AutoCanada Inc.

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

Hilda Maraachlian - Cormark Securities Steve Arthur - RBC Capital Markets Anthony Zicha - Scotiabank Derek Dley - Canaccord Genuity Mark Petrie - CIBC Chris Murray - AltaCorp Chris Bowes - National Bank Financial

Good morning. Thank you for taking the time to attend our conference call for the second quarter of 2015.

I’m Tom Orysiuk, the President and Chief Executive Officer of AutoCanada. On the call, with me today is Pat Priestner Executive Chairman; Chris Burrows, Vice President and Chief Financial Officer, who will be providing us review of our financial performance for the second quarter; and Steve Rose, our Chief Operating Officer.

After that, we will be opening up the call to your questions. 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 include statements involving 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 and 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 our AIF dated March 19, 2015, which is available on the SEDAR Web site.

As that out of the way, let’s start the call. Q2 was -- and we saw pressure on gross margin percentages.

Same-store sales revenues and gross margins were weaker than the previous quarter and we also continue to see uncertainty in the Alberta economy especially the quarter presented more than a few issues. These challenges notwithstanding, I am pleased with the adjustments we made in the quarter, which resulted in some very real progress including growth and same-store gross profit in both used vehicle and parts and service operations; meaningful quarter-to-quarter improvements to operating expenses relative to gross profit; and a more than doubling of earnings per share from the prior quarter.

Although these improvements are very good, we are not satisfied and we’re working very hard and diligently with each leadership in order to make appropriate market sensitive of adjustments to their processes and their sales and marketing plans with a focus on improving volume, gross margin, gross profit, and with our continued efforts for further improvement is expected. Additionally, we have made very good progress on the cost reduction front and which to express my appreciation to our many suppliers who are actually working very closely with us to deliver significant, savings which will benefit us throughout the coming year.

I’m also very pleased to note that this decline in parts and service and decreasing gross margin that we experienced in the first quarter of this year recovered in Q2 and we expect it shall further improve for the remainder of 2015. In summary the second quarter of 2015 will improve significantly from the first quarter of 2015 continue to be a challenging period for us and the automotive retail sector in Alberta generally.

Building on the improvements we achieved in Q2 and with continued diligence and focus on profit improvement, we’re cautiously optimistic that our performance will continue to improve as we enter into the third and traditionally strongest quarter of the year. And with that I shall turn things over to Chris Burrows, who will now speak to the financial end of the business.

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

Overall, Canadian light vehicle unit sales increased by 2.8% for the six month period ended June 30, 2015 as compared to the same period in 2014. Figures reported as new light vehicle sales in Canada 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 a result the company focuses on retail sales and does not fully participate in fleet and daily rental sales. The Company's higher sales revenues and total gross profits in the second quarter of 2015 are direct results of acquisitions made subsequent to the end of the second quarter of 2014.

Lower net earnings, same-store sales and same-store gross profits are results of reduced economic activity particularly in Alberta. As a group, our same-store new vehicle retail unit sales were down 14.7% quarter-over-quarter.

Our key operating results for the second quarter of 2015 are highlighted as follows; same-store revenue decreased by 2.8%, same-store gross profit decreased by 11%. EBITDA attributable to AutoCanada shareholders increased by 26.3%; the number of new vehicles retailed increased by 66%; the number of used vehicles retail increased by 97.1%; repair orders completed for the quarter were up a 120.5%; same-store repair orders completed for the quarter were up 2.7%.

EBITDA attributable to AutoCanada shareholders for the three months period ended June 30, 2015 increased by 26.3% to 27.4 million from 21.7 million when compared to the prior period in 2014. The increase in EBITDA attributable to AutoCanada shareholders for the quarter can mainly be attributed to the increase in the number of dealerships due to the acquisitions since Q2 2014.

Revenues from all dealerships for the second quarter of 2015 increased by 351.8 million or 75.6%, to 816.9 million from 465.1 million when compared to the same period of the prior year. This increase was driven by increases in all four revenue streams as a result of acquisitions since Q2, 2014.

Gross profit from all dealerships for the second quarter of 2015 increased by 51.9 million, or 66.9% when compared to the same period of 2014. As with revenues, gross profit increased due to increases across all four revenue streams as a result of acquisitions since Q2, 2014.

