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Group 1 Automotive (GPI)

Participants
John C. Rickel Group 1 Automotive, Inc.
Peter C. DeLongchamps Group 1 Automotive, Inc.
Earl J. Hesterberg Group 1 Automotive, Inc.
Daryl A. Kenningham Group 1 Automotive, Inc.
John Murphy Bank of America Merrill Lynch
David H. Lim Wells Fargo Securities LLC
James J. Albertine Consumer Edge Research LLC
Irina Hodakovsky KeyBanc Capital Markets, Inc.
Nicholas Todd Zangler Stephens, Inc.
David Whiston Morningstar, Inc. (Research)
David Tamberrino Goldman Sachs & Co. LLC
Call transcript
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Operator

Good morning, ladies and gentlemen. Welcome to Group 1 Automotive's 2017 Fourth Quarter and Full Year Financial Results Conference Call. Please be advised that today's conference call is being recorded. At this time, I'd like to turn the conference call over to Mr. John Rickel, Group 1's Senior Vice President and Chief Financial Officer. Mr. ahead, go Please Rickel.

John C. Rickel

Jamie. you Thank

correction the earnings we start the data morning XX. absolute an advise published diluted was diluted adjusted income, was the numbers. the me share presented XX X-K in that, is Affairs. income Pete as want We net and percentage of corrected With part adjusted Manufacturer are see published President on Mr. to the what share, previously adjusted release percentages to income Public other was tables call, We'll one turn What there press over for our percentage announcement, Financial correct. with this let our is The The to did I that Senior want of adjusted per highlight DeLongchamps, Vice that numbers earnings Relations, page were of Before was that is XX.X%. we as XX.X%. for XX.X%. incorrect. changes change net The our adjusted is in per and issuing it number XX.X% correct. correct Services be All published correct

Peter C. DeLongchamps

been morning, to earnings on welcome that this call morning refer everyone, to and today's comparison call. related Group to posted to have The the reconciliations include Thank John, a related you, that results release will we good this issued X's presentation we and and slide the website. purposes adjusted for

Automotive Safe statements made during forward-looking some measures. call, of are made of Litigation pursuant for and use financial Reform the Private to Securities conference provisions we Except Group Act management that XXXX. to Before of statements statements begin, mentioned information of like brief the the X by remarks forward-looking Harbor make are about I'd historical non-GAAP the

the are company's Commission last not but the involve available and results. volume and company's of filings Those unknown associated with conditions Exchange the the XX differ company. risks with from include, markets. limited results of the filings pricing, are which both the the forecasted materially in months. known risk these Copies Those from both periods actual cause statements Securities future described to, and and SEC are and risks uncertainties, may and other in risks to Forward-looking over

In addition, defined certain under rules, as this non-GAAP discussed call. SEC financial on measures, maybe

and As John Financial Chief of any non-GAAP Earl financial required on company are comparisons President directly Rickel, note of reconciliations unless and to stated. Officer; Officer; Participating are President GAAP to and today the President Corporate call me by measures Senior website. Please the prepared applicable all Earl. Executive rules, SEC Daryl the now Vice our on like to measures the over provides call Chief the Lance comparable its I'd President most Kenningham, with prior-year our hand Hesterberg, U.S. Vice our to in otherwise remarks Controller. our the same and Operations; such period, Parker, that

Earl J. Hesterberg

resulted gas of year, our drastically Texas our heavy employment changed the our from markets. Oklahoma first can energy in reminded events. even market in be dynamic performance late by most the continuing a reduced our single-digit Texas good oil high and Harvey. and economic, of dramatic retail drag market Texas to our markets it be South our employees. a business and negative a in lower importantly, in almost the most in many in XXXX vehicle morning Throughout of used of U.S. of The a million situation of levels $XX can the to auto business the August Pete due of impacted Houston us again and you, lives throughout of important new seriously devastating which XXX in was resulted year Thank the and most how weather-related and footprint which This Hurricane eight in how factor months was key everyone. impact impact prices, and This significantly political, our storm markets our more and the in Southern decreases changed sales year. had

