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Asbury Automotive Group, Inc. (NYSE:ABG)

2013 Bank of America Merrill Lynch Smid Cap

May 7, 2013 2:20 pm ET

Executives

Scott Krenz - SVP & CFO

Ryan Marsh - VP & Treasurer

Analysts

Scott Krenz

Not sure - probably the best way – we have our presentation here, I will click through it, this thing actually does work by putting here. And feel free with this smaller group and start feel free to just start and ask questions and whatever because I feel like sort of odd presenting in this format here, but anyhow and I don’t know how – mostly the other way, oh, there we go.

Okay, here we go forward-looking statement, yeah, I think you guys see this all the time. We don’t say a lot of things and anything we say maybe considered to be a lie. Anyhow, I don’t know what level of familiarity you have with Asbury, so I just quick through sort of the overview here fairly quickly. We are a pure light vehicle retailer, principally in the Southeast, you see Mid-Atlantic down through Florida and then across Texas. That footprint is one we were very comfortable with, we have found that over time of managing a relatively compact geographic footprint in fact it is helpful of running it tightly, tightly run, well-run organization.

You can see our relative size and where we stand. We are the seventh largest U.S. based auto retailer, we are actually the fifth largest public; there are two privates were both extremely large were out there. And you can see the number of things in terms of the states Florida, Texas, Georgia are extremely important to us and have been really very strong parts of our business and you see the rest of it and how it tails in there.

Brand makes us probably more important to some extent some may say how do we get here, we sort of inherited when the company is put together, once you got your brand makes it hard to change radically slowly over time. You can see that we tend to be skewed heavily towards the Japanese products here Honda, Nissan, Toyota are very important to us and when we add in Acura and Lexus Infiniti is a big piece of our business, we are not uncomfortable with that, those are great companies, they produce great products.

Our overall attitude towards brand mix is, would rather be more diversified than less. So as we move forward we’re more likely to find things which are less represented here, some of the domestic brands were relatively under-represented and some of the German products like Volkswagen were relatively under-represented, some of the Korean were relatively under-represented. So those would be areas, we would look to expand. Strategy wise, we repeat this and I’m sure lots of companies have these – we take some pride in the fact that I think you can go back and look at our actual performance over the last several years and see that this is what we say we do, this is what we actually do. First, and foremost we spend – manager spends most of it’s time, most of our focus is on operating really good, really good set of car stores. We take some pride in the fact that in just about every metric you want to look at we’re somewhere near the top.

And in terms of performance we just think that’s a core of what we do, we got to do it well and we spend a lot of time on that and we would – it is. Secondly we try not to fall in love with individual stores. We just don’t take the attitude that our businesses do accumulate never give off, we really look at as a portfolio and we will occasionally I mean we are not in the business going out of business so we are growing in general, in the main we are adding more than we are getting rid of but that doesn’t mean we don’t sell franchises occasionally and it doesn’t mean we don’t seek the highest recurring from that portfolio brands. And sometimes we just find that simple things, it’s easier an example there was a brand and I won’t compare some of the – we didn’t think it was going any place and we actually simply sold the franchise to somebody because we want to use the property to expand somebody who was really, really doing well. And so overall, we are actually better off in terms of return getting out of a particular franchise.

And we always look to deploy capital to the highest return, we think it’s one of them. Strategically it’s the most important decision we make is capital allocation, you will see it later but just if we do our job as a management team and I think we’ve been doing but if we do our job as a management team after we invest in the stores keeping them up to standards in terms of the manufacturers and track the places for our customers after we go into the market and find the acquisitions we think makes sense.

One of the gating factors there is just how many we can integrate at a given time. We should have and we have had excess cash which we feel is our job not to retain which we return to our shareholders. We’ve been doing that at the moment via share repurchases because that’s the strong bias of our current holders, which who we listen to but we always do look at dividends and whether that makes sense but once you had expected if we do our job in a reasonable market there will be cash which is coming back to the investment.

