Good day and welcome everyone to the Asbury Automotive Group third quarter 2007 earnings results conference call. Today’s call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Vice President of Finance and Investor Relations, Mr. Keith Style. Please go ahead sir.

Thank you, good afternoon everyone and thanks for joining us today. As you know this morning we reported third quarter 2007 earnings. The release is posted on our website at www.asburyauto.com. If you don’t have access to the internet or would like a copy of the release faxed or emailed to you please contact Gail Falotico at our Corporate Office. Gail can be reached at 212-885-2520. Before we start, I would like to remind everybody that the conference call today will include some forward-looking statements that are subject to certain risks and uncertainties which are detailed in the company’s 2006 10k report as well as other filings we have with the SEC. In addition, certain non-GAAP financial measures as defined by the SEC may be discussed in this call. To comply with SEC rules, reconciliations of non-GAAP financial measures have been attached to this morning’s release. We also from time to time update the website with additional financial information, so any interested party should check the website periodically. The purpose of today’s call is to discuss Asbury’s third quarter results. Our agenda will be as follows, Charles Oglesby our President and CEO will begin with a few introductory comments. Then Gordon Smith our CFO will add some financial highlights. Charles will finish with a few concluding remarks and after that we’ll be happy to take your calls. Now I’d like to introduce Charles Oglesby our President and CEO. Charles.

Thanks Keith and good afternoon to everyone and thanks for taking time to join us today. As many of you are aware, Asbury has delivered excellent results over the last 11 quarters. Our past performance has been largely achieved through growing our high margin businesses, used vehicles, fixed operations and finance and insurance. And during the quarter we have continued our growth in fixed operations and F&I. In addition, our performance in new vehicles was very solid considering the retail environment. To some extent we have set ourselves up with some pretty difficult comps particularly in used vehicles. I’m sure there’s concern regarding our used vehicle operations and I will address the cause of the third quarter decline, the actions we have taken and what we expect in the future. In addition to our solid performance in new vehicles, fixed operations and F&I, we have positive momentum on several other fronts. With our latest acquisitions we have now acquired $350 million in revenues this year exceeding our annual target of $200 million. And with the progress of our share repurchase program, we have now returned almost $50 million in capital to our shareholders this year. We’ve also entered into a partnership with DealerTrack and plan to convert all of our stores to its Arkona DMS system. And let me be very clear, while I’m disappointed in our performance in used vehicles this quarter, I have the utmost confidence in our team, our portfolio of stores and our model. Looking at the overall results, EPS for continuing operations was $0.58, up 7% over $0.54 last year and Gordon will discuss results in greater detail in a few moments. But adjusting last year’s performance for non-operating items we were down slightly on an EPS basis with EPS being $0.59 last year. Our…

Thanks Charles, good afternoon everyone. Income from continuing operations increased 5% for the quarter to $19.2 million or $0.58 per share, up from $18.4 million last year, or $0.54 per share. As Charles mentioned, when you take into consideration the impact of non-operational charges disclosed last year, which totaled $0.05. EPS for the quarter was down slightly. Our bottom line performance was aided by a tax benefit of which I will address in a few minutes. However, it’s important to note that the tax benefit was almost fully offset by non-operating charges and SG&A during the quarter. This quarter marks the first time in nearly three years that we were not able to deliver productivity on our adjusted expense ratio. Obviously in a difficult retail environment, particularly one characterized by an inconsistent pace of business it was a challenge for us to react to conditions in our local markets. What the numbers for the quarter do not reveal is the actions we took late in the quarter. With our recent management teams reducing our advertising plans by more than 10% and performing an in-depth review of our dealerships, staffing levels to ensure that we are properly positioned to head into the slower selling system. SG&A expenses on a comparable basis declined 160 basis points to 77.1%. However, as I mentioned earlier, our results for the quarter included $1.8 million in charges related to an abandoned real estate development project and a legal settlement cost, contributing 80 basis points, or nearly half the deterioration. Excluding these items, our SG&A deterioration dropped to 80 basis points, which can be largely attributed to the reduction in retail sales. Many aspects of our variable cost structure improved in the quarter. With personnel expenses down 30 basis points, sales person compensation down 50 basis points,…

Thanks Gordon. In summery, I’m satisfied with our performance, in light of the challenges we faced during the quarter, as our balanced business model provided considerable stability in a period of weak retail sales. As a management team, we have taken aggressive steps to ensure that we are well positioned for future success. And I remain confident, that our operating model, which allows our regional management teams to react to local market conditions, while enjoying the savings of our shared infrastructure, will continue to prove an effective approach to managing a large retail organization. I’d like to turn the call over to the operator for a few questions.

