Good afternoon, ladies and gentlemen, and welcome to the Penske Automotive Group Second Quarter 2013 Earnings Conference Call. Today's call is being recorded and will be available for replay approximately 1 hour after completion through August 7, 2013 on the company's website 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. Sir, please go ahead.

Thank you, Craig, and good afternoon, everybody. A press release detailing Penske Automotive Group's second quarter 2013 results was issued this morning and is posted on our website, along with the financial presentation designed to assist you in understanding our financial results. Joining me for today's call are Roger Penske, our Chairman; and David Jones, our Chief Financial Officer. On this call, we will be discussing certain non-GAAP financial measures, such as EBITDA. We've reconciled these items to the most directly comparable GAAP measures in this morning’s press release that is available on our website. Also, we may make forward-looking statements on this call. Our actual results may vary because of risks and uncertainties, 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. At this time, I'll now turn the call over to Roger Penske.

Thank you, Tony. Good afternoon, everyone. Thank you for joining us today. I'm pleased to report that our business produced an outstanding second quarter. We delivered solid growth across each area of our business, and we earned the highest income and earnings per share for any quarterly period in the company history. The record results were driven by a 14.1% increase in total retail unit sales and 11.6% increase in total revenue to $3.7 billion. We also leveraged our selling, general and administrative expenses as a percent of gross profit by 190 basis points and improved our operating income by 24.9%. As a result, income from operations increased 27.4% to $64 million, and related earnings per share increased 26.8% to $0.71. Let me now turn to the specifics of our record second quarter. Total retail unit sales increased 14.1% to 93,600 units, and total revenues increased 11.6% to $3.7 billion. On a same-store basis, revenues increased 11.5%, including 13.2% increases in our U.S. market and 8.5% internationally. Foreign exchange rates negatively affected our same-store revenue growth in Q2 by 110 basis points or approximately $37 million. Excluding the effect of foreign exchange, same-store retail revenue increased 12.6%, including 11.7% for international markets. Our total revenue mix in the quarter was 66% in the United States and 34% internationally. Our brand mix was consistent with last year. Premium/Luxury at 68%, volume foreign at 28% and Big Three at 4%. Looking at new vehicles, we retailed 51,300 units, representing 11.6% increase, including 11.3% improvement in the U.S. and a 12.3% increase internationally. We outperformed both the U.S. and the U.K. markets during the quarter. Breaking that down, Premium/Luxury was up 14.7%, volume foreign up 9.4% and the Big Three was up 4.9%. Total same-store new units retailed increased 10.2%. U.S. was up…

[Operator Instructions] And our first question does come from the line of John Murphy with Bank of America Merrill Lynch.

A first question on the acquisition. I'm just curious, as you look at this and the price you paid there, is this an indication or an implication that acquisitions of dealerships in the U.S. and the U.K. are too expensive right now or not available? Or was this just such a good deal as far as price that you had to go after it?

Well, I think we had to look at it strategically first that this gave us access to another market. We had experience in these product lines through our Penske Truck Leasing and our Detroit Diesel experience in the past. When we're looking at multiples on the premium side and the stores that we would look at both domestically and internationally, the multiples are getting higher. This obviously was one below that, and we think it was attractive from a standpoint of price. Also, it gave us the opportunity of a low tax rate area, 30% in Australia. And the repatriation of profits back into the U.K. where we'll finance this, there's no double tax. So from a financing standpoint, obviously, it's very good. We do have a pipeline of opportunities here in the U.S. and the U.K., which we're obviously going to follow, but it's going to be on an opportunistic approach. But overall, we've got people that have experience. We're setting up a Penske transportation international group. We'll populate that with some of our key guys here from the U.S. The management team in Australia is a great group. Probably, the average seniority of the senior people is over 10 years, and there's no question that they know the brands and I feel good about that. The dealership activities -- we have approximately 80-plus dealers in that business. About 2/3 of them are full-service sales and will give us the chance to grow. So we can introduce rental, we can introduce leasing into that market, which they don't have today. And it's interesting already. I've had calls on retail automotive opportunities since we announced this in the last 48 hours. And again, it has about $70 million of working capital in that purchase price. So again, when you work out the math, it was quite attractive. And again, I think, the manufacturers looked at us. We have to get OEM approval, which I will say today, we've gotten from all 3 of the manufacturers. And I think the fact that our experience level having been in that market played a key part for that approval. And these contracts are multiple years.

Okay. That's very helpful. And then, a second question. Getting to the new vehicle business, we saw average selling prices for your cars up 1.1%, but the gross profit per unit down about $181. And we've seen that kind of dynamic at a bunch of other dealers. Is there something changing in the relationship with the automakers, if they're pressuring gross profits or per units or relative to the selling price? Or is there something going on in the market that is just getting much more competitive because it's just a little bit interesting that you're seeing the average selling price go up but the absolute dollar gross profit unit -- per unit go down?

