Peter DeLongchamps - VP, Financial Services and Manufacturer Relations Earl Hesterberg - CEO John Rickel - CFO Lance Parker - VP, Corporate Controller.

John Murphy - Bank of America/Merrill Lynch Rick Nelson - Stephens David Lim - Wells Fargo Patrick Archambault - Goldman Sachs Brett Hoselton - KeyBanc Paresh Jain - Morgan Stanley Bill Armstrong - CL King & Associates James Albertine - Stifel.

Good morning ladies and gentlemen and welcome to Group 1 Automotives 2015 First Quarter Financial Results Conference Call. Please be advised that today's call is being recorded. I would now like to turn the conference call over to Mr. Peter DeLongchamps, Group 1's Vice President of Manufacturer Relations, Financial Services and Public Affairs.

Please go ahead Mr. DeLongchamps..

Thank you [Jamie] and good morning everyone and welcome to today's call. The earnings release we issued this morning and a related slide presentation that includes reconciliations related to the adjusted results we'll refer to on this call for comparison purposes have been posted to the Group 1 website.

Before we begin, I'd like to make some brief remarks about forward-looking statements and the use of non-GAAP financial measures.

Except for historical information mentioned during the call, statements made by management of Group 1 are forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve both known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results. Those risks include, but are not limited to, risks associated with pricing, volume and the conditions of markets.

Those and other risks are described in the company's filings with the Securities and Exchange Commission over the last 12 months. Copies of these filings are available from both the SEC and the company. In addition, certain non-GAAP financial measures, as defined under SEC rules, may be discussed on this call.

As required by applicable SEC rules, the company provides reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on its website.

Participating on call today 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 to the same prior year period, unless otherwise stated.

I would now like to hand the call over to Earl..

Thank you, Pete, and good morning, everyone. I am pleased to report Group 1 achieved record first quarter and net income of $35.8 million. This equates to a record first quarter EPS of $1.47 per diluted share, an increase of 23.5% over the prior year.

For the quarter, total revenue increased approximately $172 million or 7.6% to our first quarter record of over $2.4 billion. On a currency adjusted basis revenue grew 10.1% for the quarter.

Turning to our business segments total consolidate as new vehicle revenue grew 5% as we retailed at 3.9% more units and the average new vehicle selling price increased $352 to $33,964. New vehicles gross profit increase 4.2% as growth profit per unit increase by $5 to $1,777. During the quarter we retailed nearly 40,000 new vehicles.

Our new vehicle unit sales geographic mix was 80.1% U.S.; 11.5% UK and 8.4% Brazil. Our new vehicle brand mix was led by Toyota/Lexus sales, which accounted for roughly 26% of our new vehicle unit sales. Ford, BMW/MINI, and Honda/Acura each represented over 10% of our new vehicle unit sales. Nissan was at 9.3%.

And General Motors Hyundai Kia and [indiscernible] each increased their share of Group 1's new vehicle unit sales during the quarter. U.S. new vehicle inventory stood at 27,975 units, which equates to a 69-day supply compared to 75-day supply for the first quarter of 2014.

Total consolidated used vehicle retail revenues grew 13.3% as we retailed 11.6% more units and the average used vehicles selling price increased $325 to $20,785. U.S. same-store retail units increased 5.9% driven by 11.4% increase in certified pre-owned units.

Used vehicle retail gross profit increased 7.8% as gross profit per unit decreased $54 to $1,538 roughly [indiscernible] decrease this to increased can be explained by the changes in foreign exchange rates. During the quarter, we retailed 30,000 used retail units. U.S.

used vehicle inventories stood at 12,976 units, which equates to a 32-day supply compared to a 30-day supply for the first quarter of 2014. Total consolidated parts and service revenue increased 4.8%, while consolidated parts and service gross profit grows 6.4%.

Despite exchange rates headwinds same store parts and service gross profit grew 4.4% on 3.4% higher revenues. U.S. same-store gross profit increased 6.4% on 5.5% higher revenues.

Within finance and insurance, a combination of increased profitability per retail unit, and higher volumes, drove a total gross profit increase of 13.1% on a consolidated basis. Total consolidated F&I for retail unit increased $72 to $1,366. U.S. F&I increased $80 to an all-time quarterly record of $1,538 per unit.

Regarding our geographic segment result our U.S. operations had strong growth with total revenue increasing 8.9%, the revenue growth was driven by double digit same store and new unit increases in Houston and along the Gold Coast. So it's reasonable to say we were not impacted negatively by low oil prices in Q1.