Thank you very much. (Operator instructions) And the first question comes from Edward Yruma with J.P. Morgan.

Hi, thanks for taking my question. Charles, I know historically, you’ve prided yourself on having an operational decentralized model, and given some of the inventory pressures, are you taking more of that control in-house, and providing some governance to that.

Edward, the inventory is certainly a concern for us as mid-line inventories rise. I would say that our model has always been great communications with our local CEOs. They are much more familiar with the needs in their local markets. Overall as an organization, we will look very favorably at reducing our inventories. So the communication style has not changed, but from a local standpoint, the opportunity for reduction in inventory, they will take advantage of it.

And help me understand a little about your comments around sub prime and some of your historic successes there, and maybe some of the weakness you are now seeing. I couldn’t help but notice while I was in Florida recently, that they were very heavily advertising some of the sub prime promotions with your Coggin group. When did you start pulling back on that business in the quarter, and how long do you expect that to persist for?

Well, the sub prime market is being affected in a number of different ways, Edward. That market is traditionally a solid market. There are some unique events that are going on now; part of it is that the fleet inventory that was returned to the market is a lot less than it used to be. So that market is more expensive. So normally, you’ve got to have the right customer with a substantial amount of down payment, and the lender looks to be behind book of what their inventory is. Those conditions are really not the same today. That’s a part of it, where it’s down. We’re also finding that from a sub prime customer, that their cash is a little less today. Their disposable cash is going into other areas; higher gasoline, groceries, mortgages, different aspects of their budget. In the past, they may have been able to afford a $275 payment, while today they can afford a $210 payment. So that puts pressure on the margin, as well as the type of vehicle that you have available for that sub prime market. We are, that is still a major part of our business, but part of the inventor positioning, we may have been out of alignment with that, so we’re repositioning some of our inventory now so that we can look at a traditional prime market and continue in the CPO market as well.

Actually, one follow-up if I may. I think that you’ve historically said that sub prime is about a third of your business. Is that about right, and is that the piece that was entirely affected, or was it a smaller subset of that sub prime bucket? Thank you.

That still is about the same size of our market. However, each piece has been impacted by that. But the sub prime, we certainly didn’t take as much advantage of it as we have in the past.

It was 30% of our business this quarter. One could argue that given the emphasis that we put on that business, we would have expected it to be a little higher than it was, but that didn’t materialize.

Thank you very much.

And moving on, we will hear from Rod Lache of Deutsche Bank Securities.

Good afternoon. A couple of things, just looking at the margin deterioration in the used business, when you said that used would be flat to down in Q4 and Q1 were you referring to units or revenue or gross profit? How should we be thinking about the outlook for that business?

Well on a comp basis we expect that we will be down. There has been margin pressure on use throughout the year and a part of that is because of the wholesale market being up some, so we have stabilized on our comps, we have very strong comps in the past, we've been as high as 12-12.1% and last quarter I believe we were at 11.6%, so we improved from a low of 11% back up to 11.6%. But we are expecting continuing margin pressure because as used market declines, as the new does, there still is a supply of inventory in the market, and as that supply works through the market, there will be pressure on margins.

And, can you just explain what's happening in the wholesale business and how that’s related here? Looks like there was a bit or and erosion there and wouldn't the tighter inventory be a positive for the wholesale business?

