Good day everyone and welcome to the Asbury Automotive Group Second Quarter 2013 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to the Treasurer, Mr. Ryan Marsh. Please go ahead, sir.

Thank you, Jennifer, and good morning to everyone. Welcome to Asbury Automotive Group’s second quarter 2013 earnings call. Today’s call is being recorded and will be available for replay later today. The press release detailing Asbury’s second quarter results was issued earlier this morning and is posted on our website at asburyauto.com. Participating with us today are Craig Monaghan, our President and CEO; Michael Kearney, our Executive Vice President and COO; and Scott Krenz, our Senior Vice President and CFO. At the conclusion of our remarks, we will open up the call for questions and I will be available later for any follow-up questions you might have. Before we begin, I must remind you that discussions during the call today are likely to contain forward-looking statements. Forward-looking statements are statements other than those which are historical in nature. All forward-looking statements are subject to significant uncertainties and actual results may differ materially from those suggested by the statements. For information regarding certain of the risks that may cause actual results to differ, please see our filings with the SEC from time-to-time, including our Form 10-K for the year ended December 2012, any subsequently filed quarterly reports on Form 10-Q, and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward-looking statements. It is my pleasure to hand the call over to our President and CEO, Craig Monaghan.

Good morning everyone and thanks for joining us. We are pleased to once again report record quarterly results. Adjusted EPS from continuing operations increased 48% for the second quarter. Our stores successfully maximized sales and service opportunities across all business lines while maintaining continued expense discipline. Both revenues and gross profits were up 16%. We improved our cost structure, reducing SG&A as a percent of gross profit by 270 basis points, and we achieved record income from operations with an adjusted margin of 4.7%, placing us among the leaders of our industry. Additionally, we are excited to announce the acquisition of Hyundai, Kia, and Toyota franchises in our Atlanta market. This follows the acquisition of Bentley and Volkswagen franchises last December. We're making great progress in achieving our $500 million acquisition target. Michael will provide more color on the acquisitions during his portion of the call later. In addition to validating that we're on the right track, our results reflect the talent, hard work and commitment of our associates across the organization. We couldn't be more proud of what our team is accomplishing. Now, I'll turn the call over to Scott.

Thank you, Craig. Our second quarter adjusted results of $0.98 continue to demonstrate the operating leverage we've worked hard to build into the business. Our results this quarter include real estate charges of $3.2 million after tax or $0.11 per diluted share. These charges are primarily related to the two leased properties we bought out during the quarter and were reported in the other operating expense line in the income statement. With respect to our SG&A to gross profit margin, we hit an important company milestone for the quarter by moving below 70%. Our margin was 69.5% which is a 270 basis point improvement compared to the prior period. We have made great progress in both reducing costs and making our cost structure more variable, and we've said that there is always more to do and we continue to focus on future productivity enhancements. Excluding rent expense, which we view as a financing decision, our SG&A as a percentage of gross profit ratio was 65.8%. Our strong cash flow generation during the second quarter, in addition to the $100 million add-on to our bonds due in 2020, underwrote continued investment in our business, the acquisition of a group of stores, the completion of another two lease buyouts, and our ongoing share repurchase program. During the second quarter, we spent $9 million in CapEx. We are budgeting approximately $45 million of CapEx for 2013 as we continue to upgrade our stores, expand service capacity, and invest in technology enhancements. As is our custom, CapEx numbers exclude lease buyouts and real estate investments. We spent $14 million purchasing two properties we had previously leased. We anticipate $1.5 million in annualized rent savings, and we continue to evaluate other opportunities to buyout leases. During the second quarter, we repurchased $5 million of our…

Thank you, Scott. I would like to remind you that everything I will be covering with respect to operational highlights will pertain to same-store retail performance during the second quarter. New vehicle revenues and gross profit increased 13% and 5% compared to the prior year. Our new vehicle unit sales were up over 12% outpacing the industry growth rate of 9%. Although the new vehicle margins for the quarter were 6%, down 50 basis points, the increase in volume more than offset that margin decline. On a sequential basis, our new vehicle margins were essentially flat compared to the first quarter, and as stated in the prior quarter, we do not anticipate significant new vehicle margin erosion from the current levels this quarter. I want to highlight again the fact that our total front-end gross profit yield, that is new and used vehicle gross profit per vehicle sold plus our F&I profit per vehicle sold, of $3,198 for the second quarter is almost $50 more per vehicle than the second quarter of the prior year. The ability to essentially offset vehicle margin deterioration by increasing F&I PVR shows how the automotive retail model responds to a constantly changing sales environment. We ended the second quarter with $552 million of new vehicle inventory or 68 days supply on a trailing 30 day basis. We're comfortable with our current new vehicle inventory levels but we continue to watch them very closely. We increased used vehicle revenues 23% over the second quarter of last year as we continue implementing Phase 2 of our Asbury 121 program. Although margins decreased 30 basis points to 9% compared to the prior year period, gross profit per vehicle remained essentially the same. The average selling price increased approximately $430 a unit. Our used to new sales ratio…

