Good day, everyone. Welcome to this Asbury Automotive Group quarterly earnings release conference call. (Operator Instructions) At this time for opening remarks and introductions, I would like to turn the call over to the Vice President of Finance, Keith Style. Please go ahead, sir.

Thank you, Operator. Good morning, everyone, and thanks for joining us today. As you know, this morning we reported our third quarter 2008 earnings. The press release is posted to our website at www.AsburyAuto.com. If you'd like a copy of the release sent to you, please contact [Michelle Ramsmooge] at our corporate office. Michelle can be reached at 2128852535. Before we start today I'd like to remind everyone that the call today will include forward-looking statements that are subject to certain risks and uncertainties which are detailed in the company's 2007 10K report as well as other filings with the SEC. The purpose of today's call is to discuss Asbury's third quarter results. With us today is Charles Oglesby, our President and CEO, and Craig Monaghan, our CFO. Following their comments, we'll be happy to take your questions. Now I'd like to turn the call over to Charles Oglesby. Charles?

Thanks, Keith. Good morning, everyone, and thanks for joining us today. As you know, Asbury and the auto retailing industry have been facing significant headwinds throughout 2008 and the challenges in our retail business intensified further in the third quarter. In fact, the retail environment deteriorated substantially as the quarter progressed, and in September we saw the first sub 1 million unit sales month in the U.S. since February, 1993. It's important to note that all automotive brands, including luxury and midline imports, were down significantly in September. From a consumer perspective, household wealth in America was already under pressure from declining home values and additional pressure has been applied by the recent sharp declines in the world's equity markets. Consumer borrowing power has weakened materially as home equity financing has evaporated, credit card lines have been reduced, and many auto lenders, both captives and independent banks, have significantly tightened their lending standards. At this point we don't know - no one knows - how deep this automotive recession will be or how long it will last. In automotive retail, especially during difficult markets, cash is king, therefore we are making the difficult but necessary decisions to preserve our capital and reduce costs. We are acutely aware of the impact these decisions will have on our many stakeholders, but also believe they are essential to ensure the long-term success of our company. With respect to capital preservation we are taking action on all fronts. As announced in our release this morning, the Board of Directors has elected to suspend the dividend. In addition, we have put our acquisition strategy on hold. Finally, we will reduce our capital spending to maintenance levels in 2009, which is approximately $10 million a year. In terms of cost reductions, we have substantially broadened the…

Thank you, Charles, and good morning, everyone. I have a number of topics to review today, but would like to start with a recap of our financial performance for the third quarter. We reported income from continuing operations of $0.22 per diluted share compared to $0.58 per diluted share a year ago. As Charles mentioned, we are in unprecedented times and facing an extremely difficult automotive market but, despite these challenges, we continue to invest in our future. In this regard, our results for the quarter include $1.7 million pre-tax charge or $0.03 per share associated with terminating our prior credit facility, a $1.7 million or $0.03 per share in pre-tax restructuring costs, and continued dealer management system conversions costs. These costs were partially offset by a $1.1 million tax benefit associated with our corporate restructuring. As Charles noted, severe weather also impacted our business in the third quarter. And while it is difficult to quantify, we estimate Hurricane Ike and the tropical storms in Florida cost us an additional $0.03 per share. Next I'd like to provide an update on our goodwill impairment test. We conducted our annual test and determined that no impairment of our goodwill existed at the end of September. However, should our financial performance decline further or the market value of our stock remain depressed, we could become impaired. It is important to note that an impairment charge would not have an impact on our debt covenants; however, it would impact our ability to return capital to our shareholders in the future. Covenants and liquidity are obviously areas of concern and I'd like to address those topics next. Attached to our press release you will find a summary of our two key covenants - those on our revolving credit and major mortgage facilities. As you…