We were impacted negatively however by the record extreme snowfalls in New England during Q1 which hurt both vehicle and service sales as well as drove higher cost for snow removal.

Our UK operations had another strong quarter with total revenue growth on a local currency basis of 32.5% supported by our December acquisition of three BMW mini dealerships as well as growth across all our segments - new vehicle, used vehicle, part and service and finance insurance at our existing stores.

For Brazil while the overall Q1 industry sales were down 16% reflecting both a weakening of the macroeconomic environment and the impact of a vehicle tax increase that occurred at the beginning of the year, our new vehicle unit sales were only down 9.5% on a same store basis.

Our strategy of aligning with growing brands is working and in conjunction with aggressive cost cuts this allowed us to incur only a small loss in the quarter. We remain confident that the improvement actions that the team has implemented over the last six months will allow us to be profitable on a full year basis.

Relative to our cost performance on an overall consolidated basis, Selling General and Administrative expenses as a percent of gross profit improved 160 basis points to 74.6%. Regionally total SG&A as a percent of gross profit improved a 160 basis points in the U.S.

increased a 160 basis points in Brazil and increased 10 basis points in the UK due to the previously announced acquisition of three sizeable BMW mini dealerships in December that are still being assimilated into our group. I'll now turn the call over to our CFO John Rickel to go over our first quarter financial results in more detail.

John?.

Thank you Earl and good morning everyone. Our net income for the first quarter of 2015 rose $4.5 million or 14.4% over a comparable 2014 result to $35.8 million. On a fully diluted per share basis earnings increased 23.5% to $1.47 an all-time first quarter record. There are no adjustments made to either quarter's GAAP earnings.

Starting with a summary of our quarterly consolidated results, for the quarter we generated over $2.4 billion in total revenues, this was an improvement of $172 million or 7.6% over the same period a year ago and reflects healthy increases in each of our business units in the U.S. and the UK.

Weaker exchange rates and the impact of a slowing economy in Brazil were partial offsets. Our gross profit increased $25.8 million or 7.6% from the first quarter a year ago to $363.9 million.

For the quarter SG&A as a percent of gross profit improved 160 basis points to 74.6% and operating margin was 3.3% an increase of 20 basis points from the same period a year ago.

Floor plan interest expense decreased roughly $1.6 million or 14.3% from the prior year to $9.3 million explained by lower floor plan borrowings in Brazil due to both inventory management and the procurement of lower cost alternative financing options that are now reported under other interest expense.

Other interest expense increased $3.4 million or 32.3% to $13.9 million.

This increase is primarily attributable to an increase in weighted average debt outstanding related to our issuance of $550 million 5% bonds, used to retire our two in the quarter and 3% convertible notes during the second and third quarters of 2014, as well as a shift in Brazil interest expense that I just mentioned, our consolidated effective tax rate for the quarter was 37.7%.

Now turning to the first quarter same store results; for the quarter we reported revenues of over $2.2 billion which was 76.4 million or a 3.5% increase from the comparable 2014 period.

On a local currency basis which ignores the change in foreign exchange rates, total revenues increased 6%, within the 6% total new vehicle revenue was up 4.5% and used vehicle retail revenues improved 8.6%. Both finance and insurance and parts and service delivered another strong quarter bringing revenues 8.8% and 5.2% respectively.

Please note we've modified our press release and posted investor presentation to include year-over-year percentage change metrics on both a U.S. dollar and local currency basis. My remaining same-store comments will be on a local currency basis unless otherwise noted.

New vehicle revenues increased 4.5% on a 1.9% increase in unit sales and a 2.5% increase on our average new vehicle sales price. By country same store new unit sales increased 3.4% in the U.S., increased 2% in the UK and decreased 9.5% in Brazil. Our used retail revenues improved 8.6% on a 5.9% increase in unit sales as U.S.

CPO unit growth of 11.4% helped drive revenues. By country same store used retail unit sales increased 5.9% in the US, increased 11.2% in the UK and decreased 5.5% in Brazil. F&I per retail unit rose 5.1% driven by increases in both income per contract and penetration rates for most of our major product offerings.

The 5.2% revenue growth in parts and service is explained by increases of 16.1% in warranty, 11.1% in collision, 3.1% in wholesale parts and three-tenth of a percent in customer pay. As it has been previously mentioned our manufacture-paid maintenance continues to expand in the U.S., there's an ongoing shift of business from customer pay to warranty.