Well, I think, there's been -- they kind of raised the upside -- the MSRP and then there's some increase, in many cases, on incentives for the consumer. When you look at our -- at our business, right now, we had a 100 basis points decline in volume foreign. I think you got to go back and take a look at where we were probably 8%, 9%, we're hot in Toyota, we're -- and I think we're probably back to normal position there from a margin standpoint. We saw the U.K. probably a little more pressure on margin than we had expected. But when I look at the second half, in talking to Gerard Nieuwenhuys in the U.K. in the last couple of days, he feels the mix of vehicles, which we're going to have -- and I think that will bode well here in the U.S., that the mix of vehicles available when you think about BMW X3, x5; if you look at the A3 Sportback at Audi in the U.K. and some of the Audi product, Q5, over here and Mercedes, we're going to have vehicles that we didn't have in the first half because of the slowdown in Europe is going to drive probably a better mix for us. We can see that. So -- look we've got to manage growth. We’re down slightly. The used, we're down 20 basis points. But we're moving down. We went from probably close to $30,000 probably a number of years ago on our used average cost of sales down in the $26,000, $27,000. And we're selling down cars below $10,000. And that's going to drive a lower margin. There's no question. And I think, overall, our total vehicle growth was up despite margin compression. So I think that's the bottom line.

Yes, that's very helpful. And then, just lastly on the Parts and Service, I mean, the margins -- gross margins bumping up above 60% is really sort of pretty miraculous and something we never really expected to happen. It looks like, on Slide 12, a lot of that has to do with mix, and we're seeing a lot of the 0- to 5-year-old car population being rebuilt. I mean, is this the start of the curve of a real glory day for the Parts and Service, or is it really just too early to call? I'm just trying to understand what's going on there because it seems like it's a more natural bumping up of just operating leverage that's driving this gross profit. I'm just really trying to understand what's going on there.

I think there's 3 points. One has to do with our increased used car activity. The internal margin is much higher than the traditional. Number two, warranty is up -- was up about 15%. And based on warranty, we don't discount that so we negotiate warranty, labor rate and parts markup with a manufacturer and that's consistent. And with the new prepaid maintenance programs now at Toyota, it's been at BMW, we start to see the benefits of that overall. So I think those are 2 of the key things, which are key, and there's no question that the retail activity is driving, certainly, more opportunities. When you go back and you start to look at the down period from a standpoint vehicles zero to 5. I think if you go back to somewhere in 2011 and '12 and the market was about $62 million, and if you fast forward and use, say, $15.5 million in '12 and '13 and, say, '14 and '15, you do $16 million, you're probably going to have a carpark of zero to 5 of almost 80 million vehicles. So for me, that bodes well for us and for the other peers. And we're going to see a nice lift in the serviced apartments and quite honestly, with the initiatives of more share of wallet today with dent repairs, with tires, all of the things, the quick oil changes, which we're now doing rather than letting that move up to some of these smaller players, I think that's going to grow it because these are high-margin areas. We've gone into this quick dent repair, rapid repair, we call it, window tinting; wheel alignments. And many of these things are now sold on the service drive. And I think, every day, we're looking at trying to gain, as I said earlier, more share of wallet. So that's all positive. I think that we have to take a hard look at Q2 and compare that when we look at Q3 because there was some considerable BMW and Honda warranty going through during the quarter. And whether that had a major impact and maybe drove 100 basis points, I really can't tell you.

And our next question does come from the line of James Albertine with Stifel, Nicolaus. James J. Albertine - Stifel, Nicolaus & Co., Inc., Research Division: So I wanted to focus real quickly just given what you're seeing, it might be -- it may be a little early to predict. But what you're seeing in the U.K., any thoughts on September, which obviously is a big registration month coming up in the third quarter?

Well, what I can see is all the manufacturers have got big targets. For all of us, I think that the goal here is how much they're going to put money into the market. They always wait till the last, probably, 10 days of September to drive the final. They're pushing volume. But we see from our business plan as we forecasted, we should be in line with our expectations. Again, I talked earlier about mix, availability we think it's going to be good for us from the standpoint, helping to drive some better margins. So I guess, we'll wait and see. But we don't see anything that isn't normal in Q3 because you have March and September as registration months. James J. Albertine - Stifel, Nicolaus & Co., Inc., Research Division: Okay. That's helpful. And then, just a quick update, if you could, on your partnership with Hertz. And then, as well, maybe some color on the improvements or the movement you're seeing on the PenskeCars front from that perspective.