Of course, following our demand upside. in early and as storm, months our of especially September, the to October increases experienced vehicle key significant the replacement November, Texas markets this benefited some sales business

of Since XXXX, UK onset Our events weather-related the second events. escaped a in uncertainty has not consumer political leaving weight consistently Brexit the grown of the EU the business but major political on confidence. of half

is sudden has substantial created all to consumers. causing a and the the market effect of on which the massive X% impact for of a from the even diesel Additionally, vehicles the away future vehicle possibility tax UK decrease on issue was on for shift with also diesel for in vehicle VW greater many market exerted weakness the purchases This brands. net changes sales The with full deferral a of structure, QX. year, industry

the positive have market improvements improvements, better an vehicles revenue the on throughout X% to of they softer Group and experienced billion, bode the drama of well and currency XXX,XXX this $XX.X to fiscal seem economic With X% brand local record course, new and XXXX, auto an announce a year signs Our political increase is operating diluted XXX,XXX for earnings things the an of present. constant adjusted the a time. market industry. X are recovery the late saw basis. Group us year for background per of sales record over a a which of to complex all-time year first mix than share X proud and $X.XX. of many ongoing of the in challenges, We the used And retailed in few approximately increase for reported Brazilian all and has some full quite it allowed but outperform we're strong delivering market to at and

up with and insurance new our vehicles up X% rate components service For across business despite exchange X%, the up finance each X%. vehicles full year, reported X%, and increase revenue up used parts and headwinds, of

previously of work team over the this U.K. growth energy mentioned associates. our Given headwinds markets, our board represents Brazil, by XX,XXX the and in the across good

share, fourth our XX% an was quarter as $X.XX pleased last net diluted This of of quarter. corrected XX% release, increase million to over fourth number year Group of X which cost strong report our to by and equates the quarter mistakenly XX% driven earned as That that record income original to mentioned. $XX.X just control. John adjusted Turning EPS for adjusted per growth I'm recorded revenue was fourth in results,

not So the fourth XX%, by increased EPS quarter XX%. number

a of record X% to quarter $X.X So revenue increased fourth billion.

Turning to our business segments.

vehicles. retailed X% increased sales. consolidated constant on new slightly. profit up average increased price new vehicle as gross as new new profit X% the per X%, Total unit Consolidated selling unit currency we of gross During combined the quarter, more revenues a with basis, was increase X% a constant on over basis, vehicle XX,XXX currency vehicle

sales unit was XX% geographic new Brazil. X% Our mix UK and U.S., XX%

Our new XX%, our accounted was and XX% of our which for Volkswagen/Audi of mix of vehicle Ford brand vehicle new unit sales. sales, our led unit represented Lexus represented new XX% by new BMW/MINI represented Toyota sales. XX% vehicle unit sales vehicle

per X% on refilled of partially we a used more on average consolidated by warranty constant X% increased price basis This XX%, used of unit currency Total consolidated by the in used on an in insurance During driven consolidated decline was X% offset of unit wholesale retail over Total parts selling growth of of retail grew units X% revenues a of gross profit gross and basis. vehicle parts currency was XX% profit retail increases quarter, and a retailed as vehicle as retail vehicle and customer gross retail constant and we X%. on constant constant XX%, profit X% revenue units. increase the by for collision unit of increase currency a increased basis service increased Used and increased units currency X%. a X%. retail Finance F&I basis X%. X% driven pay XX,XXX

and to U.S. our Kenningham, Regarding President fourth our the segment to geographic cover turn UK the like before Operations Brazil. would I over Daryl results call of quarter discuss I U.S. results, to

Daryl A. Kenningham

Earl. you, Thank

for and unit. eight seventh quarter But carried revenues demand quarters that vehicle revenue of profit to the grown slight a December. increase, X%, that were registered on per X.X%. impact in while our grew believe we that we margins, Houston new QX Beaumont replacement Our same-store the Relative past the markets. our of and to U.S. Harvey Relative entered quarter Hurricane U.S. by time profit driven the unit as service the marking we same-store was beginning gross dealerships sales of again in our up growth X% parts vehicle and new have new at business, fulfilled the vehicle increased gross X.X%

inventory to continue a vehicle hold We at level. new reasonable U.S.

end, focus another yet quarterly an driven year business our end which reconditioning of departments. to was contracts, to at service increased margin and quarter parts less by point product was of internal digit This days X% customer into unit X%. warranties store $X,XXX. increases of $XX parts record the guidance and days, decline to parts store quarterly entirely the of from XXXX. down Same more wholesale all-time sit mainly of partially Our increase, F&I supply a X% mid-single on XX,XXX work. through procurement benefit per as units same in inventory penetration, collision increased U.S. a effect same at gross at the largely XX for year-over-year X%, basis delivered service XX due by by maintenance we our to XX%, driven decline up when maintain This equates back X.X% store a increased increase growth We of in our unit revenue second offset intense per U.S. Total our of revenues revenues parts was retail bringing XX.X%. extended wholesale service and placed and customers processes. increase this profit at and of inventory warranty X% gross pay XX by mix

