Good morning, ladies and gentlemen, and welcome to Group 1 Automotive's 2013 First 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 of Financial Services and Manufacturer Relations. Please go ahead, sir.

Thank you, Yusef, and good morning, everyone, and welcome to today's call. The earnings release we issued this morning and a related slide presentation that include reconciliations related to the adjusted results we'll refer to on this call for comparison purposes, have been posted on the Group 1 website. Before we begin, I would 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 provision 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 also 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. And the 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, Earl Hesterberg, our President and Chief Executive Officer; John Rickel, our Senior Vice President and Chief Financial Officer; and Lance Parker, our Vice President and Corporate Controller. Please note that all comparisons in the prepared remarks are on the same prior year period, unless otherwise stated. I'd now like to hand the call over to Earl.

Thank you, Pete, and good morning, everyone. I'm pleased to announce that Group 1 turned in a strong performance in the first quarter with 18% revenue growth and record adjusted first quarter earnings. As our U.K. operations continued to grow and we began operating a significant number of dealerships in Brazil in March, we have changed our segment reporting to give you more insight into our business and make comparisons easier. John will provide the detail on the individual segments in a moment. But on a consolidated basis, Group 1 reported records for both first quarter adjusted net income of $29.2 million, which was up 26.5% over last year; and adjusted earnings per common share of $1.16, which grew 19.6%. Total revenue increased 18% to $2 billion or double-digit growth across each business line. In total, new vehicle units sales rose 18.5% for 33,096 vehicles, with U.S. unit sales up 7.4%. Our average new vehicle selling price increased 2.7%, $33,546 per unit, reflecting an improved luxury mix which, coupled with the unit growth, drove a 21.7% increase in new vehicle revenues. Group 1's new vehicle unit sales mix was 87% U.S., 8.5% from the U.K, and with only the month of March included, 4.5% from Brazil. Toyota/Lexus sales accounted for 28% of our new vehicle unit sales, with Honda/Acura, Ford/Lincoln, Nissan/Infiniti and BMW/MINI contributing more than 10% each. We also saw significant growth with VW/Audi/Porsche, which accounted for 7% of our total new vehicle unit sales. Consolidated new vehicle inventory was at a 62-day supply or 30,582 units, with the U.S. inventory at a 71-day supply or 26,734 units on March 31. Used vehicle sales increased 12% in the first quarter. This generated a retail gross profit increase of 10.7% on 13.6% higher revenues. The average selling price increased 1.4%…

Thank you, Earl. Good morning, everyone. Our adjusted net income for the first quarter of 2013 rose $6.1 million or 46.5% on a comparable basis over our 2012 results, $29.2 million, which is the best first quarter in our company's history. These results for 2013 exclude $7 million of after-tax deal costs primarily associated with the previously announced acquisition in Brazil, and $504,000 of after-tax insurance deductibles primarily related to the previously announced hailstorm affecting our 4 New Orleans dealerships. These adjustments were partially offset by a $356,000 after-tax net gain on the previously announced disposition of a Nissan dealership in California. There are no adjustments made to first quarter 2012 reported net income. Earnings per diluted common share improved 19.6% on a comparable basis over the prior year results to $1.16, which is also the best first quarter result in Group 1's history. This result continues to highlight the growth of our company and the significant improvements we've made to our processes and cost structure and demonstrates the leverage these improvements are delivering as new vehicle sales volumes continue to increase. As Earl mentioned, beginning with this quarter's reporting, we have significantly expanded our disclosures, provided additional important information to each of our key geographical market segments, the U.S., U.K. and Brazil. We intend to provide this level of disclosure going forward. With the continued growth in the U.K. and now the entry into Brazil, we believe this additional detail is useful and important to understanding our results. Starting with a summary of our consolidated results. We delivered record revenues in the first quarter of $1.96 billion, which were up $299.1 million or 18% compared to the same period a year ago. This record reflects the acquisitions we've made and the increases in each of our business lines. Our…

