Asbury Auto Dealer Group Reports First Quarter Financial Results
STAMFORD, Conn., April 30 -- Asbury Automotive Group, Inc. , one of the largest automotive retail and service companies in the U.S., today reported financial results for the first quarter ended March 31, 2003.
Net income for the quarter was $7.1 million, or $0.21 per share, while in the prior year quarter, the Company reported pro forma net income from continuing operations of $11.4 million, or $0.33 per share (a reconciliation of pro forma net income from continuing operations to GAAP net income from continuing operations is provided on the Consolidated Statement of Income accompanying this release). The pro forma results for the prior-year quarter exclude a non-recurring deferred income tax provision required by SFAS 109 related to Asbury's change in tax status from a limited liability company to a "C" corporation in conjunction with its March 2002 initial public offering, and assume that the Company was a publicly traded "C" corporation for the entire period.
President and CEO Kenneth B. Gilman said, "As anticipated, earnings were down on a year-over-year basis, due to increased operating expenses, which we discussed in our year-end results call. At that time, we shared with investors specific expense reduction initiatives we were taking in certain of our platforms, with the anticipation of seeing the effects of those changes in the second quarter. I am pleased to be able to report that we were able to realize some of the benefits of those initiatives in March. Specifically, our SG&A expenses, as a percent of total revenue, were 12.2% in March versus 13.2% for the first two months of the quarter. While expenses are still high by historical standards, early indications are encouraging, as we still anticipate that most of the intended effects of our expense control initiatives will be fully realized in the second quarter.
"The strategy during the quarter, in terms of new vehicle sales, was primarily volume-driven. The new vehicle environment was particularly difficult, especially in the first two months of the quarter. By taking a volume-driven approach, and foregoing a small amount of new vehicle margin, we were able to sustain unit sales -- thereby fostering good relations with our manufacturer partners. On a same-store basis, our new vehicle retail unit sales were down only 1.5 percent, while the industry was down 4.4 percent.
"An area of notable strength for Asbury during the quarter was our used car business, despite what many had perceived to be a difficult used vehicle environment. This has been a key initiative for us, an area of considerable focus, with our Tampa platform being our most recent and notable success story. Tampa simply had an outstanding used car first quarter, increasing used retail unit sales by 36 percent, growing used vehicle retail gross profit margin to 12.9 percent from 10.2 percent, and increasing total used vehicle gross profit by 54 percent. Clearly, Tampa's focus on used vehicles is working, and demonstrates the value of our approach to sharing best practices.
"Our higher margin businesses -- parts and service operations, and finance and insurance -- remained strong during the quarter," Mr. Gilman added. "These businesses, which together account for well over half of Asbury's gross profit, have continued to grow in the face of a challenging environment for new vehicle sales."
Financial highlights for the quarter included:
* The Company's total revenues were approximately $1.1 billion, up
4.9 percent from a year ago. On a same-store basis, retail sales
(excluding fleet and wholesale business) were up 1.3 percent.
* Total gross profit dollars rose 3.4 percent, while same-store retail
gross profit was up marginally, in spite of a difficult pricing
environment in both the new and used car markets.
* On a same-store basis, new vehicle retail unit sales declined
1.5 percent, while new vehicle same-store retail gross profit dollars
decreased 10.5 percent.
* Used vehicle retail unit sales were flat on a same-store basis, as was
retail gross profit margin at 12.2 percent of used retail sales.
* Parts and service revenues increased 7.6 percent (4.8 percent
same-store), with the related gross profit increasing 6.7 percent
(3.4 percent same-store).
* Net finance and insurance (F&I) income was up 13.7 percent (9.8 percent
same-store) from a year ago, while F&I per vehicle retailed rose
10.4 percent to $783.