Thanks Michael. Considering the current age of vehicle fleet, extremely attractive financing rates, and the availability of exciting new product, we believe the current pace of business should continue. The outsize performance we delivered in the second quarter relative to the underlying SAAR growth proves that we have positioned our Company to outperform the industry. We believe our strong brand portfolio, attractive geographic locations, and proven ability to execute our strategies will allow us to grow across all business lines. I'm excited about Asbury's future and remain encouraged by the recent positive momentum from five trailing quarters of record profits during an uncertain economy. In closing, I want to thank each of our associates. Our record results and momentum are a direct result of your dedication and hard work. I'd now like to turn the call back to the operator and would be happy to answer your questions. Operator?

Thank you, sir. (Operator Instructions) Our first question will come from Rick Nelson with Stephens.

Good morning and congrats on a terrific quarter. I want to ask you about the incremental gross profit flow through. Our calculations ex-rent, you were at 46% in the quarter. I'm curious if you think this as a level that can be sustained and if you could address the flow through in the service and parts segment because it looks like counts and gross profits are starting to accelerate there?

Rick, it's Craig, I'll start and then maybe Mike or Scott can jump in behind me, but I think we've always said that we think flow through in the business on a standalone basis should be in the 30% to 40% range. We've been targeting something higher than that, we've been talking about somewhere – we're targeting 40% to 50%. We can only get that if we can find incremental places to drive productivity. Some of that you see for example in our lease buyouts, but there are still some more things that we think – some more advantages that will come with the role of technology enhancements. Keith Style is working on trying to make us more productive in our back offices. So, those are the things that are helping us get that incremental flow through today, and we think there is still more there. I mean, there is not a lot more there, I think we have been able to pick up all the low-lying fruit, but we're still not at the point that some of our peers are with respect to consolidation of back-office processes for example. We're making good progress, but there's still more to do. I think Michael will talk a little bit about fixed.

So Rick, on the parts and service fees, with the incremental growth in the used car part of our business, we generated a substantial increase in our reconditioning work which is a very high margin work at parts and service. We did experience some – I wouldn't necessarily say abnormal but unexpected recall business at the end of the first quarter and throughout most of the second quarter and that spike in warranty business was brought about by that, and that influenced that margin also. And then of course we just constantly work on our cost structure in those departments. To follow-up with what Craig said, we apply the same principles that we do, we're approaching the back-office part into the parts and service operation. So I think those were the big drivers on the incremental margin that we saw in the parts and service side.

Where do you think the flow-throughs are in the service business?

Just on the – if we just size like the parts and service side, at the level at which we operated in that quarter, I would say the flow-through was somewhere north of 55%.

Thank you for that. The acquisition pace seems to be picking up, you acquired three franchises this quarter, can you talk about the pricing of those and how the pipeline might look kind of on a go-forward basis?

Rick, it's Craig again. We're very happy with what we've been able to do on the acquisition side when you include the Bentley and Volkswagen store that we picked up in December. We've picked up about $150 million worth of incremental revenue in the last six, seven months, so we feel good about that. You asked a number of questions there. We just talk about the performance of those stores. Like Michael said, we – let’s go down that path for just a second. Those stores are up and running as Nalley stores today, all of them, all five of them. We've been fortunate that the sellers that we've worked with had let us get into those stores weeks ahead of time. So well before we close, we are putting in bigger price if we have to, Tier 1 lines are going in, in some cases equipment goes in, training starts, so that when we hit a store and we close, that store converts immediately. So, (inaudible) just last weekend, we had I think a great compliment from one of the people in the stores said to me over the weekend, “well you guys are like ants, you are everywhere, and what it was, we had our key people everywhere, we replaced all their PCs, we replaced most of the printers, they were converted to a new DMS, they were converted to a new CRM, they are converted to a new used vehicle management program, and like I said, the sun went on the store -- we were doing that all through the weekend, and on Monday morning, as sun went up, that is a Nalley store today running on our systems with a lot of our people from across the country still in that store holding their hands to help them make this transition. So with respect to returns, we expect the same from those stores that we get from the rest of our stores, and we expect those returns, they may not hit it immediately because there will be a little bit of people turnover, but we expect those levels of returns very quickly. As far as the pipeline is concerned, finding stores is hard work as you are well aware. It is a great time to be in the automotive retail business. People are making lot of money. As a result, we don't find a lot of sellers that are willing to sell stores at prices that we think make sense. So we've got to do well and pound the pavement a little bit, we're doing that, but it takes a lot of energy and we'll just have to see what comes. We are talking to people but I would tell you that there's nothing eminent at this point.

