This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements because of various factors. See "Cautionary Statement about Forward-Looking Statements."

Overview

We are a leading operator in the automotive retail industry. As of June 30, 2012, we owned and operated 143 franchises, representing 32 brands of automobiles, at 111 dealership locations and 25 collision service centers in the U.S. and 16 franchises at 11 dealerships and three collision centers in the U.K. We, through our regions, sell new and used cars and light trucks; arrange related vehicle financing; sell service and insurance contracts; provide automotive maintenance and repair services; and sell vehicle parts. Our operations are primarily located in major metropolitan areas in Alabama, California, Florida, Georgia, Kansas, Louisiana, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, Oklahoma, South Carolina and Texas in the U.S. and in the towns of Brighton, Chelmsford, Colchester, Farnborough, Hailsham, Harold Wood, Hindhead, London, Southend, Stanstead, and Worthing in the U.K.

As of June 30, 2012, our U.S. retail network consisted of the following two regions (with the number of dealerships they comprised): (a) the East (47 dealerships in Alabama, Florida, Georgia, Louisiana, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York and South Carolina) and (b) the West (64 dealerships in California, Kansas, Oklahoma and Texas). Each region is managed by a regional vice president who reports directly to our Chief Executive Officer and is responsible for the overall performance of their regions, as well as for overseeing the market directors and dealership general managers that report to them. Each region is also managed by a regional chief financial officer who reports directly to our Chief Financial Officer. Our dealerships in the U.K. are also managed locally with direct reporting responsibilities to our corporate management team.

Outlook

From September 2008 through most of 2009, the U.S. and global economies suffered from, among other things, a substantial decline in consumer confidence, a rise in unemployment and a tightening of credit availability. As a result, the retail automotive industry was negatively impacted by decreasing customer demand for new and used vehicles, vehicle margin pressures and higher inventory levels. Through 2011 and the first six months of 2012, economic trends have stabilized and consumer demand for new and used vehicles has shown improvement. According to industry experts, the June 2012 seasonally adjusted annual rate of sales (or "SAAR") was 14.1 million units, compared to 11.5 million units a year ago. But given the depth of the downturn, we believe the recovery to historically normalized industry selling levels will probably be extended.

Our operations have, and we believe that our operations will continue to generate positive cash flow. As such, we are focused on maximizing the return on the capital that we generate from our operations and positioning our balance sheet to take advantage of investment opportunities as they arise. We believe that the stabilizing economic trends provide opportunities for us to improve our operating results as we: (a) expand our new and used vehicle sales results and improve our sales efficiency; (b) continue to focus on our higher margin parts and service business by enhancing the cost effectiveness of our marketing efforts, implementing strategic selling methods, and improving operational efficiencies; (c) invest capital where necessary to support our anticipated growth, particularly in our parts and service business; and (d) further leverage our revenue and gross profit growth through continued cost containment.

We continue to closely scrutinize all planned future capital spending and work closely with our original equipment manufacturer ("OEM") partners in this area to make prudent investment decisions that are expected to generate an adequate return and/or improve the customer experience. We anticipate that our 2012 capital spending will be less than $55.0 million, which includes $15.0 million for specific growth initiatives in our parts and service business.

We remain committed to our growth-by-acquisition strategy, and with the prolonged nature of the anticipated economic recovery, we believe that significant opportunities exist to enhance our portfolio with dealerships that meet our stringent investment criteria. During the first six months of 2012, we completed the acquisition of 12 dealerships. We will continue to pursue dealership investment opportunities that we believe will add value for our stockholders.

Financial and Operational Highlights

Our operating results reflect the combined performance of each of our interrelated business activities, which include the sale of new vehicles, used vehicles, finance and insurance products, and parts, as well as maintenance and collision repair services. Historically, each of these activities has been directly or indirectly impacted by a variety of supply/demand factors, including vehicle inventories, consumer confidence, discretionary spending, availability and affordability of consumer credit, manufacturer incentives, weather patterns, fuel prices and interest rates. For example, during periods of sustained economic downturn or significant supply/demand imbalances, new vehicle sales may be negatively impacted as consumers tend to shift their purchases to used vehicles. Some consumers may even delay their purchasing decisions altogether, electing instead to repair their existing vehicles. In such cases, however, we believe the new vehicle sales impact on our overall business is mitigated by our ability to offer other products and services, such as used vehicles and parts, as well as maintenance and collision repair services. In addition, our ability to reduce our costs in response to lower sales also tempers the impact of lower new vehicle sales volume.

