Good afternoon, ladies and gentlemen. Welcome to the Penske Automotive Group Fourth Quarter 2014 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately one hour after completion through February 18, 2015 on the Company's Web site under the Investor Relations tab at www.penskeautomotive.com. I will now introduce Tony Pordon, the Company's Executive Vice President of Investor Relations and Corporate Development. Please go ahead.

Thank you, John and good afternoon everyone. A press release detailing Penske Automotive Group's fourth quarter 2014 financial results was issued this morning and is posted on our Web site along with a presentation designed to assist you in understanding our performance. Joining me for today's call are Roger Penske, our Chairman; David Jones, our Chief Financial Officer; and J.D. Carlson, our Controller. On this call, we will be discussing certain non-GAAP financial measures such as adjusted income from continuing operations, adjusted earnings per share from continuing operations and adjusted earnings before interest, depreciation, taxes and amortization. We have reconciled these measures in this morning's press release and investor presentation which is available on our Web site to the most directly comparable GAAP measures. The adjusted figures discussed on today's call exclude a non-cash gain of 16 million or $0.10 per share relating to the re-measurement at fair value of our previously held non-controlling interest in our U.S. commercial vehicle dealership operations. In the fourth quarter of 2014, we acquired a controlling interest in that business. We may also we may make forward-looking statements on this call. Our actual results may vary because of risks and uncertainties outlined in today's press release, which may cause the actual results to differ materially from expectations. Additional discussion and factors that could cause results to differ materially are contained in our public SEC filings, including our Form 10-K. I’ll now turn the call over to Roger.

Thank you, Tony and good afternoon everyone and thank you for joining us. Today we reported record fourth quarter unit sales, revenue and adjusted income from continuing operations and adjusted earnings per share. For our fourth quarter revenue increased 16% to 4.4 billion and adjusted income from continuing operations increased 14% to $71 million, related earnings per share increased 15% to $0.79. Our fourth quarter results were highlighted by a very strong performance from the retail automotive dealership and our U.S. based commercial vehicle dealership businesses. This was partially offset by our Australian operations which were impacted by challenging economic conditions and post acquisitions restructuring cost within our Power Systems business. The results were impacted by approximately $0.05 in the fourth quarter. Before discussing the details of the fourth quarter results, I'd like to review some of the highlights from the past year. In fact in 2014, it was our best year in the history of our Company. PAG achieved new performance records for retail unit sales, revenue and income from continuing operations and earnings per share. During the year, 12 of our U.S. dealerships were named to the Automotive News’ best 100 dealerships to work for while our UK business was again named one of the best big companies to work for by the Sunday Times. I'd like to thank each person on our team at these locations for their commitment to ensuring the long-term success of our organization. Total retail automotive unit sales increased 11% to 398,400 units. Total revenue improved 19% to 17.2 billion and same-store retail automotive revenue increased 11.7% with each area of our automotive business achieving solid growth. Our adjusted income from continuing operations improved 19% to 296 million while related earnings per share increased 19% to $3.27 when compared to last year. Our…

[Operator Instructions] And first comes John Murphy with Bank of America Merrill Lynch. Please go

Just a first question on capital allocation on acquisitions as you go forward, I'm just curious if you could just run us through the thought process on the profitability and returns of the commercial vehicle business versus the light vehicle business and how you are making that decision going forward?

Well let me first say if we look at 2015 I think that you'll have a 50% of our acquisition will be commercial in vehicle. And the other 50 will be divided 25% U.S. 25% internationally from an acquisition perspective, but to the point of commercial vehicle. What we see is lower valuations from the standpoint of commercial vehicle from the standpoint of acquisitions there is no questions it's probably 25% to 35% less from a goodwill perspective versus premium luxury automotive. Also from the standpoint of future CapEx there is significantly less requirements from the commercial vehicle aspect that there are in some of the showrooms and things we have to deliver to the OEMs. And quite honestly the rent factors are significantly lower in these cases where we’ve purchased these businesses and then releasing back from the operators and again when you look at the business I think another key metric there is when you look at the gross profit on the auto side if you looked at our results were probably around 9% to 10% sales revenue and parts and services with a 40% GP. And you look at the commercial vehicle business that gross profit is approaching 70%, so again on 27% of the sales so we see that from a strategy standpoint a cyclical strategy that the fixed coverage is anywhere between 110 as high as 140% in a couple of our locations. So we see that very strong as we go forward. So I think it drives an overall strategy in our press release on Page 13 I think we showed what we've done just in the first part of the two months of ownership our average gross profit for the auto side was 14.9% and I think we're at 16.3% in the truck side. So in our early returns are quite positive and one has to realize that our background is really is driven from probably 1988 when we bought Detroit Diesel from General Motors back and ran that business for 13 years, most of the customers in the U.S. and even internationally used our engines. So we have a great knowledge to that customer base and relationships and when Freightliner decided that they wanted to consolidate their dealership group and they have 40% of the market we jumped on-board there and made a couple of strategic acquisitions and we see that is a great vertical for us as we go forward to balance our domestic and our international in with our commercial vehicle and certainly in our knowledge of the truck business because of our big fleet makes it a positive for us as we go forward.