Commenting on the Company's Price 1 used car pilot program, Mr. Gilman said, "We have seen a steady improvement in Price 1's performance on a sequential, month-to-month basis, starting with January, and continue to believe the potential upside of developing a stand-alone used car business is well worth our modest incremental investment at this point. For the first quarter, the loss from Price 1 was $1.5 million on a pre-tax basis, and we still expect the year-over-year losses to come down by approximately $3 million."
The Company's earnings per share guidance for 2003 remains unchanged in a range between $1.50 and $1.60, based on new U.S. light vehicle sales of about 16 million units. This guidance does not include the potential impact of any acquisitions that may be completed in 2003.
Mr. Gilman concluded, "Ongoing manufacturer incentive programs, encouraging trends in new vehicle affordability, as well as the industry's strong new product pipeline, should continue to keep new car sales at a relatively strong level. Given our diverse income streams, and with more stringent cost controls now in place, we remain optimistic about Asbury's growth prospects in 2003 and beyond."
About Asbury Automotive Group
Asbury Automotive Group, Inc., headquartered in Stamford, Connecticut, is one of the largest automobile retailers in the U.S., with 2002 revenues of $4.5 billion. Built through a combination of organic growth and a series of strategic acquisitions, Asbury now operates through nine geographically concentrated, individually branded "platforms." These platforms currently operate 94 retail auto stores, encompassing 133 franchises for the sale and servicing of 36 different brands of American, European and Asian automobiles. Asbury believes that its product mix includes one of the highest proportions of luxury and mid-line import brands among leading public U.S. automotive retailers. The Company offers customers an extensive range of automotive products and services, including new and used vehicle sales and related financing and insurance, vehicle maintenance and repair services, replacement parts and service contracts.
ASBURY AUTOMOTIVE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except per share data)
(unaudited)
For the Three Months Ended
March 31, March 31, March 31,
2003 2002 Pro 2002
Actual Forma (a) Actual
REVENUES:
New vehicle $636,109 $621,018 $621,018
Used vehicle 304,307 280,856 280,856
Parts, service and collision repair 131,207 121,968 121,968
Finance and insurance, net 29,649 26,085 26,085
Total revenues 1,101,272 1,049,927 1,049,927
COST OF SALES:
New vehicle 588,691 569,471 569,471
Used vehicle 275,458 253,933 253,933
Parts, service and collision repair 62,343 57,439 57,439
Total cost of sales 926,492 880,843 880,843
GROSS PROFIT 174,780 169,084 169,084
OPERATING EXPENSES:
Selling, general and administrative 142,164 130,308 130,308
Depreciation and amortization 5,947 5,756 5,756
Income from operations 26,669 33,020 33,020
OTHER INCOME (EXPENSE):
Floor plan interest expense (4,570) (4,182) (4,182)
Other interest expense (9,954) (9,748) (9,748)
Interest income 181 314 314
Net losses from unconsolidated
entities - (100) (100)
Other (859) (392) (392)
Total other expense, net (15,202) (14,108) (14,108)
Income before income taxes
and discontinued operations 11,467 18,912 18,912
INCOME TAX PROVISION:
Income tax expense 4,564 7,527 2,228
Tax adjustment upon conversion
from an L.L.C. to a corporation - - 11,553
Income before discontinued
operations 6,903 11,385 5,131
DISCONTINUED OPERATIONS, net of tax 194 31 31
Net income $7,097 $11,416 $5,162
EARNINGS PER COMMON SHARE:
Basic and Diluted
Income from continuing operations $0.21 $0.33 $0.17
Net income $0.21 $0.34 $0.17
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic 33,052 34,000 30,400
Diluted 33,053 34,034 30,434
(a) Pro forma column includes a tax provision as if the Company were a "C"
corporation for the entire quarter as well as assumes that all shares
were outstanding for the full quarter. This column excludes a one-time
charge to establish a net deferred tax liability upon the Company's
conversion to a "C" corporation as required by SFAS 109.