We generally experience higher volumes of vehicle sales and service in the second and third calendar quarters of each year. This seasonality is generally attributable to consumer buying trends and the timing of manufacturer new vehicle model introductions. In addition, in some regions of the U.S., vehicle purchases decline during the winter months due to inclement weather. As a result, our revenues and operating income are typically lower in the first and fourth quarters and higher in the second and third quarters. Other factors unrelated to seasonality, such as changes in economic condition and manufacturer incentive programs, may exaggerate seasonal or cause counter-seasonal fluctuations in our revenues and operating income.

For the three months ended June 30, 2012, total revenues increased 28.6% from 2011 levels to $1.9 billion and gross profit improved 16.8% to $285.3 million. For the six months ended June 30, 2012, total revenues increased 23.5% from 2011 levels to $3.6 billion and gross profit improved 17.1% to $545.8 million. Operating income increased for the three and six months ended June 30, 2012 by 15.9% and 25.0%, respectively, from 2011 to $63.1 million and $117.1 million, respectively. Income before income taxes increased to $46.0 million for the second quarter of 2012, which was a 16.0% improvement over the same period from the prior year. For the first half of 2012, income before income taxes increased 29.8% to $83.4 million. For the three months ended June 30, 2012 and 2011, we realized net income of $28.6 million and $24.7 million, respectively, and diluted income per share of $1.20 and $1.03, respectively. For the six months ended June 30, 2012 and 2011, we realized net income of $51.7 million and $40.0 million, respectively, and diluted income per share of $2.18 and $1.66, respectively. For the six months ended June 30, 2012 and 2011, our net cash used was $5.4 million and $7.6 million, respectively.

Key Performance Indicators

The following table highlights certain of the key performance indicators we use to manage our business:

Consolidated Statistical Data



                                            Three Months Ended                  Six Months Ended
                                                 June 30,                           June 30,
                                          2012              2011             2012              2011
Unit Sales
Retail Sales
New Vehicle                                32,924           24,097            60,854            48,801
Used Vehicle                               22,004           17,200            42,753            33,930

Total Retail Sales                         54,928           41,297           103,607            82,731
Wholesale Sales                            11,244            8,494            21,238            17,549

Total Vehicle Sales                        66,172           49,791           124,845           100,280
Gross Margin
New Vehicle Retail Sales                      5.9 %            6.7 %             5.9 %             6.1 %
Total Used Vehicle Sales                      7.4 %            8.8 %             7.7 %             8.5 %
Parts and Service Sales                      53.1 %           52.5 %            52.6 %            52.8 %
Total Gross Margin                           15.1 %           16.6 %            15.3 %            16.2 %
SG&A (1) as a % of Gross Profit              75.1 %           75.0 %            75.8 %            77.0 %
Operating Margin                              3.3 %            3.7 %             3.3 %             3.2 %
Pretax Margin                                 2.4 %            2.7 %             2.3 %             2.2 %
Finance and Insurance Revenues
per Retail Unit Sold                    $   1,191         $  1,126         $   1,184         $   1,097

(1) Selling, general and administrative expenses.

The following discussion briefly highlights certain of the results and trends occurring within our business. Throughout the following discussion, references are made to Same Store results and variances that are discussed in more detail in the "Results of Operations" section that follows.

During the first six months of 2012, our industry experienced an increase in SAAR of new vehicle unit sales. While the average SAAR is still low relative to the years before 2008, it has risen from an average of 12.6 million through the first six months of 2011 to 14.3 million in 2012. Our new vehicle retail sales revenues increased 33.4% and 25.0% for the three and six months ended June 30, 2012, respectively. This improvement primarily reflects an increase in new vehicle unit sales of 36.6% and 24.7% for the three and six months ended June 30, 2012, respectively. The increase in unit sales is primarily a result of increased inventory levels in our predominant import brands over 2011 levels that experienced shortages as a result of the natural disaster in Japan that occurred in March 2011. New vehicle retail gross margin declined during the three and six months ended June 30, 2012 primarily as a result of an industry wide increase in the supply of new vehicles units.