As Craig noted, our efforts to drive cash out of the balance sheet and improve our liquidity have already produced significant results. Combined with our plans to reduce costs, we believe we have the financial flexibility necessary to navigate through this period of weak retail sales. At the same time, we continue to invest in Asbury's future, aligning the management structure in the most effective and efficient manner, and implementing systems and technology that will allow us to leverage our scale and serve our customers better. In many respects, we are actually disassembling and rebuilding our company. We will have the best of both worlds - efficiencies derived from the centralization of our IT and financial systems coupled with the competitive advantage of having entrepreneurial general managers making decisions in their local markets. The actions we are taking today will not only help us weather the current environment but will also position us to more effectively leverage our growth opportunities when the economy eventually improves. Now I'd like to turn the call back over to the operator and we'll take your questions. Operator?

(Operator Instructions) Your first question comes from Rod Lache - Deutsche Bank Securities.

Thanks for the color on the leverage covenants and the plans to address that. I was just wondering if you could just give us a little bit more color on the extent to which you can bring Used inventory down because I think that that actually does affect the covenants, right, because that was being funded by your revolver, or am I wrong on that?

No, that's true. Used Vehicle inventory was basically essentially 100% financed out of working capital.

So what is the flexibility on bringing Used inventory down at this point?

Bringing Used Vehicle inventory down is one of our objectives. We're still running in the mid 40day levels. We've got an objective of getting down into the 30s. That would produce additional cash.

One of the things that we're doing with that, Rod, as I mentioned, we decreased our Used Vehicle inventory by $10 million, but as you recall, we were very heavy in the subprime business in the past and so as we've repositioned the inventory - and that market basically has moved away from the industry right now - that, as we continue to bring the inventory down, our day's supply is still remaining about where it has in the past. But we will continue to drive it down and our focus is to get the day's supply down to 35 days.

And how comfortable are you with the ability to execute assets sales in this environment? Is this something that is pretty advanced at this stage or is this something that in your mind still has some risk?

Yes, Rod, we've got a lot of activity. We're talking to people who have the wherewithal to execute these transactions. Some of the activity is around dealerships. Some of it's around [dirt]. We've got a pretty high level of confidence that we can get this stuff done. It may take us six months to get through the list that we've put together, but we feel pretty good about it.

There are more sellers in the market right now than there are buyers. And as we look at our portfolio, we're looking at it strategically as well as the returns on our investments.

And on credit availability and just F&I per unit, any changes there on the outlook and can you give us any color on the extent to which the weakness is being driven by the availability of credit as opposed to just traffic?

You know, early in the year there was a demand issue, meaning when the SAR was 14 and 15 or so. And as the year has progressed, the foot traffic has absolutely slowed down. The consumer confidence has gone to, as you know, all-time lows. And in conjunction with that, the lending sources have tightened their lending requirements up. We're very fortunate that, with the captive finance companies that we have, that they are still well funded and they are making loans. They have tweaked their requirements a little bit and, as an example, with higher credit scores, lower advances, more cash from the customer. So we're actually working deals like we did back in the '80s as cash is king from getting the deal approved as well. But I would say with our mix - and certainly the more we move toward domestics financing is more of an issue - some banks are in the business and see the opportunity and others have moved out of it. But basically with our portfolio mix, the lenders that we use - Toyota Financial Services, Honda, Nemec - are still lending money and see this as an opportunity for them to help them gain market share.

And the F&I per unit, that you feel comfortable is something that is not going to be affected in this environment?

You know, we've held steady and in this environment. I think that there are a number of reasons for that. They're more financing rather than leasing, and whenever you finance a car a little longer there's going to be a little more reserve on it. Plus, you're a little more open to a service contract because if you're going to own the vehicle you may want other products on that car as well. So we feel very comfortable that we can maintain the level where we are right now.

Any thoughts on where SG&A to gross, any kind of targets as you look out the next year? It looks like a pretty significant amount of savings is coming out, but is there some kind of metric that we should be looking out for?

Rod, I struggle to give you a direct ratio. What I can tell you is we've got very specific action plans in place to get that $25 million. I think the ratio would probably be more a function of what happens on the revenue line. But $25 million you can add in.

