AutoCanada Inc.

Tom Orysiuk - President and CEO Pat Priestner - Executive Chairman Chris Burrows - VP and CFO Steve Rose - COO

Steve Arthur - RBC Capital Markets Neal Gilmer - Clarus Anthony Zicha - Scotiabank Otto Cheung - GMP Securities Chris Murray - AltaCorp Capital Mark Petrie - CIBC Maggie MacDougall - Cormark Chris Bowes - National Bank Jordan Hymowitz - Philadelphia Financial Greg Keenan - Globe and Mail

Good morning and thank you for taking the time to attend our conference call for the first quarter of 2015. On the call with me today is Pat Priestner, Executive Chairman with Chris Burrows, Vice President and Chief Financial Officer, who will be providing a review of our financial performance for the first quarter, and Steve Rose, Chief Operating Officer.

After that, we will be opening up the call to your questions. Now, before we continue with the call, let me remind everyone that certain statements in this presentation may be forward-looking in nature.

I would refer you to our more complete disclosures contained in our most recent Annual Information Form. In summary, these included statements involve known and unknown risks, uncertainties and other factors outside of management’s control that could cause actual results to differ materially from those expressed in the forward-looking statements.

AutoCanada does not assume responsibility for the accuracy and completeness of the forward-looking statements. It does not undertake any obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

For additional information about possible risks, please see the AIF dated March 19, 2015, which is available on the SEDAR website. The first quarter of 2015 was a challenging period for the automotive retail sector in Canada especially in Alberta.

January and February in particular were difficult months and although we started to see the cadence of sales improve in March. We are now entering the second quarter.

A period which our sales volumes typically increase during the year, and we are cautiously optimistic in our expectations With that, I will turn things over to Chris Burrows, who will speak to the financial end of the business and Q1.

Thanks, Tom. Generally speaking the automotive retail sector in Canada improved in the first quarter of 2015 over the same period of 2014.

Overall, Canadian light vehicle sales increased by 2.8% for the three month period ended March 31, 2015 as compared to the same period in 2014. Figures reported as new light vehicle sales in Canada due include all types of vehicle sales including retail, fleet and daily rentals.

Fleet and daily rental sales are not nearly as profitable as retail sales and as the result the company focuses on retail sales and does not fully participate in the fleet or daily rental sales channels. The Company's higher sales revenues and total gross profits in the first quarter of 2015 were direct results of acquisitions made subsequent to the end of the first quarter of 2014.

Lower earnings, same-store sales and same-store gross profits are results of reduced economic activity particularly in Western Canada and Alberta combined with other operating challenges. As a group, our same-store new vehicle retail unit sales were down 11.7% quarter-over-quarter.

Our key operating results for the first quarter of 2015 are highlighted as follows; same-store revenue decreased by 3.5% while same-store gross profit decreased by 8.5%. EBITDA attributable to AutoCanada shareholders decreased by 12.4%.

The number of new vehicles retailed increased by 54.9% and the number of used vehicles retail increased by 71%. Repair orders completed for the quarter were up 116.4% and same-store repair orders completed for the quarter were up 4%.

EBITDA attributable to AutoCanada shareholders for the three months period ended March 31, 2015 decreased by 12.4% to $12.7 million from $14.5 million when compared to the prior period in 2014. The decrease in EBITDA attributable to AutoCanada shareholders for the quarter can be mainly attributed to the general slowdown of the economy in Alberta.

Revenues from all dealerships for the first quarter of 2015 increased by $269.5 million or 74.1% to $633.4 million from $363.9 million when compared to the same period of the prior year, this increase was driven by the increases in all four revenue streams due to the consolidation of the General Motors dealerships and the acquisition completed since Q1, 2014. Gross profit from all dealerships for the first quarter of 2015 increased by $42.3 million or 67% when compared to the same period of 2014.

As of revenue gross profit increased due to increases across all four revenue streams. During the three month period ended March 31, 2015 operating expenses increased by $42.5 million or 83.8% to $93.2 million from $50.7 million of the same period of the prior year, primarily as the result of the 17 dealership acquisitions and combinations completed subsequent to the first quarter of 2014.

Operating expenses as a percentage of gross profit increased 88.4% from 80.3% with the same period of the prior year. Due in part to a time lag that exists between business contraction and coinciding decreases in fixed and variable operating expenses.