Yes and that's what we are doing right now is we want to increase overturn right on inventory, so our inventory was at a certain level and as the market declined, we had a surplus of inventory so as we are working through that inventory we received some wholesale losses on that. But that is what we continue to do, is reduce that surplus. And as you know that's kind of tricky because at the same time we are taking trade-ins on new cars because as the incentives continue on new vehicles a lot of customers will move from used to new. And so we will be taking those trade-ins as well. But getting the inventories down is absolutely one of the initiatives that we are working on.

Ok and can you just lastly give us what your exposure is to Florida and California as a percentage of the total?

On a total NOI basis Florida is about 30% in the third quarter of our income. Excluding the headquarter cost, 30% of region income is associated with Florida.

In California we have four stores so it’s a small exposure.

Ok, thank you.

We will take our next question from Rick Nelson from Stephens, Inc.

Can you talk about a timeline for rolling out Arkona and how quick you expect to see benefits?

We expect, we are rolling out now, we expect about 50% of our dealerships at the end of next year, and then we still have some obligations on our old contract through 2011 but we'll more then likely speed that up. And we are certainly starting to receive the benefits of this relationship in every store that we get it in we receive those benefits immediately. So about 50% by the end of next year.

There was discussion about Florida, I was wondering if you could address their markets particular strengths or weakness?

Well certainly our Texas market is probably one of our strongest markets right now and we've noticed some of the weakness through Mississippi and Arkansas and the rest of our markets are about flat. However one of the ways that we kind of measure our performance in our local markets is whether we gain share or lose share in our franchises. And we generally have been gaining share even in a declining market which again that is a great measure of what our local general managers and our local regional teams do in those markets.

Any comments on October sales which are seen to date for the industry?

Rick, we really don't want to comment on this quarter.

Thank you.

And our next question comes from Joe Amaturo with Buckingham Research Group.

Good afternoon. A couple questions. Could you just tell us what y our expectation is for the Florida used vehicle market for the fourth quarter that you have out there for your full year guidance? You said it was down I think 13%?

We are looking for a similar performance in the fourth quarter.

And as it relates to the Katrina impact, could you just discuss what the impact is year over year during the fourth Quarter?

That would have been in our Mississippi and Houston stores and they were down 21% in gross this quarter versus last quarter.

Is there any effect rolling over into the fourth quarter as well, is my question?

I would expect a similar softness in the fourth quarter, maybe a little bit less, but of similar magnitude.

Next, could you just discuss what percentage of an overall heavy duty dealerships gross profit comes from service and parts and comes from new vehicle sales? Gordon Smith Yes we'll get that.

One of the things I'll share with you while Gordon is looking at that is our focus is to get 100% absorption rate out of our heavy truck franchise and as we are making the changes in that facility today, as I've mentioned we made substantial structural changes from an operational standpoint with personal, with pay plans, with reduction of inventory and as that starts to improve we'll see some tremendous benefits from that franchise. We still like the franchise, it’s had a difficult time, we've made again some operational changes in it, we've really brought the expense structure down and as we move forward into the future and if rates start rolling again we are expecting some real good things from that franchise.

It’s about 30% of the gross profit of the motor trucks business

Have you seen a ramp up in service and parts with a decline in the sales and is that something we should expect going forward?

On a go forward basis what normally happens whenever the sales decline in heavy truck normally you would expect the improvement on the fix side. We went through a period of time where that did not happen and when trucks really were just not moving and so the service was not being provided as well as there are a lot of new trucks on the road today that were pulled forward last year. So as those trucks start coming in for service we do expect and increase on the fix side from a parts stand point, and we have a very strong wholesale parts department there as well, we sell parts more that just to our own locations, and so we are expecting a lift and actually we are beginning to see some of that.

For the quarter our fix operations was only up 1.5% but Charles’s point is that a lot of that is as a result of when we pulled forward as many new sales as we did there's a lot of new trucks and they haven't started to roll though the shops yet. But we would expect that to ramp up in the coming months and into next year.

I guess it fair to assume another $0.02 hit in the fourth quarter from heavy duty as we've seen kind of quarterly throughout this year so far?

Yeah, that is what we are expecting.

Then lastly based on your debt (inaudible), how much stock could you buy back, currently?

Right now about 14 million of stock at this point.

Ok, thank you.

