Dealer Group Asbury Automotive Reports Third Quarter Financial Results
Reports Net Income from Continuing Operations of $0.53 Per Share
STAMFORD, Conn., Oct. 30 -- Asbury Automotive Group, Inc. , one of the largest automotive retail and service companies in the U.S., today reported financial results for the third quarter and nine months ended September 30, 2003.
Net income from continuing operations for the third quarter was $17.2 million, or $0.53 per share (basic and diluted), compared with $16.1 million, or $0.47 per share, in the corresponding period a year ago. Net income for the quarter, including a loss from discontinued operations of $922,000, or $0.03 per share, was $16.2 million, or $0.50 per share, compared with $14.6 million, or $0.43 per share, in last year's third quarter.
Other financial highlights for the third quarter of 2003, as compared to the prior year period, were as follows:
* The Company's total revenues were approximately $1.3 billion, up 8.0
percent. On a same-store basis, retail sales (excluding fleet and
wholesale business) increased 3.0 percent.
* Total retail gross profit dollars rose 6.8 percent, while same-store
retail gross profit was up 2.1 percent.
* New vehicle retail unit sales increased 0.4 percent (down 4.3 percent
same-store). Same-store new retail unit sales were flat excluding the
Oregon platform, where the Company has undergone recent management
changes.
* Reflecting significantly higher average selling prices, new vehicle
retail dollar sales rose 9.4 percent (4.1 percent same-store); as
expected, however, new vehicle margins remained under pressure, as the
related gross profit percentage fell 80 basis points overall and 70
basis points on a same-store basis.
* Used vehicle retail unit sales increased 4.3 percent (flat on a
same-store basis). Used vehicle retail dollar sales were up 2.6
percent (down 2.3 percent same-store), while the related gross profit
percentage was down 50 basis points overall (down 40 basis points
same-store).
* Parts, service and collision repair revenues increased 11.4 percent
(5.6 percent same-store), with the related gross profits increasing
13.9 percent (8.3 percent same-store).
* Net finance and insurance (F&I) income was up 12.2 percent from a year
ago (8.3 percent same-store), while platform F&I per vehicle retailed
(PVR) rose 6.4 percent to $846.
* Results for the quarter included certain expenses incurred in
conjunction with management changes in Oregon, Texas and at the
corporate level, which reduced after-tax income by approximately $1.3
million, or $0.04 per share.
* The Company's expense reduction initiatives reduced ongoing operating
expenses at the platform level. Selling, general and administrative
(SG&A) expenses were 11.7 percent of revenues, the same as in the
comparable quarter a year ago. Excluding the management change related
expenses mentioned above, SG&A expenses were 11.6 percent of revenues
in the third quarter of 2003. As a percentage of gross profit, SG&A
expenses were 76.0 percent as reported and 75.0 percent excluding the
management change related expenses, compared with 75.4 percent in last
year's third quarter.
* For the quarter the Company's effective tax rate was 38.0 percent,
compared to 39.8 percent in the prior year period. The Company
anticipates that its effective tax rate will fluctuate between 38 and
39 percent based upon its geographic revenue source for any given
period.
President and CEO Kenneth B. Gilman commented, "Asbury's earnings per share from continuing operations rose 13 percent in the third quarter -- but almost 21 percent after adjusting for the management change related expenses noted above. These positive results reflect the balance and consistency provided by our business model in terms of its diverse income streams, as well as our successful implementation of a comprehensive expense reduction program earlier this year. Our core businesses turned in results that for the most part were consistent with the trends we saw in the second quarter, where the strength of our service businesses more than offset a continued challenging environment for retail vehicle sales. Gross profits from parts, service and collision repair and from F&I were both up at double-digit rates for the quarter, and again accounted for well over half of Asbury's overall gross profit."
Mr. Gilman continued, "We are also pleased with the results to date from our expense reduction initiatives launched at the end of last year. Adjusting for the management change related expenses outlined above, SG&A as a percentage of gross profit in the third quarter was below the year-ago level for the first time this year. Moreover, this improvement was achieved despite sharply higher insurance premiums, which added more than a full percentage point to our SG&A rate. While the initial results of our program have been excellent, we are sharpening our focus on variable costs as we head into the industry's seasonally slower months, and are working to generate further improvements."