During the three months period ended June 30, 2015 operating expenses increased by 41.3 million or 69.7% to 100.6 million from 59.2 million in the same period of the prior year, primarily as a result of 14 dealership acquisitions and combinations completed subsequent to the second quarter of 2014. Operating expenses as a percentage of gross profit increased to 77.6% from 76.2% of the same period of the prior year, due to a time lag that exists between business contract and coinciding decreased in fixed and variable operating expenses.

The company diligently reviewed the operating performance of its dealerships and utilizes the leverage of a large dealer group to reduce overall operating expenses. Finally the increase in income tax expense during the quarter is mainly due to the 2% increase in the corporate tax rate in the province of Alberta from 10% to 12%.

While this rate increase was not effective until July 1, 2015; this has impacted the second quarter as all income for the year will be taxed at an annual rate up on filing the annual property and tax returns. The increase in the tax rate has negatively impacted both basic and diluted earnings per share in the second quarter by a full $0.03 reducing for $0.59 per share to the reported $0.56 per share.

With that I will turn things over to Pat for the commentary on our outlook and expectations for the coming year.

Thanks Chris. I certainly agree with Tom, that the quarter and fact the first half of the year was very challenging but I know that we have a really-really strong management team, with Tom and his team.

And I can tell you they are extremely dedicated to improving results. One of the concerns which has been expressed to me is the timing that's taken for us to complete a couple of acquisition; that we had expected quite frankly earlier in the second quarter, although we wish otherwise, there are times when due diligence and related matter sometimes with sellers and their families don’t align with all the intentions we all had including the seller to close a little quickly.

And unfortunately this is simply a case on a couple of deals where that was the circumstance. As I have previously stated our plan is to approach acquisitions prudently and in a measured-measured manner to insure that we capitalize to the best extend possible, not only on those opportunities would provide the best long-term shareholder value, but also that we ensure that our acquisitions that are in terms that are fair and appropriate for the company.

With this framework in mind I really would like to make a couple of points. First the management team here strongly believes that we are going to deliver on the acquisition guidance of six to eight dealerships by next May.

Our track record has been that we have certainly been good on our guidance over the years, probably even very good. And secondly we are not going to close any deals whatsoever, if the terms are not right for us or before it's time.

Even if that mean the transaction may take a little bit longer than expected, in the end doing what is best for our shareholders long-term is the key to long-term sustainable success for the company and our shareholders. And Tom and I and the team here firmly- firmly believe and we are sticking to that philosophy.

And with that in mind, thank you for your continued support. And Tom do you want to open up the conversation for questions?

Yes, sure. Why don’t we turn it over to questions, and operator, after the call Chris and I will be around as well as if you want e-mail us and we will wait to talk to you.

Good morning guys. Couple of questions here; first my question would be on the outlook in Alberta.

Q1 and Q2 obviously were tough. Can you just comment what you are seeing so far inclusive in terms of traffic coming here.

And obviously oil prices are not going in the right direction here. We are seeing layoff.

What are you guys seeing on the ground there in terms of traffic and what are your expectations in terms of sales if you can comment anything on that front?

Hilda, we will take a look at it, whether it's new or used vehicles, the big drivers in our mind are employment levels. If people are working they need to use vehicle to get back and forth from home to work, particularly in areas where public transportation systems are not strong, which would apply to Alberta.

Just as a reminder, in Q1 in January and February, really what we saw, in our mind was the employment levels were good, access to credit which is another big driver in buying vehicles was also very good and remain strong right now, but we saw lack in consumer confidence particularly at the end of those two months. What's encouraging about Q2 this year is when we take a look at our forecast that we will compare to late last year and very early this year, as our performance in a percentage to forecast actually increased once we got into April, May and June and the cadence of us getting closer to our forecast actually picked up.

That being said and on a go forward basis, are we going to see that throughout the remainder of the year, that's going to be highly dependent on factors out of our control. Showroom traffic is good.

We are quite happy with the opportunities that we are getting at the dealership level. And I think to just wait for oil prices, and the economy to recover and which should be back to previous levels.

My second question here was on the excess inventory levels especially in Alberta and how that's putting pressure on the margin. So we saw that in Q1 and Q2.

I think that's going to continue a bit. What are your comments, if you can give at least color on how long you think that could continue and what gives confidence that it could reverse beginning of next year or so?

Yes, when I look at it we are about $60 million higher than we were at the end of the last year. We purchased Airdrie Chrysler, which is a very large dealership.