Thanks, John. Before I turn the call over to the operator for your questions, let me update our market outlook for the remainder of 2013. While the U.S. market remains very competitive, the conditions for buying vehicles is positive with many exciting new products being offered, rightly available credit at very low rates and solid used car values. All this is supported by significant pent-up demand as evidenced by the age of the car park. In these conditions, we continue to anticipate new vehicle industry sales will range from 15.3 million to 15.5 million units in the U.S. in 2013. The U.K. is one market in Europe that has shown stability over the past 2 years. The latest SMMT forecast has sales growing 3% this year for a total industry outlook of 2.1 million units. With our strong luxury mix, we're well positioned for this environment. And finally, for Brazil, March industry sales are encouraging with the daily selling rate increasing 4.1% compared with the prior year. However, the Brazilian economy is facing many challenges and not demonstrating significant growth at the moment. The government's recent decision to not implement the planned increases in IPI taxes that were scheduled for April 1. And the freeze of current tax rates indefinitely, is positive for the market. We would expect industry sales to range from flat to a 3.5% industry growth this year, which was consistent with the forecast of the Brazilian dealer association on Pavia.[ph] 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] Our first question comes from Simeon Gutman with Crédit Suisse. Simeon Gutman - Crédit Suisse AG, Research Division: Earl, a quick question on Nissan pricing, given the announcement yesterday. I'm curious what you think, if any competitive response will happen? And then more generally, when a manufacturer comes to the market with lower prices, are the dealers fully protected? And in this instance, will the dealers be fully protected on the margin side?

Yes, good question. The answer to your second question, was just -- Pete actually showed me the dealer bulletin this morning, so the dealers will receive some compensation to attempt to make them offer those price reductions. I thought it was a very intelligent move. I don't have the facts to back this up, but my perception has been that in recent years, Nissan has been a little high on their retail prices, which I perceived as a compensation for the fact that they have heavy incentives. So their transaction prices may not have had the same relationship to MSRP that some of their main competitors did. And I think they have various -- new management who's figured out that a lot of the search world on the Internet shopping process lines up MSRPs. And so I think they were trying to get more competitive with brands like Honda and other heavy cross-shop vehicles. So I thought that was very intelligent move and I don't think that's a negative for the dealers at all. Simeon Gutman - Crédit Suisse AG, Research Division: Okay. And do you think the other J3 brand, the other 2, in this instance, will be, I guess, bated to coming back with something more aggressive? Or this is just one manufacturer just trying to recapture some lost share?

I think it's one manufacturer trying to align their competitive position visually better. We call MSRP pricing visual pricing, and then, of course, there's equipment adjusted pricing and there's transaction pricing. That's the way the OEM marketing people look at it. And I think they had a visual price problems. I wouldn't necessarily expect their competitors to do anything, unless those competitors feel they're also uncompetitive in that visual pricing area. Simeon Gutman - Crédit Suisse AG, Research Division: Okay. And then focusing on the U.S. business for a minute, the gross profit dollars were up a little bit more than the sales growth, and the Parts & Service margin explains that, and then F&I, which was really impressive going up, explains the other piece. My question is, how sustainable that dynamic -- or how sustainable is that dynamic? Meaning, it's sort of a very loaded question of whether margins on the other side of the business will continue to either flatline or decline a little. And how much more is left on the Parts & Service side in F&I where we can see gross profit dollars still outpace the sales growth?

This is Earl again. Let me address Parts & Service first. We focus our business efforts on growing the Parts & Service business. And quite frankly, the margins falls out. It just becomes what it becomes. And it's frequently a mix among our different segments of customer pay, warranty, collision, wholesale parts and so forth. So our emphasis will continue to be on growing that business. I think our same-store growth rate was 5.4%, which I was quite happy with. I think that was a good job. And so that then moves around a bit from quarter-to-quarter, but I wouldn't read anything significant into that. On F&I, our performance has been spectacular. I don't like to say that with Pete in the room, he's responsible for that business. And clearly, the better we do, the less upside there is in the future. But I don't -- we still have dealerships that perform significantly below our average dealerships. So we continue to try to grow that business also. Simeon Gutman - Crédit Suisse AG, Research Division: Okay. My last one and I'm off. Incentive comp issue in the fourth quarter, is that -- is the business adjusted to that? Was it largely resolved?

I'm sorry, I didn't [indiscernible]. Oh, well, I hope so. And what we did was go back to every dealership and try to scrap every bit of cost. But I believe we're back in a more competitive position. We spaced on the results in the first quarter, but it's one of those things you have to be constantly vigilant about.

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

This is Elizabeth Lane on for John. I was hoping you could give us some more detail about the charges for acquisitions in the quarter? Because they were excluded in the adjusted SG&A, and that seemed a little strange. So could you talk about why those charges would be considered one-timers and -- since acquisitions are a pretty normal part of the business?