Maybe if we could stay on that theme of commercial vehicles; the equity income was incredibly strong and I'm assuming the bulk of that was PTL. Just curious if you can talk about how that business is going and what you might be expecting for 2015 and forward there?

Well there is no question from a PTLs perspective we're having a great year. We have public bonds there so that information is available probably beyond the results of that business. We had nice growth top-line growth there is no question there that we see ton miles up which is driving our rental business and also our long-term lease business. And certainly as we see the trucks being more complicated and/or costly we're seeing ownership going over to leasing which has been a real plus for us as we go forward. So we see good growth and are comfortable that Ryder is seeing the same thing as we see this market, so overall heavy duty market and the leasing rental market remains very strong and we it to be strong for the next couple of years.

And lastly Roger, as we think about the acquisition environment being pretty hot right now and valuations being fairly high, is there anything in the light vehicle portfolio as far as the dealerships that you think might be worth selling and reallocating capital to other dealerships or maybe even the commercial vehicle business, just given that pricing is so strong right now?

Well John I think we're looking at in all of our businesses and obviously things that maybe looked quite beneficial to us several years ago we might have changed our mind in certain markets. So we'd be adding and subtracting those businesses as we go forward but I think that we're going to stay focused on foreign name plates, volume foreign and primarily in the premium luxury as in the U.S. as where probably 66% overall 73 and over 95% internationally. So I would say that would be focus would be premium luxury volume foreign obviously there might be some opportunities on the domestic side. But we need to get to opportunities there would have scale and I think that’s something we'd look for. But we're looking to opportunistic and there is no question. We need to have a dealership to compliment our footprints where we have back office and we can get the benefit of scale and that’s something we've been able to do with the acquisitions the Land Rover business in Darien we also picked up some Volkswagen business in the UK which is glue on for us.

And next we go to James Albertine with Stifel. Please go ahead.

If I could just maybe shift to the Australian side of the business strategy, can you help us understand what the next steps are? How do you see the Australian strategy progressing? And the $0.05 I think I heard you say on the call as a headwind in the quarter, yet parts and service is strong, there's a 14-year average age of the fleet over there. Has that headwind already turned to more of a tailwind, or should we think about it as more of a tailwind in the first half of ’15 or still tough?

Well I think we're going to have a tough probably first quarter in six months, because right now you've got iron ore and coal prices down which are driving less of the economy and therefore people aren’t stepping up and buying new trucks and that's one of the things that we saw we had a good first quarter and second quarters slowed a little bit in the third, but in the fourth we just saw the retail business at the dealership level really come down substantially and that's when we supported those dealers with incentives which obviously aid into our profitability. We see a pretty steady process as we go through the balance of this year, there's no question that if the mining picks up and there we've had some opportunities on the other side on the off-highway side where we've been successful in getting some repowers and some of the mines that are coming back and they are doing some maintenance, so I'd say pretty much business as usual for the next three to six months in Australia from the truck side. Obviously with the consolidation of some of the things we're doing would take additional cost out, but we see these businesses our plans are to be profitable during 2015.

As it relates to the distribution versus the potential strategy of a heavy-duty retail portfolio or even an auto retail portfolio in Australia, so how are you thinking about, from a very high level, the growth prospects in that market? Thanks.