Our used vehicle results are directly affected by economic conditions, the level of manufacturer incentives on new vehicles and new vehicle financing, the number and quality of trade-ins and lease turn-ins, the availability of consumer credit, as well as our ability to effectively manage the level and quality of our overall used vehicle inventory. The stabilizing economic environment that benefited new vehicle sales also supported improved used vehicle demand that positively impacted our used vehicle retail sales. Further, the wholesale side of our business experienced increases in unit sales for the three and six months ended June 30, 2012. Used vehicle gross margins declined for the three and six months ended June 30, 2012, due to tightening price relativities between new and used vehicles, as well as a recent decline in auction prices during the latter part of the second quarter.

Our parts and service sales increased by 7.9% and 8.6%, respectively, for the three and six months ended June 30, 2012, as compared to the same period in 2011, primarily driven by increases in our customer pay parts and service business and in our collision business, as well as increases in our wholesale parts business. Our parts and service margins increased for the second quarter of 2012 but declined for the six months ended June 30, 2012, as compared to the same period in 2011. The increase in the margins during the second quarter of 2012 was primarily a result of an increase in internal work generated by increased new and used retail vehicle sales volumes. The year-to-date decline is primarily due to a mix shift away from our higher margin warranty business and towards our relatively lower margin wholesale and collision businesses.

Our consolidated finance and insurance income per retail unit sold increased for the three and six months of 2012, as compared to the same period in 2011, primarily driven by increases in penetration rates for finance and vehicle service contracts. In addition, we experienced increases in income per contract in our insurance and other product offerings.

Our total gross margin declined for the three and six months ended June 30, 2012, as compared to the same period in 2011, as a result of the shift in business mix towards the lower margin new and used vehicle businesses.

Our consolidated SG&A expenses increased in absolute dollars for the three and six months ended June 30, 2012, as compared to the same period in 2011. SG&A as a percentage of gross profit was relatively flat and decreased 120 basis points, respectively, for the three and six months ended June 30, 2012 from the same periods in 2011, reflecting ongoing cost control and the leverage on our cost structure that the higher revenues and gross profits provide. SG&A expenses during the three months ended June 30, 2012, included $2.7 million of expense related to the insurance deductible associated with a significant hail storm that struck our Oklahoma City dealerships in May.

For the three and six months ended June 30, 2012, floorplan interest expense increased 20.6% and 16.6%, respectively, as compared to the same period in 2011, primarily due to higher weighted average borrowings as our import brand inventories returned to more normalized levels following the impact of the Japanese earthquake and tsunami constrained levels last year and reflecting recent acquisitions. Other interest expense increased 11.7% and 12.8%, respectively, for the three and six months ended June 30, 2012, due in part to an increase in real estate related borrowings.

We address these items further, and other variances between the periods presented, in the "Results of Operations" section below.

Critical Accounting Policies and Accounting Estimates

The preparation of our Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles requires management to make certain estimates and assumptions.

We disclosed certain critical accounting policies and estimates in our 2011 Form 10-K, and no significant changes have occurred since that time.

Results of Operations

The following tables present comparative financial and non-financial data for the three and six months ended June 30, 2012 and 2011 of (a) our "Same Store" locations, (b) those locations acquired or disposed of during the periods ("Transactions"), and (c) the total company. Same Store amounts include the results of dealerships for the identical months in each period presented in the comparison, commencing with the first full month in which the dealership was owned by us and, in the case of dispositions, ending with the last full month it was owned by us. Same Store results also include the activities of our corporate headquarters.