Well, let's talk about Hertz. Obviously, the second quarter was the first quarter that we had both Tennessee and Indiana markets combined. We did $15 million in revenue, and the pretax was $1 million. So that would trade at about 6%. I think we're looking at a business that will, in the future, run somewhere between 5% and 6%. We've got about 6,000 vehicles today, which has the utilization roughly around 70%, which has probably driven obviously with our off-airport and also on-airport. I saw Hertz's release here in the last couple of days. Their business was up. We feel good about that brand. Our net promoter scores are through the roof in our markets both on and off airports, which is key. And as we go forward, one of the byproducts of this is the fact that we're going to have that 5,000 to 6,000 units will come off of the rental line, and those will be great used cars under $20,000 in most cases. Those will be available for our used car lots across the country. We're setting up a separate site, PenskeDirect, we're calling it, which will be an internal auction site that we can place these rental cars with pictures just like we would on AutoTrader or someplace else. We can put these cars up online for our used car managers and GMs to bid on. So we'll get maximum pricing on those, and I think that this will be key. And also, if this works out, we think this is a precursor for us to have the other dealerships online to put vehicles that they might want to move. This will give us kind of a central intersection for cars that we want to sell through the operation that come off rental and then the dealerships rather than kind of trading them side-by-side, we can give visibility on these cars across the country. So it's an inside, I would say, offense play that we have that's a byproduct of our Hertz operation.

And our next question comes from the line of Rick Nelson with Stephens Inc.

Roger, growth rate in the used car segment, the comps have really accelerated this quarter, double-digit. And can you talk about the drivers to that and whether you think that sort of growth is sustainable as we look forward?

Well, I really got to give the credit for that with Ramnath [ph] who runs the Central [ph] for us. It's just been all over this now for probably 12 to 18 months retail it first. So we don't want to wholesale a car. In fact, we look at a metric, how many cars do we wholesale versus retail. We like that to be 20% or less. So that means we're going to sell cars under $10,000. And we know how to utilize the Internet to do that and present the cars, and that's made a big difference. On the other hand when you look at -- just take the Atlanta market by itself, our BMW stores on a combined basis probably do somewhere between 200 and 250 new a month and they'll do 500 new. So that's 2:1 used to new, and that's because they're inventorying, 300, 400 used cars and that's what we're finding out today that we want to bypass this wholesaler and be able to utilize the bricks and mortar that we've invested in to sell used cars, and I think that's key and there's no question when you look at PenskeCars.com, which has been a good offense for us also. We've got over 10,000 used cars with our branding on PenskeCars so to me, that's key. Those are the things that are driving it. Also, our finance sources, there's no question the benefit of our public peers, and we have a tremendous inventory of finance sources, which give us the ability to offer low-rate financing and leasing, et cetera, which is key. 35% of all the used cars that we sold in the quarter in the U.S. were CPO'd, and that's up 15% from last year. So I think we got a lot of drivers, which are giving us that increase, and I don't think we're at the end of it either because there's plenty of used cars out there. And if you look at the CarMax model, they're buying cars, trading cars and they've grown a great business. So what we need to do is use that model, but also have that adjacent to our new car model.

Do you think the improvement in off-lease volume is helping fuel that business and units and operation generally, I know you mentioned that helping the service business, but do you think that's helping the used cars...

Leasing -- our Premium/Luxury customer was hit right in the gut back in the financial crisis. So there were less cars leased in the market. And now, that's picking back up so we're starting to see more cars coming off-lease, and we get the first shot at those. And in all cases, I think, we take 90% of those. We don't turn many of them down. So that's a great resource for us for future used cars.

Finally, if I can ask for an update, the big acquisitions, how they're performing relative to your expectations, Northern Ireland, Italy, Madison, I guess, and you acquired $750 million, that rose last year. You made the big Australian announcement this week. I'm curious how you think the -- your specs up relative to last...

Let me say, Belfast, as you said, that first has been a home run. The management team there under Yuile Magee has just been seamless. We've supported them. They're at the league -- at the top of the league tables for Europe from the standpoint of their managers. Our BMW store there was the #1 store in Europe last year. I couldn't say anything other than it's a home run. When you look at Italy, we had a business planned in Italy for EUR 1.5 million for Monza and Bologna combined, and we did EUR 1.3 million in the first 6 months. So even in a marketplace that has been tough, they've just really executed there. We've got a tremendous operator there, Andrea Mantellini, and he knows the market. We have, obviously, Elena Alberti, who is one of our top financial people who's from that region. So to me, we're going to continue to grow there. We've got a couple of acquisitions we're working on in the Italian market. The prices are minimal from a goodwill perspective. And there's no question, when you look at Lexus and Toyota Madison, it's another market I look at like Austin in Texas State Capitol, University of Wisconsin. And their user now over 1:1 already, and I would have to say it's exceeding our expectations. So overall, I just -- that's why we're looking to continue to grow. I think the plan is we told the street that we would grow double-digits, a combination of acquisitions and organic with our growth on a same-store basis over 11% in the quarter, I think we'll meet those targets easily for the total year. So overall, acquisitions are in good shape. And we got a pipeline going forward. We've got opportunities in Texas with Hyundai. We've got Bentley in New Jersey and we have Toyota in Arizona. These are all open points, which we're activating here over the next 6 months.

And our next question does come from the line of Matt Nemer with Wells Fargo Securities.

A couple of questions. First, on the Service business, just following up on the margin question that John asked earlier, is there mix within the businesses that's benefiting the margin, i.e. a mix towards labor away from parts? And then, as PDI growth has been so strong, is that also significantly benefiting the margin?