Well there has been opportunities for us to make acquisitions in the auto retail, but I think strategically what we said that that we're going to stay in distribution at this point. We think that we've committed in the market that way from the standpoint of our 60 plus dealers and Western Star and MAN, and Dennis Eagle but then we have even more dealers under the distribution for both the Detroit Diesel product and the MTU products so distribution would be our focus. I don’t think right now that we're ready to jump into the retail auto business. I think we need to focus on getting it right based on what our commitments are at this point, but we feel good about that market and one of the point I didn’t make earlier, we operated in that market when we owned Detroit Diesel we actually consolidated that market from private ownership into Detroit Diesel, so when we bought this business from Daimler it was the same business that we had a number of years ago. We know the people and we know the customers and in the Rolls Royce power systems is really the piece that MTU bought, and they bought from MTU which was also Daimler so again these are large companies exiting the business in that market which gives us a distribution opportunity with many sub-dealers and dealers, so to me it's a great parts and service play.

And if I could just sneak a quick follow-up in last year first quarter you talked about a significant number of days closed related to weather. You've had some harsh weather already this year in the Northeast. Should we think about it as more of a wash or is it a net tailwind, headwind for the first quarter? Thanks.

Well I think we looked at the number of days that we've been shutdown if we take the dealerships it's probably over 100 over the last several weeks and I looked at the numbers just for the first part of February and our Rhode Island business is off about 27% because of the snow you personally know that you guys around New York and Connecticut off about 10 so we still see some impact, but we should get that business back as we go forward.

Our next question is from Rick Nelson with Stephens. Please go ahead.

A public peer out there in the heavy-truck dealership is Rush Enterprises. They stated 4.7 billion in revenue here; roughly 900 million today. Is there anything structural that would create impediments to growing to that type of size or perhaps even bigger? Freightliner has a bigger share I think than the brands that they represent.

Well we have a framework agreement with Freightliner but it gives us lots of runway and basically I think with the parts and service business now Russia's been added for a number of years and done a good job now they've consolidated both PACCAR's Peterbilt and Navistar International those are the two brands but again when you take those two brands together they don’t have the market share that Freightliner has Freightliner is about 40% so and I see the growth as we go forward if you take the acquisition that we made in Tennessee this year recently just in the U.S. we probably have probably a 1.1 billion to 1.2 billion in revenue so when you add it all together on an annualized basis so to me there's opportunity for us to grow and I haven’t really calculated whether we’d go to 4.7 or 5 but I think there is certainly an opportunity to go, and I think their results which I have seen look quite positive and they see the same opportunity from the standpoint of the parts and service business being very strong for them also.

Your heavy-truck dealership business has pretty big concentration in Texas and Oklahoma. Recognizing your recent acquisitions are out of those markets, but how do you see the oil and gas effect there? And are you in fact seeing any slowdown in those operations?

Well I think Rick you have got to think about the business Rick we are in the highway truck business, and with the economy better the ton miles for trucks have gone up each quarter now I think sequentially for the last four or five quarters. So we certainly got that tailwind and as far as the off-highway business we might do on truck engine support we see a lot of those pieces of equipment coming back into the shops that really haven’t had good overhaul, so we see that to be good going forward, at this point we don’t see that having any material effect, in fact with lower oil prices you start to see truckers or operators buying new trucks because they have got more cash flow and there is no question that the fleets because of the current economy just in the U.S. generally we are seeing them going from a replacement mode to an additive mode. So they have been able to get pricing and those fleets are growing so there is no question that overall I think that it is going to be strong.

Our next question is from David Lim with Wells Fargo Securities. Please go ahead.

Quickly, with improving vehicle registrations in Europe, do you feel a need to do more acquisitions quickly? And how are valuation multiples trending in Europe?

Well I would say that goodwill component in Europe probably today is 10% of what it is here in the U.S. and in many cases the OEMs are directing us to trouble situations where we are really buying assets at book value and taking over real-estate through long-term leases. So the economics there are very attractive. And I think at this particular time, all of the strong OEMs that we do business with primarily in the premium luxury side are in contact with us to look at future opportunities. I think we are growing a very nice base in Italy we have a joint-venture partner Mantellini, who owns 30%, he is on the ground we have got an experienced team there and we continue to grow that business we have a strong portion of business in Germany and also we have gone through with the partner Catano who is the largest operator in Portugal for BMW he is our 50% partner in Barcelona we have been able to consolidate those operations and we have started out this year we have been in that business six months, we have been able to make tremendous progress. So those markets both are growing especially in the premium side. For us to say we are going to make a big launch where I’d say we are going to be selective, we will be opportunistic areas where we can join I know in Milan we are going to add a service center there which BMW has directed us to, to give us little more share of wallet for that client and we will share the Northern part of Milan and the factory will share the Southern part. So there is a direction, a specific direction by each of the OEMs and we think there is more to come and we will look at those but the capital allocation for there and the amount of capital is significantly less than what we’d have to see either in the U.S. or in the UK for premium luxury opportunities.