There is also abandon increase in recall activity driving warranty revenues which has put pressure on customer pay growth due to labor capacity constraints. We've increased our service technician headcount by roughly 5% in the U.S. since the first quarter of 2014 but are still actively looking to hire more technicians.

Also as reminder our parts and service revenues are not impacted by increases in internal business. The revenue associated with internal work is eliminated upon consolidations, this varies across the sector, some of our competitors account for internal work differently. In aggregate our same store gross profit grew 5.2% on a local currency basis.

Our same store new vehicle gross profit dollars increased 2.2% reflecting the 1.9% increase in unit sales as mentioned previously combined with the small increase in gross profit per unit. Our used vehicle retail gross profit increased 1.3% as the 5.9% increase in unit sales, was partially offset by a gross profit per unit decrease of 4.4%.

Our F&I gross profit grew 8.8% reflecting a 5.1% increase in PRU and a 3.6% increase in total retail unit sales. Finally, parts and service gross profit grew 6.1% reflecting the strong revenue growth mentioned previously as well as the 50 basis points increased in margins to 53.1%. Turning now to our geographic segments starting with the U.S.

market on an actual basis. For the quarter total U.S. revenues grew 8.9% to $2 billion driven by increases of 13.3% in F&I revenue, 12.9% in total used vehicle revenue; 7.4% in new vehicle revenue and 5.5% in parts and service revenues.

The increase in our parts and service revenues reflects growth in all areas of business and our F&I revenue growth reflects a 7.4% increase in retail vehicles sales volume coupled with improved profitability per retail units which grew $80 or 5.5% to $1,538 which is yet another all-time quarterly records.

Total gross profit improved 8.5% driven by increases of 7.6% in used vehicle, 7.2% in parts and service and 5.4% in new vehicles as well as the F&I increased as I just mentioned.

For the first quarter, we grew gross profit by 24.8 million, while SG&A expenses increased just $13.6 million as a result our SG&A, as a percentage gross profit improved 160 basis points to 73.1%. Operating margin for the U.S. business segment increased 20 basis points to 3.7%.

Related to our UK segment, on a local currency actual basis, for the quarter total revenue increased 32.5% roughly three-fourth of this increase is due to the December 2014 acquisition of three BMW/MINI dealerships. Gross profit from the UK segment was up 30.4% from prior year.

New vehicle gross profit grew 29.3% as an increase of 20.4% in unit sales combined with an increase in gross profits per unit of 7.4%. Used vehicle gross profit increased 34.2%, that’s a 34.2% increase in unit sales combined with an increase of 1.7% in gross profit per unit.

Parts and service gross profit improved 29.5% with roughly 6% being contributed on a same store basis. F&I income increased 31.2% which is attributable to a 4.3% increase in gross profit per retail unit and a 25.7% increase in total retail units.

During the first quarter our SG&A as a percentage gross profit increased 10 basis points to 78.3% with increase explained by the December acquisition. Same store SG&A as percentage of gross profit decreased 220 basis points to 76.1%. As we assimilate these new stores, we expect the SG&A performance to come in line with our existing operations.

Operating margins from the UK business segment was flat at 2.2%. Related to our Brazil segment on a local currency same store basis. As Earl mentioned the total industry new unit volume decreased roughly 16% from the first quarter of 2014. Despite this, our total gross profit increased by 2.4%.

New vehicle gross profit increased 8.5% as a decline of 9.5% in unit sales was more than offset by an increase in gross profit per unit of 19.8%. Used vehicle gross profit decreased approximately 30% as a 7.7% decrease in total used unit sales combine with the decrease of 24.3% in gross profit per units.

Parts and service gross profit increased roughly 1% and our F&I income increased roughly 20% which is more than explained by a 30% increase in gross profit per retail unit. SG&A as a percentage gross profit increased 80 basis points to 92.7% and operating margin decreased 20 basis points to four-tenths of a percent.

It should be noted that the first quarter is seasonally the weakest due to summer vacations and carnival. Additionally, as Earl mentioned, the total industry volume in Q1 was negatively impacted by the expiration of the government sponsored auto purchase tax incentive at the end of 2014.

Even though we reported a slight loss in the first quarter, we do expect to be profitable for the full year in Brazil. Turning to our consolidated liquidity and capital structure.

As of March 31, 2015 we had $26.3 million of cash on hand and another $100.8 million that was invested in our four plan offset account bringing immediately available funds to a total of $127.1 million. In addition, we had $150.6 million available on our acquisition line that can also be used for general corporate purposes.