The company diligently reviews the operating performance of its dealerships and utilizes the leverage of a large dealer group through due to its overall operating expenses. With that, I’ll turn things back over to Tom and Pat for the commentary on our outlook and expectations for the coming year.

Thanks, Chris. Management of course is not satisfied with the results of the quarter, notwithstanding the general economic challenges of one of our primary markets in Alberta.

We are determined to taken a necessary steps and improve our performance, which the company has pleased to a report that we have benefited from March and which although down from March 2014 was significantly improved and relative terms over January and February on a year-over-year basis. Management’s focus is primarily two faults versus on accelerating process improvement initiatives to depend its dealerships.

Particularly regarding online and lead management strategies and secondly devoting appropriate resources to take maximum advantage of potential cost savings, especially with respect to those dealerships acquired over the past year. As well as enhancing vendor consolidation efforts wherever appropriate in areas such as telecommunications, point of sale merchant services, utilities, marketing, fixed operations, goods and service purchases and group insurance.

Although the company can be no more certain than the encomiums, we’re consistently optimistic that the economies in the west and then particular in Alberta, maybe close to stabilizing with the retail vehicle market entering into its prime, spring and summer selling period. And this offers opportunities for improved sales gains.

The decline in the parts service and collision gross margin is anticipated to recover during the remainder of 2014. The decline in this quarter was a due to a increase new vehicle sales over the last few years which led to a higher proportion of lower margin warrantee work with less customer paying and internal work in our service departments as proportion of the total work that was performed.

In summary, the quarter was not when the company has satisfied with and lower - their macroeconomic trends that the company cannot control, management is focused on improving those items that are within this control and working diligently to effect these improvements. With that, I will turn the call over to Pat.

Hey, thanks Tom. We continued to aggressively but with a lot patient and clearly with a long term shareholder value, we are going to continued to pursue acquisition opportunities and obviously as Chris probably alluded to, we have a strong balance sheet.

We’re in a good position to do that. In August of 2014, we provided guidance of eight to 10 dealership acquisitions by May 31 Since that date, the companies acquired six dealerships including the recent announcement of Airdrie Chrysler, currently we’re in various stages of discussion with several acquisition targets and we expect to be in a position to announce couple more acquisitions within the next 45 days or so.

Once thing we haven’t really experienced yet is a drop in multiples but, slight move there but not a lot down like we’re kind of thought. We’re satisfied with what we have, for potential acquisitions currently in the pipeline we are talking to, number of people and we look to acquire additional four to six dealerships by May of 2016.

Also want to be very, very clear that I share with Tom and Chris and the entire management team are concern with the quarter and we certainly are focused heavily, on operational improvements as we move forward. Thank you so much for your continued support and let’s open up the meeting to questions.

Great, thank you very much. Just a couple of things, first just want to follow-up on the acquisition discussion Pat, I'm not too fussed at all about the 45 day comment extending beyond May, what about the four to six dealers over the next year or so that’s below what’s you have been recently and below it and probably some shareholders were anticipating.

Is that simply a function of buying larger dealers or considering larger dealers or is there some conservatism or any comment on your capacity to do deals, the opportunities you’re seeing out there.

All good question Steve. I think that we’re being a little, maybe a little bit of cautious, for instance if the dealer group came up, which we don’t have accounted for, we had last year, I mean we didn’t know at that time.

We would buy a large group in Calgary. So that could change that obviously.

I agree with your comment on larger stores. We’re trying to focus on large stores, I mean obviously I'd rather than buy one with a lot higher sales in earnings than two, quite to the same thing.

So I agree with that. They were probably looking at a little bit larger stores and again you never know exactly, how the markets going to play out like I said we’ve, we’re in a good shape in the pipeline all of those things, there is a no reason to think things have change much on the acquisitions side its just I don’t know that it would be as a dealer group will come up and one of that’s the group the 2, 3, 4, 6, 10 who knows.

I mean that would obviously make a difference but right now, we’re not in a position to anticipate that but it’s certainly very possibly it could happen.

Okay, good color thanks. Just changing gears on new car inventories seems quite high at the end of the quarter, would you guess as understand will give slowdown in sales.

Just wondering what actions are underway right now to kind of with your ordering patterns to try and pull that down and what level do you target I guess over the next quarter 2, 3?

Yes, we’re currently driving down those inventories Steve. What typically happens as you put new order and takes about 90 days for it to come, slight bit of variance between own brands and models and where they’re built.