When you look at the breakdown, and this has been pretty consistent. I think it's just volume. 70% of our margin in Service and Parts is customer pay. You've got probably about 20% as warranty, and the balance of 8% or 9% is in your PDI and body shops. And I think that's pretty consistent. We just see the warranty margin is up because, again, some of these prepaid maintenance programs drive a higher margin. We've had the recalls to which both I mentioned earlier in Honda and BMW have had some impact on that I just don't know when this normalizes, what it's going to be. But I still see strong high 50s as a norm as we go forward.

Okay. Great. And then, turning to the proposed -- the acquisition in Australia. Can you just talk to what the accretion could potentially look like in 2014? Is there anything you can tell us about the business strategy in terms of growth or cost cuts that take that accretion level higher next year?

Well, I think that what we're looking at in our release, we said $0.10 to $0.14 on an annualized basis and revenues in the 400 -- I guess, $420 million to $460 million the press release said. Now one of the things we're going to do, we're going to invest and putting in some rental vehicles, we're going to put in demonstrators, which they didn't use in the past. So that will take some cost -- make some cost impact, but I see this growth opportunity here. This has been part of a waste management company, which really this has kind of been a tack on, and this gives us a chance now to pull it away and operate as standalone. The #1 truck manufacturer, from a sales perspective, in Australia is Kenworth, and they had traditionally built most of their trucks there. I guess, they're going to now only build a few and import the rest. And then, from our standpoint, they're the highest priced trucks. So we're not in a market map, where we're competing to get share from a guy that's so low we have to cut prices to get it. So I think it's a rational market, I think the on-highway transportation mode is where most of the freight moves in Australia. And our ability then to add on other products, i.e. rental and leasing, will let us grow. But for me to give you an indication today, what we're going try to do we've had some questions about segment reporting. We'll talk to Dave Jones about that, and we're going to come back. So we will try to have complete clarification and transparency on that as we go forward. So to me, where we're focusing on, I think it's going to be a great addition…

And then, I just had a quick question about your web and mobile traffic growth both for the branded store websites and PenskeCars.com. Can you give us any indication on how fast the web traffic has been growing? And as people do more homework ahead of time, are there any changes sort of longer-term needed in terms of your marketing strategy or the way you look at stores and staff stores and operate stores?

Well, I think when you look at our web traffic, we're estimating it's up between 20% and 25%. We've switched a lot of our traditional advertising that had been media-related electronic and radio to the web. More precise, we could manage it. The Internet departments continue to grow in the stores. And then, there's no question, as we go out that we're going to have some really e-mail templates that we're going to roll out. We're using some tablets in our store. Our Toyota store in Round Rock on the sale side, you walk in, you've got a tablet sitting with the -- with a consumer. So we're -- I see that some of the other peers are using those. I think that we're in a transition period. There's a lot of things -- our ability to have mobile payment, which is going to be key. We can send the service bill to the customer by e-mail. He can communicate back with us, and then he can make payment over his device and that's something that we're going to roll out -- or in the process of rolling out now. So that will change the mix -- if you go to an airport today, if you think about the counters where there's nobody at these counters because people are ordering their tickets, they're getting their seat number and they're walking to the plane, well, we want that to happen certainly as we look at the service to be able to have a quicker process. So on the sale side, we're focused. On the service side, obviously, there's a lot going on there. Electronic catalogs, the ability to order our parts through the Internet, some of our key stores in the sales and wholesale side is the key also.

And then just lastly, Tesla is on fire out here in northern California and it would seem like, given your expertise in -- with luxury brands and running luxury stores that there'd be a natural fit there. Is there any opportunity for you to get involved with Tesla on the retail side?

I guess the first thing I would say, I'm not a proponent of manufacturers selling direct to the consumer. That would be point #1. I think that from Tesla, it's a great car, well-engineered. The question is, what's the next model, what's the distribution going to be for the consumer and when you look at the captive finance company, what's been the Achilles' heel of Chrysler and General Motors since the bankruptcy is trying to get a captive finance source. And at this point, I think the company is taking residual risks on those and, from my perspective, these are things you have to take a look at. We were a Fisker dealer. We turned in that franchise. Obviously we've seen what's happened. Tesla's done a much better job in execution, a very vertically integrated factory, which obviously gives them the quality of benefits. So I'm betting on, from my perspective, on BMW with the new i3 and the i8, which were announced in the last couple of days and I think it's is going to be a dogfight. But good value on Tesla, good car. I'm just not a fan of the distribution.

And your next question does come from the line of Brett Hoselton with KeyBanc.

First, the distributor in Australia. Can you talk a little bit how that deal came to your attention?

Well, I think a couple of ways. I guess, we've got investment bankers. They investment -- had been -- really set up an investment banker that had talked to us. But more important, we got a call from the OEM that said that this deal might be available. So we jumped on it right away. So it's really through our relationship with Daimler Trucks that this available -- we have great relationship with them, a long-term relationship. So that's really how it took place. We knew the market, we know a lot of the customers because of Detroit Diesel. And I think when they looked at us, with our experience level, we'd be a perfect fit.