As such our total liquidity at quarter end was $277.7 million. With regards to our real estate investment portfolio as of March 31st, we own roughly $745 million of land and building which represents 47% of our dealership locations.

to finance these holdings, we’ve utilized our mortgage facility and executed borrowings under other real estate specific debt agreements. As of March 31st, we had $57.2 million outstanding under into our mortgage facility and $404.6 million of other real estate debt excluding capital leases.

During the first quarter, we purchased approximately 198,000 shares of our outstanding stock at an average price of $81.62 for a total of $16.2 million. As of March 31st, we had $83.3 million of share repurchase authorization remaining.

In the first quarter we used $4.9 million to pay dividends of $0.20 per share, an increase of $0.03 per share or 17.6% over the prior year. For additional detail regarding our financial condition please refer to the schedules of additional information attach to news release as well as the investor presentation posted on our Web site.

With that, I’ll now turn back over to Earl..

Thanks, John. Related to our corporate development efforts, as previously announced the company acquired an Audi dealership in Texas during March 2015 and an Audi dealership in Florida during April 2015. These franchises are expected to generate approximately $240 million in annual revenues.

During the quarter, the company also disposed of a small Mazda franchise in Georgia which generated roughly $5 million for the annual revenue. We continue to adjust our dealership portfolio to ensure we are generating appropriate returns for our shareholders.

This concludes our prepared remarks; I will now turn the call over to the operator to begin the Question-and-Answer Session.

Operator?.

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from John Murphy from Bank of America/Merrill Lynch. Please go ahead with your question..

Just a first question on the SG&A leverage, which was pretty good in the quarter here. As we think about going forward, it sounds like Brazil will get a little bit less worse or get a bit better and U.S.

is accelerating and Europe is accelerating, so it sounds like there should be some operating leverage, but it also sounds like there are some other actions that are going on.

I'm just curious where you think this can go during the course of this year and are we seeing the benefit of some of your proactive measures in the oil patch, ahead of potential weakness really coming through? And will those just bear fruit as the top line doesn't decelerate there? Just trying to understand what the potential is here this year because it sounds like there is a lot of opportunity in front of you?.

John, this is John Rickel. We think that obviously there are more things we can do on the cost front, as we talk about as long as we can keep the need to grow gross profit dollars we would expect to leverage those. So I think you're right that there is more that we can do on the cost and the cost leverage..

Okay. And then as we think about the parts and service business, there is a melding of the customer pay and the warranty because of the prepaid programs.

So just trying to understand, when we look at this, you said customer pay was up only 0.3%, but warranty was up 11%, do you have any way of putting those numbers together to understand really what the customer parts and service all-in is up? Because I just -- there has obviously been a lot of recalls, and that 11% may be somewhat inflated by the recalls, and we're just trying to gauge what the actual normal ongoing increase is here?.

Well it's definitely inflated by the recall and we’ve tried to do that, I don’t think we gave you a very reliable number. We had displacement in the quarter from both recalls displacing normal work and also some increased internal work. Our internal was up 10%, but we backed that out our numbers.

So we have a lot of use car activity particularly in increasing certified pre-own which takes, which has a lot higher reconditioning cost in times. So we’ve had some displacement on warranty as well as these prepaid maintenance programs that come through as warranty instead of customer pay.

But I really can’t give you a very reliable number, I am afraid..

But recall activity as a percent of parts and service right now is, what, far less than 10% of total parts and service revenue in gross?.

Certainly in terms of growth, I don’t know in terms of number of ROs. But yes certainly in terms of growth. A lot of the recall activity is just the inspection of a vehicle, and you’re bringing in and then there is no repair required or the parts aren’t available.

So, there is a lot of traffic on recalls that doesn’t necessarily generate a lot of gross profit dollars..

Okay. Then if we think about the European business, it sounds like the BMW/MINI dealerships really helped out in the quarter, but absent that, there still was some pretty good acceleration in a business, but we're hearing mixed messages coming out of the UK and the rest of the continent on what's going on in the markets over there.

I'm just wondering if you can comment on what you're expecting for the market for the full year and how you might be able to leverage that plus or minus..

I would expect that the UK if it has a growth issue it would quite minimal, that market has been very strong. We don’t think it’s going to go down but clearly it can’t grow like it has.

Our UK BMW dealership so it’s new one, it just came good during the play change month in March they lost money, lost quite a bit of money in three of the first four months we owned them. So, they were kind of a mix bag and that’s one of the reasons it took our SG&A down.

But we still have some relatively young dealerships in the UK so we think we can continue to leverage some operating improvement not just from the new BMW dealerships but from most of our dealerships in the UK. So we still have upside in the UK..