The following table summarizes our combined Same Store results for the three and six months ended June 30, 2012, as compared to 2011:

Total Same Store Data

(dollars in thousands, except per unit amounts)



                                                      Three Months Ended June 30,                            Six Months Ended June 30,
                                                 2012           % Change          2011                 2012           % Change          2011
Revenues
New vehicle retail                            $   979,317            21.5 %    $   806,141          $ 1,820,048            14.5 %    $ 1,589,794
Used vehicle retail                               417,810            18.8 %        351,653              803,310            19.1 %        674,697
Used vehicle wholesale                             63,212             4.4 %         60,542              124,427             1.6 %        122,478
Parts and service                                 206,171             1.3 %        203,592              404,708             1.8 %        397,666
Finance, insurance and other                       60,563            30.8 %         46,293              113,775            25.7 %         90,486

Total revenues                                $ 1,727,073            17.6 %    $ 1,468,221          $ 3,266,268            13.6 %    $ 2,875,121
Cost of Sales
New vehicle retail                            $   922,113            22.6 %    $   752,123          $ 1,714,081            14.8 %    $ 1,493,095
Used vehicle retail                               382,265            20.5 %        317,326              734,361            20.1 %        611,518
Used vehicle wholesale                             62,801             6.6 %         58,890              121,529             2.7 %        118,334
Parts and service                                  97,284             0.7 %         96,595              191,471             2.1 %        187,569

Total cost of sales                           $ 1,464,463            19.6 %    $ 1,224,934          $ 2,761,442            14.6 %    $ 2,410,516

Gross profit                                  $   262,610             7.9 %    $   243,287          $   504,826             8.7 %    $   464,605

Selling, general and administrative
expenses                                      $   197,644             8.2 %    $   182,674          $   382,921             6.9 %    $   358,185
Depreciation and amortization expenses        $     7,333            11.3 %    $     6,589          $    14,252             9.6 %    $    13,009
Floorplan interest expense                    $     7,177            11.3 %    $     6,450          $    14,178             7.4 %    $    13,201
Gross Margin
New vehicle retail                                    5.8 %                            6.7 %                5.8 %                            6.1 %
Used vehicle                                          7.5 %                            8.7 %                7.7 %                            8.4 %
Parts and service                                    52.8 %                           52.6 %               52.7 %                           52.8 %
Total gross margin                                   15.2 %                           16.6 %               15.5 %                           16.2 %
SG&A as a % of gross profit                          75.3 %                           75.1 %               75.9 %                           77.1 %
Operating margin                                      3.3 %                            3.7 %                3.3 %                            3.2 %
Finance and insurance revenues per retail
unit sold                                     $     1,206             7.1 %    $     1,126          $     1,194             8.8 %    $     1,097

The discussion that follows provides explanation for the material variances noted above. In addition, each table presents, by primary statement of operations line item, comparative financial and non-financial data of our Same Store locations, Transactions and the consolidated company for the three and six months ended June 30, 2012 and 2011.

New Vehicle Retail Data

(dollars in thousands, except per unit amounts)



                                            Three Months Ended June 30,                            Six Months Ended June 30,
                                       2012           % Change          2011                2012           % Change           2011
Retail Unit Sales
Same Stores                              29,899            24.7 %        23,977               55,691            14.5 %          48,637
Transactions                              3,025                             120                5,163                               164

Total                                    32,924            36.6 %        24,097               60,854            24.7 %          48,801
Retail Sales Revenues
Same Stores                         $   979,317            21.5 %     $ 806,141          $ 1,820,048            14.5 %     $ 1,589,794
Transactions                            101,393                           3,740              173,257                             4,801

Total                               $ 1,080,710            33.4 %     $ 809,881          $ 1,993,305            25.0 %     $ 1,594,595
Gross Profit
Same Stores                         $    57,204             5.9 %     $  54,018          $   105,967             9.6 %     $    96,699
Transactions                              6,638                             246               10,695                               337