And moving on we will hear from Rich Kwas with Wachovia Capital Markets.

Good afternoon. Gordon, could you comment on the comment you made regarding reducing support personnel near the end of the quarter. What type of impact you expect in the fourth quarter and how much more do you have to go in terms of fixing the overall expense structure?

Well I think plagiarism is a great thing and one of the things we're asking everybody to do is really look at the bottom 10% of your employee base and those are the ones that are a real drag on the operation. So we're actively looking at that and trying to take that piece out of the business. As a starting point obviously with retail sales being down as much as they are, we have to actually look at the management layer of the company. We’ve set a lot of these stores out for much higher volume rates and with the lower demand at this point in time it makes a lot of sense to start hitting that pretty actively. As you know personnel is about 30% of the overall cost structure of the business, so that is where we will be looking and looking hard. We just started the process in September, not much of an impact. Hard to measure at this point how much we have. We've made some assumptions that overall our cost will be at least flat on an SG&A percentage basis in the fourth quarter versus last year on declining revenues to kind of mute the impact and what's further is most of the impact being seen in the first quarter and beyond.

And in the new guidance what sales assumption are you making for 2007?

For 2007?

Yeah, I mean your previous guidance was a sales range was 15.9 to 16.7 if I recall.

Yeah that’s correct.

So what is the new number?

We're looking at it about 16 at this point in time. If you look at a lot of things that are being published by some of your guys is that with consumer confidence at where it’s at people are expecting a relatively soft Christmas and that's the biggest. When we look to the fourth quarter as you know, the last week of the year really makes or breaks the quarter and it’s the part we are most concerned about at this juncture. I think it was Wachovia that just published today on consumer sentiment being down very significantly on October, which doesn't bode well for the Christmas selling season. And we are trying to take some of that into account.

And on import margins, particularly Honda, what are you seeing? One of your peers talked about import margins getting worse sequentially from the first part of the year. What are you seeing? Are you seeing the same trend and incrementally in Q3 were they much worse than Q2 and what do you expect going forward?

As far as breaking it down, obviously with the incentive money on Honda we saw margins improved about 120 basis points, that’s about $230 a vehicle. We have seen some deterioration in Toyota, our margin on Toyota was 6.9; in the third quarter of 2006 it was down to 6%. Of the other ones they are pretty much about the same we saw from last year, BMW being the exception versus last year with the three series that’s up about 7% which has been fairly constant throughout the year. So a little deterioration in Toyota. It will be interesting to see how Honda holds up with the new accord going into the fourth quarter but their margin should stay about the same where they have been. For the first two quarters of this year they were 7.6-7.7 and as I said it was [8.8] in the third quarter so we expect to be back down in the 7.5 range in the fourth quarter.

What did you say was the benefit of the buy and bonus for the Honda program this quarter? You booked almost all of that right?

Which state?

What was the overall benefit to the gross margin of Honda this quarter?

Well in terms of a per vehicle basis that margin improvement is about $236 a vehicle.

And that was all retro right? That included the volume you booked earlier in the year too?

Yeah pretty much. There was a little in the second quarter but most of it was recorded in the third quarter. That's correct.

Ok, great, thanks so much. Operator Our next question comes from Darren Kennedy with Goldman, Sachs.

Hi, it’s Matt Fassler here. One question I had was about the new heavy truck market. If I’m not mistaken it’s been down about 40-50% in your brand mix I think, each month, all year long. Is there something new that seems to be pressuring that business or is this just really as it seems that it just caught you off guard now?

I would say that it caught us off guard. What we've been working on actually is again getting that business in line with where the market is and setting it up for more success in the future. There were some basic changes that we needed to make. We needed to make some strategic decisions last year that at the time we made them were great decisions and that was to ramp up on inventory because we had the opportunity to get some inventory that others did not because of our performance we had in the past. And as the market-because we expected that to be that inventory to be at high demand cause there just wasn’t anymore of it with the new admission regulations. It ended up not being the case and so we’ve had to work through that inventory. So, we’ve had older inventory and there is not much new inventory on the market because as you’ve seen the production rates on heavy trucks has been down. So we’ve worked through that inventory and really done a great job of reducing probably over $40 million worth of inventory we’ve been able to move out of. So, it hasn’t caught us off guard, I’d say the duration was a little more surprising to us, and in talking with the analysts and with some of the manufacturers there, they’re expecting early second quarter next year that we should start to see some improvements.