That’s about 17 million or that 60 million. In a higher sales philosophy period right now, so we’d expect a natural lift in your inventory.

We are high in few dealerships and couple of strong brands in Alberta, but we’ve, I think we made very good progress on working our way out of that. We know from working with our OEM partners that it’s not just us, it’s the entire dealer body of the different brands, they’re carrying a lot of inventory.

You recall in the Q1 call, we said we anticipated some margin pressure going into Q2 and I think that will last as well for Q3. It’s really hard for us to predict, but if I was to guess based on our experience then, yes, we’re going to continue to see some margin pressure.

How long that’s going to last is difficult for us to predict. What’s interesting is where it's showing up?

It's showing up in our used retail wholesale numbers. When I look at last year of Q2, we made about a million bucks there.

This year was basically a breakeven. So you can really see the pressure on the new vehicle grosses in Q2.

So if sales continue to drop, if the economy exports and all that, still we should expect this to continue as well, like it might take a bit longer for inventories to be back at reasonable or sustainable level?

We’ve seen sales cadence pick up, I think to a certain degree in Q2. We’ve also seen a much tighter control of our operating expenses as percentage of our gross, which is helping us out.

If you take a look at Q1 our operating expenses as a percentage for gross was 88%, this quarter was 77% and the GAAP between the differences in 2014 is dropped a bit. So we’re definitely making adjustments to match the marketplace in our operating.

And my last question before I pass to live. You guys mentioned in the MD&A that you made changes in the integration schedule and format.

I know it takes usually two years to integrate them properly. Can you just comment what you see now, is it going to break longer with that comment if you say you made some changes or is it going to be sooner or later than two years?

I think, it's still going to take two years and that’s pretty common in our industry. And I take a look at some of the U.S.

public companies, that’s generally the metric. I believe most of them use for including stores into same-stores.

There is a lot of stuff that you have to do changing over software, telephone lines, that type of stuff, it all takes time. And then of course the training pattern that team does whenever we acquire dealerships.

First out maybe just drilling up on that last point on margin pressure; just trying to get a sense of what that means in terms of was Q2 fully pressured for margins would you say, in the new segment? Do you think there might be more pressure in that as this inventory works through?

I think we’re going to see still the pressure on it, when you compare year-over-year, Steve. We see the pressure easing up as the inventory situation falls into place for virtually everybody.

How I kind of look at it, I look at two different things. I look at our overall gross margins.

When you take a look at that, we had a full one point drop from 2014 to 2015. And a good chunk of that is coming from the new and the used.

We’ve got improvement in parts and services. We’ve got improvement in F&I, but the real telling story is to break it down between same-stores and newly acquired sales and there is a pretty significant GAAP between the same-stores and newly acquired stores.

And when you take a look at that where you’re seeing a lot of pressures in my mind coming from trying to move those new vehicles and that trickles down, as the trickledown effect your used vehicles. So we lost comparatively quarter-to-quarter about $1 million on used vehicle wholesale and you saw some pressure again on our used vehicle margins, basically moved from 7.4% to 6.74%, once you back up the used vehicle wholesale.

And I think a lot of that relates to getting the new vehicle inventory in line for the whole industry.

The year-over-year decline makes sense, but I guess from Q2 levels, would you think it goes down further from there as you mentioned these action, there is that kind of a tough enough level at this stage?

Now we see them probably gradually improving, they aren’t borrowing any big economic shock, and I think we’ll just see a slow gradual improvement and back to normal.

I guess related new unit same-store was down as was expected, maybe a little bit worse than feared, but a lot of strength in used same-store, I think it was up 15% or something. Can you just described the way you saw that strength, and what was behind it?

Was that just macro-factors, chipping upon used or and new or was that specific programs that you are targeting with used?

We have been -- and you are familiar with that, we know what’s going on in the used vehicle merchandizing side working with our dealers and making sure that the vehicles merchandized right. I think we are seeing the fruits of that.

I think our products and service business has been strong on a same-store basis. We have got almost a full point percentage basis on parts and service.

So instead of selling some vehicles people might be coming in servicing, that's hard for us to read. But I think that's driving some of that.

And the F&I margins remain strong on a same-store basis. As well I think you are seeing some of the pick up on the stores, as the 17 that we acquired last year, their margins are coming in line slowly with our existing stores.

And that's probably an area where we have got some room to get some good lift going into the future.