This is Scott. We did lay out a plan over three years and you should note that we're running ahead of the plan. So, we don’t feel badly about our execution here at all. We're running well ahead of the plan.

Next we'll hear from John Murphy with Bank of America Merrill Lynch.

Just a first question on grosses, I mean we're seeing the average transaction prices increase at the same time as the gross dollars are actually going down on on a yearly basis, which is driving the margin compression. I'm just trying to understand, if there's something that is changing in the dynamic with your suppliers or the automakers that they're really pushing on you to keep more of the profits, because that's where the benefit is landings with the automakers, just trying to understand are they doing anything with stair-step programs or incentives or anything else that's really kind of changing the dynamic here?

John, this is Michael. I don’t think there's anything that's radical out there. There's constant movement in the incentive world. We see some manufacturers go heavy on stair-steps and some manufacturers back off of them. Sometimes, the stair-step programs have objectives that are stretched, sometimes not so much, but I don't think it's anything that's radical, anything that's different. I think from my view, the biggest piece that puts pressure on our margin is market share grab. Every manufacturer is trying to gain market share and with that there comes a substantial amount of competition in the marketplace, and we respond to what other dealers in our local markets are doing, but I think we've seen not quite as much of an acceleration of that compression. I hope and believe that it wold sustain where it is right today. As I mentioned in the last couple of quarters, we don't see a big swing, don’t anticipate a big swing, but I also don’t see any radical behavior in the incentive market right now either.

So we should think about the dollar gross per vehicle hovering around $2,000, and then maybe the margin might swing up and down depending on what happens with the average transaction prices, but is $2,000 your bogey in the way you think about this?

That's pretty close to it. We do look at total yield, so that number stays in that $3,100, $3,200 range, but if you figured $2,000 on new cars and roughly $2,000 on pre-owned, I think that's a fairly reasonable way to look at it.

Okay, that's helpful. Second question, just on the parts and service, the 61.3%, I mean obviously you outlined the rationale for why you got there, but you did also indicate that you thought you could operate roughly around these levels going forward. I mean is 60% to 61% a decent number to assume that you can operate at? I mean that’s a very high level, and it's (inaudible) are a lot of good guys in the quarter?

Yes, that's a little high. I would not say that we can maintain the 61%. We have stayed in the north of 56%, 57% range, and I'm quite comfortable with that number. The 61%, again I think there are a lot of starts that are lined in the second quarter that contributed to that.

Huge piece of that is the outstanding job our people did with used cars because that piece is – because of the way we account for it, that's essentially a 100% margin business in parts and service, eliminate the revenue, so that 26% I think it was increased period over period in de-conditioning the internal work because of our used car business contributed a lot to that 61% this quarter.

That's very helpful, Scott. And that kind of leads me to my next question, we're all very hyper-focused on the growth in the 0 to 6-year old or 0 to 5-year old car fleet for the flow-through to parts and service, but it does create another big opportunity on the used vehicle side. I'm just curious if you're seeing that and with the increase obviously you're focused on used vehicle business so there's a lot of microscopic reviewing, but also just with that population growing, could we see the same store sales comps for a while because of that factor?

John, this is Mike, I'll make sure I understand the question, as it relates to pre-owned segment?

Used vehicle, whether it would be CPO or straight retailing, that fleet where that supply of 0 to 6-year old cars is going to be growing, I think most people are focused on that benefitting the parts and service business but it's creating more cars for you guys to potentially buy and sell in the used vehicle business and if you think there was some benefit in the quarter, should that conduct to continue going forward?