replacement of prior with used in inventory. post-hurricane vehicle inventory a used in selling exceed ultimately levels. a those vehicles, the margins resulted the which of of lower in supply lift cleared earlier used is quarter too Harvey loan which Our but profit our much same-store We area on procurement XX-day enough a level as units. was to resulted decline, down bit basis. rate Also, Hurricane our reasonable business year did not strategy year, ended gross stock, we versus the vehicle the demand X%

believe XXXX, forward there and initiatives strategic grow of to used opportunity underway. results have to several we is the For our business look we ample

and I'd employees the turn U.S. Earl. day, Lastly, work great to the to our do every I'll over now call like back think they X,XXX for all

Earl J. Hesterberg

Daryl. Thanks,

vehicle operations a QX UK well in sales performed very Our market. new in

parts and in we by XX% F&I declined X% gross Our which and same-store market strong performance. overall overall, new vehicle service profit and unit same-store sales an used with decreased X% grew car,

a realized XX% vehicle gross total we've Specifically, gross XX% X% and profit, used in increase parts in F&I and increase a profit gross profit. increase in a service

year new Total SG&A In currency Brazil, once a on to XX.X%. growth full cost service. same-store F&I, an in of significant is a despite management gross same-store of a increase cost our improved generated all gross and substantial increased also points in a of brand parts sales leverage total a gross to to basis our profit in as in local XX% the X% driven in continued portfolio. increased profit vehicle unit XX% to quarterly X%. For constant our favorable in XXX XX% growth via increase – and of a and by testament control XX% controlled industry This profit the in a percent used increase team able We're basis as our increase new and segments. XXXX, XX% decline we profit again both with business increase

the We well-positioned market. continue the team now that and in proud our to to will to be fourth call over more go take to advantage very financial some John done I of Rickel, CFO, of our turn our over are quarter John? local full results work of has recovering detail.

John C. Rickel

Thank Good you, morning, Earl. everyone.

year. fully our $X.XX, X.X% $X.X another Reform million diluted benefited after the $XX.X adjustments per rate to benefit record of for in U.S. asset This quarter by million. over with of approximately Bill or a non-cash yet corporate adjusted comparable adjusted result. the $X.X share the XXXX quarterly increased charges to results, quarter net we basis, On XXXX million. tax to income increased results in XX.X% $X which primarily prior our of company results related tax offset impairment a the partially a $XX over earnings XX.X% fourth consolidated million. the reduction net was approximately These income for exclude Starting $XX.X billion our quarterly was which Tax increase for quarter, in the For revenues enacted total XXXX, by net fourth generated summary million

million $XX.X ago to the from increased profit year a gross $XXX.X Our fourth X.X% or quarter million.

profit, higher all-time million, expense for is or an Other interest expense increased XX.X% million year quarterly the million. rates decreased SG&A $XX.X higher and as interest adjusted last increasing operating to XX% primarily This U.S. focused XX%, in the $X.X Floorplan percent gross basis record also equaled versus due the quarter LIBOR company. U.S. basis discipline from XXX quarter. $X.X increased As interest profit. improved SG&A remain in points was to flow profit on leverage attributed the of prior interest SG&A increase to cost by Brazil in XXX or $XX.X fourth gross to teams XX.X% to X.X% year. points through the where to particularly while gross impressive rates. million

tax for the Our year XX.X%. XX.X% adjusted was consolidated quarter was and the effective rate full for

We expect rate which If would the in year the and a have Tax operating been resulted cash and flow million and XXXX of would XX% company additional Reform in favorable U.S. over full per of over place additional have between total in earnings very benefit for from share. effective in XXXX, tax $XX $X.XX XX% beyond our Bill.

additional shareholders. about excited will for are benefits capital our We this the provide

liquidity consolidated to in Turning our structure. capital

a $XX.X of common repurchase another funds of offset on of had XX, $XXX did during our bringing stock invested accounts, that million. not million was $XXX.X As in December hand the We we and quarter. any immediately to floorplan available million cash total

For shares the an beginning of we common $XX.XX repurchased a at price with XXXX. XXXX, repurchases shares the outstanding average These of total XXX,XXX for represent X% full-year million. approximately the of $XX.X at total of

authorized As of used outstanding to have and an our quarter over during we of XX.X share, share yield remaining today, Also program. the increase diluted of X% of quarter, share and common $X.X fourth ago $XX.X board over the repurchase we approximately million per X%. pay shares dividends year fourth on per $X.XX million a annualized million

options allow in Lastly, ownership have the real nine our we leased U.S. XX% to ownership increasing December we to XX% U.S. end increase previously purchase XXXX. and in and by to real estate U.S. underlying dealerships, place our would January, us purchased estate the of of that

terms near control these pursue assets We will continue as over strategically lease expiration.