For the first nine months of 2003, net income from continuing operations was $39.5 million, or $1.21 per share; for the corresponding period last year, the Company's pro forma net income from continuing operations was $42.8 million, or $1.26 per share. Net income for the nine months, including discontinued operations, was $35.6 million, or $1.09 per share, compared to $32.6 million, or $0.99 per share, a year ago. (A reconciliation of pro forma income from continuing operations to GAAP income from continuing operations of $36.9 million, or $1.12 per share, 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 concluded, "Asbury's improving performance over the past few quarters is a reflection of our continued focus on getting back to the basics of solid retail execution. We have eliminated non-core businesses, made a number of key management changes, and significantly reduced operating expenses. Looking ahead, we continue to target a long-term earnings growth rate of approximately 15 percent -- roughly half from organic growth and half from acquisitions."
The Company went on to note that thus far in 2003, it had completed acquisitions that will add about $330 million in annualized revenues, already within its targeted annual acquisition range of $300 million to $500 million. In addition, the Company noted that it had executed contracts to acquire three dealerships with annual revenues of $175 million and signed letters of intent to acquire three dealerships with annual revenues of $250 million. These yet to close transactions are subject in all cases to manufacturer consent and in some cases to the execution of definitive purchase agreements.
Commenting on its earnings guidance for 2003, the Company anticipates that earnings from continuing operations should come in around $1.55 per share. The Company noted that this estimate is based upon the assumption that the environment for selling new and used vehicles, as experienced at the end of the third quarter and into October, will continue to be difficult with the expectation that new and used vehicle same-store retail unit sales will be down in the mid to upper single digit range, respectively. In addition, there is an expectation of continued strength in its fixed operations and F&I businesses, consistent with third quarter results. The Company also noted that managing its variable costs during the industry's traditionally slow months of November through February will be a critically important factor in meeting its earnings expectations. Lastly, this guidance includes acquisitions that have already been completed, but not those that may be completed during the remainder of the year.
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 95 retail auto stores, encompassing 138 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. Additional information is available at the Company's website, www.asburyauto.com.
ASBURY AUTOMOTIVE GROUP, INC.
SELECTED DATA
(in thousands except unit data)
(unaudited)
Same Store
GAAP Results for Results for the
the Three Three Months
Months Ended Ended
September 30, September 30,
2003 2002 2003 2002
RETAIL UNITS:
New 26,867 26,755 25,597 26,755
Used 15,774 15,119 15,124 15,119
Total 42,641 41,874 40,721 41,874
REVENUE:
New retail $778,712 $712,039 $741,220 $712,030
Used retail 239,812 233,763 228,338 233,763
Parts, service and
collision repair 143,032 128,429 135,671 128,429
Finance and
insurance, net 37,366 33,289 36,049 33,289
Fleet 7,330 10,812 7,133 10,812
Wholesale 79,216 72,270 75,372 72,270
Total $1,285,468 $1,190,602 $1,223,783 $1,190,602
GROSS PROFIT:
New retail $49,753 $50,263 $47,347 $50,263
Used retail 28,562 28,916 27,434 28,916
Parts, service and
collision repair 76,331 66,992 72,525 66,992
Finance and insurance,
net 37,366 33,289 36,049 33,289
Fleet 299 361 301 361
Wholesale (850) (1,749) (857) (1,749)
Floor plan interest
credit 6,614 6,394 6,433 6,394
Total $198,075 $184,466 $189,232 $184,466
