Asbury Automotive Group Reports Second Quarter Financial Results
- Reports Net Income from Continuing Operations of $0.44 Per Share -
STAMFORD, Conn., July 31 -- Asbury Automotive Group, Inc. , one of the largest automotive retail and service companies in the U.S., today reported financial results for the second quarter and six months ended June 30, 2003.
Net income from continuing operations for the second quarter was $14.3 million compared with $14.9 million in the corresponding period a year ago. Basic and diluted earnings per share from continuing operations were $0.44 per share in both periods.
Net income for the second quarter was $12.3 million compared with $12.8 million a year ago. Net income includes the results of discontinued operations, the majority of which ($0.05 per share) consists of certain now closed non-core businesses including the Company's Price 1 pilot program as well as its six 'Thomason Select' used car stores. Basic earnings per share, including discontinued operations, were $0.38 in both periods, while diluted earnings per share were $0.38 for 2003 versus $0.37 for 2002.
Financial highlights for the second quarter of 2003 included:
* The Company's total revenues were approximately $1.2 billion, up
11.0 percent from a year ago. On a same-store basis, retail sales
(excluding fleet and wholesale business) were up 7.8 percent.
* Total gross profit dollars rose 7.6 percent, while same-store retail
gross profit was up 3.5 percent.
* New vehicle retail unit sales increased 7.7 percent (4.2 percent
same-store), while the related gross profit was up 0.5 percent (down
3.3 percent same-store).
* Used vehicle retail unit sales increased 4.3 percent (1.3 percent
same-store), while the related gross profit was essentially flat (down
2.4 percent same-store).
* Parts and service revenues increased 11.3 percent (7.1 percent
same-store), with the related gross profits increasing 11.1 percent
(6.0 percent same-store).
* Net finance and insurance (F&I) income was up 18.8 percent from a year
ago (15.9 percent same-store), while F&I per vehicle retailed (PVR)
rose 11.7 percent to $815.
Commenting on its expense reduction initiatives, the Company reported that for the second quarter of 2003, selling, general and administrative (SG&A) expenses were 11.9 percent of revenues versus 12.0 percent a year ago. As a percentage of gross profit, SG&A expenses in the quarter were 77.4 percent, a notable improvement from 80.6 percent in the first quarter but still higher than a year ago (76.0 percent).
In addition, during the quarter the Company incurred $1.2 million of severance expenses related to management changes at its Oregon platform, and approximately $1 million of increased legal fees associated with litigation and acquisition activity.
President and CEO Kenneth B. Gilman commented, "Directionally, our expense trends are positive. We initiated our expense reduction program in the first quarter, achieved traction in the second quarter and anticipate a fully implemented program by the third quarter. This should allow us to convert increased gross profit dollars in the second half of this year into higher profit levels when compared to prior periods."
For the first six months of 2003, net income from continuing operations was $22.4 million, or $0.68 per basic and diluted share; for the corresponding period last year, the Company's pro forma net income from continuing operations was $26.7 million, or $0.78 per diluted share. Net income for the six months was $19.4 million or $0.59 per basic and diluted share as compared to $17.9 million, or $0.56 per basic and diluted share from a year ago. (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 period 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.
Mr. Gilman continued, "We are pleased with the improving trends that are apparent in Asbury's financial results for the second quarter, particularly our ability to generate meaningful increases in gross profit on a comparable store basis. Earnings from continuing operations were essentially flat to a year ago because of higher expense rates, which while now declining are still elevated relative to historical levels. Thanks to the expense reduction initiatives implemented in the first half of the year, our year-over-year increases in operating expenses were much better aligned with our rate of revenue and gross profit growth than in either the first quarter of this year or the fourth quarter of last year. As a result, Asbury's earnings per share from continuing operations were flat to a year ago -- a notable improvement from the 30 percent decline for the first quarter.
"In terms of both new and used vehicle sales, Asbury continued to outperform the industry during the second quarter. Our 4 percent same-store increase in new retail unit sales was much stronger than the industry's slight decline; similarly, we experienced a same-store increase in used retail unit sales while the overall performance of franchised dealers was down for the quarter. Tactically, as noted previously, we remained focused during the quarter on sustaining unit sales - partly to strengthen our relationships with our manufacturers, and partly in the knowledge that increased unit sales have a very profitable carryover effect on other key segments of Asbury's business."