Total                               $    63,842            17.7 %     $  54,264          $   116,662            20.2 %     $    97,036
Gross Profit per Retail Unit Sold
Same Stores                         $     1,913           (15.1 )%    $   2,253          $     1,903            (4.3 )%    $     1,988
Transactions                        $     2,194                       $   2,050          $     2,071                       $     2,055
Total                               $     1,939           (13.9 )%    $   2,252          $     1,917            (3.6 )%    $     1,988
Gross Margin
Same Stores                                 5.8 %                           6.7 %                5.8 %                             6.1 %
Transactions                                6.5 %                           6.6 %                6.2 %                             7.0 %
Total                                       5.9 %                           6.7 %                5.9 %                             6.1 %

Coupled with the increase in SAAR, we believe the focus that we have placed on improving our dealership sales processes has led to increased Same Store new vehicle sales and profit. In addition, the recovery by our major import brand OEM partners from the natural disasters in Japan in 2011 led to the normalization of inventory levels and bolstered new vehicle sales. Our Same Store new vehicle retail revenues increased 21.5%, primarily on increased new vehicle unit sales of 24.7% for the three months ended June 30, 2012, as compared to the same period in 2011. From a mix standpoint, we generated the majority of the volume increase through our import brands, which sold 35.0% more units in the second quarter of 2012, as compared to the same period in 2011. Same Store revenues for the three months ended June 30, 2012 improved 33.9% in our import brands, as well as 23.1% and 8.4% in our domestic and luxury categories, respectively, as compared to the same period in 2011. The mix shift effect on revenues from the normalization of import brand inventories contributed to a decline in our Same Store revenues per retail unit ("PRU"), which decreased 2.6% to $32,754 in the second quarter of 2012, as compared to the same period in 2011. The level of retail sales, as well as our own ability to retain or grow market share during the future periods, is difficult to predict.

Our Same Store new vehicle gross profit increased 5.9% for the three months ended June 30, 2012 as a result of the 24.7% increase in new vehicle retail unit sales. The mix effect of our new vehicle business shifting to import from luxury brands, coupled with the improved level of industry-wide supply of import brand inventory contributed to a decline in our Same Store gross profit PRU by 15.1%, as compared to the same period in 2011. Same Store gross profit PRU declined $435 in our import brands and $202 in our domestic brands, but improved $18 in our luxury brands. On a sequential basis, we experienced a 1.2%, or $22, increase in our gross profit PRU for second quarter of 2012, as compared to the first quarter of 2012.

For the six months ended June 30, 2012, as compared to the same period in 2011, Same Store new vehicle unit sales and revenues increased 14.5%. Same Store unit sales increased 22.1%, 17.8%, and 3.5% in our domestic, import, and luxury categories, respectively. Our Same Store new vehicle retail revenues PRU were

relatively flat, at $32,681 for the six months ended June 30, 2012, as compared to the same period in 2011. Gross profit PRU decreased 4.3% to $1,903 in the first half of 2012 from $1,988 during the same period in 2011, and, as a result, our gross margin decreased 30 basis points from 6.1% to 5.8% for the six months ended 2012, as compared to the same period in 2011.

The following table sets forth our Same Store new vehicle retail sales volume by manufacturer:

Same Store New Vehicle Unit Sales



                                       Three Months Ended June 30,                      Six Months Ended June 30,
                                    2012          % Change         2011             2012         % Change         2011
Toyota                               10,257            49.1 %       6,878            18,832           22.3 %      15,393
Nissan                                3,547            15.5         3,070             7,193            9.9         6,548
Honda                                 3,648            34.2         2,718             6,695           13.8         5,881
BMW                                   3,563            (0.2 )       3,570             6,397           (1.0 )       6,461
Ford                                  2,355            22.1         1,928             4,508           22.2         3,689
Daimler                               1,567             2.1         1,535             2,889            1.6         2,843
General Motors                        1,371            17.0         1,172             2,604           11.7         2,332
Chrysler                              1,439            27.8         1,126             2,708           34.1         2,019
Volkswagen                              778             5.9           735             1,251           12.5         1,112
Other                                 1,374            10.4         1,245             2,614           10.8         2,359

Total                                29,899            24.7 %      23,977            55,691           14.5 %      48,637

Most manufacturers offer interest assistance to offset floorplan interest charges incurred in connection with inventory purchases. This assistance varies by manufacturer, but generally provides for a defined amount, adjusted . . .