With that really two components that let to the inventory build up, one is when we made those orders 90 days ago and we’re projecting much higher sales levels then, what we currently have, so you have a bit of natural buildup there. And compounding that as the vehicles are arriving a lot quicker than the 90 day period.

So we’ve adjusted our ordering strategy, we’re working with our OEM partners and we anticipate a gradual dry downs in normal levels. We’re fortunate that this happening early in the 2015 model here, that something we can work away through, fairly quickly.

What it does do in the marketplace because we are not the only guys have impacted by it as it does put some pressure on margin, there is many of our competitors are carrying as much from inventory as thus, so they are trying to move that inventory at that same time and that would gradually correct itself and it adds a little bit more to the storage cost and there is a little bit more lot damage and additional cost and moving an inventory around that. All temporary and very manageable to work away, how does we move through the year.

Is that margin impact because of those storage and other factors there is a price?

It's that storage and other factors, as well, I know in one market, one of our competitors is really should in for volume very little margin, trying to get their inventory levels corrected and that's definitely impacting our store in that area. There is different things going on in different marketplaces within Alberta and across Canada within inventory levels and we come up with the strategy for each store and we work with our dealers on it.

Just one last one for me at this stage, just the capital plan later than the MD&A looks like much lower figure than a quarter go for relocations and upgrades. Am I reading that correctly and that really just a function of some initiatives being pushed out a little bit in this environment or there is other factors there.

Yes, Steve that would be accurate. We have a team internally that manages all of our facilities and we continually update and reevaluate kind of our capital spending and whether or not we can differ and delay.

So that very much is a function of kind of reassessing what is required today and what our ability as to pushed out. So your comments are accurate.

Okay, so through 2015, 2016 kind of focus on those numbers and then depending on what the environment is over the next year or two, maybe pick those things up again in ’17 and ’18 is that the right way to think about it.

That would be the great way to think about it.

Okay. Thanks very much.

Thanks very much. I think I’ll just maybe start just on how your comments with respect to acquisition multiples you haven’t seen much change there.

As you’re going through and having discussions with various different dealer groups, are you considering like sort of contingent consideration such that is sort of protecting the multiple little bit either, downwards there or what have you depending on the sort of how earnings play out for the, four to 12 months versus what kind of value the acquisitions on the past 12 months which obviously is being effected.

I think that’s a good thought. Obviously, we haven’t had to do a lot of that but its something that we are looking at.

I think each deal stands on its own. And we have a pretty good idea, we have been doing this long time, what the stores are worth but, yes in this environment that's something that we would definitely consider and are working with.

And I think there was a common in the MD&A with respect to sort of geography and sort of focus, is that both in March and you are saying you still firm believer in Alberta and so forth but also taking to look elsewhere but this MD&A sort of seems to point that you are looking to try to diversify a little bit more to have a little less exposure, am I reading that correctly?

I don't think so Neal. I’m a big Alberta fan, I’m looking at this always long term, long term, not worrying about one quarter to the next, when province we love Alberta, so I don’t think at all that we’re thinking about.

We think that there might be some opportunity here and we’re clearly were always looking elsewhere as well but no I wouldn’t say that we’re trying to get away from Alberta too much because we have again have long term Alberta is a great, great place look at the population, the young people living here are so many different factors that we look at, so

Yes, fair enough. That’s good.

Moving on to the price of vehicles, I know Steve touched on briefly I think it actually looks like on the new side actually had a slight increase in your realized price per vehicle in the quarter. There is an article that I saw in Wall Street Journal a couple of weeks back with respect to Chrysler were actually trying to increase its selling price on soon its vehicles particularly Ram and Jeep now, is that just more focus in the U.S.

are you seeing much movement from the OEM’s as far as trying to adjust price that you’re seeing.

Yes, we’ve seen a couple of price increases with the couple of our OEMs, I think its largely exchange driven and it has not been anything very significant, maybe talking a few $100 here now. I don’t see happening again the real impact on, if you go to keep in mind we have a price increase like that it’s the generally the whole marketplace right.

Yes, fair enough. Last question then I pass for line just on the finance and insurance margin seems to be little bit lower than what I’ve seem historically is that sort of a new level going forward, is that just also impacted by that the lower than - vehicle sales in Q1.

No, I think that’s just a blip, I think that’s store – is really good, really drives those finance and insurance margins of availability of credit and we’re finding credit is as good as its ever been. So I think you’re just seeing as a short term fluctuation.