And then switching gears, gross profit throughput, 38% in the quarter, how do you see that trending going forward? Many of your peers think kind of 40%, 50% range. What are your general thoughts as you move forward to the remainder of this year and maybe in the next year?

Well, I've seen some big numbers on flow-through and as we look at our business, I'd like to see a 4 on it but that's really driven obviously by certainly, our SG&A managing that and then of course continued to maintain gross. If we see deterioration on gross continuing, that number's going to be harder and harder to see that flow-through. But I think that if we can operate between 30% and 40%, that we're in good -- really in good shape. One of the things that we have to look at in our case, is our higher rental expense. And in the Premium/Luxury side, our loaner car expense is considerably higher. We run anywhere between 3% to 7% of gross in a Premium/Luxury store. You take Crevier BMW in the West Coast got 350 loaner cars. That's an expense that you don't have in some of the other non-premium businesses. So there's a lot of moving parts. I feel good about SG&A to gross excluding rent at 69.5, I think that's key. And if you look at same-store for the quarter, we'd be at 42%, so that's a world-class number for us.

And as I think about your Parts and Service margins, I understand that this quarter may have been a little stronger because you had some recall business and so forth. But we've generally seen a trend upwards from many of your peers and you as well. It seems like your used car operations are doing quite well and your used car reconditioning should be a nice tailwind for you for the foreseeable future; warranty, generally speaking a tailwind again maybe a little bit of a step back with some of the recalls in the near term. But I guess I have a hard time seeing why Parts and Service margins couldn't just continue to trend upwards at a slow steady pace, at least for the next year, maybe 2 years as warranty rebounds and used car reconditioning continues to go up. Are there some headwinds that you see that might cause it to plateau?

Well, I think the overall Parts and Services gross will grow because when we talk about the 0 to 5-year cars that I mentioned earlier in a question, we see that growing from about 62 million, which would have probably been the bottom in 2011, '12 to almost 80 million, so that's going to drive the overall number. I think the warranty in the prepaid maintenance, more and more of the manufacturer, just to give you an idea, think about it today. You can get an oil change and many of us advertised $29.95 or $39.95 under the Toyota care program, you get 7/10 of 1 hour, and say you're at $100, at $70 for labor and you get your full markup on the oil. So when you start to look at that, that's a real opportunity. And we're doing every single customer for 2 years has that benefits. So I don't see the manufacturers taking that away. I think that's something of a norm as we go forward. And the other thing you can't predict is recall activity. With the BMW and Honda recalls, obviously we see -- seem to see them everyday but we benefit from that. And that's, again, is we establish warranty labor rates based on the competitive market, proliferates are not negotiated down under a warranty situation, they're firm. And the parts markups are firm. So the only area where we get less markup on, on warranty parts is in Europe, where we just got a 10% lift on parts. So we don't get the benefit we get here, probably at 33%. So I think 60% margin is excellent. I'm not trying to manage to a number. I wouldn't tell you when we started the quarter, we'd get the 60% but when it came together, I think we got a number of different factions whether it's more warranty, obviously, customer labor is 70% of the mix. But we get big margin on our reconditioning because many of those people are on hourly. So that pays the bill. And we're doing more of it inside. We used to sublet a lot of work. And today, in sublet, you might markup 10%. But when we bring that in-house, the rapid repair, the tire work, a lot of the things that we'd done outside our window tinting, our windshields, and these markets where we have campuses, we have specific businesses, but that's all they do and I think that drives part of this margin. Wheel alignments gives more share of wallet where we really hadn't focused on that. So these are the things that we're trying to continue to focus on.

And our next question does come from the line of Ravi Shanker with Morgan Stanley.

So can you just give us an update on the state of the U.S. luxury market. Do you have all the inventory you need for the models that really are selling. Any particular model that's in the pipeline and what's the state of '13 versus '14?

Now with the market as strong as it is, the inventory control is important. One thing we did see, they're up almost $300 million on a same-store basis on new vehicles. So to me, we've got to be sure that we're not over inventory but as I look at some of the BMW products, which are phasing out, X5, we're in great shape. We look across the line. I think that we never have enough of the right models. There's no question as we go through the quarter. But overall, I'm not hearing that there's a lot of issue at this particular time from the standpoint of inventory.

Are you seeing any of pricing actions at all from Lexus Infinity and Acura?

Boy, I'd have to ask our guys Ravi to tell you. I mean I look at the overall growth, we had some impact on margin during the quarter, but inventory is strong. In fact, I'm doing this call from Lexus of Ediston. Today, their inventory is in good shape though. They'll do over a 1-to-1 new -- used-to-new this quarter or this month. So overall, I think business continues to be very bright.

Understood. And just finally, you have a very strong and diverse international operation, U.K., Germany, Italy, Australia. Have you given any thought to going into the emerging markets at all and capitalizing on the volume growth that we expect there.