We stated that – again we’re trying to be as transparent as we can. So we stated what a three year capital allocation plan is here it is, we are on track to do this, we’ve had this in place now since middle late last year and we continue to execute against this. So investing in our stores $35 million, $45 million a year we continue to target buying back facilities which are currently leased. The target of getting to 75% if we could we probably would get to 100% we started running into leases which would be prohibitively expensive to take out so 75% sort of the near term or medium term goal here. When we say we buy out these and own these properties that doesn’t mean we’re – we want to have title to them but we are willing to have mortgage, we have been actively mortgaging these facilities principally with the OEMs with our manufacturing partners so Toyota stores with Toyota finance. And it’s a good way for us to lock in relatively cheap money over the long-term to maintain the Toyota store.

We are actively looking for acquisitions, we did one in late last year really early this year for testing purposes Volkswagen in our Bentley store I guess two franchises. We continue to look for them; it’s a patient hunt, I think we have new patient here, there are 18,000 dealers in this country slowly consolidating there are deals out there we just want to do quick deals and then we talk to and repatriating share, capital to our shareholders with pretty much liquidity of 25 million to 30 million a year. And more of the stock price should fall off which is not doing today.

Question-and-Answer Session

Unidentified Analyst

Why is it better to own the real estate than to lease the facilities or what other options there are?

Scott Krenz

There are sub-leases, one is purely financial that the implicit cap rates in these leases is higher than we can mortgage the properties for. So there is an interest arbitrage there essentially in the P&L. And the bigger part of it is operational. Manufacturers have programs for identity and branding facilities need to be constantly updated perhaps expanded. If you were leasing a facility you are putting a lot of money in somebody else’s property.

There are times I had mentioned we had a situation where we took a franchise that we didn’t think of strong future and we sold that and we moved a high-end brand into that store because of it’s location and we are doing much better there. In the lease facility sometimes you can’t do that. The lease will require you putting strains on who is there and you get – need to get approval from on and those sorts of things. We get this much more operational freedom, we are investing in our own property and then there is a financial benefit as well. Pretty pictures.

Unidentified Analyst

You have just going back to pretty pictures, do you have a standard Asbury format or if you want the stores look like you’ve done this since the retail operation, it looks like cookie cutter kind of like business?

Scott Krenz

No, the answer is don’t. First of all brand manufacturers of different guides and different standards for brands. And for the most part that is a standard Honda store is an example what we call the beer can from that little wave, all Honda stores look at although that’s DeLand right.

Unidentified Company Speaker

Yeah, the beer can customers.

Scott Krenz

This is a record breaking story that Honda is looking at there the blue beer can there is normally painted a little blue which is the blue that Honda is chosen fads in by day and a half and as we repainted about every week. So what that is that is actually blue glass block with blue lights behind it. So it lights up blue and stuff and Honda at first was very much skeptical about and I think they decided to take. Hey we should look at this all over, but that the standard Honda store. So a lot of these store would look different, BMW store would look different.

Unidentified Analyst

That would be different within the brand. So your Honda store you run them all the same do you have some more number of the service space to?

Scott Krenz

Some of them are no some of them are on different properties some of them were inherited, some of them we bought we’re not going to rebuild.

Ryan Marsh

Market size.

Scott Krenz

Market size.

Ryan Marsh

Some of them are Real America.

Scott Krenz

Some of them are rural America. So they vary we spend a lot of time planning what a store will look like that is a, it’s becoming a, we are working with the manufacturer. This is pretty standard because this is all new car showroom. Yeah, the bulk of this is the facilities the car showroom upfront. He tried to tell the manufacturers these days is less car showroom. We would like to put the service entrance right in front glass with up here we are open the business come in for services. That’s hard to get across to the manufacturer but that’s really where the market is the stores are doing and how stores.

Ryan Marsh

They want you to sell cars but the dealer actually wants the service.

Scott Krenz

They want services cars exactly. So there is if your eyes looking at back you also the other thing which drives these stores is heavily, heavily regulated by the locality we are in. There is a lot of zonal requirement. This one we needed for that lid up jar can we needed a zonal requirement for the land Florida to do that. And that was a fair amount of fights. No, they are all somewhat custom. They are similar we do have style and we have a single designer who works with us in the specialized in car stores. I think you got to mentioned on what a good looking group of people with them that’s okay.