When we first put the plan together late last year and to the first part of 2007, the expectation was the first half of the year that retail demand would be off very significantly, somewhere in the neighborhood of 40 to 50%, and we did see that, and that was the result of the pull-forward on the emissions. What somewhat took people by surprise is really the credit crunch, the economic environment in the second half hasn’t supported a rebound up to the new trucks. It’s all caught up in the same stuff. We’re all reading about the macro environment. It took everybody a little bit by surprise. So it is softer than what we anticipated it to be and plus the tough comp with all the pull forward, a lot of that was in the fourth quarter last year, so those are the factors that contributed to it.

So you’re really saying that you had expected the recovery by now, but the weakness is just the persistence of that is a little different? Gordon Smith Exactly.

Okay and then moving the use to sub prime it sounds like you’re going at this - it does not appear that its because some of the common concerns I’ve heard like, are the lenders really pulling back or is this just some kind of consumer you believe impinged more the consumer more broadly and also as well as the clean impact on inventory making it so there’s less sub prime product?

Well the sub prime lenders from their perspective, they’ve got a very mature model they’ve been in this business a long time and they’ve been in the collection business a long time. What we are seeing from that aspect is that in the past they may have been more lenient with their guidelines and today they’re not, they’re being more strict and adhering to their guidelines and the consumer is, it’s more difficult for that customer to meet the current guidelines. So, we’re kind of seeing a combination of events there.

So it’s effectively a tightening of standards, the policies really haven’t changed, it’s just that they’re getting, they’re watching them more closely.

Yes. And the inventories as we mentioned, there’s less of that, that prime inventory available today and what is available is more expensive so it doesn’t quite fit the model as easily as it did before.

At least in some markets, I know you said it works better in some markets than others, it certainly helps sales. Where do you think that this got – that pursing this business has gotten you in terms of incremental growth in years, what kind of comparisons should we be concerned about as you cycle that?

Well when you look at the growth that we experienced the last two years some of that has been a result of weather conditions in our other markets because we had some explosive growth in Florida in ’05 after the hurricanes there. A lot of it has been because we implemented software technology two and a half, three years ago and with implementation of our used car teams. I don’t know if there’s as much low hanging fruit, as we had to gain in the past. So, when we look at the comps and the soft market we didn’t stop selling cars. This is basically the same team that performed all of these 11 quarters of great performance in the past so we just didn’t follow up a log unfortunately and this happens. So it’s a number of conditions that came at the same time that made this performance look as it does. So, on a go forward basis that’s why we’re seeing flat to down on the used car side.

Look I guess that Houston was one of your main markets in sub prime, didn’t you say something about the costs being up there. What was the metric you discussed, was it a 30% relative to the rest of your business?

No, I think that what I said – The post Katrina with our Houston and Mississippi, our growth was down 21% because of the comps that we in ’06 because of Katrina, they were up.

Right, they were up, it was up significantly. I thought that was a result of your effort going into sub prime there.

Yes, that’s true. There was a very strong effort and we still have a strong team in that Houston market.

Okay. Thank you.

And our next question comes from Matt Nemer with Thomas Weisel Partners.

Hi good afternoon. My first question is can you provide the new vehicle margin per unit excluding the Honda Accord bonus payment? Is there a way to back that out?

For just Honda?

I’m sorry for everything other than Honda. Just trying to get a sense of the underlying new vehicle gross margins excluding that bonus payment.

I can get you that calculation; I don’t have that one off the top of my head.

Okay fair enough. Then I didn’t hear but did you provide any detail on the abandoned real-estate project?