Well, emerging markets are interesting and you see big multinational companies going into those. I think the retail business is a little bit different. We've got to have local partners as we do when we look at the in-country capability in Australia, same thing in Germany. And certainly in Italy in the U.K. So we'd have to get certainly expertise because, certainly, the cultural and business ethics are different in some of those areas. So we've got to be real careful. But I would say all markets are interesting to us but I think we got plenty in our plate right now.

And our next question does come from Aditya Oberoi with Goldman Sachs.

It's actually Pat Archambault here. Just on the -- more on the acquisition, can you tell us -- like this is a bit of a different business, right, being distribution. I think there's a couple of dealerships within it, but it's mostly distribution. Maybe a little bit more about the rationale of it sitting within Penske Automotive Group rather than Penske Corp. I think you had mentioned that there was an ability to take advantage of some tax benefits in the U.K. I think you had also mentioned a desire to be -- maybe in Australia on the light vehicle side. But maybe more on that rationale.

Well I think #1, we're a global player and want to build the growth, and this was an entry into that market from the standpoint within existing business, with a little less than $0.5 billion in sales that gets us really in that particular market. It's a market we know as we were the distributor for Detroit Diesel there in the past. This is a more of a dealership business and we own the assets. When you look at truck leasing, we've got 6 billion of trucks. So when I look in this market, our distributor at 72% to 75% of the trucks, that we handled in Australia, we'll have pre-ordered by our dealers. We hedge the currency between the euro and the Aussie dollar, and certainly the pound and the U.S. dollar. But when I look at the business overall, I think this gives us the ability to provide geographic benefits certainly from a revenue standpoint, profit diversification. And it's not a change in our strategy, I don't think at all. From the other standpoint, we have a private company and this is a public company. And I think that the value that we can bring to the shareholder with this acquisition under PAG, the fact that the financing for this transaction is from the captives. When you look at it, it's key, along with our ability to finance some of the transaction through our cash flows in the U.K. and then pick up this benefit of taxes and repatriation. So when you put it all together, it probably wasn't too smooth. I'm giving you all the answers but I think it fits there. And the fact that we can take and have some hand raisers internally at PAG that want to go into that market, we'll take some expertise from truck leasing. But remember, truck leasing is a joint venture that we have with GE and it's strictly logistics, the truck leasing. So I think that this fits probably best in where we have it in PAG.

That make sense. The follow-up I had is just -- maybe with respect to your Slide 16. I guess, can you tell us a little bit about what your leverage targets are for Penske? And how do we think about the kind of dry powder you're going to have left post this acquisition to pursue some of the other ideas that you're thinking about.

If you look at the peer group and you look at debt to capital, I mean, some are as high as 50%. I think if you take the rental cars out and really look at those, it's an inventory that turns, we're at 38% and I said I'm comfortable operating somewhere in the 30% to 45% range. And if you go back to 2009, we're at 50%. And today, we have been able to really look at 38% is where we are today, and we'll get back $70 million through our floor plan on this particular transaction once it's done. So it's really just -- you got to do the transaction but the good news is that the trucks that we have in inventory that are in process will be financed as floor plan for us. And then the same floor plan provider than I would say 95% of the cases that provide floor planning and retail financing for the dealerships that we sell to.

So I haven't done the math but you see yourself even post the transaction with the working capital benefit having some bandwidth left for more M&A.

Yes, absolutely, we've got $545 million today and I think, at the end of the quarter, if I'm correct, we had about $7 million outstanding on our credit line. In the U.K., and we have probably GBP 125 million line there. So there's plenty of room and the cash flow has been excellent there.

And our next question does come from the line of Scott Stember with Sidoti & Company. Scott L. Stember - Sidoti & Company, LLC: You talked about Parts and Services. Was there any meaningful difference in the growth rates between the U.S. and your international operations?

Well when you look at Parts and Service, pretty flat in the U.K. I think that's an opportunity on international for us. We were up in domestically, we were up about 9%. So overall we get less margin there because of warranty parts. And I think I mentioned that earlier. We had exchange impact there. We showed 1% but it would've been 4% if we didn't have the exchange rates. So there's some impact there from a mix standpoint. But we need -- the problem -- not a problem, but we don't have the facility size and footprint in a lot of the stores in the U.K so we can go into somebody's auxilliary businesses on the service side. We certainly don't have the body shop footprint internationally that we have here in the U.S., and that helps drive some of this business. So to me, we'll wait and see, we don't have the -- over there, we don't have this prepaid maintenance that we have here in the U.S. and this is a more competitive market. So those are things that you'd have to say, are different than the core business here. Scott L. Stember - Sidoti & Company, LLC: Okay. Just moving to the SG&A leverage. Other than the traditional personnel and advertising leverage that you've been getting, is there anything else that's in there that you've been able to get? And looking out, are there any other levers that you can point to?