Unidentified Analyst

That’s out of Florida or is that you’ll be?

Scott Krenz

No, I have no idea.

Ryan Marsh

That’s something we got from HR I imagine.

Scott Krenz

I bet.

Ryan Marsh

Lot of photo.

Scott Krenz

Yeah, HR would be too excited because I don’t recognize anybody that and the car by the way that is a 2013 Honda core which you ever want to look at really knock out tire that is a great car for the price point.

Unidentified Analyst

What was that all the way about the right and the modest?

Scott Krenz

The service links, service links. That’s what we are trying to do with service. This is today in service link and I care about this and this might be the land how do we know but it’s they used to open free link day and it’s cleans of whistle they need to get on that for. On this side the last was service charges will be there we’ll be able to see in the store we see tires and everyone of our stores not you go you see tires probably displayed right upfront and it should be very inviting to come in. So I think that’s what we are trying to do is service, we're trying to get a very comfortable place to come in and very inviting place to be.

Unidentified Analyst

How do you (inaudible) on services types this maybe going at least too much but how do you place the perception is more extend to buy everything if the deal is then it also the tires store or the local whatever the tire it maybe tires there and might be my tire and immediately they got my cars. I can go to you know here count there you know count there say 25 types of tire would fair enough and I’ll be the case but that’s a perception?

Scott Krenz

We spend a lot of time educating the consumer. What you said there it’s a great question I mean they just in parts and service fixed operations is what’s the called the business and fixed ops it’s a business which has high margin has tremendous potential for us and we are trying to grow the biggest down side here is I take my car there for warranty work since the warranty is done I go simple off if you guys going to go with me. It’s simple is that. That’s not true I mean it’s demonstrably not true. Our stores we price compared to the people around us those tires I - nobody will understand for the tire. No the same tire which you want to go compare the run flat against a cheap tire you’ll find a big difference in price but for the same tire we will sell it competitively with anybody and in fact we don’t make much money on tires if any money at all.

The business we get from those the alignment the money and the balance yes that’s our prices for a oil change are comparative with anybody in the area and we’ll get in and out. So how do we get that across to people we have their to compared board and the stores many of the lanes. We are bringing into. We have one a really good job as a company embracing and working with the way the consumer shops today. The way the consumer shops today if they don’t just randomly walk into a store and kick some tires they are online shopping comparing models.

It might be on the manufacturer side build the car and then go from there into a local site. We spend a lot of time, we come up on a researches that go things are set about it online we have very attractive sites. We have CRM tools talking to the general manger of a reasonably high volume Honda dealership who told me that they get 60,000 in bound increase via the interest every month they make 30,000 out bound calls every month setting up appointments with people following up on those leads.

We do not buy a leans anymore they are coming pretty much to us via the Internet, it’s a very sophisticated operation now we are taking that sophistication and those tools move it in the fixed ops. So they are thinking in the same way where you set up your appointments you should be able to set up your appointments online you should be able to make inquires you’ll get specials. We know you’re car frequently we know exactly what the mileage is just because it’s reported those uplink things having all the time. But we certainly know about when you do for all change about when you for the tires and we’ll send you specials we’ll contact you we’ll make it easy as possible for you to get in and out of store by how we adjust in the hours we run and making you aware of it making you aware we’ll send out internet most of our marketing these days will can fix ops and there is not the big advent to take for the cheesy ad on late night television during the horror show and the horror it’s now shipped at very much to being digital focused online marketing with an online digital marketing group where we can measure results and measure the clip through and you know what we’re doing.

We are now moving that into the fixed ops. And we are in the early stages probably in doing that and getting that level of specification now into the service drive. So I think there is a lot of advantage so how do we do it that’s how we’re going to connect to people continue to educate them make sure they get down with service. And where we are successful it’s hugely successful. We have a store in Texas first go to Texas that he services 250 cars by noon on every Saturday in and out huge operation.

