Good morning, ladies and gentlemen, and welcome to the Group 1 Automotive Fourth Quarter Earnings Conference Call. Please be advised that this call is being recorded. I would now like to turn the call over to Mr. Pete Delongchamps, Vice President Financial Services and Manufacturer Relations. Please go ahead, Mr. Delongchamps.

Thank you very much, and good morning, everyone, and welcome to today's call. Before we begin, I'd like to make some brief remarks about forward-looking statements and the use of non-GAAP financial measures. Except for historical information mentioned during the conference call, statements made by management of Group 1 Automotive are forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve both known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results. Those risks include, but are not limited to, risks associated with pricing, volume and the conditions of markets. Those and other risks are described in the company's filings with the Securities and Exchange Commission over the last 12 months. Copies of these filings are available from both the SEC and the company. In addition, certain non-GAAP financial measures, as defined under SEC rules, may be discussed on this call. As required by applicable SEC rules, the company provides reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on its website. Participating with me on today's call are Earl Hesterberg, our President and Chief Executive Officer; John Rickel, our Senior Vice President and Chief Financial Officer; and Lance Parker, our Vice President, Corporate Controller. I'll now hand the call over to Earl.

Thank you, Pete. And good morning, everyone. Earlier today, Group 1 reported record-setting fourth quarter and full year operating results. Diluted earnings per common share on an adjusted basis were $0.94 and $3.62 for the fourth quarter and full year, respectively. This was the best fourth quarter and best year the company has ever reported since going public in 1997. What makes this particularly impressive is that we delivered these record results in a year where the overall industry selling environment was still weak at 12.8 million annual units, and we had limited inventory availability from 2 of our key Japanese suppliers, whose brands normally represent about 49% of our New Vehicle unit sales. Even with our 2 largest manufacturing partners being constrained by natural disasters, our New Vehicle unit sales grew about 5%, demonstrating the resilience of our diversified brand portfolio and exceptional operating team. The unit sales increase, coupled with higher average selling prices, led to a 10.2% increase of New Vehicle revenues. Used Vehicles retail sales continued to be strong in 2011. Full year revenues were up 11.4% on a 6.8% unit sales increase and a 4.4% higher average selling prices. Finance and Insurance revenues grew to a record $1,135 per retail unit resulting in a 16% revenue increase. We also reported a record fourth quarter result of $1,183 per retail unit. These records can be attributed to the enhanced focus and oversight we put on this business that is driving better penetration rates for our product offerings. Parts and Service revenues increased 6.1% in 2011 compared to 2010, reflecting increases in our customer pay, wholesale parts and collision businesses. We're very pleased with the work we have done in this business to improve processes, efficiencies and customer satisfaction have translated into increasing revenues and gross profits.…

Thank you, Earl, and good morning, everyone. For diluted common share, adjusted net income improved 51.6% over prior year to $0.94, which is the best fourth quarter result in our company's history. What makes this result even more impressive is that we achieved these levels in a 13.4 million SAAR selling environment that continued to be constrained by Japanese inventory shortages and a weakened economy. In comparison, the next best fourth quarter results were achieved in a SAAR environment of 16.8 million units. This reflects the significant improvement we've made to our processes and cost structure and begins to demonstrate the leverage those improvements will deliver as New Vehicle sales volume increases over the next few years. Our net income for the fourth quarter of 2011 rose $7.3 million or 49.3% over our 2010 results to $22 million on an adjusted basis. These results for 2011 exclude $461,000 of after-tax, noncash asset impairment charges, as well as a $641,000 after-tax charge related to an accrual for a pending legal matter. The comparable prior period results exclude $4.9 million of after-tax, noncash asset impairment charges, as well as an $810,000 income tax benefit related to discrete items. Compared to the same period a year ago, our adjusted operating margin improved 40 basis points to 3.2%, and our adjusted pretax margin improved 50 basis points to 2.2%. On a consolidated basis, revenues increased during the fourth quarter by $188.2 million or 13.1% to $1.63 billion compared to the same period a year ago, reflecting increases in each of our business segments. New Vehicle revenues increased 13.5% to $945.4 million on 8.1% more units with the ongoing effects of supply shortages and a number of our Japanese brands were more than offset by improved sales in our major domestic brands. In addition, our…