GROSS MARGIN %:
New retail (including
floor plan
interest credit) 7.2% 8.0% 7.3% 8.0%
Used retail 11.9% 12.4% 12.0% 12.4%
Parts, service and
collision repair 53.4% 52.2% 53.5% 52.2%
Finance and insurance,
net 100.0% 100.0% 100.0% 100.0%
Total 15.4% 15.5% 15.5% 15.5%
GROSS PROFIT PER UNIT:
New retail (including
floor plan
interest credit) $2,098 $2,118 $2,101 $2,118
Used retail 1,811 1,913 1,814 1,913
Weighted average $1,992 $2,044 $1,994 $2,044
PLATFORM F&I PVR $846 $795 $853 $795
EBITDA (a) $42,897 $41,412 $41,509 $41,412
EBITDA % 3.3% 3.5% 3.4% 3.5%
OPERATING INCOME % 3.3% 3.4% 3.3% 3.4%
GAAP Results for Same Store Results
the Nine for the
Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
RETAIL UNITS:
New 75,141 73,072 72,638 73,060
Used 46,145 44,479 44,616 44,463
Total 121,286 117,551 117,254 117,523
REVENUE:
New retail $2,147,816 $1,974,297 $2,072,222 $1,973,987
Used retail 703,559 679,209 678,158 678,941
Parts, service and
collision repair 411,858 373,941 395,882 373,854
Finance and insurance,
net 100,497 87,721 97,685 87,701
Fleet 37,017 32,955 36,822 32,955
Wholesale 212,286 208,038 204,357 208,036
Total $3,613,033 $3,356,161 $3,485,126 $3,355,474
GROSS PROFIT:
New retail $141,334 $145,704 $136,447 $145,684
Used retail 83,545 82,803 80,996 82,771
Parts, service and
collision repair 217,919 196,945 208,570 196,888
Finance and insurance,
net 100,497 87,721 97,685 87,701
Fleet 875 980 877 980
Wholesale (703) (1,949) (632) (1,950)
Floor plan interest
credit 18,069 17,641 17,674 17,641
Total $561,536 $529,845 $541,617 $529,715
GROSS MARGIN %:
New retail (including
floor plan
interest credit) 7.4% 8.3% 7.4% 8.3%
Used retail 11.9% 12.2% 11.9% 12.2%
Parts, service and
collision repair 52.9% 52.7% 52.7% 52.7%
Finance and insurance,
net 100.0% 100.0% 100.0% 100.0%
Total 15.5% 15.8% 15.5% 15.8%
GROSS PROFIT PER UNIT:
New retail (including
floor plan
interest credit) $2,121 $2,235 $2,122 $2,235
Used retail 1,810 1,862 1,815 1,862
Weighted average $2,003 $2,094 $2,005 $2,094
PLATFORM F&I PVR $818 $746 $822 $746
EBITDA (a) $109,860 $114,285 $107,648 $114,330
EBITDA % 3.0% 3.4% 3.1% 3.4%
OPERATING INCOME % 3.0% 3.3% 3.1% 3.3%
September December
30, 31,
2003 2002
CAPITALIZATION:
Long-term debt (including current portion) $535,804 $475,152
Stockholders' equity 454,529 426,951
Total $990,333 $902,103
For the Nine Months
Ended
September 30,
2003 2002
FREE CASH FLOW (b):
Net cash provided by operating activities $68,064 $69,881
Capital expenditure (33,434) (38,102)
Financial capital expenditure 7,172 5,450
Sales/leaseback proceeds paid directly to the
Company's lenders 5,485 --
Total $47,287 $37,229
(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 expenditures plus proceeds from financing activities
associated with the related period's capital projects.
ASBURY AUTOMOTIVE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except per share data)
(unaudited)
For the Three Months
Ended
September 30,
2003 2002
REVENUES:
New vehicle $786,042 $722,851
Used vehicle 319,028 306,033
Parts, service and collision repair 143,032 128,429
Finance and insurance, net 37,366 33,289
Total revenues 1,285,468 1,190,602
COST OF SALES:
New vehicle 729,376 665,833
Used vehicle 291,316 278,866
Parts, service and collision repair 66,701 61,437
Total cost of sales 1,087,393 1,006,136
GROSS PROFIT 198,075 184,466
OPERATING EXPENSES:
Selling, general and administrative 150,559 139,148
Depreciation and amortization 5,141 4,549
Income from operations 42,375 40,769
OTHER INCOME (EXPENSE);
Floor plan interest expense (4,633) (4,368)
Other interest expense (10,087) (10,074)
Interest income 188 283
Net losses from unconsolidated entities -- --
Other income (expense) (174) 179
Total other expense, net (14,706) (13,980)
Income before income taxes and discontinued
operations 27,669 26,789
INCOME TAX PROVISION:
Income tax expense 10,503 10,695
Tax adjustment upon conversion from an L.L.C.