You mentioned as well Tom just adjustments made in the quarter to boost gross margins to cut OpEx; it sounds like that's been pretty effective. Can you just elaborate a little bit on what some of those actions are and how much further those initiatives have to play out?

I was really talking about operating expense as a percentage of gross margin and we have got a very significant improvement on that on the quarter. Basically we are back to all our big suppliers and work with them and not necessarily been asked for price reductions.

But worked within to say how do we get more efficient, how do we reduce our spend in capital without dropping service levels to our dealerships. And they have been good at working with us.

We have worked them that taught us some ideas. We've also done a lot of work with our dealers on taking look at pay plans, taking a look at just overall efficiencies of operating expenditures including advertising expense.

And it's an area that we are going to continue to focus on throughout the year with the same vigor that we did at the beginning of this year.

And just final one, just on the capital spend while looking to the MD&A $30 million or so being added to the relocations up to I think 140 million or so, getting to be a large number. Just curious about the nature of that increase, how required it is and just generally your comfort level at the balance sheet as some of that work through over the next year.

I mean Steve this is always the case our capital expenditure plans, some of it is required from our OEM partners. We continue to work through the timing of that to the extent that we can delay or defer.

Some of the increase in Q2 is soft and perhaps conservative in our forecast for where we are going to go. But we do still continue to work with the OEMs to work on timing.

Okay. But generally I think your balance sheet supports that plus the acquisition intentions and just general releases with.

Okay. Thanks I will pass the line for now.

Thank you.

Pat, could you give us some color in terms of acquisition pipeline like which regions would provide the most target rich opportunities? And second part to that question is, are you any closer in signing up new OEM as compared to a year ago?

Two good questions. I think we are continuing to look obviously.

We like West we like BC, we like Alberta. Again I know some people will probably say; why you are buying in Alberta.

We are looking long-term, this is not even long, mid to long term here and we think that that value of the stores we will be able to acquire in Alberta in the next couple of years will be great for the company long-term. So obviously we are still focused there.

BC looking heavily in; Saskatchewan a little bit as well. Certainly Manitoba, we now have a bit of a presence.

So something would come up, we are open. Ontario, obviously it is an area where there is obviously a lot of room for growth, but again we are being very patience.

We want to make sure we buy the right dealerships in that market, in all markets, but particularly in that market, So I certainly see some potential there and we are active right now looking at some stuff there. New OEMs working diligently, our team is on that.

I have nothing to announce at this point and have nothing to announce in the next week or two on that. And who knows, we are still working and we believe long term.

All the OEMs will be onsite, they are everywhere else in the world. Right now they are not, but we are making progress.

Okay. Thanks and one last question.

Chris had mentioned a bit on the CapEx but going forward like what kind of CapEx spend should we be looking at over the next couple of years?

Well I think you will see a little bit less, Tony, like last year we acquired 17 dealerships and some of the CapEx is generated from the acquisitions obviously. One of the reasons that many dealers decide to sell is that they don’t want to go through a major renovation or relocation and it's really a core part of our business.

And we’ve got a dedicated team that looks after the renovations and the relocations and we don't hesitate to do it to, typically we got a fairly really nice bump in sales on a major renovation or relocation. And that's something that we factor in on the acquisition front.

As Chris said that 30 million, a good chunk of that's probably fairly soft, it's a down there. I think we’re being very conservative.

And the other thing is we’re pretty rigorous about projecting out our numbers from an operating point of view and a balance sheet point of view on three to five year basis, and see what is this put us with our covenants and our business model, our need for equity and it's something we are reviewing frequently during every quarter and we’re quite comfortable at our plans.

Yes, hi guys, I’m just wondering if you’ve seen any price increases from some of the OEMs come across the border, given the weakness that we are seeing here in the Canadian dollar?

Very small at this point, you never know what will happen. But we’ve certainly been through this with the dollar before, a number of times.

The reality is all the manufactures in Canada are fighting very-very hard for their own market share. And they are very competitive.

So I don't, Tom, I would think it’s not something we’re overly concerned about it all.

No, I have said, the nice part about that there is a price increase and all the dealers are in the same boat now. We’re all buying the same price and selling at the same price.

Right and how are dealer incentives sort of trending, as there is a highly promotional environment, to clear some of this excess inventory?

I’m not seeing a big change in the dealer incentive at all. What I have seen is our OEM partners, really working, not only with us but the entirely dealer body, very fairly.