He runs he will run, he is not, he started this but other stores do it but he’ll run clinics where once a month, once a quarter whatever he does he puts a model of every car up on a lift, has mechanics there and you are invited to come in and have any question want. How this car work what is this do what goes on which has gotten people in the stores it’s gotten so popular he has found, he has discovered salesmen and dealers from competing dealerships coming into his clinics. And he set fine come on in, but I mean that sort of, that sort of effort that will uplift the fixed operations.

Unidentified Analyst

So on the service side, I mean I’m just speaking from my side. I used to be in your camp a lot more than I’m now because our dealer not only the price is somewhat competitive they are probably a little higher but the overall experience is much better because they washed my car, they vacuum my car. They are a lot more reliable, their hours are longer and there is a whole food station and free food and…

Scott Krenz

Meaning we were pretty Wi-Fi.

Unidentified Analyst

Right. And well the last thing I want to say is it valuable then they everyone and their grandmother has a Blackberry but six or seven years ago before they were everywhere, they had 10 computers within a year and I don’t think Jeffrey will have a computer maybe used back in the day. So it’s an overall pretty good experience now then in fact and like my dad stay outside.

Scott Krenz

We do provide, we don’t just provide the computers anymore, we’ll provide workstations so when you’re there your car has been serviced and you can plug in your computer and the workstation like a partition next to it so you can work and you still work.

Ryan Marsh

So the only go pound for pound okay then we will go and change to 20 and my dealer is 30 that getting as a red bottle 50% more and $10 more but adding everything else is pretty good deal.

Scott Krenz

Make sure you get the same quality of life.

Unidentified Analyst

Is probably because I drive an Acura and my wife drives a Toyota and the dealer experience is totally different just to kind of build on to grow a facility (inaudible).

Scott Krenz

Right.

Unidentified Analyst

There is nothing exactly what is going on here. But when I go to the dealer I heard Richard talking about to get my car serviced.

Scott Krenz

You’re the Acura guy.

Unidentified Analyst

Yeah.

Scott Krenz

Right.

Unidentified Analyst

Two and half hours for an oil change.

Scott Krenz

That’s what I'm talking about.

Unidentified Analyst

Yeah, that is a dealer, that’s in the Toyota deal includes do you take learning because you have the high-end stores and just because hey guys, I know Toyota says and just understand your thoughts, our Lexus customers are a lot happier.

Scott Krenz

That’s what I have, a Lexus.

Ryan Marsh

For example, that’s my phone.

Scott Krenz

But now in Toyota. Roswell, Georgia now in Toyota, beautiful store bring you car in for an oil change we will take your car, we’ll change the oil, we will rotate the tires, we’ll top-up all fluids, we wash it and we’ll return it to you in 20 minutes or less.

Unidentified Analyst

That’s beautiful. That might have kind of seen your wash.

Ryan Marsh

That’s my point.

Unidentified Analyst

That’s my point too.

Unidentified Company Speaker

Well that is what, that’s what.

Unidentified Analyst

I think we’re agreeing.

Scott Krenz

Right, yeah but that’s just running that’s why I said, that’s why operational excellence is so important that’s the standard we set for our stores. That’s why our stores will outperform other stores, because we bring that operational excellence so we have standards like that we have a, we have a fixed ops guy who set these standards and work with everyone in the stores. We don’t want you to have that experience in fact if you have that experience we owe into the internally we go into like what speed, what now what arm, and figure it out because we can’t allow this to happen again. That’s partially what our online management people do as well we’re constantly throwing a few have bad experience they took two hours to change your oil we’ll find it, we’ll flag it and we’ll be there that stores was the essence of what the heck is happening here, because this isn’t right.

I had bad experiences too I was that time took my wife’s car, I took it to the end of the dealership and that in different city. And it’s a horrible experience in actually found the not to general but the owner of the group and actually told him, do you know what’s going on in your store? And I got turned out of the brother-in-laws general manager so it’s not that uncomfortable, but anyhow quick fuel get back, everybody knows that the new vehicle is an opportunity everybody wants to start that just quick (inaudible) for the time here, everybody wants when they talk about our business most people I don’t say everybody but most people say it’s a new car story this is about selling new cars, well it is new cars I mean there is a lot of things driving new cars you can see at the ages of fleet is now 11 years and 150,000 miles out there that is old than as and as owner as they can get I don’t know but it’s got to get pretty damn close.