Mr. Gilman concluded, "The key to the quarter was getting back to basics -- focusing on the core elements of our business that make our model successful. To that end, we made several difficult decisions during the quarter that allowed us to maintain that focus, including closing certain non-core businesses. We believe this is one of the reasons we were able to continue growing our higher margin businesses. Specifically, during the quarter, our F&I income per vehicle retailed grew 12 percent, for our sixth consecutive quarter of double-digit increases, while our parts and service gross profit was up 11 percent. We intend to maintain this focus so that our core businesses continue to perform well, demonstrating to investors that our diversified automotive retail and services business model is working very much as planned."
The Company has revised its earnings per share guidance for 2003 slightly, primarily to reflect the discontinuation of the Price 1 pilot program, to a range of $1.55 to $1.60. The assumptions underlying this guidance range continue to include new U.S. light vehicle sales of approximately 16 million units. Potential acquisitions that may be completed in the second half of 2003 are not included in this range.
Asbury will host a conference call to discuss its 2003 second quarter results this morning at 10:00 a.m. Eastern Time. The call will be simulcast live on the Internet and can be accessed by logging onto http://www.asburyauto.com/ or http://www.ccbn.com/. In addition, a live audio of the call will be accessible to the public by calling (888) 855-5428; international callers, please dial (719) 457-2665; no access code is required. A conference call replay will be available one hour following the call for 14 days and can be accessed by calling (888) 203-1112 (domestic), or (719) 457- 0820 (international); access code 749849.
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 92 retail auto stores, encompassing 132 franchises for the sale and servicing of 35 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.
Forward-Looking Statements
This press release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements relating to goals, plans, projections and guidance regarding the Company's financial position, results of operations, market position, product development, pending and potential future acquisitions and business strategy. These statements are based on management's current expectations and involve significant risks and uncertainties that may cause results to differ materially from those set forth in the statements. These risks and uncertainties include, among other things, market factors, the Company's relationships with vehicle manufacturers and other suppliers, risks associated with the Company's substantial indebtedness, risks related to pending and potential future acquisitions, general economic conditions both nationally and locally and governmental regulations and legislation. There can be no guarantees that the Company's plans for future operations will be successfully implemented or that they will prove to be commercially successful. These and other risk factors are discussed in the Company's annual report on Form 10-K and in its other filings with the Securities and Exchange Commission. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.
ASBURY AUTOMOTIVE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except per share data)
(unaudited)
For the Three Months Ended
June 30, 2003 June 30, 2002
REVENUES:
New vehicle $765,271 $666,859
Used vehicle 308,363 302,280
Parts, service and collision repair 139,078 124,947
Finance and insurance, net 33,990 28,609
Total revenues 1,246,702 1,122,695
COST OF SALES:
New vehicle 708,964 610,842
Used vehicle 281,002 275,370
Parts, service and collision repair 65,730 58,951
Total cost of sales 1,055,696 945,163
GROSS PROFIT 191,006 177,532
OPERATING EXPENSES:
Selling, general and administrative 147,825 134,931
Depreciation and amortization 5,055 4,859
Income from operations 38,126 37,742
OTHER INCOME (EXPENSE):
Floor plan interest expense (5,122) (4,500)