Then just, lastly, John, you were pretty active on the balance sheet last year, as far as simplifying and terming some debt out. Are any other opportunities to do so this year and would you consider doing a euro-denominated issuance? Because we've seen a lot of companies do that at very, very, very minimal cost..

It’s a good question John we did most of the heavy lifting last year there is not really a lot left in the way of clean up that’s needed. If we would need to do any sort of debt issuance this year I mean the idea you’ve float is one that we certainly would probably look at.

But right now there is really nothing on the horizon that would require us to do any debt issuance..

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

For the local currency disclosure, that’s very helpful.

Can you put the currency translation in terms of the bottom-line impact, how much you think that affected EPS?.

Rick this is John. It cost us probably about $0.02 for the UK and benefited us about a penny for Brazil. So net-net about $0.01 of EPS..

Also like to ask about the acquisition environment. You bought these two Audi stores.

If you could comment on the multiples there, and the BMW stores in the UK that closed in the fourth quarter?.

I wouldn’t comment specifically Rick but the luxury stores like that Audi and BMW are extremely expensive these days. And there’re quite difficult to find them and to find the business proposition that creates a good return on investment for shareholders. So those are difficult to find. We’re glad we did.

But I don’t think there are necessarily a lot of those out there that will pen so well if you’re objectively looking at future return on investments. So we’re continuing to look for them. The numbers are generally easier to make work in the UK just because the competitive environment is a little bit different there.

The acquisition environment in the U.S. I think has slowed down a little bit there is still plenty of dealerships for sale but it appears that price expectations are still pretty stout. And I think an acquirer has to be a lot more careful purchasing dealerships in the 17 million industry SAR than a 13 million or 15 million industry SAR..

And Brazil, do you have hold off there for a while?.

Not at all, I was there all last week we have some more adjustments to make to our portfolio there, to make it stronger. In particularly, our Nissan Peugeot dealerships are not performing well there. But there are significant number of opportunities in Brazil. And we will actively look to expand there, particularly with the strength of the dollar..

Finally, your help for the UK was helpful.

Brazil, take last quarter, you had talked about a flat market expectation, any changes to that coming out of the first quarter?.

No, the first quarter was really tough in January and February but we expected that and the real pressure is on the big four brands which -- and we don’t participate with those brands. But Fiat, Volkswagen, Ford and General Motors, they are struggling the most as you would expect when the market is weak.

Higher brands such as Toyota, BMW and Land Rover are our key brands are much more stable..

Our next question comes from David Lim from Wells Fargo. Please go ahead with your question..

Just the question on truck mix in the quarter can you explain, we noticed that the ATPs in the U.S. has increased about $700, $800 per unit, but your gross profit per unit only increased $7 on a year-over-year basis.

Is there anything to do with you guys still being more Toyota heavy than Ford heavy and is there anything to do with the F-Series not fully being ramped up?.

David, this is John Rickel. Yes, your numbers are basically accurate. And that is the piece the other one clearly being more Toyota heavy we continue to see pressure on mid line imports and I don’t think that was unique listening to what the others have announced with a partial offset.

We also see the luxury brands kind of get down into more entry level models. There has been some pressure on some of the luxury margins. And then your final point is right that Ford hasn’t fully loaded up with F-Series as that comes on stream later this year that should be a benefit for us..

Thanks, John. Also the question I had is on your SG&A-to-gross profit on improvement in the U.S., it was flattish on a same-store sales basis, better from a consolidated basis in the U.S.

Is that just more to do with the recent acquisitions still going down the cost curve?.

No, it basically on the same store basis David, as Earl mentioned we had stores up in Boston we’re heavier up in the Northeast than anybody else really other than maybe PAG. And so a lot of expenses around snow removal; Boston in particular just got hammered. And that really kind of held back some of the same store flow through.

On the consolidated, it was basically the benefit of some of the disposals we did over the last couple of quarters..

And just two more from me, on the SG&A-to-gross profit, if you neutralize FX, would that have been a 20-basis point impact? That's what I'm calculating is the 20, 30 basis point impact for FX..

It sounds about right David but let me confirm that for you offline..

And then, finally, there are some recent discussions about this Digital Millennium Copyright Act. I think OEMs are trying to limit the accessibility of individual like DIY or even do-it-for-me people when it comes to the ETU access to the vehicle.

Any commentary there on what you are hearing from the OEs as these cars are becoming more [supercomputer-risqué] in many respects, as well as the need for improved cyber security?.