Okay. Thanks very much.

Hi, good morning.

Hi, Anthony.

Tom, could you give us some color on the state of the competitive marketplace in Alberta and have you seen any changes and then play turnover in the marketplace?

Play turnover with our dealerships, so…

No, in the marketplace in general.

Yes like, I was looking at some on playing levels, the day, Alberta was running above 4.5% most recently I think the numbers were around 5.4 and there is some predictions that will move to like 7 maybe 7.5 and we don’t see that as a big material change in employment levels. We’re not too concerned about that, of course we’d love to seem them around that 5.5 range but 7 is I think very manageable for us.

Okay. And Pat what’s the biggest challenge or change to close deals today versus 12 months ago.

I really don’t think there is a lot of change one area might be, certainly experienced over the last few months were maybe earnings are dropping a little bit especially in Alberta, the margins were down a little bit again I think on a short term. And sometimes the sellers, going keep pushing back and then say boy, look I’d made the last five years and there is lot of treat - what that sellers saying, so maybe we protect ourselves is to the question, the Neal asked about so maybe, not in earn out but, I’m talking about something like that.

So that’s maybe one small thing otherwise no change Tony, no change.

Okay and one last question, how close are you in terms of signing a new OEM?

I hate to comment on that question more always talking with them. I can’t give any update that’s any different then a quarter ago or two quarters ago for that matter.

We’re working hard; we think we’re going to make some progress at this point we can’t announce anything.

Okay, thank you.

Good morning. My first question just relates to your new vehicle margins, you touched on earlier margins were impacted by added storage cost in Q1 and were not but I just want to get a sense of how I guess incentive played into it, whether not meeting certain sales targets are you want to able to get certain incentives back from the OEMs.

Yes, I try to concentrate Otto, when I look at that on the same-store successful. We have greater control over, I’m pretty happy when I take a look at same-store gross margin with the 9.37 level which I think we ran at and I think you look at, Q1 last year we are running about 10,3 which was pretty close to a all time high.

So that 9 ranges really good, I don’t see incentives playing into at a lot, incentives really at the end of the day get passed on to the consumer and then the prices the price and really placing into the whole market. The dealership makes us to the same brand has the same and same offer to the consumer, what drives the vehicle sale at the end of the day is the employment levels and the availability to credit.

Right now there is a little bit of margin pressure out there both on new end users guys try to hit their new targets and the market in general has high levels of inventory that they're trying to move at the retail level.

Okay, but that was under impression that, if it particular dealership were able to hit certain volume targets, some OEM’s have their step - incentives and what not does that play a factor in how your margins are reported and how the performance of the margins is on a quarter-to-quarter to basis.

Yes, it does, if you I actually taking about essential dealers on target, its much harder to hit them in particularly in Q1 it was very challenging, operating environment that probably reflected that one drop percentage point or 100 basis points drop in new vehicle margins. At the same time, we’re seeing some of these targets getting lowered with I’ve never seen in the ten years, I have been doing this as we move through the year and very positive for us I think long term that the OEMs are working are working with the entire dealer body.

Okay and I guess just one question related to that is are these targets, set based on year ago performance or really just ad hoc basis?

Traditionally they have been said based on the prior year performance and what we’re finding this year is the OEM’s are working very closely with the dealer body. The OEMs need the dealers to the profitable when sell vehicles and they’re working with them, I would say all are OEM partners have been jus absolutely great to work with them if that - and they have taken that very realistic approach to some of the challenges the dealers are happen are facing in particularly in places like Alberta.

Okay. Just second question with respect to the partner service department, obviously the one team mix of the work was greater than Q1, just wondering what your expectations are sort for Q2, is this mix sort of expected to stay similar and or is that expected to improve?

I think it’s going to improve, when I look at Q1 last year about 40% of our services were with warrantee and another 30 was customer pay and another 30 was internal. We saw warrantee as a percentage of our entire work service jump up to almost 60% in Q1 of this year and there was an increase amount of warrantee work because we sold so many vehicles last three years.

We’ve had a very strong new car market like most dealers and that’s resulted an increase in the warrantee work. We had a, I think a little bit of pull back on the customer pay, as we got this period of economic uncertainty and as particularly showed up in January and February and leveled little bit March.