Other interest expense (9,997) (8,926)
Interest income 81 348
Net losses from unconsolidated entities -- --
Other income (expense) 592 54
Total other expense, net (14,446) (13,024)
Income before income taxes
and discontinued operations 23,680 24,718
INCOME TAX PROVISION:
Income tax expense 9,425 9,810
Tax adjustment upon conversion
from an L.L.C. to a corporation -- --
Income before discontinued operations 14,255 14,908
DISCONTINUED OPERATIONS, net of tax (1,982) (2,128)
Net income $12,273 $12,780
EARNINGS PER COMMON SHARE:
Basic
Income from continuing operations $0.44 $0.44
Net income $0.38 $0.38
Diluted
Income from continuing operations $0.44 $0.44
Net income $0.38 $0.37
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 32,701 34,000
Diluted 32,714 34,084
For the Six Months Ended
June 30,
June 30, 2002 Pro June 30,
2003 Forma (a) 2002 Actual
REVENUES:
New vehicle $1,398,791 $1,284,401 $1,284,401
Used vehicle 596,817 581,214 581,214
Parts, service and collision
repair 268,826 245,512 245,512
Finance and insurance, net 63,131 54,432 54,432
Total revenues 2,327,565 2,165,559 2,165,559
COST OF SALES:
New vehicle 1,295,179 1,177,094 1,177,094
Used vehicle 541,687 527,527 527,527
Parts, service and collision
repair 127,238 115,559 115,559
Total cost of sales 1,964,104 1,820,180 1,820,180
GROSS PROFIT 363,461 345,379 345,379
OPERATING EXPENSES:
Selling, general and
administrative 286,860 264,136 264,136
Depreciation and amortization 9,866 9,731 9,731
Income from operations 66,735 71,512 71,512
OTHER INCOME (EXPENSE):
Floor plan interest expense (9,630) (8,691) (8,691)
Other interest expense (19,951) (18,674) (18,674)
Interest income 262 662 662
Net losses from
unconsolidated entities -- (100) (100)
Other income (expense) (270) (341) (341)
Total other expense, net (29,589) (27,144) (27,144)
Income before income taxes
and discontinued operations 37,146 44,368 44,368
INCOME TAX PROVISION:
Income tax expense 14,784 17,658 12,037
Tax adjustment upon conversion
from an L.L.C. to a corporation -- -- 11,553
Income before discontinued
operations 22,362 26,710 20,778
DISCONTINUED OPERATIONS, net of tax (2,992) (2,837) (2,837)
Net income $19,370 $23,873 $17,941
EARNINGS PER COMMON SHARE:
Basic
Income from continuing operations $0.68 $0.79 $0.65
Net income $0.59 $0.70 $0.56
Diluted
Income from continuing
operations $0.68 $0.78 $0.64
Net income $0.59 $0.70 $0.56
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
Basic 32,876 34,000 32,210
Diluted 32,881 34,084 32,258
(a) Pro forma column includes a tax provision as if the Company were a
"C" corporation for the entire period as well as assumes that all
shares were outstanding for the full period. 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 from continuing operations to pro
forma net income from continuing operations:
GAAP net income from continuing operations $20,778
Tax adjustment upon conversion from an L.L.C. 11,553
to a corporation
Pro forma income tax charge (c) (5,621)
Pro forma net income from continuing operations 26,710
(c) Represents the pro forma tax charge from continuing operations for
the time during the period that the company was an L.L.C.
ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS June 30, December 31,
2003 2002
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $24,575 $22,613
Contracts-in-transit 102,573 91,190
Accounts receivable, net 113,877 96,090
Inventories 642,375 604,791
Prepaid and other current assets 46,413 47,857
Total current assets 929,813 862,541
PROPERTY AND EQUIPMENT, net 258,602 274,172
GOODWILL, net 434,596 402,133
OTHER ASSETS 68,241 66,798
Total assets $1,691,252 $1,605,644
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Floor plan notes payable $585,768 $540,419
Current maturities of long-term debt 30,369 36,412
Accounts payable and accrued liabilities 126,456 117,445
Total current liabilities 742,593 694,276
LONG-TERM DEBT 468,894 438,740
OTHER LIABILITIES 41,760 45,677
STOCKHOLDERS' EQUITY 438,005 426,951
Total liabilities and
stockholders' equity $1,691,252 $1,605,644
ASBURY AUTOMOTIVE GROUP, INC.