They are listening to the concerns we have and they are adjusting their business models and their plans, like straight all givers, as partners as fairly.

Just switching gears a little bit, on the part service in collision business, I believe last quarter warranty work made up about 60% of that and I think you said historically it's around 30%.Where was the warranty work this quarter? Has it come down a little bit from Q1?

Year-over-year it probably be -- we would have more warranty work. This year we added two really large BMW stores as well as the other acquisitions.

And part of the BMW business model is selling the vehicle, but all their regular scheduled maintenance included, and it was just a great deal for the consumer and a very smart move on their part. And we do that work at basically a discounted rate.

When I look at our parts in service margins, on a same-store basis, we’re up almost a full percentage point, which is good, 53.4. Overall we’re at 50.7.

So that tells me we’ve got some room to improve ballpark in service margins on the other stores we've acquired.

I just wanted to follow-up on a couple of items you’ve already discuss, but in terms of the OpEx you mentioned in your Q2 commentary that its up year-over-year, it's your ability to impact the OpEx has sort of lag the sales decline. But would you say that's going to continue into Q3 or do you feel like you’ve sort of achieved all that you can achieve in terms of right sizing the OpEx to the current run rate of the business?

Well, that's a very good question Mark. I take a look comparatively as Q1; Q1 of 2014, our operating expenses percentage for gross is running at 79.4%, Q1 2015 was an eye-popping 88.37%.

What I’m really encouraged about is when I take a look at Q2 we've closed that GAAP considerably year-over-year. Last we're running in Q2 75.5%, this year we are at 77.55%.

So I think we’ve picked up a lot of the opportunity there, I still think there is maybe full basis points or maybe 2 basis points sitting there. The team here I think has done an outstanding job of recognizing the opportunity.

And how we basically look at it is we’ve got fixed expenses, we’ve got variable and we’ve got some semi-variable. And the semi-variable include the inventory costs, which we’ve got already ahead by several months or three, four months depending on the brand as well as much of the advertising plans.

So that semi-variable, what you’re saying is dropping and we’re getting that reduced and there is probably still a little of meat on the bone there that we can cut off without impacting sales at all in the next quarter.

And then could you just comment on the new vehicle same-store decline of 14%, I mean obviously I’m sure a lot of that's driven in Alberta. Could you just talk about the regional performance to some extent?

A lot of the distributor in Alberta, we’re finding the Calgary market probably to be a little bit tougher than the 0:29:48.5[indiscernible] market. We’re talking pure retail numbers.

That’s our business. We do get reports from all our OEM partners, how we’re doing relative to the other dealers with the same brand and the regions that we operate it.

And I’m not aware of anywhere that we’re underperforming the other dealers of the same brands to any significant extend at all. By and large our guys are doing a really good job, and I am quite proud of the job that they’re doing relative to our competitors.

So would say you’re holding market share in Alberta?

Yes, definitely.

And then just on the used, I know that sort of historically over the last number of years. There have been supply, a huge there; is that changing at all or is the growth that we’re seeing, they are really just a matter of your execution and people trading down from new to used?

Couple of different things going on there, Mark. I think we’re kind of holding our own.

I think you’ve seen what we’ve done in the used vehicle merchandise side and I think we’re starting to see some benefits from that as several of our dealerships were seeing the turns go up and a little bit drop in the gross. But overall gross earned by the dealership, were up on the used side.

We’re definitely seeing some used vehicles going down south, the extent of that happening in the Canadian marketplace is really hard for us to predict, or get full insight into. But the used market, I think is something long-term, is going to improve in Canada and it’s going to be a good opportunity not only for us, for all the entire dealer body as we see more used vehicles becoming available.

You know it will be something that will gradually build over the next couple of years.

Just, all of the questions have been answered, but just some quick questions on inventory and just maybe ensuring that I understand this correctly. You talked about having excess inventory, I’m going to guess a lot of that you'd alluded to the fact that some of it was ordered before we had the downturn in Alberta.

Do you have any opportunity to maybe move some of that inventory around or change your ordering patterns so that you can more level the inventory needs for each of your different regions?

It’s little bit difficult to do Chris, because the transportation costs involved to ship a car from Alberta to Ontario or Ontario to Alberta. You’re going to add a fair bit.

The OEMs are pretty good at working with the entire dealer body to allow dealer transfers to happen between dealerships. If you need a car it’s typically easier to just get a dealer transfer in.