Sure, Elizabeth. This is John Rickel, and a fair question. Obviously, there's a big difference with the first quarter was -- for almost all the other acquisitions that we do, we do it in-house and we don't have to have large investment banker fees, large legal fees, large public accounting fees. So for that reason, we view that as different than the normal model and appropriate to exclude from the results.

Okay. So those aren't charges that you would expect to happen in future acquisitions if they were just the normal, like, one-off?

Correct. So for normal one-offs, we don't go through with those charges, we do all of that in-house.

Got it, great. And then just one follow-up on Simeon's pricing question. Would a price cut like what Nissan's doing ultimately be a positive for the dealerships to relieve some of the pressure to discount at the dealer level in order to push volume?

Well, to the degree that a manufacturer can more closely align MSRP prices and transaction prices, I think it's healthier for everybody involved. I don't think accounting for or compensating for incentive cost in MSRP pricing is a healthy thing. And I honestly believe that's what Nissan was doing. So I think they're trying to fix that. And I think it's a good thing for the brand and the dealers.

[Operator Instructions] Our next question comes from Bill Armstrong with CL King Associates. William R. Armstrong - CL King & Associates, Inc., Research Division: I want to talk about finance penetration for a minute. The U.K. and Brazil look pretty close at 45%, 46%, and they're well below the U.S. I was wondering if you can just discuss any opportunities in the U.K. and Brazil for increasing the finance penetration? And is there any structural reason why those penetration rates are so much lower than in the U.S.?

Yes, Bill. This is John Rickel. We think there probably are additional opportunities in the U.K. We're obviously still very early on in the learning process with Brazil. I'm not sure on penetration rates in Brazil, but we certainly think as the market develops, there is going to be significant opportunities products like extended service contracts. William R. Armstrong - CL King & Associates, Inc., Research Division: And in the U.K., is there opportunity there to get upwards U.S. penetration rates in the mid-'70s? Or are there structural impediments to that?

I don't know about what the ultimate penetration potential is, but we know that, particularly with our newer businesses, which is, what, about 9 of our dealerships, that we can -- that there isn't a structured process like we'd like to see it and that should improve penetration. We also have not had much scale in the U.K., so I do believe that we will have some opportunity to leverage lenders as we grow that business. So I think there's significant upside in the U.K., but I couldn't really give you a number on what the market would hold as a penetration potential from the top of my head.

Our next question comes from Aditya Oberoi.

I had a question on your Parts & Service, obviously a very strong performance in Q1, comps up 5.3%. Can we sustain this momentum? Or were there some one-offs that helped the Parts & Service business in Q1?

This is Earl. I believe we can sustain that momentum. On the last call we had a couple of months ago, I know that at the end of last year, we started to see a turnup in our growth rate, which I think, there is an underlying tailwind we're starting to get now, which is the units in operation profile. And we're trying to go a little bit beyond that, but our growth rate, I believe in the fourth quarter and the first quarter, you're starting to see it step up, and we made a lot of investments in recent years to try to accentuate that. So I think we can stay mid-single digits. That will be our goal and try to even do a little better than that. So I think we're coming into a nice phase in Parts & Service growth.

Got it. And my second question is on the gross profit per vehicle on the new side in the U.S. I think, John, you mentioned that it was a little bit under pressure because of the tough comp from last year. When do we start seeing the normalization of comps on that end?

Yes, this is John Rickel. I think that we've lastly [ph] kind of the period that was a little more difficult. Basically, first quarter of 2012 was when inventories basically fully returned. Honda came in kind of right at the end of the quarter, but by start of the second quarter last year, the inventories were back. From those levels, I think we're kind of now at about a run rate.

Got it. And my final question on Brazil. Now that Brazil has been part of your company for, I think, more than 2 months now, anything that has surprised you on the positive or the negative since the time you've done the acquisition, closed the acquisition?

Yes, this is Earl. The positive is the quality of our people. I love our team down there. They think likely. They're aggressive. They're intense. So I'm really excited and having fun working with them. I guess on the educational side, which is similar to my experience in other developing markets where I worked, like Russia and Turkey and Eastern Europe, the supply of vehicles is very choppy, very unpredictable in these markets. One month, you have the cars, the next month, you don't have the cars. So I'm still trying to sort some of that out. So that makes things a little less predictable than the way we do business in the U.K. and in the U.S.

And was that comment related to new vehicles or used, or both?

New. New. The used vehicle market is very undeveloped, at least at the dealership level at the moment.