to of as please the presentation regarding website. release investor schedules financial on well detail as refer turn our over the additional For Earl. condition, our posted the to I additional attached now to information news will call back

Earl J. Hesterberg

was revenues. announced franchises El Thanks John. million company the annual Related are pleased to franchise addition generate January the Audi efforts, our to These Rover to and and have three franchises the $XXX Paso of UK previously purchase in the corporate Subaru in in development approximately of the expected Land Texas.

We all of expect the our to in strategy of continue course growth through markets over our discipline XXXX. acquisitions three of

shareholders. and sharing approximately have company previously tenured on support announced with We at benefit As we our total and quarter in be March Tax John provide this staff. receive pleased a our a employees will cost non-managerial million. results. were benefit payment will bill mentioned, that This material a the X bonus $X.X will U.S. U.S. Reform to our Approximately reflected one-time employees be will dealership of first X,XXX to $XXX

market our for me the call I turn before to operator update outlook questions, let your XXXX. over the Finally, for

in For from Total the sales new expect overall another units, X% XXXX new came in the XXXX. we million to a XX.X in slight vehicle industry. U.S. see at pullback vehicle decline

million in XXXX, anticipating another around are decline XX.X units. so We X%

million the X% record the XXXX to a UK, For million down declined in unit X.X sales industry XXXX units. in new X.X vehicle from

our million the to X.X a another for continue did same on the million with X.X will at between X% to to as combined X%. recent units. the in beginning we of year. market industry had sales XX% with XXXX. Brazil, us equate which our improved And the industry over market XXXX to and decline in path performance that allow would sales gain we from substantially expect anticipated the improved X.X exposure We more unit million Industry units, again the of to million outperform We X.X units of increased brand acquisitions the than of believe once

positive which to will this the increase expect Given we're concludes XX% to units we the call with million the industry I X% operator would X.X now and over economy, the equate of of trend in turn remarks. session. sales an the our begin seeing signals to to continue prepared Operator? another This to million X.X question-and-answer between units.

Operator

question-and-answer go this from question. the at Bank begin comes Please of gentlemen, John first we'll from with today and Murphy Ladies question session. your our And time ahead America.

John Murphy

Good guys. morning

to ask you, wanted three the question sort tax from Just of different angles.

benefit in as that after than your could little are so tax retail is seeing think sense? savings those you down, you in strategy of picky should better will or And kind going past returns much were Second, that more could first, then away? how bit – it know You – change might a as more they acquisitions small bit be the tax third, sales make because there of picking it aggressive up? your are a you are on competed from be far tax retained, be is any business the little any because they acquisitions because making be be now rate do

Earl J. Hesterberg

Earl. it's John, Hi

Unfortunately, to the I in all, Certainly, any some. most expect us It's very market difficult UK late actually if the time and there there's in overall vehicle I market. generally what and really is. – development. of incrementality market this February, Brazil know and and recent January tax will be and say the from before U.S. it's I new factor year, it's kind we years, businesses think see impact where of do of for too would February have the tell from the early positive a actions. to market First in sales such the March well we both as and

So our capital business, so be And that's the the kind us that generally continue available of to lead we first grow to prefer deployed to acquisitions. would part. with

tax in stronger looking acquisitions, Clearly, a put works a when to math on also need at not mind, one. individual the U.S. the to demand should line we looking us U.K. and acquisitions. at in we're that is acquisitions trend way that market positive but you're total is look at So positive when the the a position in bear benefit the

So a business say that I so of that these probably buy to look going make more by mitigates it – to wouldn't our us to in three all is and but do prefer grow to that. bit, markets itself overall, we dealerships. continue But factor we'll

John C. Rickel

this Yeah, this John, other pretty call. gets job of competed your Rickel. last I answering question this actually do is Jackson about, did week we think On on think a away? John Mike his good

If of owned through organized of you entities. vast those, look majority the pass vast those in most kind the cap the as majority the at dealerships of by U.S. the are of data, still private are and

to to the on from pass rate point. same to if whereas they're through will of of not get you we're dropping kind level XX% XX.X% So XX.X% going got, implied Their that basically first tax from that's the XX%. are go benefit we a

a basis, organized benefit to on way. somebody we're So get relative than that going more