Thanks, John. If you'd asked us back in 2007 how we would expect to perform in a 12.8 million new unit New Vehicle selling environment, we would have anticipated being close to break even. So we are delighted that we not only reported strong financial results for both the fourth quarter and the full year, but record-setting financial results. I'm proud of the job our operating team has done in restructuring our business, significantly improving processes, delivering on growth and keeping our customers satisfied. We're very optimistic about the future. We expect significant and steady growth in the industry over the next few years with an increase of 14 million units for the industry in 2012. Driving sales in the coming years with significant pent-up customer demand is evidenced by the record age of the U.S. car park that is nearing 11 years. The increased marketing spend we are seeing from our manufacturing partners, customer financing that is back to pre-recession conditions, balanced inventory levels, strong used car values and many new exciting product launches. With the improvements we've made, we're confident we will be able to continue to leverage our costs and deliver earnings growth in such an environment. Capital expenditures are projected to be less than $55 million in 2012 with $15 million of that total dedicated to specific Parts and Services growth initiatives. While we've not set a specific target, we do expect to remain active on the acquisition front. We continue to actively seek deals in the United States and the United Kingdom that meet our strategic and financial targets. With the strongest balance sheet in the sector, we're well-positioned to continue to grow the company and build scale while adding value for our shareholders. That concludes our prepared remarks. I will now turn the call over to the operator to begin the question-and-answer session. Operator?

[Operator Instructions] And our first question will come from Himanshu Patel of JPMorgan.

This is Vivek Aalok for Himanshu Patel this morning. I had a quick question on your incremental throughput. I know you guys have a target of $0.50 of incremental throughput on future gross profit growth, but I just wanted to understand what would number be including acquisitions because particularly this quarter, this number including acquisition was 40%.

Right. This is John Rickel. The rough rule of thumb that I gave you of kind of $0.50 flow through is on a same-store basis. So you're right when you throw in the acquisitions it was below that. But if you adjust for the acquisitions, in fact, it was more like $0.52. So we continue to be very comfortable with that rough rule of thumb that we've shared with you.

Okay, sure. And in terms of your acquisitions, have you ever noticed that in the last 1 year, all the acquisitions that you have made were targeted to premium -- to luxury and domestic luxury customers? And is that just an attempt to diversify your exposure away from Japanese automakers maybe, or if that's true, what is the mix that you are expecting in the future in terms of domestic luxury and Japanese luxury?

Yes, this is John Rickel. Let me correct you on the specifics, and I'll let Earl address the strategy question that really underlies that. What we acquired last year included domestic. So Ford, GM, so there were both domestic and some luxury brands in there. And I'll let Earl kind of address the broader question.

Yes, I think we're now in an environment where I would no longer limit or specifically target the brands that we would consider going forward in terms of acquisitions. The strength in terms of sales growth last year, certainly at the end of last year, was with the domestic brands. We purchased a couple last year. So now we're merely looking for acquisitions that are good return on investment for our shareholders and, hopefully, that supplement the scale we may have in specific geographic markets. So I would say, we're more open on the brand mix of acquisitions than we've never been, at least, since I've been in Group 1.

Okay, sure, Earl. And the last question will be on your new weaker margins. I saw your margins coming down pretty sharply this quarter on a sequential basis at least. How -- what would you attribute that to? And going forward, how should we think about New Vehicle margins, if you can shed some color on that?

Yes, this is John Rickel. We had indicated all along that the margins that we drove in kind of the second and the third quarter benefited pretty sharply from the overall industry inventory shortages. We're overweight on Toyota and Honda, and with those brands in particular being in short supply through the summer months, our operating team did a good job of fully maximizing the value of our inventory. As the inventories have come back, we have said all along that we anticipated those margins returning to the more normalized levels, which was really what you saw on the fourth quarter. On a year-over-year basis, we were up. But you're right, sequentially, we were down. And we would anticipate, as inventories have normalized, that you're going to see something probably in that low 6% range as we go forward.