So we’re seeing those vehicle start to replaced at a higher and a higher cadence. Financing right now is extremely attractive for the consumer. There is a lot of new product out there, population continues to grow, number of licenses issued continues to grow. So over time we fully expect to see new vehicles continue to grow I'm often asked what do you think kind of get to 17 the answer is probably yes I don’t know when but it’s a pretty good environment will it be a bit cyclical yeah then we all have cycles and new cars and it will be what it is.

Unidentified Analyst

But (inaudible) I mean this kind of sounds so stupid but in theory you make a lot more on service than a new car are actually profit-wise?

Scott Krenz

Margin-wise.

Unidentified Company Speaker

Margin-wise so in theory when some would be better nobody ever bought a new car then your profit margin would be and it’s skeptics in their old car now they ran into the ground.

Scott Krenz

There is a where we certainly want to repair your car it’s not that we don’t make money on a new and used vehicles. Well and we tend not to think in the auto retail business with very seldom think about margins it’s a not a term that’s commonly used we talk about gross, everybody talk about the gross what’s the gross, what’s the gross and that’s what they’re looking at just looking for certain gross profit out of the transaction. Part of the reason that margins are going down is because prices of cars are going up faster than the grosses we’re getting are going up they’re both going up, but the price is going up. So it squeezes the margin, we tend not to think of that. The other thing is that the transaction, we’ve F&I just one of these slides with finance and insurance is a big part of this equation. The average – for Asbury the average new car gross is about 2200 hours – 2200 hours. The average PVR what we get in the F&I office on that transaction is just short of 1300. So big shock, so it takes you to on average it takes you to 3400, 3500 hours.

Unidentified Analyst

(inaudible).

Scott Krenz

That’s – yeah that’s everything combined that’s the total and then leasing that can be a little different, because sometimes on the lease the F&I opportunities are a little different then it can be on a straight purchase and depending on the brand sometimes it be relatively the BMW lease comes with maintenance and stuff already rolled into it, so we don’t sell separately.

But it is a big piece of the property, if you look at what we call the total fund and deal, which is the amount we’re making in the variable – the sales part of the thing, its running like 32 something all these days per vehicle 3200 and something, 3250 or something per vehicle. And its been steadily rising I don’t know what the margins are going to do with, that has been steadily rising as we take in more and more growth of the transaction.

So it really is a very robust model and people get far too concern sometime what’s happening with the margins of the cars, as suppose to what we’re getting out of the entire transaction. Mostly these guys are pretty smart and we desk a car take all these variables, are they financing it or they’re going to be buying extra products from us, they give me a good trade, you know you take all these variables in. And at the end of the day you will make a profit on that transaction and some people might get less and some people might pay more, I mean that’s the business is.

Used we’ve talked about that, the number of used, we are trying to get to one-to-one or selling one used vehicle for every new vehicle were somewhere between 0.75 and 0.8 something for last quarter varies a little. Why is used an opportunity – I used in our BMC because, non-franchise dealers, non-franchise used car dealers that are out there still hold the majority of the market. This market should be gained and why can we take market here because we see the car first and comes to us with a trade. The non-franchise dealer is buying the majority of their cars in auction those are the cars we decide not to sell and we send to auction that franchise dealers did.

So there is an opportunity to expand this business, we have done a significant job over the last few years you see in expanding those business. And its profitable we get, about $1800, $1900 per vehicle gross on used compared to the 2200. So it didn’t make that much a difference between the two plus you get the same PVR for the F&I transaction.

So, because that F&I transaction is per vehicle retailers, every vehicle retailer, it’s a little different by brand and whatever. So there is a big opportunity here at low beyond just the vehicle we’re selling, parts we’ve talked about quite a bit here, very high margin, we’re bringing the tools out there we’re running programs, we’re trying to deal with this perception that were the high value here in the high class dealer out there. And I think having a fair amount of success, I mean anecdotally we’re hearing from people that we are having an impact on you know Pep Boys and (inaudible) and all everybody else we’re selling, as we bring more cars into our service lanes.