What we have done is, we’ve reduced our orders, because we’ve got inventory on the ground and we're filling up holes in it. So the inventory levels -- we’re quite happy with the progress we’re making on and over the quarter.

I think in the Q3, definitely by the end of Q4, we’ll be able to get them to a level that work.

And then just looking at the operating expenses, you’ve given us some pretty good color. But I guess what I’m looking at right now, if I was kind of looking at your run rate, it looks like as you said the min costs is sort of flat winding a little bit, but in terms of employ cost, I mean is there much we can really do there or you are sort of stuck at sort of a baseline level now, as of a level we saw in Q2 with some decent activity is kind of what to think that we are going to have to see through Q3 and Q4.

Our employee costs are, they are what they are. I kind of like -- certain amount of people at a dealership in order to sustain your sales level.

So if you got to take a look at about your headcounts, right. And then the next thing is you have to pay whatever the market is.

We are paying I think very well. The key part of our business I think is paying our employs well and giving the tools that they need to succeed to look after our customers.

And we're competitive in the marketplace. We don’t over-pay, we don’t under-pay and a lot of them are around variable compensation.

So with a downturn let's say for example, in Alberta store, their compensation has dropped as well as ours. And there is not generally a lot of people that work at a dealership level.

They are not on a fixed salary. It's largely what you produce or what you sell, how the guys are getting paid.

Okay. And then the last question, it's a bit of, you alluded to the fact that one of the major drivers is employment but the other driver I think that we have heard you talk about before is just the availability of credit.

Just wondering how you are seeing the availability of credit right now? Are you seeing lenders starting to pull back, some of the uncertainty?

Are they looking for higher the loan to value ratios? Is there any sort of behavior that you are seeing there?

And I am assuming each of the markets a little bit unique, but any color you can give us around that will be great.

Another good question; not at all, I think that banks and the OEM finance arms are very aggressive. They are looking for business.

They are not doing really stupid deals, but they never work. And certainly, Tom, again I do not see any risk in the next few quarters at all to the availability of credit.

I think it's very good.

Hey good morning. I just wanted to follow up on your same store and used vehicle revenues.

The average revenue per used vehicle was up 13%, I am wondering if you can help me understand what's going on there?

I think it's just a little bit more newer models that we are selling. We are seeing a slight return on the used vehicle, availability of vehicles out there.

Nothing huge, and again as I said before we would expect to see a bit of a gradual improvement on that. And we are getting a little bit more the three year old vehicle that three year old vehicle coming into inventory.

So you think that's going to continue?

Yes. I think you will see a gradual improvement on that, counterbalancing that; which again it's hard for us to predict as how many of these vehicles are going down to the United States because of the low Canadian dollar.

Fair enough. And then just on the repair business, you guys mentioned that you expect it to improve through the year.

I am wondering how much of visibility you guys have on that business, and what gives you confidence that you can increase those gross margins when mix can be variable.

We have taken a look at it, in very simplistic terms as we take a look at what we are doing at our same stores and then we take a look to the same brand sort of acquired stores to -- why can't we move the margin at the acquired store to what we have on our same store basis. So if you have got an existing Hyundai store that's getting a 50% parts and service gross margin, if we require one is to 44, we should be able to move the 44 close to 50.

And that's where we think we will get a bit of a lift. A lot of it is just efficiencies.

It's just being little bit smart in how you do business, getting discounts maybe on some of the part you are not buying from the OEMs and et cetera, how you are reconditioning your used vehicles, why you charge your used vehicle department on internal work that type of stuffs. It's easy fixes but it takes time to put in place.

Okay. Fair enough.

And just lastly I am wondering if you can talk about maybe the inventory levels not necessarily yours, but your OEMs' in your market? And maybe how you think competitive dealerships are managing their inventory?

How does that market look relative to yours?

For OEM inventory levels, that's something we have got insight in -- if we don’t have insight in and if we did, we wouldn’t comment on it anyways. With respect to other dealers we have got an idea what they are carrying, they are literally all over the map, because there are so many different dealerships right, in each of the markets that we compete in.

Well, I would just like thank again everybody else participating in the call, and everybody that asked the question. Chris and I will around for most of day if someone else wants to get hold us, please feel free to email us, or phone us, and we’ll do our best to get back either today or tomorrow.

And have a great day and have a great weekend. Look forward to talk to you next quarter.