Our next question comes from John Murphy from Bank of America Merrill Lynch.

It's just -- a first question on pent-up demand for Toyota and Honda. You seem to indicate that these 3 were really making up for the weakness in those 2 brands just given the inventory shortage in the fourth quarter. I'm just curious, as we step forward and those inventories are normalized as you're indicating in the first and second quarter, if you think there will be a bit of a snap back or at least a pent-up demand for those brands, or has that been fulfilled by sort of competing brands? I'm just trying to understand where the pent-up demand for those 2 brands specifically.

John, it's Earl. I don't know that I would attribute a massive pent-up demand. I think -- I don't think a lot of customers would hold off and wait when they need to buy a new car these days. So much of the replacement demand is they're just driven by the age of the car park. But I do think that there is some optimism for Toyota and Honda, and that they have more inventory available. They're very powerful companies and powerful brands who will fight to regain sales. I think we've already seen some evidence of that, and they now start to have some new product available, which gives them an avenue to flex their marketing muscle, which they both have. So the new CRV came out before Christmas. Toyota has many product launches this year. Obviously, the Camry launch was in the fourth quarter last year, and it appears to be building momentum. So I don't know that pent-up demand is a big element of the optimism I would feel about Toyota and Honda, but I think they -- there's a lot of reason to believe they're going to get some share back this year.

That's helpful. Then just the same question on pricing. It sounds like you're saying that Toyota and Honda are getting a bit more promotional, yet we're seeing average transaction prices rise pretty significantly throughout the industry. I'm just curious what you're seeing there? Are there sort of newer stair-step programs that are going on behind the scenes that are not being captured in a published data? I'm just trying to understand the increase in the marketing dollar is really on the ad spending side or whether they're actually on the incentives.

I haven't seen a lot of price-driven marketing yet by Honda and Toyota, and nor have they needed it because of their inventory situation. So I don't think their marketing thrust has really been price to date than were have -- they have been a recent heavy user of stair-steps, but I don't know what will happen in the future, but I know there'll be a lot of competitive market activity this year to launch new products, to promote the brands and how much it escalates in terms of marketing spend, I don't know. But I think it'll be a good year to buy cars for consumers, best one in a couple years.

But Earl, when talking about marketing dollars, I mean, really, that could be toggled between ad spending and incentives. Is that correct?

Yes, that's right. And that's kind of a tactical thing that the manufacturers decide quarter-by-quarter basis. I mean, you saw the money spent on the Super Bowl the other day. There were quite a few car ads on that, so I think that's a precursor that the marketing budgets are in play for the OEMs. So they've -- most of them have some new product this year that they want to position in the market.

Yes, and as we all know, it's only half time in America.

Yes, I believe I saw that one, too. I believe I saw that one.

We all have. One last quick -- one last question. We spent a little bit time out at the NADA convention last week, and it sounds like there's a lot of buzz and potentially availability of the acquisition from stores for sale. In some cases, it sounds like it may be just a little bit more than 1 piece and 2 piece that there -- in the next year or 2, there might be some big groups that they could potentially be up for sale. I'm just curious if you would be open to a large acquisition, or are you comfortable doing sort of these smaller tuck-ins over time?

No, we would always prefer larger acquisition. I just think the more scale you get in a given market, which is usually what you get with a larger acquisition is better for us. So, yes, we're completely open to larger acquisitions.

Our next question comes from Simeon Gutman of Credit Suisse.

A question on expenses. You had a great performance pretty much all year. Can you talk about the areas of the business that gained efficiencies? How should we think about them potentially accelerating throughout 2012?

Yes, Simeon, this is John Rickel. I mean, the pieces really were around leveraging the scale, so it's things like the fixed cost. You, obviously, don't add more rent or store cost for a given level of volumes. So as we've been enable to drive gross profit dollars, we'll leverage that. The team has done a good job of continuing to be appropriately restrained with advertising. We obviously need to accelerate it as the volumes come up. But they're not out accelerating what's going on there. I think we've done a good job on the fixed part of personnel if you think about accounting cost, payroll cost. Those are not linear with volume either, and I think we've done a good job of scaling those. So it's really about kind of driving, for lack of a better term, more revenue through those fixed cost elements is really giving us the leverage.