And the day-to-day level. operate these, plans away, owners into so compete is of important Most doesn't PTI, are of day-to-day they're to that the tax the get owner's not PTI point incentive an of if at more bill decision really not really dealership second really decision at the their operators. the on going the making have to the kind The dealerships level. are

John Murphy

of to this the be horse or used us can some around used. too change anything reading That's And kind point very comments? alluded but question. Then in initiatives might putting or here, with much second like I you be the sound shift there just Daryl, some I the am thought there cart before does share Is you into the at strategic your might process helpful. business. around a it

Daryl A. Kenningham

some in us that help it's but used grow network, used. car about started opportunity initiatives talk that acknowledge will detail early and in some on our Well, We to and us that we've we're it. we work but working for inside them, hard business have – on too

John Murphy

F&I, I ceilings $X,XXX there here, strong. kind Okay. in just I asymptotic that's U.S. to number or particularly And we mean, we're big said then keeps this? you further? at very on know, there push reaching year-over-year, I the but of Is a that was limits think lastly, Are and Pete up room $XX. mentioning

Peter C. DeLongchamps

to the record was a on services countries in job great our all John, clearly, quarter's team I this think three Well, do of continue strategy performance setting. executing financial and

the good car for but It's number forward. We is our still are with used a hikes outperform, to, I is as Daryl clearly that intent to think to number PVR, mid-$X,XXXs,= inevitable, rate probably our alluded moving modeling. probably business, and interest your a plan increase

John Murphy

And same is the more and ... the there a less difference between new the used or generally they F&I are on or PVR the

Peter C. DeLongchamps

You money new the make on more business.

John C. Rickel

$XXX is a new being is about It's with more John, John this unit lucrative. little a between new and used delta Rickel.

more have with really extended particular on contracts service new the in We opportunities units.

John Murphy

Thank very guys. much, Great. you

Operator

Securities. your next from from David Our comes with Fargo Please question. go ahead Wells question Lim

David H. Lim

and Sheila. Hi, gentlemen good morning good morning

the came secret are I there down you a doing? you color question, lot first have it in give What's SG&A on can us some the the control, the guys the year-over-year? quarter? for cost What sauce So achievement is, a

Earl J. Hesterberg

and struggling started secret we reduction actions the team, and say – David, sauce at year we Daryl they started aggressive year. was I the Well, beginning the markets our mostly out with energy really very should of last his cost

some and had had in other months of hurricane also but the Boston So replacement like of four or in first business business. some markets. it better seven months were eight or our the then in from cost five clearly, year, some the And of last year, the of places improvement stripping we Southeast the demand we the we out was and

the helped on leverage or been year. the efforts working six And months so for team that gross the as really it reduction U.S. a of the cost eight we first had profit, had

John C. Rickel

Rickel. John David, is this

great other team would as And things they The on cost that is on a inventory levels though a to I down. that Daryl one part great piece the job getting of add did of overall around with also the is did the job it's and inventory units parking along also and our control cost bunch margin it's whole of goes moving the much not of damage. the a it, just but that extra costs. too the lot, ancillary pressure, There's

some is of there that that inventory back getting benefit came normalized So to definitely extra level.

So I think that's another plus that us. looks to be sustainable for

David H. Lim

more So can quarters. that think future we the conceivably there's come in leverage to

to a this get how is XXXX? of progress trying Just throughout gauge sustainable

John C. Rickel

the Yeah. as again. David, function some gross of is Earl kind generation John To is it's it profit this degree, indicated because a your of ratio.

team gross of $X.XX through. to the the stay you profit, continue continue with to you dollar grow a flowing continue battle It's comfortable can on really on If leverage gross think cost. think I the you kind that. we focused to of grow still can We're profit? will can

can generation comes the profit really for the to view we it So down much how on do gross year.

David H. Lim

Understood. And then...

Earl J. Hesterberg

do this to months work larger of to in to Earl XX SG&A, have and the We've I lot recent XX with we're to relative lot our some the David, a level cost more to have work acquisition. do there. in grown UK. of streamline last of our cost happy and we don't current and think do a significantly we is

UK. the So I think to lot of we in have do work a cost

David H. Lim

of should prepared impressive industry. picking know going is on XXXX? that the really in there outperformance low-hanging talked The UK we performance or gentlemen into to relative remarks. about fruit you think I Is and it how the on this you're that about of So continuation that a piggybacking your lot

Earl J. Hesterberg

David, Ford businesses has when in and brands our even businesses and strong lot think it many extremely UK to falling dramatically. with a were I the remained mix Audi Well do brand our falling other

So some mature that now. years is had and we XX UK that, businesses and pretty to for are some have resilient part our a of we've also in the of it up that more

factor the to the that's outperform think in been market us primary XXXX. allowing in I So

David H. Lim

final the my you're acquisitions is acquisition, given of to the more then backdrop Brazil and when maybe And it comes in Thank Understood. question in is, to it UK? that so industry some assume safe targeting the in you. U.S.