Understanding that most luxury vehicles are leased, can you give us some additional color on what percentage of your F&I is from vehicle financing? And in the scenario that the CFPB goes to some level of flat fees, how would that hurt your business?

Well when you look at our overall business, I think the number is probably you could use 40% would be finance reserve and 60% would be product income. And if you looked at the U.S. by itself I don’t have the number specifically on the international basis Tony can follow-up with those. And quite honestly when you look at and certainly CFPB in our case 65% of our business is U.S. and 35% internationally so 35% wouldn’t be affected and then you look at 60% of that is product income, I think we are in a pretty good shape one of the things that we are doing, we are looking at a model and really a pilot from NADA so we are trying to see what impact that might have on us at four stores, so we will keep you posted on that, but at the present time there is been very little action on that from the standpoint of connection with us and I think that the pilot that we are running with NADA we have initial standard rate mark ups for all the customers and there is a deviation obviously we have to put that in writing and document that. So it’s a pretty straight forward transaction. So we are testing the water on that potential option for the future if that would become something that the government would seem to be necessary to explore with the retail auto network.

And finally, if I may, how should we think about working capital needs on the commercial side versus the light vehicle side? Thank you.

Well, I think overall when you look at the commercial vehicle side, you really got two components, your new and used truck inventory and the good news is, our partner is Freightliner and certainly the commercial vehicle side of Freightliner's captive finance is very strong probably the strongest in the industry and that bodes well for us and we do all of our financing, our acquisition line obviously and also our work planning with those folks and so basically, releasing the majority of the facilities today and we had very attractive rates and on top of that we've the ability for capital from Daimler and also they handle our floor planning so we don't need to go to banks or third-parties for support, there is a tremendous I think value that's been created by the Freightliner brand and Western Star across the U.S. and Daimler is just standing behind that from a standpoint of their vehicles and with the 40% market share that's only going to drive more parts and service. So we'll have -- we carry a higher parts inventory where we carry 300,000 to 400,000 in a large Premium/Luxury star we probably carry 2 million in parts inventory and a retail Freightliner business.

Our next question is from Brett Hoselton with KeyBanc, please go ahead.

Wanted to start off just on the M&A front, you did about $1 billion in revenue or so in 2014. Kind of about 5% revenue growth, is that the pace of acquisitions that you think might be reasonable to expect in 2015 and 2016?

Well, as we have tried to model ourselves, we're looking at about 50% of our growth from the standpoint of probably looking at 10% overall, half of that would be through organic and the balance would be through acquisition and when you looked at this past year we did about 225 million on the retail automotive side and we had about 800 million on a going forward basis in commercial vehicle and the power system business was about 200 if you looked at 2014, and if you look at it on an annualized basis but I think that 5% as we go forward on the acquisition side is realistic now but as we get into more of the commercial vehicle and if there is a platform in the U.S. or internationally that we're going to look at that, that would be multiple locations obviously that would grow that and we'll remain opportunistic buyer where we have scale.

And then as I think about the breakdown there, it sounded like you're thinking maybe about half of that is commercial vehicle, half of that is automotive. Then as you talked you also suggested maybe half mix of U.S., half international. Assuming those numbers are correct, the U.S. and international is my impression correct that you are thinking, when you talk about international, it's automotive but there's also an opportunity in commercial vehicle? Because it didn't sound like you are interested in getting into the dealership side of the business in Australia, but it sounds like maybe you are considering some commercial vehicle in Europe?

Well let me straighten that up, we are not at this point and we would let you know that we are not going into the retail auto business in Australia at this point we're going to play the hand that we have built ourselves on the commercial vehicle and also parts distribution business and as we look at Europe, we're not going into the commercial vehicle business -- our retail business, there we're going to stay automotive but when you come to back to the U.S. we're going to be in the retail heavy duty truck business.

So it sounds like the incremental dollar is going to be spent on commercial vehicle dealerships in the U.S. and then you are going to -- any international is going to, for the most part, be automotive related and possibly more focused on Europe. Is that a fair assessment?

That's correct, yes.