SELECTED DATA
(dollars in thousands except per unit data)
(unaudited)
GAAP Results For Same Store Results
the Three Months for the Three Months
Ended Ended
June 30, June 30,
2003 2002 2003 2002
RETAIL UNITS:
New 26,133 24,265 25,260 24,253
Used 15,552 14,914 15,096 14,898
Total 41,685 39,179 40,356 39,151
REVENUE:
New retail 749,041 655,892 721,257 655,582
Used retail 239,146 229,435 231,096 229,167
Parts, service and collision
repair 139,078 124,947 133,730 124,860
Finance and insurance, net 33,990 28,609 33,136 28,589
Fleet 16,230 10,967 16,238 10,967
Wholesale 69,217 72,845 67,023 72,843
Total 1,246,702 1,122,695 1,202,480 1,122,008
GROSS PROFIT:
New retail 49,993 49,731 48,080 49,711
Used retail 27,551 27,557 26,860 27,525
Parts, service and collision
repair 73,348 65,996 69,908 65,938
Finance and insurance, net 33,990 28,609 33,136 28,589
Fleet 227 359 234 359
Wholesale (190) (647) (176) (647)
Floor plan interest credits 6,087 5,927 5,983 5,927
Total 191,006 177,532 184,025 177,402
GROSS MARGIN %:
New retail (including floor
plan interest credits) 7.5% 8.5% 7.5% 8.5%
Used retail 11.5% 12.0% 11.6% 12.0%
Parts, service and collision
repair 52.7% 52.8% 52.3% 52.8%
Finance and insurance, net 100.0% 100.0% 100.0% 100.0%
Total 15.3% 15.8% 15.3% 15.8%
GROSS PROFIT PER UNIT:
New retail (including floor
plan interest credits) 2,146 2,294 2,140 2,294
Used retail 1,772 1,848 1,779 1,848
Weighted average 2,006 2,124 2,005 2,124
F&I PVR $815 $730 $821 $730
EBITDA (a) $38,732 $38,503 $37,787 $38,549
EBITDA % 3.1% 3.4% 3.1% 3.4%
OPERATING INCOME % 3.1% 3.4% 3.1% 3.4%
June 30, December
2003 31, 2002
CAPITALIZATION:
Long-term debt (including
current portion) $499,263 $475,152
Stockholders' equity 438,005 426,951
Total 937,268 902,103
GAAP Results for the
Six Months Ended June 30,
2003 2002
FREE CASH FLOW (b):
Net cash provided by
operating activities 31,997 33,973
Capital expenditure (24,613) (23,623)
Financed capital expenditure 6,803 5,447
Sales/leaseback proceeds paid
directly to the Company's
lenders 5,726 --
Total 19,913 15,797
GAAP Results For Same Store Results
the Six Months for the Six Months
Ended Ended
June 30, June 30,
2003 2002 2003 2002
RETAIL UNITS:
New 48,274 46,317 47,041 46,305
Used 30,371 29,360 29,492 29,344
Total 78,645 75,677 76,533 75,649
REVENUE:
New retail 1,369,103 1,262,258 1,331,002 1,261,948
Used retail 463,746 445,446 449,820 445,178
Parts, service and collision
repair 268,826 245,512 260,210 245,424
Finance and insurance, net 63,131 54,432 61,637 54,412
Fleet 29,688 22,143 29,689 22,143
Wholesale 133,071 135,768 128,985 135,767
Total 2,327,565 2,165,559 2,261,343 2,164,872
GROSS PROFIT:
New retail 91,581 95,440 89,100 95,421
Used retail 54,983 53,887 53,562 53,855
Parts, service and collision
repair 141,588 129,953 136,044 129,894
Finance and Insurance, net 63,131 54,432 61,637 54,412
Fleet 576 619 577 619
Wholesale 147 (200) 224 (200)
Floor plan interest credits 11,455 11,248 11,241 11,248
Total 363,461 345,379 352,385 345,249
GROSS MARGIN %:
New retail (including floor
plan interest credits) 7.5% 8.5% 7.5% 8.5%
Used retail 11.9% 12.1% 11.9% 12.1%
Parts, service and collision
repair 52.7% 52.9% 52.3% 52.9%
Finance and insurance, net 100.0% 100.0% 100.0% 100.0%
Total 15.6% 15.9% 15.6% 15.9%
GROSS PROFIT PER UNIT:
New retail (including floor
plan interest credits) 2,134 2,303 2,133 2,304
Used retail 1,810 1,835 1,816 1,835
Weighted average 2,009 2,122 2,011 2,122
F&I PVR $803 $719 $805 $719
EBITDA (a) $66,963 $72,873 $66,139 $72,918
EBITDA % 2.9% 3.4% 2.9% 3.4%
OPERATING INCOME % 2.9% 3.3% 2.9% 3.3%
(a) EBITDA is defined as earnings before income taxes, 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 expenditure plus proceeds from financing activities
associated with the related period's capital projects.