Okay. And then on the same-store gross profit in Parts and Service on the same-store basis, I think those numbers are a little challenge, but some of that is tough compare, some of it may be mixed. Can you talk about first, when the warranty compares, when they ease? And then how should we think about the same-store gross profit and outlook for that -- the Parts and Service business over the course of the year?

Yes. This is Earl. Yes, clearly, fourth quarter last year was one of our worst comparator numbers on warranty because the Toyota, Lexus recalls were really, really somewhere near their peak back then. I believe it will be close to third quarter before some of those comparisons ease up with our warranty business down over 14% in the fourth quarter last year. That was a huge hit. And -- but that will ease as we certainly move into the second half of 2012 in terms of the degree of difficulty of the comparison.

Okay. And then last one on F&I for vehicle. It's a pretty chart for the whole year. Could you talk about -- I don't know how the J3 supply situation may have had an impact or if they're just -- are there new products you're selling, other technologies, or the price and any other mix implications?

Simeon, it's Pete Delongchamps, and thank you for your kind words. It was really a function of us focusing on penetration rates and identifying dealerships, that kind of opportunity. And there are certain regions of the country that we traditionally did not perform well, and our field staff really improved the processes, redoubled their efforts on training, and we've got great results from select dealerships and markets that made a significant difference in the overall PRU.

Is there a target amount per vehicle that if you flow through some of the benefits you've been seeing that we should think about, and then if -- as the supply comes back and some of the import volume mix is back in, how should that play into that per vehicle number?

It's almost impossible -- this is Earl, by the way, to lock into a target number. The market is very dynamic, particularly as lease programs come and go, they change our ability to penetrate in various brands in geographic markets. I think the only thing we can say is, we think we have upside from here. We think we can continue to take that number up a bit.

Okay and connected to that, are you seeing the quality of offerings change or are you just executing better?

Well, we are executing better but we have to also agree that it's a better financing environment and obviously, finance income is a big part of this business equation, so as banks are more aggressive in lending more customers finance and that helps this business equation. And as consumers are a little more optimistic and willing to step out and commit to products and loans some things that helps this process also.

The next question comes from Nick Nelson of Stephens.

Same-store unit growth for new cars up 1% looks like it lagged the industry. Wondering if you can comment there, was it the inventory shortages and if you can comment on market share within your markets?

Yes, well certainly. It was driven almost entirely just by lack of availability in about half of our business which was Toyota, Lexus, Honda, Acura. And there's also shortage -- some shortages in BMW, and we sold out of X3s and X5s for a long time and we run down 3 Series. So it's not just the Japanese brands but there's some other brands that have been short of products as well. But I'll give you an example, at our biggest Lexus store in the last few days of December there were 4 model lines, we had nothing to sell. Nothing. And even in our big Toyota dealerships, and we have 2 of the top 10 in the country, we thought we had restocked nicely and had enough inventory going into December. By the end of December, we were out of several model lines of cars. And so we did not finish the fourth quarter as strongly as we would normally in our Japanese brands. So I believe that explains the issue. So we're looking forward to outpacing the industry average gross in -- growth in New Vehicle sales this year. We need to -- just like Honda and Toyota need to recover, we need to get on that bandwagon with them this year.

Okay. I know it's a small piece of your business but if you could comment on the U.K.? How that performed in the quarter.

Yes, the U.K. business, we're fortunate with BMW and MINI there. It's about 5% of our sales. BMW and MINI are 2 of the strongest brands in the U.K. at the moment and throughout last year. The U.K. market showed to be down 4.4% last year but that was overstated a bit because the actual retail business in the U.K., the selling cars to customers one at a time was down about 14%. So there's no doubt the U.K. economy is weak and the U.K. auto industry is struggling. However, the premium brands, as you might expect, like BMW and MINI and others are holding up significantly better. But there's nothing passive about the U.K. economy at the moment relative to all the retailing.