And then how do I think -- switching gears on gross profit throughput as I look back over the past few years, 2012 and 2013, you kind of were in that range of 30%, 35%. And I think in the past you've talked about that as being the gross profit throughput range that you are targeting. This year you declined down into that 20% range, give or take. My impression is that there are some headwinds here on the commercial vehicle side that kind of pulled you down a little bit this year. How do we think about gross profit throughput into 2015 and into 2016? I guess what I'm really asking is if we are ramping up on the commercial vehicle and if that was the headwind in 2014, does that mean in 2015 we should be thinking more along the lines of 20%, 25% gross profit throughput as you continue to grow that commercial vehicle business? Or do you expect that you can improve the overall gross profit throughput of the Company?

Well, I think we’d just look at Q4 for a moment, our retail auto business was at 30% so that's and remember our fourth quarter is not the strongest from the standpoint of the UK because they've registration quarters both in Q1 and Q3. I think from the standpoint of this year, we had the first quarter we were impacted significantly because of weather and then we had the flow through impact because of the start-up in Australia and the slowdown of the economy, but I'd say that if we looked at Australia and I said this earlier I think that we're going to see kind of a slow start here of the economy I don’t see something that is going to overnight ignite it and unless we see some iron ore or some of those prices change at the moment. We also have some impact from the standpoint of currency and things that we're buying outside or we're buying from the U.S. and/or from Germany. So that may will have some impact just on a foreign exchange basis overall I think that commercial vehicle will certainly be better from the standpoint of SG&A to grow. So we're going to see some benefit there which hopefully will drive some better flow through.

Is there as you think about the automotive dealership business versus the commercial vehicle dealership business -- and I think you just commented on this -- but how do we think about the throughput rate for the automotive business versus the commercial vehicle business? It sounds like the SG&A might be a little bit better as a percentage of gross on the commercial vehicle side. Is this throughput also better on the commercial vehicle side?

Well I think if we look at the business as remember now. We’ve owned this business today for two months really November-December the business we've originally bought in Texas I go back remember 18 months ago we made a 25% investment strategic just to get our toe in the water and then of course we made the bigger investment here in October and November. And the one thing that I see Brett is that we're at 14.9% overall as a company from a gross profit perspective and for the first two months two innings don’t make a ball game but you'll look at that 16.3 we know that our real estate costs are less. So I think overall we're going to see more pull through from the commercial vehicle side. And we'll start to give you some of the metrics there as we go through it and you'll see that if you had a chance to look at our release but I think it's on Page 13 use a little more insight on that.

Our next question is from Scott Stember with Sidoti & Company. Please go ahead.

Can you just maybe talk about what you are thinking for the U.S. sales environment on the new car side for 2015?

Well I've seen everybody else’s statement and I guess I fall in line in cadence with them that we see probably a 17 million SAAR for the year. I think that we'll see a mix change and see more SUV and truck purchases versus cars due to the fact that fuel prices are down and I think that’s going to put pressure on hybrids and electric vehicles at least in the short-term. You've got a real strong credit situation from the standpoint of availability I think consumer confidence is higher I mentioned on the truck side on the heavy truck side the lower fuel price is going to see owner operators and fleets increase their fleet so I think that with unemployment down and the ages of vehicles creeping up we're going to see still see a pretty robust market.

And maybe here in the U.S. could you talk about potential areas or areas of weakness during the quarter that you saw or areas of particular strength from a geographic standpoint?

Well when I look at the market itself I think we had some good luck in Orange County that was strong for us. We were up double digit their Puerto Rico obviously was one of the drags that we had on our business people talk about flow through. We were down double-digit in Puerto Rico and we saw a little bit light here in January Atlanta has been a very strong market for us and Central Jersey those would be a double-digit increases at least for the fourth quarter.

And just that last question as it relates to Australia once again. It seems like we probably have another couple of quarters before you start to see the light at the end of the tunnel there, but have you made any plans or contingency plans to right-size the business in the event that things don't come back as soon as you would hope?

