Group 1 Automotive, Inc.

Good morning, ladies and gentlemen, and welcome to Group 1 Automotive 2020 Second Quarter Financial Results Conference Call. Please be advised that this call is being recorded. I would now like to turn the call over to Mr. Pete DeLongshaw, Group 1 Senior Vice President of Manufacturer Relations, Financial Services, and Public Affairs. Please go ahead, Mr. DeLongshaw.

Thank you, Chuck, and good morning, everyone, and welcome to today's call. The earnings release we issued this morning and a related slide presentation that include reconciliations related to the adjusted results we will refer to on this call for comparison purposes have been posted to Group 1's website. Before we begin, I'd like to make some brief remarks about forward-looking statements and the use of non-GAAP financial measures. Except for historical information mentioned during the conference call, statements made by management of Group 1 are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve both known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results. Those risks include, but are not limited to risks associated with pricing volume, conditions of markets, adverse developments in the global economy, as well as the public health crisis related to the COVID-19 virus. and resulting impacts on demand for new and used vehicles and related services. Uncertainty regarding the duration and severity of COVID-19 and its impact on U.S. international authorities to ease current restrictions on various commercial and economic activities, and uncertainty regarding the timing, pace, and extent of economic recovery in the U.S. and elsewhere from the unknown current and future impacts of COVID-19. and the unknown future impacts of oil producers and the effects such that can have on travel, transportation, and oil prices, which in turn will likely adverse affect demand for our vehicles and service. Those and other risks are described in the company's filings with the Securities and Exchange Commission over the past 12 months. Copies of these filings are available from both the SEC and the company. In addition, certain non-GAAP financial measures as defined under SEC rules may be discussed on this call. As required by applicable SEC rules, the company provides reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on its website. Participating with me on the call today, Earl Hesterberg, our President and Chief Executive Officer, Daryl Kenningham, our President of U.S. and Brazilian Operations, John Rickle, our Senior Vice President and Chief Financial Officer, also Daniel McHenry, who is our incoming Chief Financial Officer, and Michael Welch, our Vice President and Corporate Controller. I'd like to kind of give the call over to Earl.

Thanks, Pete, and good morning to everyone. The business and personal experiences all of us have been through since early March are difficult to describe. The challenges and uncertainty we have faced in recent months are unprecedented, and I believe that makes our results this quarter extremely impressive. Our original goal was to keep the company afloat and stabilize it financially in the face of an uncertain period of shutdown as we entered April in the second quarter. Therefore, our $69.6 million of adjusted net income and $3.70 of adjusted earnings per share are nothing short of a spectacular performance. These numbers represent 32% and 33% increases respectively over last year's second quarter numbers and were accomplished despite a 29% decrease in total revenues. Clearly, these impressive results demonstrate the resiliency of our business model and the brilliant efforts of our employees. Unfortunately, they also represent extremely decisive and aggressive cost-cutting actions we took across all three of our markets in Lake March when it became clear that many of our businesses would be virtually locked down due to a variety of shelter-in-place orders in all three of our markets. This resulted in many of our employees... nearly 8,000 in total, being furloughed by early April. These were very painful actions to take, but were necessary due to the unknown duration of the business shutdowns. At this point, we've been able to return many of our furloughed workers to a point where our US and UK headcounts are roughly two-thirds of our pre-COVID levels. Additionally, a large number of our remaining employees made sacrifices with reduced compensation and benefits as well. And we are beginning to reverse some of these actions as we see the market further stabilize. Looking at the track of our U.S. and U.K. businesses during the second quarter, we saw sudden dramatic decreases in our U.S. operations in early April. During the first half of April, Both our vehicle sales and service business were down about 50%. Some of our showrooms were completely closed, and although most of our service departments remained open, customer traffic dropped dramatically. In early May, our used vehicle business returned to near normal levels, and our new vehicle sales pace continued to increase steadily throughout the quarter. By the end of the quarter, our new vehicle sales had improved to a level of approximately 15% below last year, but then stalled out due to inventory issues. In the UK, we had a massive financial obstacle to overcome in the second quarter, as our service departments were closed down except for emergency service for the entire quarter until May 18th, and our vehicle showrooms were closed until June 1st. This made it impossible to generate meaningful gross profit in two of the three months this quarter. However, our cost reductions combined with a strong snapback in the sales and service market in June brought us back to a profitable level in June and we have good momentum going into the third quarter. Mitigating our UK losses with a strong June and the great work by our US team in May and June enabled our company to hold our gross profit decline to 21% versus the 29% revenue drop I previously mentioned, and to leverage our business model with a 33% reduction in adjusted SG&A expense. That is something few companies can do. To provide some color on our U.S. performance, I'll turn things over to Daryl Kenningham. Daryl? Thank you, Earl. Our outstanding U.S.