F&I we talked about – F&I is a little misunderstood already focuses on the app, you can see that app is 38%, the majority 62% are products that we sell. And that the big hitter is in there are extended warranty, dealer service contracts and which called the gap insurance. Gap insurance simply is the insurance give your value of the car not from the loan, so if you decide to sell that car later on and whatever reason is depreciated more than your loan is amortized, you are protected against that.

Unidentified Analyst

That doesn’t include source of upgrading that, you’re not talking about that - you’re not talking about driving this, so you are only talking about financial instruments in these other products?

Scott Krenz

Our action stuff would be add-on when we sell the cars.

Unidentified Analyst

Okay. So you said you have $2200.

Scott Krenz

Yeah, that's in $2200. But – long financing out there is very good. I mean right now the financing environment is higher to get a lot better you see the terminal loan has been increasing steadily and the rates have been coming down so we can offer most car buyers or payment buyers they come in along with a $50,000 for a car that very soon turns into a conversation that can afford 450 a month. And both term and rate play into that so we can give people very attractive terms out there we actually do better, I had a lot of questions I get asked just about every meeting these days what’s the Consumer Finance Protection Board to you.

They don’t regulate us they regulate the banks, the FTC regulates us and the FTC is actually going to study others business and have determined that they concluded independently that in fact we have been generally healthy for the consumer. The consumer generally will go down to it's credit union or they’ll go to bank and they’ll say what we are lending to get pre-approval letter and they’ll bring it in very subtly at the end of financing place that approval letter because we have the tools will access the entire market form and generally we’ll find out better rate.

Unidentified Analyst

So your debt, that’s right, now, the average guy pays 4% if he takes out a loan is that about both?

Scott Krenz

Yeah, yeah.

Unidentified Analyst

And so what happens when supposedly interest rates go up, well I’ve been hearing that for five year and they haven’t gone up yet?

Scott Krenz

Well, I think how they go up is as important as that because I agree with you I think they will go up.

Unidentified Analyst

Right you have been saying that five years ago and they didn’t so.

Scott Krenz

Just a matter of time we just got it wrong…

Ryan Marsh

I hope you are wrong.

Scott Krenz

My - (inaudible) there was a guy the economist Samuelson or something said that the euro will never last and he is going to be right but he just took him 10 years longer than he thought. They will go up I think how if they spike access the financing first is first and foremost if something happens where the banks to shutoff lending it hurts us badly. Okay, so if there is access now if the rate spike quickly and people don’t have time to react to it they won't come to us here but if we’re in an environment where the rates are rising then you got to assume that everything else in the economy is adjusting as well real incomes are going up and well that's not a shock. I think if that happens as long as there is access to credit I hope we’ll have a big impact. So, as how as much as they’re up.

Capital we talked about, we talked about in the capital allocation, resources all and out of deployment, acquisitions we can talk about I mean we the public market we are a fraction of the market up there, there are 18,000 dealerships out there, the publics are a very small group. But we are growing one, we have access to capital two, as a group and Asbury in particular we run a better store, we make higher margins in our stores significantly higher margins we do better in being profitable.

When we originally started the manufacturers were somewhat livery of us they were use to dealing with the modern top and frankly they get bossed around a lot easily more easily than us. I think they’ve gotten much more comfortable and in generally support of us because they figured out we own a damn good store, we support their brand very well, we’re able to deploy the capital and the source we keep that looking good we can put in place our image plans and they’re much more comfortable with us.

What’s happening in general out there a couple of trends, stores have gotten very expensive. A standalone mid-line import store in a decent market is probably going to cost somewhere between $40 and $50 million to buy that's a big piece of change. And what it does is it shrunk the number of available buyers significantly. Manufacturers need to approve the transfer they are unlikely to approve somebody who just has a lot of money with no car experience they want people who can operate. So, a number of people who can buy these things as company got very smaller because they’ve gotten very expensive.