Okay. And on the acquisition front, $563 million in revs for the year and you're off to a big start in 2012. Can you comment on acquisition pricing and with the recovery in auto sales seeming to be firmly in place how the sellers are -- is willing to part with their dealerships?

It's still quite challenging to find acquisitions that fit our investment return hurdles. It is still very difficult. We look at an incredible lot number of opportunities to find 1. Clearly the ones we found meet our 50% pretax return on investment hurdle or we wouldn't have done that. But there's more to look at but it's no easier to do a deal now than it probably was at this time last year. Real estate makes it more complicated because commercial real estate values have obviously dropped since the recession began in 2008 or late 2007. So people who have been in the real estate for a long time, that's difficult for them to come to grips with current market prices on real estate sometimes.

How would you rank the capital alternatives at this point, acquisitions, buybacks or retirement?

Clearly, our priority is to grow our company in acquisitions or investing in expanding our business through our additional stores. So that is number 1. 1, A, B, C and probably number 2.

Our next question comes from Ravi Shanker from Morgan Stanley.

This is Yejay Ying for Ravi. Just a couple quick questions if I can. You guys have guided to a $14 million start for 2012 sort of on the back of strong -- the old car fleet, you guys alluded to bigger ad budgets. Do you guys see any potential for upside to that now that we sort of printed a $14.2 million in January or is that sort of more of a ceiling?

I think there's a potential upside for that. I wouldn't forecast that there's too much uncertainty in the world. It seems like something positive happened in Greece today but there's just too much uncertainty around the globe and it's now a global economy and things anywhere in the globe can within a half hour, affect the U.S. consumer sentiment. But we're -- $14 million, I think, is certainly a credible number when you look at how the fourth quarter finished last year, how January started this year and when we see the age of these trade-ins that are coming into our dealerships and there are a lot of old cars being turned in. I feel pretty good about $14 million and I don't think it's a ceiling.

Got it. If we could switch gears a bit into the Used. It seems like the used inventory appears to be still pretty tight on acquisitions still pretty high and we're anniversarying into a sort of trough period for those off lease vehicles. How do you expect that to play out in 2012 for you guys and can you continue to expect to see the depressed used margins?

Yes, it's still hard to find good used cars. We're getting more trade-ins as the New Vehicle market improves as New Vehicle sales improve but as I just mentioned the age of some of these trade-ins, many of them are not really retailable or they're low dollar units that don't hit the back part of our target market for Used Vehicle retail. So I think it's -- the used car pricing will probably stay firm this year and it's still going to be a challenge to get enough high-quality used cars for retailers such as ourselves.

Okay, great. If I could sneak in 1 more. I didn't hear anything about this previously, could you guys give a bit more color on the nature of the pending legal matter that you guys had this quarter?

No, we can't comment on the litigation because it's a very unusual and complex matter. But I think as it relates to our investors and probably to you and your colleagues, the worst case financial impact to our company was accounted for in the fourth quarter of 2011. That's already included in our financial statement. So financially that should not be a matter going forward.

Our next question comes from Adi Oberio of Goldman Sachs.

I had a quick question on your overall sales in the fourth quarter. Can you talk a little bit about which specific regions you saw more strength versus others?

Yes, this is John Rickel. We saw really good strength in Texas and Oklahoma again. That part of the country did quite well. Gulf Coast was pretty decent. Some weakness up into kind of the Northeast. For us though, that's hard to separate between that and brands, that was -- we're pretty heavy in import up in the Boston area for example and as Earl indicated, you will continue to suffer from inventory shortages and similar sort of in California, a little bit weaker there but we're very heavy in import out there as well. So for us it's a little hard to sort geography from the inventory shortages issues but certainly Texas and Oklahoma had a very good quarter.

Great. And 1 question on P&S. Obviously, you were lapping tough comps so the -- and then warranty was a headwind this quarter so P&S as same-store sales was only up 0.5%. As we think about 2012 warranty will continue to remain a headwind, what kind of growth should we be thinking about in that specific segment?