John C. Rickel

David, We've resources markets. this open would is we're all say opportunities three got and in John. the all pretty three looking financial at We're opportunistic. we're that markets. in in I three all

David H. Lim

Great. Thank much. you so

Operator

Edge. from next your Please question. from ahead Our comes question go with Jamie Consumer Albertine

James J. Albertine

good you Thank and on congratulations a everybody quarter. and morning Great. great

Earl J. Hesterberg

Jamie. Thanks,

James J. Albertine

you're maybe or a efforts elaborate how that that you years little Thanks. play bit things spend quarter on on this Could can? upon the in and early the seeing a some the of centralization of the want can of seeing if the trends time into several part some some fourth conversion we if and of over service, maybe quarter past update of out us parts first little just in to you're the of and undertook nature? unpack bit you terms develop customer you And retention, year,

Daryl A. Kenningham

we parts trends really pleased The business. quarter, Very that. with in good the fourth saw wholesale growth in our

business although and is as not much Our collision quite grew healthy. as warranty well safety grew but our also

led it. board saw of we area growth. one across that wasn't So It sort the

some Houston. in try center of leverage call our to centralization Development continue Center we with to that Business of terms area, In the and

to that continue specifically leverage new talk We more find cost ways profit don't that, to we leverage yet. want to across opportunities gross and

business still retention we see a publish. is are great But we we the and our incrementally that that. that numbers service, Some new have feel is deal leveraged still to from we we grow that – we've – see customer customer but found at it's we of that that our there helped also retention and fairly opportunity them like more

James J. Albertine

at on the good Very would fourth an a and anomaly, them question prior to if be, and used. saw side some car new little time. about see would characterize a that a you talk question quarter may trends follow-up as Okay. you I as Can my quickly same inventory you bit the focused vehicle spike did average think a OEMs, of at the prices the we lot in move higher time, and same than to vehicle incentives on had post-storm, used I new through

as just fourth kind or So any would forecast can you do anomaly. And quarter we form trends that us you color shape if give you as on way if used characterize January maybe in normalizing Thanks. or wondering XXXX? of some an see into

Earl J. Hesterberg

Okay. monthly in This market the payments because sacrifice we that kind than at new versus opposed the observation reports used most to hurricane used took, our in vehicles that's markets, used was values holding more and some residuals many the expected. of of which market even in toward into the realign on the of across weak is relative new bit got certainly the And was a January a replacement the we was is then cars pretty our strong. Maybe recent the well too little and that. as in still And day impacted Manheim such like used. basis even show in typically. demand there skewed of month But profit good there the is market. Earl. up impact supply We hurricane actually country still Yeah, brought distortion end attracted a to are used we

level. think hard to about to it's year sales opportunities be will an I opportunity sales. but So part work increase in business it present know And will will be used, to that at of margins be going the pretty to going us but the I current forward. highly a you good maintain would competitive, for think continue that have It the to strong this will

James J. Albertine

best luck. and of good. Thanks again Very

Operator

next comes go Irina question. KeyBanc. question from your from Our with ahead Please Hodakovsky

Irina Hodakovsky

rest the that? understand for Thank business around country? the to relative A outlook, and the perform everyone. hurricane and December How market. Texas recovery us the January you your questions the morning, couple exclude disruptions if you of Good in you. after did Help

Earl J. Hesterberg

Irina, factors. Earl. market lot a Texas have this is does of The improving

energy-related the of ago what earlier, sure we December. months late are a sure does demand, a exactly early But bit March. I As after can which we recovery the of terms activity get yet. better marketing it there's it in be not was tell we energy these small than yet, even for we I'm any that in little or markets year mentioned in probably of evaporated a can't and say November hurricane to of lot current end but state But until December, have such the seem are to

For example, year year XX,XXX zero and in XX,XXX the Houston jobs did year, last the have before. previous

jobs But yet. the no going, related. confidence markets, really Texas appear it even up least in the doubt is of are So that doesn't more picking that there yet seen are energy at but there's hiring these the consumer any we haven't though energy

optimistic are the should in the base XXXX sales a markets we improve into to move that Texas energy as we level of bit. start So