Well, I think we look at our peer groups and we look at comp to gross, and we'd got ourself, I think, in line now. We've looked at some studies across the different skill groups. The marketing spend on a per car basis. And remember, you've got the gross -- the expansion of gross helps drive that number. So we need to remember, it's not just an expense. I am not driving the business counting every pencil in every dealership and I don't give a star if someone -- if somebody has higher rents, other people have real estate that they own. I think what you have got to look is from an SG&A to gross standpoint, where are we less rent? And at that point, I think you see we're running the business pretty efficiently and I'm obviously well-focused on the number. And it's one of the great things having a peer group, because you could see that it helps you with the management thing. We could say, "Look, if one of the other peers is able to grow in a certain rate." If you look at margins, that helps drive us to be -- have better quality and better numbers.

And our next question does come from the line of David Whiston with MorningStar.

On Australia, can I just a little more clarification on once you decided an Asia Pac expansion made sense. Why commercial vehicle over light? And would you want to have a light vehicle network in Australia.

Well, when you talk about light, are you talking about retail auto?

Yes.

Listen, I think this is -- we pressed this doorbell first because when we get the scale right out of the box, get this on the ground, we'll understand the market. And I think I said earlier that I've had, I think, 2 -- I know 2 for sure, almost 3 calls. Already this market's about 1/2 the size of the U.K. And Toyota has probably about 20% of the market. So we know the brands and we would expect that, to make acquisitions on retail auto, if they were the right brands and fit our strategy. And then the fact of the distributorship, we're going to be in every single market in Australia with a franchise dealers So we'll have some access to knowledge of that local market. So to me, it's good and the good news is here, that we have a strong captive finance operation in Australia, DT&A, which is key from the standpoint of the business both on the MAN [ph] side and on the Daimler side. So retail financing and leasing for the consumer, floor planning for the dealer and floor planning for us. So -- and again, it's asset light. The total fixed assets in this business other than vehicles and parts is about $6 million. So to me, we don't have all fixed assets you'd have in a normal dealership. That might -- would have been a good answer to the question I got earlier. It's asset light.

Okay, that's helpful. On Europe, some of the OEMs are saying they're seeing signs of stabilization but certainly not showing up though in the EU 27 registration data. I know your main focus is the U.K. and that market is doing really well. But do you have any insights on what the state of the consumer auto spending is on the continent?

Well, I'd have to say that we've seen some lift in our super Premium/Luxury business in Hamburg and Bremen, which is the Ferrari, Maserati, Bentley, Rolls-Royce, Aston Martin, Lamborghini. We've seen some lift there. Our Porsche business in Germany, is slightly ahead of last year. So there is some downward pressure, there's no question. But in Italy, on the other hand, we've had nice growth there year-over-year. And I think it's the management team and the fact that we took over business, it was undercapitalized and there's no question that we're getting the benefit of that, good people, giving them the capital they need to operate it. We've got the Used Car business and quite honestly, we're 100% ahead of our target for the market in the first 6 months. So that's us as PAG, and we would look to grow selectively in other markets. And the good news is, all the OEMs are, since they know we're there are giving us insight on potential people who want to divest, which gives us a pretty good windshield of opportunity.

And our next question does come from the line of Brian Sponheimer with Gabelli & Company. Brian Sponheimer - Gabelli & Company, Inc.: Just -- most of my questions have been answered. With the $200 million acquisition, how flexible would you consider yourself should you come across another large potential acquisition, say, an Agnew or Crevier.

Well, if we came across Agnew, I mean, we would do it. I don't think there's anything holding us back. But it's got to be in the right area, it's certainly got to be the right brands and would be opportunistic. But we also want to look at our debt to capital and know that we have a, are safe and secure from an overall standpoint. Remember, we went back here I guess, it was, say, 12 months ago or maybe less and we did some 10-year money, $550 million at 5.75%, 10 years. So we've got some pretty patient sub-debt, which sits out there until 2022. And then with the credit availability through our credit lines in the U.S. and also in the U.K., we've got over $0.5 billion of available cash or credit lines plus the cash flow that we'll generate during the year. Now we're paying out about 28% of our net income for dividends and we've got almost a 2% return to our shareholders. So I think that's obviously attractive to them and we have to look at that in our capital allocation. Obviously, it's going to meet the CI requirements for our investors, the dividends, and then we got acquisitions. So it's a continuum. With our board, we have about $100 million available, I think $85 million to be exact, for debt repayment or share buyback. And we'll continue to buy in the shares that we give to our employees so we can keep our shareholder account from a share standpoint at about $90 million. And that's obviously something we're going to focus on. But overall, acquisitions I look at are pretty much going to be opportunistic. But, and we're not just going to go by 1 thing in a market, unless it's a glue-on that we can -- that we already have scale. Brian Sponheimer - Gabelli & Company, Inc.: I guess, just one last one, going to Western Star. Any sense of the dip in the Australian dollar helped this deal come together a little bit quicker than you'd imagine? Or was this something where you were 200 bp for the business, and finally the seller came to you and basically relented? Or I guess, the other side of that, is there any concern about the Aussie market should their Federal Reserve bank continue to weaken their own dollar.