Dealers in general they have gotten old, a lot of these people started in 60s, 70s and they’re looking to move on and there is a small group of people who can buy them there is a lot of stores out there which are for sale. The other thing happening is always things I talked about in terms of the environment we’re in - this online world we’re in the new way we are dealing with the consumer I’d say fundamentally it’s changed, five years ago the average consumer visited little over four stores where they made a purchasing decision, today for the long-term purposes that is of one. They have already shopped, they have gone online they have looked to produce you need to be able to compete that then requires I can tell you because IT report to management this morning chatting with them lot of issues it’s a very complex environment requires a lot of investment very sophisticated skill sets and a lot of knowledge which the small groups just cannot compete with these guys.

So I think all of these things are pushing us to into a consolidation but it’s happening relatively slowly so we are there looking for acquisitions, we’ve targeted $400 million to $600 million over the next three years two and half year now. I think we were pretty confident we can get there part of the reason to spacing of that is part of the value proposition here is when we look at a standalone or a small group of stores we generally our stores operated at much higher level so this guy want some fair prices for the store. We can’t offer him that but we still make money because relatively shorter that we can bring that so up to performance level which is much higher.

Casing point an actual example we did in December of last year December of during our Christmas so basically end of last year we bought a Volkswagen store, I ran into the Volkswagen regional guy in the store basically at the end of the first quarter. And he was telling me how delighted he was that Asbury now own the store, this store have gone from being the worse performer in his region to the best performer in his region in one quarter and I was bringing in the Asbury tools, the Asbury processes, the Asbury people the Asbury training. So just a matter of being able to integrate stores is very important to us. And then we talked about returning capital for the shareholders. We always show that is just because we like to push ourselves. We don’t understand we’ve slowly moved up here with well we’re making progress here at one point we were dead last and slowly moved up here, we’ve been banging out results and I think the company is performing extremely well.

Automation did rolled on to itself or either chasing with the (inaudible) he does a great job but we’re slowly getting it over the New Year. Business has grew again, people I don’t think understand how resilient this model is how much we can be that is not just a new car store it’s a fixed opp store, it’s a used car store there is a lot more to this that we can grow it to an acquisition story for the big groups. And so you can make your own thing, but we look at that evaluation gap to the other especially retailers and sometimes we wonder why and we can’t really justify to be able to model a car price in all of this why Asbury, the headline here in the last five seconds so yeah we have really demonstrated I think you just need to look a track record for looking operational performance and I just go back past couple of years and see it.

We’ve also demonstrated the discipline we have to follow that capital allocation strategy balance sheet strong management team is better round and it’s very stable on the – you can really address to these things so we’ve been heck of a place to invest money and we very much are conscious so our owners and returning to them a good return.

Unidentified Analyst

What’s your return on invested capital investing in year ago?

Scott Krenz

We do – I don’t want company ever remember this…

Unidentified Analyst

Mid-teens.

Scott Krenz

Yeah and I think our cost of capital is down probably low teens.

Unidentified Analyst

And you think they’re all achievable one from here.

Scott Krenz

Gosh, I didn’t think about that in that sense.

Unidentified Analyst

Okay.

Scott Krenz

Pull that again, we will continue to perform, hope they will.

Unidentified Analyst

I just wanted to ask you a quick one on Nissan, it’s a pretty big brand in your mix and they just announced price cuts (inaudible) is this really more a different Nissan issue and putting that ultimately be a benefit to the dealers than they have less (inaudible) a little bit.

Scott Krenz

Oh gosh, that is a complicated question. Nissan has announced price cuts that probably talk to Nissan. But we think its probably more to do with Nissan specific issues. Their manufacturing schedule, the amount of inventory they got, what they are trying to do. They definitely are trying to recapture some market share out there.

Unidentified Analyst

Yeah.

Scott Krenz

If their manufacturing schedule the amount of inventory they got what they are trying to do they definitely are trying to recapture some market share out there I mean they surprise anybody, is it a broader issue, these price wars like that never help the dealer. They cause people get confused, so we will continue to monitor it, right now that’s not been a big issue for us. Okay, get back on that way.

Unidentified Analyst

Right.

Scott Krenz

I appreciate.

Unidentified Analyst

Okay. Thanks very much for your time. (inaudible).

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