We’re aware of the issues David but I can’t profess to be an expert on it. We’ve been involved with some of the rights repair legislation in certain states. But that tends to be I think an OEM driven intellectual property discussion. And I don’t really have any insights, so I think that could be productive for this discussion..

I got you. And let me squeeze one last thing here, CFPB front, any new thoughts there or any new developments there? Thank you..

David, this is Peter DeLongchamps. I guess the short answer is no. We’re continuing work with our lending partners to ensure that we’re in compliant as possible in all of our dealerships. But in all the discussions in are through the lenders at this point. So I don’t think there is any new development since the last time we talked about..

Our next question comes from Patrick Archambault from Goldman Sachs. Please go ahead with your question..

A couple from me, just clarification on Brazil it just seems like since you guys have spent time down there in general, but it seems like you have spent a lot of time down there recently, what do you see the trajectory of sales, and how do you see the trajectory of sales? It sounds like there was this IPI issue that expired in December and that's what created a very weak start of the year, but has it been picking up and are people actually more constructive about an improvement relative to what you saw in January and February?.

The overall environment is quite fragmented in terms of the psychology. Of course if Petrobras scandal has dominated a lot of the psychology economically in the market. So maybe that will start to settle down after they provided some clarity last week. But in the automotive sector, it’s more of a brand story.

And as I mentioned previously, the big four brands are challenged quite a bit since they have the most to lose. But brands like Toyota and Honda are actually selling every car they can make. They have new factories in Brazil, and Nissan has a new factory in Brazil. We’re little confused about what that business model is.

But it appears that their sales are going up, I wouldn’t say our profits are following that yet. But then you have BMW with a new factory, Land Rover planning a new factory, those are our brands.

So there is really a big transition for many of the brands particularly the ones that we deal with as they start to produce locally and then enables them to have more competitive price points and should enable them to increase our whole volume even in this kind of challenging market.

So, you almost have to look at it brand-by-brand in the automotive industry. But Toyota and Honda as they make more cars, they even sell more cars, that’s how different it is from the overall macro numbers have come down 16.5% or whatever that final number was..

So is it a market that’s been starved of premium product and you're finally starting to see that come in with these companies manufacturing locally?.

It hasn’t been starved premium product, but premium product has been priced so astronomically because of the tax structure that it is limited overall demand historically. And as these premium brands start to produce locally it’s going to dramatically reduce the transaction prices and I expect there will be much more volume potential for them..

Got it. That's helpful. Just back on consolidated numbers, you are used to new ratio was up quite a bit year-on-year. It had been declining in terms of -- all throughout last year, actually, and I guess the first quarter was the first time we had seen it up in a year. So maybe a little bit on what has allowed you to do that.

Is that the industry, used as maybe coming back because of some of that inventory acquisition? Or is that more of a Group 1 factor?.

Yes, I expect there is several factors, we don’t really look at that metric, I know as we exited the Long Island market, that probably helped our ratio a bit because we didn’t have much space for used cars there, but I think overall the used market is strong this year, and with a better supply of off-lease vehicle we’ve seen our certified pre-own long increase quite a bit that seems to be a stronger part of the market.

So I would just say overall that we’re seeing the used car market have some strength so far this year, probably more than we would have forecasted..

Okay. I appreciate the color. And then one last one from me, I mean I sort of have to ask here with the sales report coming in a couple of days.

Any kind of initial views of how we're stacking up here in April and versus March?.

Well I’ll refer to the press reports of the last couple of days which showed a relatively strong April. It seems that the prognosticators are kind of between 16.3 million and 16.7 million unit SAR for April. That makes sense to me.

And April seldom quite as strong as March because with quarter-end marketing programs, you generally get a push in March, in overall volume. But I would say, we haven’t seen anything to materially change the overall momentum of the market and that seems consistent with what these third-parties are forecasting this month in terms of 16.3 to 16.7.

So I think it's fair to say the momentum in the market is still quite strong..

Our next question comes from Brett Hoselton from KeyBanc. Please go ahead with your question..

Wanted to start off kind of focusing again on the Brazil market, I am looking at Slide 47, which I know it's a lot of slides here, so Earl, you may not be familiar with it, but in it you have your new vehicle sales in Brazil going from 3.4 million in 2014 to 3.4 million in 2015, consistent with your kind of flat expectations.

It looks like 2016 it's jumping up to 4.2 million units, if I'm not mistaken, give or take, but that's like around a 24% year-over-year increase. Obviously, pretty substantial increase in 2016. I presumed these aren't necessarily your projections; they are probably somebody else's. But my question is simply, that's the big jump and --..

