they respond immediately. They're not giving up any more share. And I, we see that in a recent announcement. They did a announcement yesterday that's huge. It's a retroactive program for another $1,500 dealer cash on each unit if we hit the target. I mean, it's, you talk about each manufacturer, they all have something, and it may be where they're slow that they're pushing.

And Chrysler's, you know, a little slower on minivans, so they're really going to ramp that. Because they've got really good products in minivan. And price can drive it. People will buy it, even over an Odyssey if there's a price difference. And we've seen these shifts go on for about the last six months. You know, more aggressive than we ever have. And as I stated earlier, if those incentives soften it means the sales are good. So we don't need them. That's the neat thing about the model. It works, really, either way.

Yes, usually a pull back in incentives, that's an indication that the in demand is getting stronger and manufacturers no longer need to so that's not necessarily a negative.

Our grosses normally go up, and just in the natural place in the market place if incentives are strong. I mean, if incentives aren't strong, that means the demand is strong.

So they all as long as there's weakness. You know, in demand will drive it up.

Does that get you there?

Yeah, that's pretty good. Thanks. And Jeff, did you just give what the current share count is on an absolute basis?

Current share count after basis is, it's 18.5 million shares.

Okay, thanks a lot, guys.

Thanks, Scott.

Thank you, and our next question is coming from of . Your line is live.

Thank you. Well congratulations on, I feel very repetitious in the fact that every quarter congratulations.

Well you're the first guy that's said congratulations, so thank you, Dick.

Okay. And to you, Jeff. I can hear you laughing in the background. A couple quick, most of my questions have been answered. But number one, in reference to the estimate of $1.87, I know, just not quite sure what your answer was to this. The acquisitions to date are included in that. The further acquisitions are not? Would not be included? Is that the right interpretation?

No, the further acquisitions are included, Dick. We're estimating another 300 to 600 million that are included in those.

But remember, we only get the piece of that that flows in this year. We'll ramp in the next year. But anything we buy now is only going to give us three quarters.

I understand. Okay, second question would be, have you increased your credit line, and this is an equity offering, you're just giving the same credit line

Our current credit line of a $130 million is totally unused. And we're at the point of where with the new equity we're able to look at renewing that line and possibly increasing the amount. We actually would like to increase that, and that's our plan.

The trouble is, we need more money.

We didn't use our acquisition line very much, so.

But they don't now how many, how grassy we might want to become in terms of acquisitions. We're going to try to increase that line, we're working through that right now with Ford Credit. And we may for a club and include some of the other manufacturers.

It's what we have, as we stated in the call, you know, we have enough capital to acquire nearly two billion dollars in revenue. And that's, you know, nearly the . So you know, we certainly have enough capital right now, in terms of cash in and credit lines to grow, you know, for the next, the next year or two.

Well we should have that new line completed, Dick, certainly by October of this year.

Right. Thank you. Again, congratulations. That makes it twice.

Okay, thanks, Dick.

Our next question is coming from of Genesis . Dough, or line is live.

Thank you. I'll say congratulations as well. I just have a couple quick questions for you. In terms of incorporating acquisitions, end year guidance, what have you accounted for in the of those, when those acquisitions will be closed?

We've done it pretty much evenly through the remainder of what's in the year. And, you know, the timing there could take it to of the 300 million, which is low end. It contributed about 150 million to this year. Just take half of the 600 million, on the high end, and that would be a contribution of 300 millions. So rough .

At this point.

At this point, yeah.

Okay. And then just one question on your margins. Because your gross margin was excellent, like you said, top of the crew. We're still not seeing that flow down to the operating and pre-tax side. Do you have, will you expect, I guess, sequential improvement each quarter throughout the rest of the year?

We were sort of looking for that, Doug. We think that, normally this is our lowest quarter. And in that mix of new cars, we're still high. We didn't get that extra gross profit on the front end, that we normally would get it in a better mix. But, you know, that's the business. Because aggregate dollars, we're still great on an earnings per share basis.

Right, okay.

Yeah, we can definitely see, you know, that our targeted, or operating margin, if you look at our guidance for the year, it's 3.1 to 3.3 percent.

We're still with that. We still can exceed that.

Yep.

Okay. And then the final question is just your penetration rate on your F and I. Has that stayed pretty consistent during the quarter?

I don't, we did 75 percent.

75, okay.

Which was a percent better than last year.

So it's very consistent. Most of our stores, a lot of them, over 30 percent or 80 percent, so a lot of that, the new stores, aren't doing do yet. But we think we can get 80 percent.

Okay, excellent. Thank you.

Thank you. AS a final reminder, ladies and gentlemen, it's one followed by four on your touch tone phone. Our next question is coming from of . , your line is live.

Hello. I guess I got to say congratulations.

Thanks, .

I forget, the I guess have been selling things after the horse is already out of the barn, like they usually do. I just wondered if you are able to work around this, or to what degree this will be ongoing?

Well we still got the one to even, and that's the great we were really only point nine from last year. So we have seen a material change. Most of that was from Ford Credit, quite frankly, and they weren't really a . They really tightened up on used car financing, you know, just generally. So we've been spreading that is still there. We got several other, Western Financial Service is doing a great job for us. And I think they can pick up a lot more. And they do reach down into that you know, category of customer.

They really don't do a lot with the D category, anyway. And that's where you're probably seeing the most tightening.

Right.

This is really hard where our diversity of credit source works to our advantage. Because we, that's one of our competitive advantages. We have 70, more, different lenders that we use. And it's normal that some of them are pulling back and some of them are more aggressive at the same time. So the more lenders you have, which has been our strategy all along, not to focus on just one or two lenders, because that can really hurt you in .

So I think that's why are used, same store and everything, you know, we did perform better than the group on the used car side. Because of that diversification in our lenders.

We have a great partnership with WFS Financial. That's a good company, because they still have services, which is rare now. Most everyone centralized that, and the paper goes down dramatically when they centralize it. They the paper.

WFS has them?

WFS has a model where their stores are accountable for the paper they buy, they collect it. They know their customers and actually succeed at a much higher level. And because of that they can buy deeper. I mean, we're really pleased at their performance right now. you got to find somebody that will take those people.

Okay, thanks.

Thank you, .

Thank you, gentlemen, there will be no further questions at this time.

Okay, we'll close the conference call, and thank everybody for listening. And we'll look forward to another successful quarter and talk to you later.

Thank you for participation ladies and gentlemen. This concludes Lithia Motors teleconference. You may disconnect your lines at this time, and have a good day.

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