Our next question comes from Scott Stember with Sidoti. Scott L. Stember - Sidoti & Company, LLC: John, you mentioned part of the warranties transfer is related to the things like Toyota Care moving from customer pay. Could you basically talk about how much of that, or anecdotally, how much of that shift really drove the warranty business?

Yes, Scott, I don't have the exact numbers in front of me. But it's probably a couple of percentage points. It's not just Toyota Care. Recognize that this is now spreading to other manufacturers, so it's now more than just Toyota Care. We use that as an example, but there's a number of manufacturers that have now introduced this.

Well, BMW has had it for a long time as well. Scott L. Stember - Sidoti & Company, LLC: Right. And maybe just talk about on the collision side, you keep seeing very strong growth there. How much of that was driven by weather? Or is that just you guys doing a good job of improving your operations at the stores that you have?

Well, I believe the majority of it was the investments we have made in that business, and including -- and people to operate, we have a great management team, which we've developed over the years. So I would say the majority has been execution. But there are a couple markets we have where we had some weather tailwind, we -- which then generally ends up being more negative for our company than positive. But we've had a couple of hailstorms in recent months. Not counting the one we announced yesterday. We've had one in New Orleans and another one in Oklahoma City many months back. So there's some weather in there, too, but I would only think that would be a couple of percentage points. Scott L. Stember - Sidoti & Company, LLC: Got you. And going back to that point you just made about the hailstorm in Houston and Oklahoma City, could you maybe just talk about, from a sales disruption, what kind of an impact that could have within the next couple of quarters?

Well, unfortunately, it usually has a 2 to 3 week, if not, a month disruption because we just can't get replenishment, new vehicle inventory from the OEMs that quickly. We do try to move some from our own dealerships to the degree possible. But it basically takes you out of undamaged fresh salable new vehicle inventory for a minimum of a couple of weeks, and sometimes it's a month or more before you get it back. So unfortunately, we have too much experience with these events. Scott L. Stember - Sidoti & Company, LLC: Okay. And just last question. Obviously, we saw the April numbers for the U.S. have come through. Can you maybe just talk about what you saw in what's in the U.S. and the U.K. in new or in operations in April?

Yes. Well, yes. And without doing too much specific forward-looking information, which I really can't do because I don't have final April numbers from my company anyway. But Pete gave me some data this morning on the retail SAAR for April, which is what we looked at. And it's really just about the same as it was for the first 3 months of the year, $12.3 million. It was $12.4 million the previous 2 months and $12.6 million in January. And this is according to a manufacturer report that we get, that we find to be highly reliable. It's not JD Powers, which is the other source we kind of use. But it still seems like a fairly steady market to me on new vehicles in the U.S. I don't think it's taking a step change up in the last 4 months, but I don't see it being that much weaker. With the one exception for our company is we are finding the Northeast, and in particular new England, extremely weak. The U.K. also appears to be quite steady, which has been very surprising to me over the last year or 2, given their government spending cuts and so forth. But really haven't seen anything changing the level of sales in the U.K. either.

Our next question comes from Matt Nemer with Wells Fargo Securities.

So my first question is on service. Given the stronger growth that we're seeing there, I'm wondering if you can talk to the -- how the flow-through rate in that business might differ to -- versus the overall 50% flow-through rates that you're targeting? I would think it would be higher, but I just wanted to verify that.

Yes, Matt. This is John Rickel. Not massively. I mean, it's actually pretty close. And we've looked at this because we got the question before, so I'm kind of comfortable with kind of that general assumption on same flow-through for Parts & Service.

Okay. And then turning to SG&A, in terms of the cost actions that you took during the quarter, did we see the full benefit of those in this quarter? Or were there actions that took place during the quarter, in the middle of the first quarter, where Q2 will be a better proxy for expenses?

Yes, Matt, this is John. Earl jumped on this really fast and really hard, so I think we got a lot of it in the first quarter. There may be a little bit of run rate going into the second, but I think we got the vast majority of it out pretty quick.

Okay, great. And then just lastly, Earl, it would be great if you could give us some help [ph] in terms of prioritizing the acquisition opportunities between the U.S., the U.K. and Brazil, how are you kind of ranking those types of opportunities for the next year or so?