I think as I stated a number of times, the franchised dealers get approximately 30% to 35% of the total number of pre-owned vehicles that are sold in the country each year, and so I think there's ample opportunity for us to continue to grow same-store pre-owned business. I think the availability is the best that's been in a while, there's a lot of product that's out there, we as you all know grew our inventory I would say substantially in the last couple of quarters, and that also has helped in reflecting the sales. When we have this kind of a broad based inventory, we can track more customers. So to answer your direct question, I think that the availability of product is better than has been in quite a while and that we sure had some benefit from that.

Okay, great. And then lastly Scott just a question on the lease buyouts, you mentioned in the quarter that you did about $1.5 million in rent expense and the cost that you guys highlighted was $5.2 million in the quarter and that's about an annual return of 29%. That seems like a great deal to execute on and obviously I'm sure there's some planning of costs on the back-end. How do you think about the math there on what you have left, I mean it was like you've got $32 million to $33 million of rent expense on an annualized basis based on what you had stated in the quarter, could we see those kinds of chunky returns as you work through this process or was this just an especially attractive situation on these two lease buyouts in the quarter?

I'm a little – I'm not sure where the $5.2 million comes from. I'll tell you, we do get attractive returns on these, there's no question, but we're talking about returns that are more in the middle teens, that sort of area of the return on investment and these are not 29, so the cost to do that was a little – of buying them out was a bit more than $5.2 million. So going forward though, we do see those attractive returns. Many times, we have to wait for the opportunity to present itself, as the lease nears its termination and stuff, and we tend to get those returns in sort of the low mid-teen type of area.

John, this is Craig. John, could I help you out just a little bit. I think we may have some confusion.

Because I used the charge that you guys stated in the quarter, the $5.2 million was the denominator I was using.

No, you have the right numbers, but let me put in Dick and Jane language that I can understand, Scott could do the detailed accounting later, so I may oversimplify this, but the way I think about it, cash flow we spent $14 million and we bought out these leases. The leases we bought out were situations where we were leasing the dirt but we had built the store that sat on top of the dirt, and the accounting rules applied required us to take a write-off on the value of the building that we had on our books on that leased property. So the $5.2 million, the vast majority of the $5.2 million, was a non-cash accounting charge because we had to write down the value of the building, but the economic return was, we will say $1.5 million of rent on a cash outflow of $14 million to acquire the property.

It's so simple even I can understand it, right, thank you very much.

And that gives you the 10%, 11% that Scott was talking about, it's kind of the returns that we look for on these buyouts.

Got you, that's very helpful, thank you very much.

Next we will hear from Bill Armstrong with CL King & Associates. Bill Armstrong - CL King & Associates: Back to the warranty increase, huge increase obviously, and you called out recalls as helping, are you able to maybe breakout recalls versus maybe units in operation maybe driven some of that?

Bill, this is Michael. I don't have that and we can surely get back with you on that but it's essentially what we saw in the end of the first quarter and throughout most of the second quarter. There were a couple of major brands just had some recalls that stacked up and as I've said in previous times, we can't predict them, we deal with them and our shops have capacity to handle them but we just happened to see a number of large brands just have a number of them just hit in this time period. Bill Armstrong - CL King & Associates: Okay. Moving on to used, you had the unit same-store sales increase of 20% which obviously was much higher than the overall growth in the industry, what drove that huge outperformance?

Bill, it's Michael again. Couple of things. In the implementation of our programs, the 121 program that we started a number of years ago, we have executed well on the training piece and we've executed well on the actual program itself. What we're starting to see is a maturing of that process, we have the ability now to move inventory within clusters much easier than we have in the past, we've got experience to individuals in those markets that again have matured with this process. So it's execution of the plan that we started a number of years ago. I mentioned earlier, there is a nice availability of product, we're very aggressive in the way we price our trades, we've become much more aggressive in not wholesaling, not taking nearly as much product to the auctions, and we're finding homes for those vehicles at a variety of price pan. So, there's no magic bullet to it, it's execution of what we started, it's availability of product and it's keeping the cars that sometimes we used to send to the auction, we're keeping them and selling them now. Bill Armstrong - CL King & Associates: Okay, well it's definitely working for you. And then finally just on this Atlanta, the Atlanta acquisitions, are these three franchises, are these three separate locations, I mean separate facilities?

Yes, they are. Bill Armstrong - CL King & Associates: Okay, and would you be – are these facilities owned or leased?

We own two of the facilities, the third is on a lease, a lease parcel, but we intend to move that onto a property that we will own. Bill Armstrong - CL King & Associates: Okay, great, thank you.

Next we'll hear from Rod Lache with Deutsche Bank.