Well, we're doing business based on historic numbers and forecast and we feel pretty good. We obviously look at the sensitivity of the dollar and the U.S. dollar and the Aussie dollar, even the -- or the euro. But we have very little currency risk once we place an order, and the dealers are placing orders based on Australian dollars. So we hedge all the purchases at the time we order so there's no -- we have no risk there. And as far as this transaction, I guess, we just hit it at the right spot where the pound and the U.S. dollar, it strengthened over the last probably, say, 4 or 5 months. We hit it right at the right time. And that wasn't the motivator for us. That's just sometimes you get a benefit, it could have gone the other way. We have hedged the purchase price from when we signed the document to closing, so I think we've done all the prudent things we would do in a transaction like this. Brian Sponheimer - Gabelli & Company, Inc.: From an operational perspective, hard to poke any holes in this quarter. Great job, guys.

[Operator Instructions] And your next question does come from the line of Simeon Gutman with Credit Suisse. Simeon Gutman - Crédit Suisse AG, Research Division: Just 1 quick housekeeping and then 1 higher level. You mentioned earlier the Parts and Service U.S. comp was up, I think, 9%, and you said U.K. was flattish. Is the mix of business similar to the way it mixes out compared to total revenue?

Well we'd have more customer labor because the warranty, when you look at Parts and Service in the U.K., we don't have the markup on our parts, but -- and we don't have the body shop. Again, we're selling more, newer used cars. One thing we don't have is this retail-first mentality. I think we're -- it's starting to penetrate. So our cost to sale in the U.K. because our demonstrators, we have to have under the franchise agreements, we have to have a certain number of demonstrators. And in the U.S., we'd sell those as new cars. In the U.K., those are sold as used. So we don't have the opportunity for the reconditioning at some of that margin. So that would be some of the differences between the difference. And I think, overall, 80% of the service and parts would be customer pay. And probably 20% warranty, so obviously it's a little higher. Simeon Gutman - Crédit Suisse AG, Research Division: Okay, and then the second one, a little higher level as sales and gross profit per unit this quarter, I think the group in general saw a little dip. I think for you, in particular, you mentioned some U.K. and then we heard a lot about stair steps. So I'm curious if what we're going through is a blip, if you think the proposition for dealers in general, the trade-off between sales and gross profit has changed? Or do we snap back but this was just a weird period and comparing to a tough one 1 year ago in terms of a lot of deals and incentives out there in the market?

When I look at the peers and kind of look at where we are on overall new margins, it really -- when you look at it from an overall standpoint, our peers are in the 6s and 5s, we're at 7.5. And if you look at used and we're at 7. And I think Lithia [ph] as high as 15%. I'm not sure how all the accounting is done, to be honest with you, from the standpoint of these margins. All I know is that we're getting, I think, a good margin on our new. We've been there. We've been as high, obviously, over 8 in the past. It just depends where we are. We're going to continue to focus on growth. Remember, our salespeople and our managers, they're all paid on margin. So we're all focused in the right direction. I think the constant gross that we look at is pretty consistent. We see gross going down, comps coming down with it. So it's like an elevator. I think that we're -- our guys have done a good job managing it. When you look at the business on the new side, we're down $181 year-over-year, Q2. We're only down $84 on used and we're growing the business. So overall, our gross profit's up and then, I guess, if we're going to be in the volume business, you're going to probably have a little less margin but. And on the Premium/Luxury side, we have a little more time to spend with a customer because we don't have -- we're not big volume stores, we're on the volume foreign. These are bigger stores and, again, we had more turnover in the sales forces on these volume foreign stores because you have 25 or 35 salespeople. And sometimes, the capability of that lower-tier sales guy tends to give the product away, and we just need to do a better job in training. So it starts with training of our employees and I think that there's no question when you look at Premium/Luxury, this will drive in the fourth quarter, always is the biggest quarter for us from a gross margin standpoint on new. So we just have to wait and see, but we're looking at it just like you right? We're in the same boat everybody else is. We see pressure on margin. The consumer today, with true car and some of these other tools that are available, many times, the consumer comes in knowing more than we do about the particular car. We've just got to better educate our sales teams. Simeon Gutman - Crédit Suisse AG, Research Division: And does the model change over year help in the next quarter? So does that help maybe bring the margin rate up a little?

Well, all new models, obviously, when you get the new models in, unfortunately, we've seen in the U.K that there are some Internet guys, get on the Internet but they're trying to meet these volume targets that they start discounting cars that are new, and that's what hurts us. When you see the same car that you're trying to sell at the retail level on the Internet by one of the -- it's inter-brand competition. But that's driven by the manufacturers trying to push instead of having a pull system. But obviously, we don't have any control over that.

And at this time, there are no further questions. I would like to turn the call back for any closing comments.

Great, thanks. And thanks, everybody for joining us. See you next quarter.

Thank you very much. Ladies and gentlemen, that will conclude the conference for today. We do thank you for your participation. You may now disconnect your lines at this time.