Sure, Matt. Well, quite frankly, we're looking to expand in all 3 markets if we can find a good return on investment for our shareholders. But it's probably safe to say, we will prioritize the U.S. and the U.K. a little bit higher in the near term until we get a better feel of what the natural sales and profit level and cash flow level is in the Brazilian market. But that said, we're pretty excited about Brazil, and we are looking at expansion opportunities there. But it is only logical that after 60 days of doing business, you'd want to have a good understanding of what that business can generate on its own in a steady state. But we're looking in all 3, but clearly, we have more confidence in experience base in the U.S. and U.K.

Our next question comes from Rick Nelson with Stephens.

Truck sales have been quite strong through the quarter and April had seemed to be the case. Can you talk about what that means for your business and do you think we've turned the corner now on margins with the mix shift that seems to be occurring?

Yes, Rick. This is Earl. You're correct. The truck business has been gaining strength now. I actually think it started late last year, but it's become more transparent, I think, in the first quarter this year and probably in April also, because I saw the Ram brand had a huge increase in April. And the Ford business was very good in April also as reported by Ford yesterday. So I don't know if we turned the corner on margins. I hope we have. With -- the truck business certainly helps the dollar margin, I don't know that it helps the percent that much. The trucks are very expensive, so the dollar profits tend to be pretty good, but I don't know that they're that much above average in terms of a percentage gross margin. There is some competition out there and there will be more competition in the full-size truck segment. As the new General Motors truck gets out there. There are some aggressive sell-down of the old General Motors trucks. I just mentioned the Ram sales increase and Ford always protects their share quite nicely. So I think there's going to be a lot of competitive activity, but I would expect it to be a very good sales year for full-size trucks, and I think that trend is going to continue.

Earl, as you have [indiscernible] 3 major categories come out [ph] kind of midline, import and luxury. Who do you think -- which of those segments do you think would outperform us here?

Well, I'm not sure I can say this, but I think the domestic looks strong to me right now. Our Ford business have been incredible for 2 years, and I think you saw those numbers yesterday. And I don't believe they've fully ramped up Fusion and Escape inventories yet, along with the strong truck market we just mentioned. And we also just mentioned the Ram business, and I think they have some new jeep product on the way. And then, of course, the General Motors truck family is critical to their corporate success. So I think the domestics have a lot of things going for them this year. So I would probably favor that. Of course, there's been a lot of talk about the yen and so forth with the Japanese and we'll have to see how that plays out.

The other thing, Rick, this is John, to kind of bear in mind is, certainly, through the next couple of months, the comps for Toyota and Honda are really difficult. They've got some boosts last year. We were delivering units that have been ordered -- customers had to wait 3 and 4 months to get while the inventories normalize, which makes some really difficult comparisons. And I think when you look at the April results, you'll see a little bit of that. That obviously mitigates as the year goes on. But certainly, for the next couple of months, I think the Japanese have some really difficult comps.

Okay. Toyota did look -- and the Koreans looked a little weaker. Do you think they stepped up in terms [ph] of activity to the top of big comp [indiscernible]...

I'm sorry, the Korean brands?

Toyota and the Korean, seemed like they were a little weak. What do you think [indiscernible]?

Well, relative to the yen, Toyota has had tough comps. The Korean brand seemed to be suffering a little bit on supply. It had some disruptions at home. So I know that they're both very aggressive organizations, Hyundai and Toyota, so I would expect them to continue to try to fight, to get some of that share back.

[Operator Instructions] Our next question comes from Jordon Hymowitz with Philadelphia Financial.

On the finance side -- finance and insurance, what percent is financing versus the rest? Is it about 40%?

Yes, Jordon. This is John Rickel. Probably of the $1,300 unit, about $450 of it is finance.

Okay. And you said that in Brazil, there's also some sort of yield spread premium cap, but it's lower than the U.S.?

Well, it's not a cap. The issue is that there's only a handful of banks that actually are in the market down there. So it's just not as competitive. And the amounts you get on your lending, is just not as lucrative as the result.

Okay. And what percent -- when you said finance, does that include leasing or not include leasing?

It does include leasing.

It does include leasing.

So do you guys get inventory leasing as well?

Yes, but they tend to be more flat, Jordon, because those are almost all through the captive OEMs.

Okay. And the last question, what percent is leasing?

I think in our company, it's running about 17% or 18%, which is a little below the market, but that's because we are big in Texas, which isn't a big lease state.

This concludes our question-and-answer session. I would now like to turn the conference back over to Earl Hesterberg for any closing remarks. Please go ahead.

Thanks to everyone for joining us today. We look forward to updating you on our second quarter earnings call. Have a good day.

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