Yeah, we were looking to do a fairly substantial Greenfield project down in Florida, we got a long way into the project, but the insularly costs with doing the project just overwhelmed our – it started not to make sense. The city was asking for incremental improvements to the roads and all that costs that we didn’t anticipate seeing at the beginning ended up making it uneconomical to continue with the project and that’s why we eventually abandoned it. Very painful, but it was the right business decision to do and to stay where we are.

Got it. And lastly, it’s my understanding that Arkona is more streamlined than the ADP Reynolds or UCS solutions that it was typically prior to this year used by either smaller stores or single point stores. Are they making significant improvements or changes to the software this year or are they doing any custom work for you to roll this out, to create synergies between stores?

Yes, as we had great and in depth conversations with DealerTrack and Arkona about being able to serve the needs of an organization of this size and with the improvements they have made and are continuing to make it with the cost savings, which was only part of the driver. The other part was the vision that we shared with DealerTrack and that is to create a seamless process where not only customers, we have a tremendous customer benefit, but our employee benefit as well so that we can create speed and efficiency in the sales process and service process and follow up process. So, we have a tremendous vision of where we will end with this dealership with DealerTrack and Arkona. So the cost savings and their ability to serve our needs as well as just this tremendous vision that I personally had for 20 years in this business and have not seen an opportunity for a large retailer and an IT partner to come together and create something of this vision in the past and we had the opportunity to do that and they shared that same vision. So, absolutely yes, they can serve what our needs are and on a go-forward basis it will continue to improve on efficiency and in the speed of the process.

What we’re looking for Matt, it really is a seamless process of where we input customer data wants and it follows the customer all the way through, through the fixed department and then out the other end in terms of doing the next transaction with the individual and to that end DealerTrack has committed a substantial amount of their RND efforts to making that happen, including on the DMS side. Let’s be fair they’re not where they need to be in terms of that product today, but they have the resources and the commitment and with our help they’re gonna get there and they’ve committed quite aggressively to making that happen. It’s not that it’s a bad product today we’re just going to make it better.

Got it, that’s helpful thank you.

And just to add on to that a little bit Matt, the way that I look at it, the savings Matt that we’re getting from the DMS, I think that’s really the tip, I think you’ve heard me say this before, but that’s the tip of the iceberg, when you look at a seamless processes. One of the metrics we’re looking at typically takes a customer about four hours to get through the dealership once he’s serious about buying a car. With this, when we’re successful with this process we can at least halve that time if not even beyond that, so lots of savings, which translates into at that point pure sales people that can do more deals and so on and so forth. You can see the domino effect of having an integrated system like this and that’s what gets us excited about going forward with DealerTrack.

We will now hear from Rich Kwas from Wachovia.

Hi just to follow up in terms of the guidance in the fourth quarter what are the big swing factors with the 8 cents spread?

I’m not sure I understand your question Rich.

Well when I think about the applied guidance for the fourth quarter here with the 210, 218 guidance for the fourth quarter, what gets you to the 210 versus what gets you to the 218, what are the assumptions?

Yeah, I think that is purely on the retail side of the business, you know as I said, a lot of it comes down to what happens in December and more specifically in last week or so of December. If the Christmas season is soft that gets you into the lower end of the guidance. I think it comes down to that in particular, that’s the reason for the wide, you know the pretty wide spread in the guidance at this point in time. You know we’re not quite sure where that piece is going to fall out.

Okay and then on the 3.5 million total pre tax savings, that’s the annual savings going forward?

Right.

Okay then that’s 3.5 million going forward and when do you expect to get the first piece of that in ’08?

You can’t do this, but excluding the costs to transition at the stores we will start to see as Charles said during 2008. My expectation is we will see about 35 - 40% of that savings starting in the second half of 2008.

Thank You.

At this time we have no further questions in the queue. I will turn it back over to our host for today for closing remarks.

Well we appreciate everyone joining us today and we are, just to kind of summarize, we are very excited about this particular market that is challenging. We’ve seen these kinds of dips before and the market has always rebounded. We don’t ever know how long it will take for it to rebound but we know that it does and the long-term trends are very positive and we’re very positive on our company and the leadership in particular in our field organizations as well so thanks for everyone joining us today.

And once again this does conclude today’s call thank you for joining us and have a great day.