Feb 14, 2018 • 10:00 am ET

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Q & A
Operator
Operator

(Operator Instructions) Steve Dyer, Craig-Hallum.

Analyst
Steve Dyer

I'm wondering if you could elaborate on the SALT deduction comment. I guess I wouldn't have necessarily put two and two together. But maybe what are you seeing and what do you anticipate seeing in terms of changing behavior?

Executive
John North

Yeah, Steve, this is John. I think, we'll talk a little bit more broadly about our guidance overall. We updated our outlook for '18 based on the current sales performance and market conditions. And certainly the tax reform is going to be accretive to us, but we also anticipate likely increases in interest rates this year. The Fed's talking about three, even four, interest rate increases. I'd remind you that a 1% move in interest rate is $15 million pretax for us, or about $0.40. And then we're tempering our expectations a little bit on the coasts, where the majority of our sales are, due to the limitation of the SALT, as you mentioned.

We also didn't see a lot of the benefit it appears many of our peers have from replacement demand due to Hurricane Harvey. Inevitably we look at our kind of trends in the market. We're taking the opportunity to utilize some of our tax savings to invest in our team members and improve certain employee benefits. So we kind of put that all together. It appears the market is stable. We're certainly not seeing, as Bryan mentioned, an increase in SAAR in 2018. And I think it's too soon to tell anymore about what the ultimate impact might be on the coasts.

Analyst
Steve Dyer

That's helpful, John. And then, I mean, as it relates I guess drilling down a little bit more on the tax deductibility limitations, et cetera, are you expecting just overall demand softness? Or are you expecting people are just sort of trading down, buying less car? What are you sort of baking in your expectations there generally?

Executive
John North

I think it's more that we haven't see real acceleration. And if you look at how the fourth quarter ended, I mean, I think SAAR ended the quarter at 17.8 million, which was up pretty dramatically. But it appears that a lot of that was concentrated in the middle part of the US, particularly around kind of hurricane replacement. We're estimating 200,000 to 300,000 cars were lost there. As we look at our coastal performance, it appears things are pretty steady in kind of the upper-16 low-17-million-unit range. And we think that some of that's a function of the fact that those are high state income tax locations that might be affected. So I wouldn't say that we've seen a big shift. I think it's more that we saw pretty consistent performance through the quarter, but it appears that the underlying demand is a little softer than it might have indicated in Q4 based on some of that hurricane replacement.

Analyst
Steve Dyer

Got it. Okay. And then question on acquisitions. You guys, it looked like FTC okayed some -- what appeared to be acquisitions yesterday, nothing