Irina Hodakovsky

versus look Again opportunities, UK, rest the XXXX into previously at you did, vehicle mentioned And view substantially at forward also the in UK you've you your and in how the Thank volume versus of that. on been outperformed looking how going you do same-store when industry especially a basis. the used industry you market? for the the used focusing outlook new volume

Earl J. Hesterberg

is Brexit Well, the UK really pretty all and in Brexit now the some about every headline plate there negotiations. March the much but related, market Again is UK. it's the month sensational change day is choppy right

know going there is weaker the clarity have lot really be just overall, become we expect fairly I it's to to change what come of a have the clarity don't quickly. quarter. month. until see we in we But until on opportunity first operational Brexit March So do I and because don't plate expect we've we that large

the certain on are do low inflated really U.S. When dynamics business volume used in The new There new a fleets, increased work lot the in very gets self-registrations, the loan going on to increased used pressure we're different a cost. is the is of quite the mileage, of that virtually because UK it car from vehicle zero into with there's service demo So of market. car UK, business mile you that used with fleets and lot brands a cars. end up cars, pushed activity is of market

And so the is vehicle growth really substitute much in vehicle seen that you've business, new used the dramatic of business.

Irina Hodakovsky

as the showing Got the around the kind that for fourth a What sustainability unstable. look last and you plans Brazil. it. of improvement, XXXX? And signs we're your to of you us are further of can you move that for the at quarter the XXXX? we as instability Brazil in seeing as of growth into of mentioned but lot signs signs still relate what And some some politically then of has question are Brazil of been

Earl J. Hesterberg

lowest in going year presidential Absent nice lack the to really is be The dropped is who and the are go the that been. market whether a been There friendly called SELIC rate the interest clarity only the will who swing one business on they the on election. Dilma about very auto oriented. or market this replaced president, presidential rate would on president current is interest sales the Rousseff, and rate point, ever factor that not. to Brazil business how the and of prime days and primary be very trend be ago that, recovery At continue. this impeached – two it's has will the prime will friendly The again candidates

that So friendly there If fall. right the this some become a business candidate friendly recovery a now, nice we're very on is market next will path. hope president

Irina Hodakovsky

much. Understood. Thank very you

Operator

question with question. our go Stephens. next And comes from Nelson ahead Please from Rick your

Nicholas Todd Zangler

weigh Rick. is more activity for beginning potential you this pricing. flattening last days, to From comments some the versus more better elevated positive months, sellers? we is acquisition in Zangler you XXXX? Nick on guys, on in competition, Do pipeline, in six pretty SAAR heard XXXX the activity the the And these acquisition think last on see do Hey XX some

Daryl A. Kenningham

history we where are how us, dealerships in Well, But want I do grow. be think as out right prudent you are there. can tells there grow, we to as buy you better plenty many we and now,

would are So say cautiously. forward I think plentiful, the I we'll opportunities move but somewhat

Nicholas Todd Zangler

of or cadence maybe could be the the hurricane? on detail timeframe? when year. just effect little tax market first Texas a there then sales as full a into you from do in a November-December normalized question pull-forward maybe more expect in Texas going And to the chance lull And the even related provide just bit you to for maybe on or year quarter – really you. Any this the that Got one a

Daryl A. Kenningham

to hurricane demand got business It but we incremental December, still more There from in replacement. we some second replacement to see by Well, may visible had us. hurricane of couldn't I in see there, became early difficult the time the November. certainly November have any that to half been was

and I small mentioned throughout these most are driving earlier, are tell is As months the just in the But Texas, factor that's to confidence it's we February number important improving and know what hard market. consumer in one auto the January that like as thing the awful sales. factors volume is that

Nicholas Todd Zangler

guys. Thanks, Great.

Operator

Morningstar. your ahead go question from comes Our from Please with David next question. Whiston

David Whiston

still I'm tough vehicle guess, U.S. new totally on I clear keep How did you it despite morning. the Good not Thanks. incentive GPU a environment? growing your being

Earl J. Hesterberg

something And we as It's a the was down vehicle also brands Well. help and gives that our some we some leverage. that quite in us improvements profit focus is to level. also That bit, thing day us when inventory drops helps on that saw well. every more certainly something one gross

David Whiston

Okay. you cost efficient few in Are you structure margins where see out over talked or going time? maybe And to at you say the UK. time, about able there an a years this