Good morning, this is Dan Galves standing in for Rod. A lot of my questions have been asked and answered, just wanted to ask about if you could give us some color on the parts and service business? As we look forward, units in operation will be growing pretty strongly, maybe less than five-year-old vehicles but greater than five-year-old vehicles will probably be falling. Could you give us a sense of your exposures to those two different segments, what you've done to improve retention in six-plus and whether you'd be able to continue to gain share in that area?

Dan, this is Michael, I'll take a shot at answering that backwards on the older product. I think, generally speaking, even though the cars are in the six to say nine, ten-year bracket, they are still very technologically advanced automobiles. There's a lot of technologies involved with doing major repair work on those vehicles, a lot of the computer modules as well as the sophistication of the drivetrains and the engine technology. So I think the dealers are well-positioned to handle that older product out there just from a standpoint of the investment we've made in training of our people, the equipment that we've got in our facilities to handle them. So even though they are in that five to ten bracket let's say, I think the franchised dealers are well-positioned to handle those. On top of that, we began the tire initiative a little over a year and a half ago, we believe that that is a retention program, we're very pleased with our tire results, we're seeing some very, very nice results from that, we have a wiper blade retention program, those are all geared to attract the customer who's just coming out of the warranty. That person we want to get them to come back in our shops as soon as that warranty period expires. In addition to that, the training that we now do in the finance and insurance departments emphasizing prepaid maintenance and extended warranty not only do we receive the upfront benefit of increased, the enhanced PVR, those products bring the customers back to our shops, they bring them back on a regular basis, they bring them back during the warranty and post warranty period. So those are all programs we've all put in place. We are seeing the benefits from them and we anticipate that we can take advantage of the increased units in operation that are out there.

Okay, very helpful, I appreciate that. Just one last question just on general competitiveness on new vehicles. I know you said that you haven't seen any kind of broad based incentive activity but would notice some increased competitiveness maybe in midsized vehicles, small vehicles, is there anything you can talk to in those segments and kind of what's your outlook going forward?

Dan, this is Michael again. So in the segment – let's put the Camry, the Accord, the Malibu, the Sonara, the launch of all those very nicely priced import sedans, the domestic sedans, there is fierce competition from the manufacturers to gain market share. They are all outstanding product. So we're seeing – we do see a substantial push to move that product, the pricing is very competitive, the price bands of those product is very narrow. I don't anticipate that changing. So we have to, as an industry, we'll adapt to the pricing that's out there but it is very competitive. I can't predict what the manufacturers will do in terms of incentive but I will tell you that the number of products in that segment seems to grow and the push for market share with the manufacturers is very intense right now and we will just work our way through it.

Okay, thanks very much, appreciate the answers.

Next we will go to Jamie Albertine with Stifel. Jamie Albertine - Stifel Nicolaus & Co.: Good morning and congratulations on a great quarter. I had a quick question if I could ask on the F&I side, considering the phenomenal used unit growth that you called out at the end of the second quarter, just trying to peel away, as you see it, how much F&I lift is contributed to the used side versus perhaps more of a focus on a new vehicle transaction to drill more F&I per unit growth there as well?

Jamie, this is Michael. I think there's no doubt that the growth in the pre-owned segment contributes to some of our F&I growth. It is a little different mix of business on what we sell. Obviously we sell a greater amount of extended warranty on our pre-owned business than we do on our new business. However, our finance penetration rate is roughly the same across the board with those, so I don’t see any particular lift on the pre-owned side of that, but no question that the other product sales, we do get a bigger piece of that when we sell on the pre-owned side. Jamie Albertine - Stifel Nicolaus & Co.: Great, I appreciate the detail, and then if I could ask just a quick follow-up on the M&A side, I'm really trying to tease out sort of as we think about broader market consolidation over time, sort of what can drive the ebbs and flows of that consolidation and I guess based on what you're seeing, and I'm sure the NDAs that you have outstanding and the M&A work that you've done, are the smaller or independent private peers doing as good of a job as you're doing but maybe some of the public peers are doing on the used vehicle side, or are they going to be more susceptible to the pressures that you've called out, whether it's stair-step programs or other pressures on new vehicle gross profit per unit which would presumably drive them into a M&A conversation if you will?