(b) Reconciliation of GAAP net income to pro forma net income:
GAAP net income $5,162
Tax adjustment upon conversion
from an L.L.C. to a corporation 11,553
Pro forma income tax charge (5,299)(c)
Pro forma net income $11,416
(c) Represents the pro forma tax charge for the time period during the
quarter that the Company was an L.L.C.
ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31,
ASSETS 2003 2002
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $38,077 $22,613
Contracts-in-transit 88,936 91,190
Accounts receivable, net 93,275 96,090
Inventories 622,436 604,791
Prepaid and other current assets 30,810 35,099
Total current assets 873,534 849,783
PROPERTY AND EQUIPMENT, net 277,735 286,930
GOODWILL 400,666 402,133
OTHER ASSETS 67,233 66,798
Total assets $1,619,168 $1,605,644
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Floor plan notes payable $559,783 $540,419
Current maturities of long-term debt 30,609 35,009
Accounts payable and accrued liabilities 118,529 117,445
Total current liabilities 708,921 692,873
LONG-TERM DEBT 436,241 440,143
OTHER LIABILITIES 41,817 45,677
STOCKHOLDERS' EQUITY 432,189 426,951
Total liabilities and
stockholders' equity $1,619,168 $1,605,644
ASBURY AUTOMOTIVE GROUP, INC.
SELECTED DATA
(dollars in thousands except per unit data)
(unaudited)
GAAP Results Same Store Results
For the For the
Three Months Ended Three Months Ended
March 31, March 31,
2003 2002 2003 2002
RETAIL UNITS:
New 22,283 22,211 21,888 22,211
Used 15,602 14,579 14,569 14,579
Total 37,885 36,790 36,457 36,790
REVENUE:
New retail $622,647 $609,841 $611,673 $609,841
Used retail 232,576 217,546 220,007 217,546
Parts, service and
collision repair 131,207 121,968 127,871 121,968
Finance and insurance, net 29,649 26,085 28,638 26,085
Fleet 13,462 11,177 13,457 11,177
Wholesale 71,731 63,310 62,300 63,310
Total $1,101,272 $1,049,927 $1,063,946 $1,049,927
GROSS PROFIT:
New retail $41,686 $45,923 $41,084 $45,923
Used retail 28,610 26,483 26,887 26,483
Parts, Service and
collision repair 68,864 64,529 66,712 64,529
Finance and Insurance, net 29,649 26,085 28,638 26,085
Fleet 343 261 337 261
Wholesale 239 440 392 440
Floor Plan Interest Credit 5,389 5,363 5,279 5,363
Total $174,780 $169,084 $169,329 $169,084
GROSS MARGIN %:
New retail (including floor
plan interest credits) 7.6% 8.4% 7.6% 8.4%
Used retail 12.3% 12.2% 12.2% 12.2%
Parts, service and
collision repair 52.5% 52.9% 52.2% 52.9%
Finance and insurance, net 100.0% 100.0% 100.0% 100.0%
Total 15.9% 16.1% 15.9% 16.1%
GROSS PROFIT PER UNIT:
New retail (including floor
plan interest credits) $2,113 $2,309 $2,118 $2,309
Used retail 1,834 1,817 1,845 1,817
Weighted average $1,998 $2,114 $2,009 $2,114
F&I PVR $783 $709 $786 $709
EBITDA (a) $27,368 $34,516 $28,765 $34,516
EBITDA % 2.5% 3.3% 2.7% 3.3%
OPERATING INCOME % 2.4% 3.1% 2.7% 3.1%
CAPITAL EXPENDITURES $15,223 $8,593
FREE CASH FLOW (b) $14,015 $7,807
March 31, December 31,
2003 2003
CAPITALIZATION:
Long-term debt (including
current portion) $466,850 $475,152
Stockholders equity 432,189 426,951
Total $899,039 $902,103
(a) EBITDA is defined as earnings before income taxes, minority interest,
discontinued operations, other interest expense, depreciation and
amortization and net losses from unconsolidated affiliates.
(b) Free cash flow is defined as net cash provided by operating activities
less capital expenditures.