Yes, Brett let me jump in there is John Rickel. Those are the local kind of dealer association. The numbers in there for ’14 and ’15, we’ve obviously put in our local forecast. We don’t have an independent number; we’re not planning the business on that kind of jump.

The indication there though is clearly there is longer run potential in the market whether or not that’s next year or ’17, I don’t know that we’re smart enough to say that, but your point about a jump for next year, we’re not planning the business based on that..

Okay.

So I guess the crux of the question was ultimately going to be, what you think about next year? I mean it sounds like, generally speaking, up is probably a good estimate, but do you think that you're likely to see a single-digit increase or flat or up 10%? What do you think -- based on what you're seeing today, what's your general sense of 2016? Any guess?.

Brett, this is John. We really don't forecast the next year, I mean it's way too early to be offering prognostications on 2016, we'll address that when we get into the fall, we need to see how this year unfolds. Clearly we like the longer run aspect of Brazil, but we're not in a position to give you any sort of estimates on '16 just yet..

Okay. Then let me ask you a little bit shorter-term perspective on Brazil. If unit sales are down 9.5% on a same-store basis in the first quarter, you're expecting flattish for the full year that generally implies that you're going to see some improvement as you move through the remainder of the year.

So my question is, is that as a result of the sales stabilizing at current levels and comparisons becoming easier or is it simply -- how do you think about the remainder of the year, why does it go up on a year-over-year basis..

I think the remainder of the year would be probably as an industry significantly better than January and February, January and February were atypically weak, our March business was significantly profitable and because the market settled down, the pull ahead to last year settled down, people got back to work after the carnival and you know we think we can make headway and certainly our sales won't be down in 9.5% in the quarters ahead in Brazil..

Okay. Very good, then. Looking at your UK business, on the used cars side up 11% on a same-store sales basis is very good.

My question is, was that just a matter of an easy comparison, was there some fleet business in there? How did -- was there anything in particular that is driving that?.

Well, it’s not fleet business on the used car side but there is some aggressive marketing pushes in the UK for OEMs because of the pound's relative strength compared to the Euro and such and so I think there're probably some manufactured used cars that are getting pushed into the market with low mileage and that can be good for dealers like us..

Okay. Then as we think about your parts and service business, ignoring FX, you're growing in that low to mid-single-digit range.

Is that a reasonable expectation, again ignoring FX, for the parts and service revenue going forward, or is there some reason to believe that it is going to maybe accelerate or decelerate in your case?.

Well I think we had a below average quarter in the US in terms of fixed growth, I think we should have been a little bit higher than that, I think mention some warranty and internal displacement, we also had six dealerships in New England that barely grew at all and now it’s against a weak comp last year but we had three weeks kind of a four consecutive snowstorms up there.

We had five big shops under construction during the quarter that troubled business a bit. So I think our US business I think we should have a reasonable chance to have better growth rates in the quarters ahead this year..

Brett, I'll stand by what we told you which the expectation is mid-single digits and for the reason as Earl indicated we're a little bit under that in first quarter but I think we're still very comfortable with that as we look forward..

Excellent. Earl, John, thank you very much, gentlemen. .

Our next question comes from Paresh Jain from Morgan Stanley; please go ahead with your question..

Morning everyone, first question on Brazil, the headcount reductions you had there, what percentage of it was purely a response to lower volumes and how much of it was efficiency related? Trying to get a sense of how much cost can come back, if and when volumes come back in Brazil?.

Yes, the headcount reductions you're right were in Brazil we took out about 10% of the headcount out. Certainly a portion of that was volume related but better than half of it was just kind of pure efficiencies and we're comfortable that those costs will stay out..

Thanks. That's good color. Switching to the U.S. same-store new number, the growth rate there was much below industrial rate and it seems like the oil-related markets did well.

What was the driver of the underperformance there? Do you think there was any impact from the advertising spend cut that you guys saw in the last two quarters?.

No, I didn't see it as advertizing related but our, particularly our Ford truck business has been throttled way back in Texas and across the southern U.S.

just due to lack of supply, in some cases of the new trucks that the customers want and in some cases we're running out of 2014, so our Ford business was much weaker than I would expect it to be, we actually expected it to be quite strong this year as the supply increases of the new trucks..

Right, and as Earl indicated the snow up in the northeast didn't help either..

Got it. Thank you. .

Our next question comes from Bill Armstrong from CL King & Associates; please go ahead with your question..