This is Craig, I'll take a shot, and it will be I think my perception more than – I don’t think we have the hard facts in many of these cases but I would start off and say that automotive retail business is becoming much more complex, and just look at what we went through over the weekend, it's a great example, we can drop in an IT team that will put in a state-of-the-art systems in that store or any store that it's hard for somebody who's running a mom-and-pop store, even two or three stores, to bring that level of sophistication that these people bring, whether it's Wi-Fi, whether it's taking full advantage to our ends or anything else that we drop in. We've got a team of experts that can do that. Likewise, you leave the IT closet if you would, while you're walking around the store and you bump into one of the used vehicle people, we have people who dedicate their careers to used vehicles and they too are in that store working with those people training them to how to use our used vehicle systems, out buying used vehicles for them to help them if you would pre-stop their inventory so that when that store opened on Monday that it was ready to rock-n-roll, and then the same thing happens across the board. I mean we had some of our parts and service people in that store who would come from the Carolinas and some of our best parts and service people who are bringing a level of expertise that somebody who just has one store just couldn't possibly have. And so I think as a result a lot of these things you'll find that in general, the large consolidators generate margins that are…

I'm not really sure how to answer. I think M&A will move at its own pace no matter what the SAAR does, I mean there will be sellers who are ready to sell and I think there'll be opportunities for large consolidators to go out and be able to make transactions that make economic sense and I think in good times and bad. We just have to see what comes, it's very hard to predict. Jamie Albertine - Stifel Nicolaus & Co.: Understood. Thanks again guys and good luck for the next quarter.

Next we'll hear from Brett Hoselton with KeyBanc.

Wanted to start off just, if I'm reading the report correctly, I'm looking at new vehicles, it looks like your luxury sales increased by 11% but your gross profit was flat, and I'm kind of wondering can you kind of talk about why the disconnect between the revenue growth and the gross profit growth?

Brett, this is Michael, so that is correct and I'm not sure I would classify it as a disconnect, I will tell you that in the luxury segment, as in the mid-line segment, competition is intense. There has been a little model shift in our business from the very expensive cal it 7-series, S-Class Mercedes down to the 5-series or the GS and the Lexus, there's been a shift in that over time and the margins on those particular products are not as high as the other ones. We are seeing a little bit of age on some of again the very higher margin vehicles in that segment, they will be replaced within the next, most of them will be replaced with the next 12 to 18 months, but right now there is a little bit of age to some of that. So I think that it's just a combination of the consumer acquiring a lesser price luxury vehicle, I think it's the competition within the segment, and I think that some of the margin on the older product that's out there has got pressure, we wish to see a little bit of relief in that as the new ones come out but again those products don't have a significant amount of volume to that business.

Thank you. And I wanted to ask you about used vehicle same store sales, there's been a number of questions here, as I look at your used vehicle same-store sales performance, you were up 4% in the third quarter of last year, up 1% in the fourth quarter, you were up 9% in the first quarter, and then up 20% here in this past quarter which obviously is a pretty significant improvement, acceleration, and I think what people are kind of asking and driving at here is, do the next few quarters, until the comps get maybe more difficult, do the next few quarters look more like up 20% or they look more like up 1% to 4%?

Brett, this is Michael again. I think we can do better than the 1% to 4%, 20% is a big number. I will tell you that there were a couple of segments, geographic segments within our Company that had unexpected growth in the second quarter, a number of personnel changes that were made, some realign that impacted those tremendously, but I think the growth in the pre-owned business is a function of inventory, how much and the breadth of the inventory and I think it is also a function of concentration of how you move that product, whether you want to wholesale it or retail it. So I think that we can maintain quite reasonable growth. I would not commit to the 20% but I think we can do much better than before.

And then as we think about, just so I'm clear on the parts and service sales, the warranty, it sounds like what you're saying is that you had some unusually high recall activity in the second quarter and that's going to likely slow down as you move into the third quarter, is that correct?

I think that's a fair assumption. Again, as I've said many times, I don't want to sound like a broken record, it's very difficult to predict recalls, we won't know them, we just we deal with them as they come out and with our brand mix, sometimes there's a greater impact of recall than some other times.

Excellent, thank you very much gentlemen.

We'll now move to a question from Ravi Shanker with Morgan Stanley.

If I can just follow up on what you had said earlier about the M&A, are you seeing any signs of cracks or just openings of doors with the sellers who are more willing to sell or maybe in valuations coming down a little bit, because it just seems that the market was pretty clogged-up up until a couple of months ago?

I don't know that we could go that far. I just go back to its – the SAAR is strong, dealerships are making a lot of money, we find it's a lot of work, it's a lot of work to find a dealer that makes sense. No, they're not lining up at our door to sell by any stretch of the imagination.