Well I think we've been rightsizing the business here for the last 12 months we've just been in that business for 12 months. The consolidation opportunities which are taking place when we take two big organizations that have master parts warehouses and we can bring those together that take some IT corrections and engineering what you're taking place today we get out a certain excess warehouse capacity some of our marketing expenses where we can combine our marketing and back office there is a number of things that are taking place. And of course we've had a reduction already some of the cost associated in the fourth quarter. We had people redundancies already in the power systems business so they'll be a little bit of that but I don’t think it's something that will have to call out I think that the business will continue to grow it is a very solid business when you look at freight in Australia it is by truck there is no question it’s a huge landscape and the fact that we are in a power system business just to think about it. We're powering most of the mine haul trucks and it is a lot of repower business these are the 350 ton trucks we got mine haul and we've got fast ferry, we have got marine, we got military, we've got contracts with the Australian Navy in place that we're working everyday and then you look on the on-highway side, every time a Freightliner truck is sold in Australia and also the majority of the Western Stars that are sold have Detroit Diesel engines so they're just seeding the network for units and operation for us to handle the warranties and serve and parts then we have our dealership group that we distribute to, so there's a tremendous amount of opportunity and I think the our capability it would take millions to replicate the capability we have for both the on and off-highway. So to me our strategy and then moving into New Zealand, the New Zealand market is better than Australia right now because their timber and dairy products and China still relies on them for a lot of their support. And we see that business there has been much better than Australia. And then we have some opportunity because the off-highway business, we've been quoting and being successful in some big repowers in Indonesia and other parts of that part of the world, so these are bigger contracts big gen-sets for buildings like the American Express or Citicorp in New York those are things that we compete on with Caterpillar and Cummins but the MTU product has been very successful in those markets so we also see once you are successful you will have the ongoing maintenance contracts so this is really right down the alley that we were involved in for 13 years when we owned Detroit Diesel it's just a different size engine when you get off-highway.

Next we go to Patrick Archambault with Goldman Sachs. Please go ahead.

Just sorry if I missed it, but -- so you had a 5% target for inorganic growth. Do you have -- did you mention or do you have something you could share just broadly on the organic side that you expect, just consistent with your --?

I think I said that we would have a 10% combined organic 5 -- and it could balance either way if I look this year our growth if you look at for the full year it was over 11% on a same-store basis so under promised and over performed I guess, but to me I think that's realistic when you look at the size when you're talking 17 billion 5% is key. One thing that we have to look at is that the as we go into the first quarter and second quarter of 2015, there'll be some pressure on foreign exchange because when you look at the pound it was $1.70 last year it is obviously $1.50 and also the euro at roughly 1.23 or 1.24 down to about 10, so there will be some impact there. And you have the Aussie dollar when we bought the business year and half ago there's 92 or 93 and it's in the mid 70s right now so those are things that we have to manage around but the basic core business is international our business as you can believe it 2002 we bought Sytner in the UK $125 million U.S. dollar investment doing 900 million in revenue and in 2014 it did 6 billion so and we're 98% premium luxury number one in every one of those brands there except Land Rover and Jaguar number two so to me this international piece as we look at our business a little bit different than just domestic and we're going to continue to try to differentiate ourselves now also with the commercial vehicle.

No question UK has been a big bright spot. You know, I guess just actually that dovetails nicely on the other question I had. In terms of the FX, I mean obviously this is mostly translation, but just to make sure, check that box as we are repatriating it and trying to think through the impact on profitability, just the gross profit margin is probably the best guide?

Well when you think about the UK that is one of the reasons I wouldn’t say the only reason but when we invested into Australia we can put investments into Australia and bring the money back without being taxed which has been a good use of our excess cash we generated in Australia the other good thing about that is the tax rate today I think in the UK is now down to 21% so we're getting better a lower tax rate and we're not bringing money back to the U.S. we're actually deploying that money in these other markets.

Sorry. No, what I meant is that if like the revenue per vehicle impact that you are referring to -- from a year-on-year perspective in the first half, just kind of if I think about the profit impact, the gross margin is as good a guide as any as how that revenue impact will translate, correct?

Well I think you'll have a lower the sale price will obviously come down reflecting the pound versus the dollar reporting in U.S. dollars so you've got $0.20 reduction already and that will manifest itself on the gross profit per unit there's no question so we will have that but again when I look at 2014 I think I asked our guys they said we had about $0.05 benefit in 2014 on currency.

I'm sorry, could you repeat that last piece?

Exchange when you look at the FX it was 5% benefit to the overall for the year I think.

Last question for me just on margins, if I look at just the new side, for the last couple of quarters you had been seeing that increase year-on-year and I think a lot of that was mix-driven, right? This quarter there was -- it was below I think by about 20 bps if I'm not mistaken. So how do we think -- what -- one quarter, obviously, is not like a full-year trend. But how do we think about the competitive dynamics of the new vehicle space where we sit now? What are your expectations for the direction of gross profit going forward?