So we had as proportional drop in that customer pay and the internal work has proportion was down. So I think you’ll just see that correct, the warrantee stuff is a little bit lower margin then customer paying internal, just, that drives that drop in the overall margin.

Okay, okay and just my last question with respect to acquisition, you mentioned that the volume of acquisitions are obviously little bit higher and it seems opportunities are there, can you just talk about whether, given the higher greater amount of opportunities are you actually pushing away deals and it is are you pushing away more deals anywhere in the same time, three months ago or in the last quarter?

I think, if you looked at where we’re growing over the next number of years, where we’re maybe a couple of years ago. The only deals I’d say were pushing away is deals we probably would have done a few years ago that are maybe a little bit smaller, little harder in some ways to manage because the earnings aren’t maybe as high in some of those lower volume stores.

So we’re probably walking from some of those are not engaging and some of those, I think that’s a fair comment but any store that’s a really good store in our view that has some volume, were certainly aggressively working on doing, no change what so ever to that. I would say as I have been saying for the last couple conference calls, patient is so important long term, its easy to buy, harder to manage we buy and our management team here, I think we’re pretty focused on buying the right stores but we bought over the last number of years as working well for us and I don’t want to get too aggressive on first of multiples and second of stretching on stores too much.

So I would probably slightly more patient then we were maybe six months ago and second of all as I said probably some of the smaller stores, would add to our – maybe give us an extra three acquisitions in the next year but doesn’t really do a lot for shareholders long term with kind of staying away from those.

Okay, perfect. Great, that’s all I had.

Thanks guys. Good morning.

Just thinking about, some of the acquisitions you made over the last over while, I think the last time we had an opportunity to chat. One of the issues that we sort of highlighted even in the Q4 and in the Q1 was just a pace of integration, can you give us some updates on how the just in stores you’ve already purchased, how you’re moving along in terms of the development of just there core processes.

Yes, Chris that’s a really good question, when I joined the company, almost a decade ago we had a dozen stores and we acquired some of the - our approached integration I think has really been refined developed over the years. And I’m really quite comfortable with it, quite happy with that.

Typically, when we’re buying a store, we see an increase on the marketing spend which leads to an increase in leads, which is a bit of a burden on the store but as you move along we see increased sales, we see margin improvement, we talked before probably about a 200 basis point improvement in overall operating performance and that’s still holding through and I think very consistent once we factor out maybe some of the factors we’re seeing now with the Alberta economy. We’ve also feel and our views on this haven’t changed that probably takes two years on average to fully integrate a dealership.

All the stores that we bought are at slightly different levels of integration depending on the timing. And then last year we brought the higher group [indiscernible] we bought it from a very, very strong operators, really good guys, we kept them in place; they have been working with us.

And, we’ve been probably working a little bit slower with them then we would have on a single point store. With the right strategy, I think at the time and it’s the right strategy now that being said, we’re very confident that over the two year period from the time we’ve required them we'll have them fully integrated, we’ll keep the staff in place, all the key players there at the dealership level which I think is very important to us and very important to them.

Because when we buy a dealership, we don’t look that, we’re just buying the brand and the market area were also taking on the employees and we have invest lot, we spent a lot of time in training and we try to minimize the turnover as much as possible.

Okay, thanks. And that kind of brining my next question which is sort of your operational cost and you made some comments there, they’re reviewing the number of things including in some cases headcount, does where your at right now were some of the uncertainty in Alberta kind of put additional pressure on your kind of capability to this integration and then I guess the other thing if you can and just sort of on day-to-day business, are there any levels that you have, that are easily able to be pulled, I know its always tough to have good people in jurisdictions like Alberta, what can you do, are if any inter to maybe work on some of those up cost.

We’re actually looking at everything on the expense side, we spent a fair bit of time, we’re taking to look at aggregating some of our suppliers, there is a now difference between Canadian and U.S suppliers because of the exchange rate. Some of these contracts are long term but we’ve worked very diligently and the whole team and we’ve identified, hard savings that I think slightly over $2 million right now across the group, $1.3 million from the operational side and another, I say about I think as $900,000 just on the benefit insurance etcetera.

That being said, last year we managed in the very strong market, we pulled the lot of savings out of our vendor network to begin with, so this isn’t something that’s new to us, its just been a tact with the renewed bigger and its surprising me, how well its working and I think we’ve got further opportunities probably for another couple million dollars with the savings from, my last meeting - Saturday with the team we went through this and its matter going to back to some of these vendors and working with them to get some savings. Some really positive of that, at the same time on the big believer that, we also have to take a look at topline growth, what we can do protect and grow that.