Yes, this is John Rickel. I think we're still comfortable kind of low single digits in that area.

Okay. And do you think obviously that will come after the cost of a small headwind to margins given that the mix will be more towards as you said in this quarter as well it will be tires and other low margin product?

Yes, this is John again. I think that's fair. But I don't think that's a huge amount of margin degradation. But yes, there's probably a little margin pressure that may be in there.

Our next question comes from Brett Hoselton of KeyBanc.

This is Matthew Mishan in for Brett. Usage of percentage in New slips in the fourth quarter to 65%. As sales rise next year, I mean, would you expect to keep up with the new sales with the Used or would you expect that ratio to decline a little bit?

We don't really manage that ratio so I don't know. That ratio is so dependent on our geographic mix of sales because of places like California and Northeast where we don't have space for lots. So we don't really manage to that ratio number because for us it's not meaningful.

This is John, I would anticipate, given the areas that Earl mentioned tend to be our big import areas. We're going to -- should see kind of more New Vehicle growth there as the Toyota and Honda inventory situations improve. And that would lead me to logically say there probably is some pressure on that new to used ratio because we're going to likely grow New Vehicle sales faster there than what they pick up their Used Vehicles with the space limitations.

And on the SG&A incremental, you're targeting or a rule of thumb is $0.50 on a dollar, what would drive -- what woul;d be kind of a headwind to that or what would be kind of a tailwind to that? Is there anything we should think about 2012 versus 2011?

Yes, this is John. We continue to be comfortable with that rough rule of thumb, remember that's on a same-store basis. But no, I think that's a reasonable calculation basis for your models.

And then just a follow-up on the acquisition activity in particular in the U.K. you sometimes can make a larger acquisition there. As maybe some of the issues over in Europe created some opportunity there?

I think anytime a market is under financial pressure -- economic pressure that there are some opportunities for acquisitions to come out of that. So I'm optimistic that we'll be able to look at some things that are in the year ahead that we haven't had a chance to look at in the past couple of years.

Our next question comes from Scott Stember from Sidoti & Company.

Can you talk about how your luxury premium brands did, specifically BMW and Mercedes?

BMW was fantastic all year for us and they're a bigger part of our mix than Mercedes is. In fact, as I mentioned we've been constrained as most BMW dealers have been on X3s and X5s all year and as we sell down the 3 Series. So they are just about to launch the new 3 Series you probably could have done even better but BMW was fantastic in the fourth quarter and all year even with limited supply. And I will say, we have 6 Mercedes stores and a couple of big ones, Mercedes came on strong in the second half of last year and the M Class SUV for them was very powerful as the year came out. So we saw Mercedes on an upswing at the end of last year also. Lexus, we just we didn't have any bullets. Just didn't have that, the vehicles to sell and actually still don't. And hopefully that will build this first quarter but I think that when Lexus has product, then they'll increase sales again too.

And on the mid-level imports going over to Honda. Can you talk about how the new Civic performed in the quarter and now with a refreshed model coming out in the next few months, what are your expectations on any sale pickups going forward?

Well, I think we're going to see positive numbers for Honda throughout most of this year. I don't know that the Civic is going to be a huge, huge factor but the comparison, we're starting to get into some comparison as we get into the spring and summer against very weak months last year and the CRV is bringing a lot of Honda traffic back into the dealership. So I don't think Honda will be a spectacular story but I think Honda will display some steady growth numbers this year that will probably peak near the end of this year.

Okay. And then just the last question a follow-up on the acquisitions, Earl, you mentioned focusing more on returns versus brand. But how does the Chrysler brand fall into your thought process going forward?

Well, I'm not sure I'm 100% convinced yet but I have to tell you our Chrysler dealerships did good last year and our Chrysler sales were around 50% last year, so it does catch your attention. Those are all obviously very low competitor months and year but our Chrysler dealerships were a pleasant surprise last year. The sales growth is big and never say never. It hasn't made it to the top of the list yet but I didn't think we would ever had this type of conversation where I could say Chrysler sales were up 50% either. So that company has really done a lot of things right. So it would have to be a really attractive investment opportunity for our company but never say never.