When you break it up on new vehicles, we were 8.5% or 8.4% on luxury and our domestic was down from 6.9 to 6.1 so we probably had that impact. And also Puerto Rico had a big impact on us because that business was poor and we were hanging on trying to get whatever business we could. So I feel where our strength is in premium luxury we certainly performed pretty well, when you look at the total new market we are down $58 on a dollar per unit for the fourth quarter which was 20 basis points but again as I said on the premium luxury side, we went from 85 to 84 so are very small move there. And I think that when you look at the quarter you really got to remember that we don’t have the impact of the registration in the UK. So it’s more of a natural business during quarter. We don’t get that sales impact that will see in the first and third this year.

So it looks like the sort of flattish to upward trend is still…

And I would say if you looked at the used car, as I looked at the use just like you do. When we look at the used car side we had a decrease in used vehicle margins in the UK which drove our overall margin down, but I would also say that when we looked at our inventory we really bought inventory in the fourth quarter and the UK which is going to drive much better in Q1. So we will see if the margin should be better as we go into the first quarter.

And how about just on the topic of used margins, how -- are you seeing the promised influx of off-lease vehicles? And what is the --? I know you get this question a lot, but just to bring us up-to-date, what is the opportunity there to bring down inventory acquisition costs and have that be a tailwind?

We are looking forward to the off lease today when you look at premium luxury 50% to 55% of our business is leased with say Audi, Lexus, BMW and Mercedes they are going to have 150,000 cars coming back each one of them, so there is going to be a tremendous opportunity to take those used cars in and then you get the chance to certify those and with that you get some of the new car rates that are available. So I see that as an opportunity because we have been struggling to get enough good used cars on the premium luxury side over the last I would say 12 to 24 months. And our CPO was up 11% in the quarter and I think that that also will give us an opportunity going forward to get more new customers into the brands.

And we have a question from David Whiston with Morningstar. Please go ahead.

Three questions, first on the dividend, you've had a lot of frequent dividend increases and I was just curious if that has always been your plan, or do things just keep going better than you had expected?

Well that’s really the discretion of the Board, and the consistency of the dividend I think it has been important to the shareholders, and our goal is obviously to increase the payout as we go forward. I think if I had a upper level of payout it might be 35% but right now as we continue to grow our business we haven’t quite got to that pay out level but I think the return of 1.7 is in today’s currency market where we are I think we are key and share buybacks we already did about 300,000 share buybacks you can see that we are spending our money on acquisitions we are not buying our stock back and we are paying dividends. So I think you have got two investors out there some like dividends, some like share buybacks, and in our particular case we think that deploying our money in on acquisitions to grow our business will grow our bottom-line and grow our revenue faster and we are consistent about 90.3 million shares outstanding that’s been for the last couple of years. We do offer our employees restricted shares and we typically buy those shares that they're in the money back each year so that would be consistent year-over-year.

And then going back to an earlier question on brands is the reason that you seemed to continue to have a strong preference to imports in the U.S. over GM and Ford, Chrysler, is that purely due to the lack of scale on the domestic side that you mentioned earlier?

Yes, I would say since our mix for the last 15 years has been driven towards Premium/Luxury and Volume Foreign, we miss the boat you might say on some of the larger better acquisitions on the domestic side, we have some good GM business, some Ford business and some Chrysler business but it is much-much smaller than the other peers on the public side but we're talking to Chrysler, GM and Ford about opportunities but we got to get one to have the right scale and for sure have to be in markets where we already have a footprint.

Are you at all interested in more Cadillac?

Cadillac, it's been a brand to we were involved in fact it was one of my best brands I had early on in my career and I think that if we could get Cadillac in the right market, we certainly be interested because it's a Premium/Luxury brand, we even had conversation with Farley and Mark Fields is there a place that we could take on Lincoln we think that, their strategy now and maybe in a smaller place where we had the right CapEx in the right facility it might be a very interesting opportunity we're not betting the farm on it but we certainly feel that we need to be sure that we're engaged with the domestic OEMs.

And then last question; on an annualized basis today, roughly what percent of your commercial vehicles revenue is in Asia-Pacific?

I would say the annualized that number today is probably 3% to 4%.

Of overall revenue or of commercial vehicle revenue?

Overall.

You have a question from Paresh Jain with Morgan Stanley, please go ahead.

On luxury, it seems like MINI had a pretty bad 2014 due to a lack of new products and, if I have the numbers right, 1Q of last year they were down almost 40% year-on-year. Can you remind us again how much of your new business is Mini and if you now have a good product mix there to take advantage of easier comps through the year?