I think we’ve got a couple of different opportunities there. our strategy of, increasing leads and getting better at handling dispositional leads is something I have we believe and we quite invested and then you’re going to see as continued to carry on our strategy in that way as well.

Great. And then I guess my last question just, kind of looking at the combination of what free cash flow was in the quarter and that was negative for the first time in a while and your leverage, I mean if I - numbers right and I mean just on apparent basis probably little bit lower perform almost three times.

There has been a few things happened, there is some concern with the change in government Alberta, there is possibly we could see another debt - decision, the oil prices are reverse things like that, what kind of capacity do you have if things in Alberta, don’t start to improve and say we take another down term in the Q3, Q4?

I turn that one over Chris to before I do so I think you want to keep in mind, when you take a look at the Q1 numbers that we had a $16 million with the cash taxes paid in Q1. And we also had $10 million with the cash going into inventory and excess of our flooring - let’s $26 million.

So once you pulled back those two big adjustments, I’m not so first about, Q1 taxes are do Q1 and then something you’re going to see all the time with the switch over to the income trust, there is some additional cash going out there, there was a few years ago just made those transitional rules work. We do a lot of modeling under lot of different scenarios now I’ll turn that over to Chris now.

Yes. Chris, when I think about its we’ve got still on the books existing as of today at the end of Q1, I suppose, we got over a $130 million that we could use to deploy in terms of additional acquisitions and that net of any additional pre cash flow and I think as Tom as mentioned pre cash flow in Q1 or at least cash from operating activities run negative for the first time in a long time but I would not expect that to continue for the reason as Tom has highlighted.

So I think that there is a sufficient immediate debt capacity that we had used to deploy into that net of any additional cash flow that is turned from the operating business.

And, just in terms of, I mean that acquisitions you have the ability to flex but I mean are you, how committed are you to your capital spending plan at this point?

We have that an internal facilities team that continually revaluate kind of what is plan from a CapEx perspective, some of the CapEx that its planned is not – we’re not able to differ delayed to great extent that, maybe perhaps manufacture partner in Polk, some of its more discretionary to us and we continually revaluated there, is there a strong return for that or should we pushed off into the future. So what we got in the, what we got as quote in the MD&A, I think we’re reasonably committed to at this point, we think that it’s the timing is as described as accurate but that changes from day-to-day and quarter-to-quarter.

Okay, great. Thanks guys.

Hi, good morning. Just a few follow ups, wondering if you could comment about the performance within Alberta and I think before you had data that you expected certain parts of Alberta to be more resilient and not be had as hard, is that come?

Yes, I would say so perfectly Mark, we definitely feel that Calgary is getting impact of the harder than Edmonton and Edmonton, slightly harder than Grand Prairie, personally I thought Grand Prairie would be a little bit stronger with the out of fours, three in that, that’s been going on there and how the housing starts in states, I think I might miss the mark a little bit is that, its taking probably a little bit longer for the Grand Prairie economy to adjust to that. That being said, their employment levels are very strong, the economy is, I think much stronger there than in Edmonton and on Calgary is quietly off so but trends there, the extent of it is a probably a little bit different and where I thought would been three, four months ago.

Okay, thanks. Are you seeing any change in the supply of used vehicles and I just, I guess I wonder if as the economy slows and jobs loss is amount, do lease turns, claim and does that effect supply on the user side.

Well, there is a not a lot of leases out there and hasn’t been for a while. So, we’re not seeing a big pickup there, in most market Quebec, there is a definitely a lot of leases and we got a pretty good process in order to make sure that we retain those customers and on the supply side used vehicles last week and I visit a couple of our dealers in there, both of them are, complained about how difficult that is to find good quality used vehicles.

With used vehicles, the market we plan is that 2 to 5 year old vehicle that is eligible for bank financing that’s hard to sell privately and supply amount is still tight, its improving, its not where it was two years ago but it still tight.

And then just a follow up, when you talked about OEM’s being little more flexible and actually reducing, you've seen some reduced sales targets, is that across OEMs or is that one type OEM or and is that a across regions or is that just for Alberta?

It's Pat, I don’t really want to get into details on what certain different OEMs are doing, we’ve never done that. We’re not going to start.