Your next question comes from Rick Nelson - Stephens Inc.

September was a very tough month for the industry. You mentioned sub 1 million units. Was Asbury profitable in the month of September?

Rick, we've not broken out monthly profits. I think we should stick to the quarter. But like you heard us mention earlier, we were fine and we've got a lot of confidence in our ability to work through this difficult market.

How about economy expense? How much of the expense reduction that you talked about this morning showed up in the third quarter and how much would you think would show up here in the fourth quarter?

There was virtually no benefit of expense reductions in the third quarter. I think we'll just begin to see some of those benefits in the fourth quarter. I think it'll be the first quarter where we start to see them in any material way. But we will be incurring the costs. I think we need to emphasize that. We took about $1.7 million of costs in the third quarter and we're going to have costs probably in that same vicinity in the fourth quarter as well.

And a question on the dividend. I'm curious why you decided to suspend the dividend rather than cut it to a minimal level?

Rick, the Board considered all options and, you know, this was not an easy decision. But it was determined that it was prudent and in the best interest of all our shareholders to suspend entirely given this environment. But the Board always revisits this quarterly, as we have every quarter.

Your next question comes from Richard Kwas - Wachovia Capital Markets, LLC.

Craig, on the leverage ratio, with the paydown under the revolver, at this point it doesn't seem like there's a lot more you can do on the debt side. Is that accurate?

Well, we did pay off the revolver so when you look at the schedules that we've attached here with this release and you're looking at that calculation, there's $40 million of revolver debt in there that is gone. So we have had that improvement. But there's nothing that prohibits us from buying back debt in the open market, so that would be another option.

And then in terms of the CapEx, the $10 million, is that an all in number now assuming that it sounds like you're not going to be expanding facilities and, as you said, you're not making acquisitions. Is that really an all in number for next year?

Yes, that would be an all in number, Rich, or less.

And then in terms of the Used Vehicle market here, wholesale prices have stabilized for trucks. What are you seeing in terms of margins, really, where it seems to have stabilized a bit here. Is that kind of the good assumption to use going forward?

You know, Rich, we've got Michael Kearney in the room with us today and he's got some local color on that so I'm going to ask him to answer that.

Rich, that's a good question. The used car market at the wholesale level is how I think I'll answer that. At the wholesale level there is a lot of product that is backing up at auctions today. So what we see going over the next 30 to 60 days particularly is that that will have to free up, the vehicles will be sold and the prices will then, at the wholesale side, get a little bit cheaper, which is a double-edged sword for us in that when we take cars we might have to take a little less at the wholesale side, but we can buy cars a whole lot cheaper. As we go into the back part of this quarter and into the first part of next year we'll be able to have inventory that we've been able to buy below market.

So it looks like it's still another quarter where there's some volatility and then maybe into the first part of '09 some more stability?

That's the way that we're seeing it. And as you noted, Rich, our margins have held pretty good, over 11% for the last couple of quarters. So we feel that we know how to retail these cars that we have in our inventory.

And then could you - Charles, could you remind us on the subprime mix, I know that you'd been working to get that down as a percentage of the Used unit sales. I think it was down around 20% or so last quarter. Did that move down again?

Yes. I tell you, the market is helping us move that down even more, Rich, but yes. You know, that market is still there and it's a mature model that the subprime lenders really got away from with the cheap money and letting anybody buy and those days are over. And I do believe that when the credit markets start to free up that those lenders will be able to come back in the market. They won't be as free as they had been in the past, but that's a huge market that is still out there. It is probably about 15% of our business right now.

And then finally, trends in Florida - I know it's still pretty difficult there. Any signs of improvement or I should say signs of stabilization that you're seeing at all?

Rich, it is a very challenging market. I think it is stabilizing. I couldn't begin to tell you how long it'll stay at the level, but I do see signs of stability. As we mentioned earlier on it, we've aggressively approached cost in all of our markets and I think you will see the benefits of that very quickly in there. But in terms of retail sales, units, the customers coming into the showroom, I think it has stabilized. I assume, you know, we're walking along the bottom; just don't know how long we're going to walk on the bottom.