Well, I know that our MINI business is just under 10% of MINIs on a national basis so you can calculate I don't know what the national MINI number was for the year but we were just approaching 10% because we've a framework agreement that we start to bump up to when we get the 10 and to me MINI is a great brand and they just had problems in executing the new models coming out but we saw some good traction in the fourth quarter with MINI coming back with the new product.

And staying on luxury, a dealer peer of yours mentioned that luxury stores can go for almost 50% premium to domestic. Can you talk a little about what is making luxury stores so attractive to buyers, and if there is any secular share gain story here for luxury?

Well, look, number one, I think we've got to look at the 18,000 franchises that are in the marketplace and you look at Mercedes-Benz, you look at Audi, certainly Lexus and you look at the BMW, those brands in fact when you look at Lexus, BMW and Mercedes have about 300 plus dealerships Audi today I think has 175 standalones but you just don't have the inter-brand competition, you have a higher gross margin, you were running over 4,000 per unit on our Premium/Luxury versus 1,600 this is the frontend without F&I in our business and I think that today, with the downstream working down remember these are Q7s and S classes and what have you that was what they were known for and now they are working down the food chain with A3s and X1s and CLAs and things like that, these are becoming aspirational brands and they have a strong leasing portfolio, which gives us that full circle to get those cars back and I would say this that just generally, when we look at return on sales it's not a secret to anybody that the Premium/Luxury have a better return on sales so I'm sure that, that's driving a lot of the interest. So to me, there is no question when you look at U.S.'s Luxury market is 12% and if you go to the UK today is 25 and go back 5 or 6 years UK market is gone from about 17% or 18% to 25% so, the good news is that there is a tailwind there and when we start to see and I think the event of the SUVs, the M class way back early and the RX from Lexus, these people really drove those Luxury brands to me early on and have taken…

Our final question is from Carl Dorf with Dorf Asset Management. Please go ahead.

I want to address the elephant in the room.

How did you get all the way to the last guys here?

Well, I guess I put myself in a little bit later. Your stock is down about 7% today. I looked at the release. The only thing that I saw that bothered me a little was your debt went up. Hearing the call today I hear about the foreign exchange being a headwind, but that was in there before the release, should have been anyway. I'm wondering, one, can you qualify the foreign exchange impact negative headwind that you're looking at this year based on where rates are today. And is there something else that I am missing that has caused the magnitude of the decline in the price of the stock?

I wish I could to project to start each day obviously I can't. I think that there is question that we’ve had you heard it on the call from the standpoint of the impact of Australia which said with the price will be $0.05. Which obviously heard that overall numbers.

Roger, but what I see in that is you have met with your guidance; despite the fact of the Australia problems, the rest of the business was stronger than most analysts were probably looking for?

Well I think where we met street estimate there is no question. And I think that we run the business to generate profits that are sustainable not just quarter-by-quarter. And I think that when you look at the total benefit of foreign exchange in 2014 I think it was approximately 300 million in revenue something like that. So when you look at 2015 we've got the UK pound to the dollar going from a $1.72 to $1.50 and the euro from a $1.25 and $1.10 or $1.11 you can figure that out. I think there is no way to come back to you and give you the exact details on that but there will be some impact but we expect to perform accordingly.

So other than that there's really nothing else that you see that would've caused this?

No I don’t know what expectations were we felt very good about our business when you look at revenue up 16 net income and earnings per share up almost 14%. And on a year basis revenue up 19 in your income and you're EPS up 19. I'm not sure that there is much more we can do obviously we continue to drive the bottom-line and I think that there some of our peers beat the street which they've done a great job. But on the other hand that’s not our goal every month to beat the street our goal each quarter is to run the business and I think Australia might have some. But to me when they understand our strategy and I'll just articulate it to you quickly. In 99 we got this business we said we were going to be foreign premium luxury. We grew that today 73% overall and then we went on to UK it's 99% there and the business we're doing in Western Europe is premium luxury and then we swing back here into the U.S. in our commercial vehicles strategy now is going into a business where we know the customers we've been in that business because of our Detroit Diesel ownership. So I think you'll start to look at us a little bit differently within UL because we have the international piece which obviously is Europe and the UK and Australia then you have the commercial vehicle piece. And I think when that all melted together you'll see that through the cycles that we’re going to have a strong parts and service compliment in our business which will certainly pay dividends.

And Mr. Penske I'll turn it back to you for any closing comments.

No time, thanks everybody for being on. And we'll see you next quarter. Thank you.