to a corporation -- --
Income from continuing operations (b) 17,166 16,094
DISCONTINUED OPERATIONS, net of tax (922) (1,450)
Net income $16,244 $14,644
EARNINGS PER COMMON SHARE:
Basic -
Income from continuing operations $0.53 $0.47
Net income $0.50 $0.43
Diluted -
Income from continuing operations $0.53 $0.47
Net income $0.50 $0.43
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 32,419 34,000
Diluted 32,612 34,001
For the Nine Months Ended September 30,
2002 Pro
2003 Forma (a) 2002 Actual
REVENUES:
New vehicle $2,184,833 $2,007,252 $2,007,252
Used vehicle 915,845 887,247 887,247
Parts, service and
collision repair 411,858 373,941 373,941
Finance and insurance, net 100,497 87,721 87,721
Total revenues 3,613,033 3,356,161 3,356,161
COST OF SALES:
New vehicle 2,024,555 1,842,927 1,842,927
Used vehicle 833,003 806,393 806,393
Parts, service and
collision repair 193,939 176,996 176,996
Total cost of sales 3,051,497 2,826,316 2,826,316
GROSS PROFIT 561,536 529,845 529,845
OPERATING EXPENSES:
Selling, general and
administrative 437,419 403,284 403,284
Depreciation and amortization 15,007 14,280 14,280
Income from operations 109,110 112,281 112,281
OTHER INCOME (EXPENSE);
Floor plan interest expense (14,263) (13,059) (13,059)
Other interest expense (30,038) (28,748) (28,748)
Interest income 450 945 945
Net losses from
unconsolidated entities -- (100) (100)
Other income (expense) (444) (162) (162)
Total other expense,
net (44,295) (41,124) (41,124)
Income before income
taxes and
discontinued operations 64,815 71,157 71,157
INCOME TAX PROVISION:
Income tax expense 25,287 28,320 22,732
Tax adjustment upon
conversion from an
L.L.C. to a corporation -- -- 11,553
Income from continuing
operations(b) 39,528 42,837 36,872
DISCONTINUED OPERATIONS,
net of tax (3,914) (4,286) (4,286)
Net income $35,614 $38,551 $32,586
EARNINGS PER COMMON SHARE:
Basic -
Income from
continuing operations $1.21 $1.26 $1.12
Net income $1.09 $1.13 $0.99
Diluted -
Income from
continuing operations $1.21 $1.26 $1.12
Net income $1.09 $1.13 $0.99
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
Basic 32,721 34,000 32,813
Diluted 32,761 34,021 32,834
(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 $36,872
Tax adjustment upon conversion from an L.L.C.
to a corporation 11,553
Pro forma income tax charge (5,588) (c)
Pro forma net income from continuing operations $42,837
(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)
September 30, December 31,
ASSETS 2003 2002
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $48,804 $22,613
Contracts-in-transit 86,380 91,190
Accounts receivable, net 112,050 96,090
Inventories 560,268 591,839
Prepaid and other current assets 47,740 47,857
Total current assets 855,242 849,589
PROPERTY AND EQUIPMENT, net 282,801 265,642
GOODWILL, net 464,763 402,133
OTHER ASSETS 65,594 66,758
ASSETS HELD FOR SALE 6,437 21,522
Total assets $1,674,837 $1,605,644
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Floor plan notes payable $488,502 $528,591
Current maturities of long-term debt 31,855 36,412
Accounts payable and accrued liabilities 132,298 117,445
Total current liabilities 652,655 682,448
LONG-TERM DEBT 503,949 438,740
OTHER LIABILITIES 59,889 45,552
LIABILITIES ASSOCIATED WITH ASSETS HELD FOR SALE 3,815 11,953
STOCKHOLDERS' EQUITY 454,529 426,951
Total liabilities and stockholders'
equity $1,674,837 $1,605,644