It's only halftime.

Our next question comes from James Albertine with Stifel Nicolaus.

I guess, the first thing I wanted to touch on very quickly was just any sort of color you could provide from a regional perspective on Parts and Service given warmer than average weather and in general customers sort of deferring service work, we're seeing that across the after market certainly. But I wanted to understand the impact that you're seeing in your businesses. And then secondly, you do a lot of what I think is great work on customer tracking, what can you glean from the data you've collected in the back half of last year in terms of perhaps are customers taking a longer time to research new purchases. Are they simply just buying cars when their existing cars are becoming undriveable? What trends have you sort of noticed there that you can give us some insight to?

That's a great question, actually. First to your Parts and Service question, I don't have much insight regionally. We haven't seen much difference regionally although we're starting to pick up the anecdotal bits about "Oh, we're not having a harsh winter in the Northeast", and so forth. I guess we have to have a first quarter data and compare it to last year but there's clearly we're not getting the snow and if we don't get some snow in February and March there will be some Collision business issues up over prior year in the Northeast but our Collision business is spread across the country pretty evenly. We are seeing, I would say, with service customers that for the last couple of years it's been hard to sell some of the maintenance type work such as a brake job or something, they'll put that off as long as possible but then on the repairs, we do get in the dealership. They have to be done and they tend to be some nice bigger dollar repairs because people have to keep these cars running and when they need a repair it needs significant repair and I expect the aftermarket has been seeing that sort of thing also. And I don't think the economic pressure has eased up that much in terms of that dynamic in the Parts and Service business. Now your point on the New Vehicle purchases. I would say that customers are much -- doing a lot more shopping before they enter the dealership, using the Internet, very well-versed in the products they're considering in terms of the technology and product offerings. So it does put a lot of pressure on us to keep up the training of our sales people and make sure that we can continue to provide service and not be at a disadvantage versus a well-educated customer and that's something we're working on in our company, it's a training aspect. And I think that's all pretty logical in an environment like this. So I think there's some data relative to Internet shopping that supports that.

And just a quick follow-up to your last point there. I would think that it just makes sense to me that in this environment, a company like yourselves with a larger consolidated footprint and healthier balance sheet to some extent to make investments in technology and improvements in technology, customer facing interactions, you'd stand to gain market share from perhaps a smaller mom-and-pop if you will. Is there any color you could provide there?

For competitive reasons I don't want to go into too much detail but absolutely. We -- through last year and accelerating into this year we have a lot of technology investments we're making in areas like customer relationship management, social and digital media and things like that, customer handling related things. So yes, that's one of the advantages that we should have as a big group is technology versus technology to improve customer satisfaction but also to make our people more productive and efficient. So we definitely have significant technology investments underway.

Our next question comes from Chen Rivlin of Rubicon Partners.

Quick question for you. The $12 million in amortization of debt discounts for 2011, I just wanted to confirm and that's almost all of it is the non-cash amortization due to the convertible notes, is that correct?

Absolutely, this is John.

So, this is another something like $0.50 in cash per share. So as you look at the adjusted earnings it's more like $4.10 than the $3.60 that you put up, is that correct?

That is correct. If we hadn't had to deal with APB 14-1, that is spot on.

All right, okay. And the other question I had. I think that it was a year ago, maybe a couple of years ago and you provided this interesting rule of thumb when you turn to EPS versus $1 million incremental SAAR and it used to be like $0.55 to $0.65. What's the count following that? Is that kind of still counting on the low end of that?

No, especially when you factor in things like APB-14-1 things like that we kind of adjusted that to an expectation of $0.50 to $0.55 of EPS for every million units in SAAR change.

This does conclude our question-and-answer portion. I would now like to turn the conference back over to Mr. Hesterberg for any closing remarks.

Thanks to everyone for joining us today. We look forward to updating you on our first quarter earnings results in April. Have a good day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.