Good morning gentlemen, back to Brazil, your decline in sales was obviously better than the overall industry. You indicated that it was really driven by your brand mix.

Do you have any sense for whether you've gained or lost market share within the brands that you carry?.

Oh, we're definitely gaining market share with the exception of Peugeot I would say..

What's driving those share gains and maybe also what’s driving the share loss in Peugeot?.

The Peugeot brand is extremely weak and is a bad financial proposition for us right now. So we have -- we’re just trying to minimize the losses that are at Peugeot stores right now there and we’re trying to determine what the long-term business model is there.

But we have very strong operations and where we dominate our locations with the other brands like Land Rover, BMW and Toyota..

Got it. Okay. In the U.S., your new unit same-store sales were up about 3.4%, which looks like it lagged in the industry a little bit.

Any color there?.

But definitely on a brand adjusted basis I don’t think, I think it was just about on the industry average..

And it's basically for the reason that Earl mentioned previously been short of F-Series were 10% plus Ford mix. So certainly the Ford storage were held back by not having enough of the new truck and then clearly the snow impact up in the Northeast was played a role as well..

And then finally, your U.S. parts and service margins were up very nicely.

Was that a mix issue or what drove that increase and is that sustainable?.

No, I think it was more of the mix issue. Our wholesale parts business was down for the quarter and that’s our lowest margin business..

The other piece Bill that played into that the -- we have a lot of internal work on the back of all those use car sales. We don’t count the revenue, but we do keep the gross profit associated with that. So is basically largely driven by the impact of the internal work.

And as long as we continue to sell use cars at the rate that we’re doing that should sustainable..

[Operator Instructions] Our next question comes from James Albertine from Stifel. Please go ahead with your question..

Real quickly, on F&I, you continue to set the bar higher. Pete, congratulations again. It's one of the big standouts of your results in the first quarter relative to your peers.

Can you first frame for us how much of it is sort of financing related and how much is product related, and where do you see the expansion opportunity is greatest between those two buckets? Thanks..

We think that where we are today is a comfortable position for the company. About a third of it is related to lending activities and the remainder is to product which we have increased our penetration rates over the past few years.

But at the end of the day it has been training execution of the dealership level, the compliance that we have and audit procedures that we have in place help grow the business.

So, we’re comfortable from a forecasting standpoint we are today, we do have a terrific quarter and we’re just going to continue to work on the underperforming dealerships who try and make those dealerships better. But there has been a lot of hard work and execution and good team work with our lenders and vendor partner.

So it’s a solid piece of our business and I appreciate your asking the question..

Thanks for that color, Pete, and if I may ask just a follow-up, in light of some of your comments on the F-150, which are understood, and clearly in the Northeast, as well understood, can you give us any clarity in terms of perhaps the order backlog for the F-150 that gives you some visibility into the second quarter, perhaps beyond? And then to the extent that you're not going to get most likely parts and service work back going forward but to the extent that new vehicle or used vehicle sales in the Northeast were deferred, any insight there as well? Thanks so much..

On the F-Series Jamie this is Earl, are actually very complex dynamic. There are decent numbers of the 2015 trucks out there but the customer demand we have are for very loaded trucks, King Ranch, Platinum, and so forth.

These early adopters on a truck like this, want the exact trucks they want and we just don't have the precise trucks in stock that a lot these buyers are clamoring for, that’s quite normal on a launch.

And then here is a big difference in transaction price between the ‘15s and the ‘14s and there are incentives on the ‘14s and not much on the ‘15s and a lot of the most popular 2014s, work trucks and popularly equipped trucks and more value models, those in many cases sold out.

So the 2014 is a totally different transaction price and a great value proposition, but in the end it's hard to get the trucks that customers want in both the ’14 and the ’15 at the moment, that’s normal, that’s a normal particularly for a massive volume model that sell 700,000 units a year, is an issue.

There is also some super duty F-Series shortages that we’ve run into. Back to the New England situation. We had that weather last year; it's just that in New England this year it's been for about three straight weeks, I think for consecutive snowstorms, so we never really got reopened.

And you get -- it seems that you get most of that new vehicle business back, but the service business is tough to get back because once you lose those hours the shops tend to run either fully loaded or close to fully load and most of time these days, so you just never get those work hours back..

And ladies and gentlemen at this time it showing no additional questions. I like to turn the conference call back over for any closing remarks..

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

And ladies and gentlemen that does conclude today’s conference call. We do thank you for attending. You may now disconnect your telephone lines..