Got it. So the dealer you just did was more opportunistic than open the flood gates?

I think very much so. We have relationships with – there are a number of stores that we are interested in, we have relationships with the potential sellers, I call up, we do a lot of lunches, but these things will happen at their own pace, but I think we – what we have done and here's how we think about it, we've got a capital structure that will let us do deals, it will let us do sizable deals if they present themselves, and our people out in the store are doing a phenomenal job of executing this transaction that we closed over the weekend, it was I think a very good, we just view it as a training, in parts a training cycle for us, I think we've demonstrated that we can parachute in and convert these stores very quickly and fold them into the Asbury systems. So when an opportunity presents itself, we are very well prepared to jump all over it from both a financial perspective and an execution perspective. So when they come, when we see the right deals, we will make them happen but we don't control the pace, I guess that's my point. We can't force a seller, we can only be ready when a seller presents themselves.

Understood. And also on the F&I, one quarter into the CFPB rules being enforced, are you seeing any movement at all on the part of the banks to maybe change the way deals are done or is it normal service?

That's a great question. We are seeing some changes at the banks. I'd back up and say, we don't have a lot of visibility, in fact we have virtually no visibility into where this is going. What we do know is that we have limits or caps in place on the F&I product and the rights that we offer to our customers and the banks do as well. I would say, this is just a gut thing, we don't have the statistics, but it does feel like the banks have become a little more, I don’t know if diligent is the word or focused, that we are seeing more caps in the stores on transactions. So it's almost as though there is some preparation that is already happening. I don’t know Michael if you have anything to add to that.

Yes, again I think the banks are in an anticipation mode, and to backup what Craig said, we have very little transparency into what is going on at the government level but I would also emphasize that we're as a model of retailers are quite resilient and we will deal with whatever we need to deal with. We have caps in place as Craig said and we still function quite well with all those caps that we had in place for years.

So if I can clarify, the caps that the banks are putting in place are compatible with your own caps, meaning that nothing is eating into the F part of your F&I business for now, or are you seeing some in regards?

Every deal is unique, so maybe I'll just give you an example. I mean you mentioned a bank offer a rate on a transaction and say that the capital is spread, here's the rate that we're willing to offer and you can't take a spread any greater than that. And in some cases, those caps will even be tighter than our caps.

I understood and this is still an evolving situation, so I think – I've gone to a lot of dealers that have been saying that there hasn't been too much of an indication, I think they're seeing the far signs of something moving, so I think we just have to wait and see how far the banks will go in terms of enforcing this.

And I think you're right, I think like Michael said, it's very resilient, this strand of yield is like a balloon in our mind, you can push on at one place and it expands in another place. It's amazing to me that our front end yield on that $3,000 range has been there for probably five to seven years, very steady growth, but in different times, it comes from different places, and if there is a shift here with the way we finance transactions, that will put pressure on us to try to find another way to try to keep that front end yield at about $3,000 a unit.

We'll now move to a question from Bret Jordan with BB&T Capital Markets. Bret Jordan - BB&T Capital Markets: A question on the tire program and maybe some color on recent trends in that program and maybe what the impact of the tire program on the service gross margin is in the lower margin category that you see pricing changing as you had some success bringing customers in the door in that category?

This is Michael. Again from day one, the tire program was put in place as a retention tool. So our margin on the tire business is very low, it's sub 10% with just the tire sales itself. However we've known from the tire industry and the work that we've done that for every $1 of tire that you sell, at some point in time the customer will come back to you and spend a $1.50. So we make very small margin on the original $1 but we make 50% to 60% on the incremental $1.50 that we get. So we are beginning, we don't have all the data yet but we have studied the pilot program that we put in place and that data we are looking at, we're seeing customers come back at faster rate, they are doing not just what we would call tire maintenance, they're not just coming back to get front in the line, although they are coming back to do that, we're seeing them come back in to have all lube oil filter work done, brake work done, tune ups that type of nature. So it is a long-term project. Again, we've known since the beginning we will suffer with the very small margin on the sale of the tire in anticipation of bringing the customers back into the higher margin business on both maintenance and heavy maintenance as they come back to us. Bret Jordan - BB&T Capital Markets: Have you seen any change in the trajectory of tires this year, I mean it's a tough category for a couple of years, do you see people accelerate in their pace of purchase in 2013?