I think Tom made a good point that certainly at least one of the manufactures, made a slight adjustment which we think will be beneficial in the second quarter and but beyond that to be fair to the manufactures that great partners I don’t think we want to be going and commenting on stuff that’s, that much detail.

Yes, what I would add Mark, is that we’re really pleased with our relationship with them and, they treat us no different then the other dealers and it’s been working with them, they all get what’s going on and I just been getting working relationship with them.

Yes, completely understand. Thanks a lot.

Good morning and most of my question actually been answered. Just one small question, I’m wondering outside of Western Canada, here in Eastern Canada we had pretty terrible winter and did you see any impact from whether on performance of your dealership outside of Western Canada during Q1 that perhaps impacted sales growth in the quarter.

Welcome back Maggie. Definitely, we did see some impact, particularly for BMW brands where they ship out Halifax and like lot of the other brands.

There is definitely some issues that were weather related with getting these vehicles moving west from the Halifax port that resulted in the delay and shipments. We’re quite happy with the sales volumes out of those dealerships.

So when we look out on a combined basis particularly last month, with all sets in all time record for sales for their dealership, but some of that was probably a little bit weather related, now that the products coming back and its correcting themselves.

Okay. Thanks

Good morning. Just wanted to follow-up on some of the inventory questions.

It seems that we've genuinely see the impact of your Q4 access inventory position on Q1 gross margin. So my question is really on the cadence of gross margin moves it seems likely to be that gross margin make it worsen than Q2 as you rationalize that inventory before they get better and as soon as they got accurate or might think about that wrong?

It's hard to say, I would say the bigger part of the bulge was Q1 and the inventory levels are already subsiding at least within our dealer network. I'm not too sure about our competitors and the actions of our competitors are definitely going to have some impact on us in Q2.

We priced our vehicles at fair price to move them and if competitor reduces there in order to move it, we’re going to have some adjustments as we move and at something we monitor closely but I expect the pressure on margins to still be there, however probably not as profound as it was in Q1.

Right. So no big pressure to clear the inventory to meet OEM targets or anything like that?

There is - that pressure has been there every month I have been in this business. Month ends always an interesting time and its something we live with everyday and there has been real no change there.

All right. Thanks very much.

Thanks guys. I had a question on pricing multiples.

You say there hasn’t been much of a change. I'm wondering is that from a quarter-to-quarter or more recently because in the states pricing multiples are up 40%, 50% over the past couple of years and I am just wondering is – haven't change from the past quarter, so my question is kind of little bit same cadence in other words, pricing multiples made another change from last quarter but there is still up a lot over the past couple years.

No, I don’t think that, I agree with your thinking on some of the American multiples, obviously we follow that a little bit. They seem to, I think you set there are up 40% to 50%.

Yes.

It’s interesting, I haven't read they are about that high but they are certainly high for sure, they are higher then they were. I think we’re pretty steady the last couple of years, here has been very, very similar may be a slight move but not even close to that American number.

We just haven’t seen them drop much and part of that is a course may be the earnings are down a little bit and some of the markets we’re looking at. So it makes the multiple look a little bit higher short, short terms, so we’re being very, very patient but I do not expect to see that 40%to 50% increase you’re talking about in the states here.

And the other thing in the state there is a lot more transactions. Again you’re the only public and in Canada, are there a lot more transactions in Canada two or three years ago or not necessarily.

I think there is certainly up. If you look at the agents or dealer body they didn't get younger because we’re in recession in Alberta.

The reality is there is a lot of a people going to sell over the next few years. We're being slightly more patient as I said earlier on the call and buying what we consider a little bit larger in better dealerships for us long term.

But we certainly see a lot of people selling over the next few years including groups.

Thank you very much, congratulations, in a very difficult environment you did a very good job in the quarter.

Well, thank you.

Good morning. In the MD&A were you talk about lower achievement of sales volume incentives in some stores, I wonder if you can put a bit of geographic detail on the.

I think Greg, Alberta would have been probably hit the hardest for that. Targets are in place for while and all of sudden oil drops like that, takes little while to adjust.

Okay. And what about brands?

I can't go there Greg, you know that.

Okay, thanks.

Well, I'd like to thank everybody for participating in our call. If you have some follow up questions just call either Chris or myself in the office.

We’re going to offsite for most of the morning but we'll definitely be around. And once again thank you and we look forward to talking to you in Q2.