Okay, so generally things are getting less worse.

That's a nice way to put it, yes.

(Operator Instructions) Your next question comes from Matt Nemer - Thomas Weisel Partners.

My first question was - I apologize if I missed this - but on the floor plan, the new floor plan lines, can you just give us a little more detail on what transpired during the quarter with your floor plan financing and then maybe what you've arranged to replace it and if you could go into some detail on what sort of rates you were able to get on that financing?

That's an involved question. I think your question really involves around structure. Is that correct?

Yes.

The prior facility was a syndicate. It had numerous bank participants as well as captives, 17 or 18 in total, and that was to fund both floor plan and the revolver. In the facility that we've put together, to a large extent we've given the floor plan back to the respective captives. In return for that, we asked the captives to support us with a revolver and to allow us to strip out our Used Vehicle collateral so that we could set up a separate Used Vehicle line, and that's what you see today. With respect to rates, the rates that we're realizing on the revolver are, I would say, very similar to the rates that we've seen in the past although they're based on utilization as opposed to - I think in the past it was more of a ratings based pricing. The floor plan rates with the luxury and the import stores are very attractive. I would say in the LIBOR plus 125 range. The floor plan rates with the domestics are significantly higher, more than 100 basis points higher.

And then I was wondering if you could give us a little bit more detail on what you're seeing in Parts and Service, at least during the quarter? What was the mix of business between warranty and customer pay and how did those trend?

You know, warranty was up 5%, which is the second quarter that we've seen that, and our customer pay was down slightly. We're finding, although last quarter was very difficult for us because we had the tropical storm in Florida where, with the floods and the rain, it disrupted our business there about four days. We had the hurricane in Texas and you know the results of that, and then in Atlanta we had almost a severe gas shortage. We had as many as 50% of our service customers that we follow up with on BDC cancel appointments. So we feel very comfortable that this part of our business is still operating stable. The brand mix we have, these are the growing franchises. There are more UIOs in the market with the franchises that we have, so looking out as those UIOs are growing, that will, again, support the stabilization of the business plus the service contracts that we've sold for the last couple of years as well may keep that customer tied to us as well. So there's a number of events going on that is stabilizing that business. We do know that a number of customers are pushing out any of the extensive work. If they can put it off, they are right now. But at some point in time that work will also have to come back in.

And then on the cost reduction plan, on the piece that's related to store productivity is that basic elimination of labor expense related to the lower gross profit or is there actually a structural change that you've made in the stores in terms of the way they operate, i.e., taking out a function or combining functions?

Yes, all of that. Advertising, we're scrutinizing advertising. Right now we're redirecting that more to Internet, more specific needs at this point, although we still want to keep our brand names out there. It would involve cutting inventories, managing inventories better. Putting in compensation plans competitive in the marketplace, but making sure that they are the appropriate compensation plans, where in some areas where we can have less costly health plans. The third part is software providers. All the things that you just said is what we're looking at on these cost reductions, Matt.

I missed the CapEx guidance for next year. I thought I heard you say $10 million. Could you just confirm that?

Yes, that's correct, $10 million.

And should we consider that to be your maintenance rate or is that actually perhaps lower than maintenance, where you're sort of conserving cash in '09?

No, that would be maintenance rate.

And everyone, that is all the time we have for questions today. I'll turn the conference back over to our speakers for any additional or closing remarks.

Well, we appreciate everyone joining us today. We're very excited about what is going on in Asbury at this time. Even though it is a very challenging time, with the culture that is in this organization and the people that are working very hard, very diligent, and the approach that we have taken to make sure we have the liquidity to get through this, again, very difficult time and the people to execute that, we're very comfortable with whatever in the market happens in '09. So thank you for joining us today and we'll talk to you next quarter.

That does conclude today's conference. Thank you all for your participation and have a great day.