Earl J. Hesterberg

of story UK believe in is I one more supply the margin the demand. Well, and

production. dropping reducing from manufacturers have this not addition Brexit-related have in to several In demand been uncertainty, reacted there quickly who enough the

will us, have a margins. of number we plays that's that one they have factor told reducing see the Several to these OEMs out. are how but in production determining So

does how So adjustments in see be to I'll out. plays need to have that There some regard. that

David Whiston

doing Oklahoma question also for your doing see about of but lot for with generation a whole maybe early this do more for customers new the year, that you the are customers more old especially one new or the just going generation trucks, Ram truck? the getting value generation, Texas, buzz fairly pickup old year, on you And with

Earl J. Hesterberg

a more up truck, more always new Ram value market model. and component. value-sensitive. can of buyers drives and Well, the there's heavy a that a always Ford you I that, many specifications previous very the goes think velocity it's there's equipment truck dramatically truck the whether increased Motors on we price are see in so truck, truck new Every sales are see truck, General and these, There these time

always we a see there's when major model that shift. So

David Whiston

Thank Okay. you.

Operator

question. from Tamberrino ahead Please Our Sachs. go comes from next question Goldman David your with

David Tamberrino

partners seeing seeing heading products incremental you market Great. you segment? of is in playing support? Are you're I OEM crossover for continued out this morning. levels Thank they're in we're of year, expectations probably relationship rising you from your demand good two How launching new that to softening I into and hear environment. the think wanted what particularly Are to as getting share XXXX? year

Earl J. Hesterberg

our get most the which of level better I'm one through better with. seem appropriate inventories year of the particular. we down continued in BMW cars getting brands model that for the of much the rebalancing Toyota the that They our of done last some more a thinking trucks major to helped fourth optimal the and have be job demand problem end things market. is biggest That's and SUVs mix that deal at such of the us the think to an of does getting versus within I Well, in quarter.

slow is toward in But last seem to OEMs the start does the months. a February see how sales quickly able to that The is react March. has SUV Now, because over new that are have to year, again all rate to and build, we well January we a this inventory and truck big been many in calendar they better. tends and over problem two getting years and shift for be been haven't to

Daryl A. Kenningham

true. did evidence that's the well. And products Camry launched, think quarter fourth I that saw Accord you shrinking in new well, the in new a Difficulty] doing it great are (XX:XX) So doing theoretically and was segment is the [Technical and

So incremental I drives volumes. still think product these new

David Tamberrino

an will? that if expecting availability. within those intensified to have competition crossovers it you you segments, call Are fairness That's the greater

Daryl A. Kenningham

and for today and more great there more Well, entries is coming. offering more offerings sure

growing but is So segment that also crazy. – like

at time we think going to in industry the was XX%, in SUV. January it's every know to and You XX% think I grow truck

more grow. is to there it seems still room there like So

David Tamberrino

that experiment it. dealers in that Got that ride one your world? And the a from supporting off that with a standalone that. the of that your agreement right an in branched of as is strategic your perspective? competitors working one could seen We've AD partners platforms ride-hailing also hailers then a the something would you're and discussions potentially of a in from Is of lone it now Is used, consider? up vehicle maintenance. OEM the couple And maintenance with come some announced hasn't vehicle you with with rest Ubers think something really seen I of for from standpoint, perspective the

Earl J. Hesterberg

Yeah, things I because interesting to of just market. think are come these the change going all to there is

both the looked standalone know and some tried we've You operations closed of quite past. in have Asbury their believe, a bit. that I at Lithia and views

closed think, I one AutoNation about more or ago a decade also.

into a not of there servicing aren't various people want Thus also, back So toe certainly on dipping and like real very and experimenting entry things only to the and And many lot that which things. ride was those studying those successful. who's really types the into interesting We're we seems water which into it been has who considered. is be bank barriers success one forth. to you obviously, with it the to expansion that fleet concept. far, we've see, There see sharing and know, their the of so concept

we people and lot are money. with studying things want those there's discussing for of them If a investor money, looking board. yeah, you our But

have how trends for to we a don't the shareholders make interested. exactly those just interest, investment our know we but into some reasonable of So emerging we're

David Tamberrino

you. Thank the insight. appreciate Understood,

Operator

conference to gentlemen, at to remarks. closing additional time, questions. management back like and ladies showing call any the no I'd for And turn this I'm over

Earl J. Hesterberg

forward everyone Thank in to first for us joining Thanks April. today. Okay. look quarter call updating our We you. to you on earnings

Operator

conference and today's gentlemen, Ladies thank does you conclude attending. that We for do call.

now disconnect lines. may You your