Our entire program has grown a little bit this year, we've put some fairly aggressive numbers out there, we had a substantial increase in 2012, we've seen an increase this year, it's not been at the same pace as we did last year, we did think it would be but it has not been there, but we are not seeing what I would call a tightening in that market, it is very consistent, we've had a reasonable consistent growth in that, it is a function of promotion, it is a function of awareness, point-of-sale material and some marketing and advertising to that, but I'm not seeing a tightening on that, no. Bret Jordan - BB&T Capital Markets: Okay, and then one last question. In your prepared remarks, you said that 1.5 times rate of loyalty for the tire program customers, is that 1.5 times average spend or is that frequency of return?

That was frequency of return.

And our last question will come from David Whiston with Morningstar Equity Research.

Couple of things. Could you first just repeat the amount available on the credit line as part of that $408 million liquidity?

In the credit line, yes $233 million.

And going back to the CFPB question, can you talk a bit about why – what exactly is advantageous for the consumer here, is it just the higher probability of getting finance and then going to the bank directly or they getting a lower rate or what?

This is Michael, I'll take a shot at this and then Craig from there. We view indirect lending, which is the portion of the world we live in where we provide a service for the consumer called indirect lending, we view that as a very strong benefit to the consumer for a couple of reasons. Number one, in many cases, we can help them get a rate with the bank that they may or may not be able to get on their own, but I think more importantly, we can do it for them, we can help them, it's most expeditious the way that it's handled. The banks deal with it the same way, they don't have to carry the staff needed to process the initial contact with the consumer, the credit application, the stipulations, that's all handled at our level. So it is advantageous both for the banks but it is extremely advantageous for the consumer. They don’t have to do the shopping as much, they don’t have to go to a variety of places, we can do that for them. So we view the indirect lending part of the business as very much consumer advantage, and again, we don’t know where this will go but right now we do believe that we provide a substantial service to the consumer.

I'll just jump in behind Michael and say, if you were to sit in a store and watch what happens today, essentially with the systems that we have in place, the consumers' application will electronically be transmitted to multiple banks and come back on their screen and typically within I would say minutes, again depending on the quality of the credit scores and things, but within minutes there could be offers from five different banks with a loan for the consumer. So, from my perspective, it creates a competitive environment that helps to get the customer a price that they may not be able to achieve when they're out there on their own going from one bank to the next bank to next bank if they're willing to even pursue it that aggressively. I think the other thing that is beginning to happen and will continue to happen over time is this process is becoming very efficient. The customer's information goes into the system, we are approaching the point where that information goes electronically to the banks, we're starting to get away from the big paper chase, banks can make decisions, many of those decisions could be highly automated, in some instances we can get an approval within a matter of minutes and be funded certainly within 24 hours. Now that's not across the board but that's where the industry is going and I think that's going to take out costs for everyone and not only be in our best interest, the bank's best interest, but also the consumers' best interest of a much more efficient system.

That's helpful. And on the accounting then, is there a brief moment at the point of sale where you guys are the lender and then you settle them with the bank or are you purely an intermediary?

No, we're purely an intermediary here, there's no point at which we accept that credit risk.

Okay. And switching gears, have you given any or are you willing to give any guidance on maybe several years out on what your new vehicle market share could be for the whole U.S. industry?

No. I mean we're such a small player, I mean I think the consolidators as a group have less than 7% of the industry and we're just a small part of that group. I think the way we look at our business is the SAAR will be what it is, we know this is a cyclical industry, it moves up and down, we can't control it, our responsibility is to make sure we're doing the best job we can as executors and capital allocators and that's what we're focused on. We treat this business like we own it and we run these stores as well as they can be run and we want to make sure we are very prudent the way we allocate our shareholders' capital, and that's all we could control.

Okay, that makes sense. Just very quickly, a little bit of commentary on why new vehicle gross margin was down 50 bps?

This is Michael again. I think there is a substantial amount of pressure in the mid-line import market, again what I would call the Camry, the Accord, the Malibu segment, there's just a lot of product, the great product out there and I think there's a substantial amount of push for the manufacturer's market share which then is felt at the dealership level and dealers are very aggressive, it's a very good time to be in the business, so there's a lot of product that is being sold and with that there sometimes comes an excessive amount of push on the sale price, and I think we're all in the industry seeing that right now.

Okay, that's helpful. Thank you.

We understand that was our last question. Just want to say thank you, we appreciate everybody's time, and thanks for being with us this morning. Take care.

Thank you. That does conclude our conference call for today. We do thank you all for your participation.