Asbury Automotive Group Reports Fourth Quarter and 2003 Financial Results
STAMFORD, Conn., Feb. 25, 2004 -- Asbury Automotive Group, Inc. , one of the largest automotive retail and service companies in the U.S., today reported financial results for the fourth quarter and year ended December 31, 2003.
For the year, net income from continuing operations was $50.5 million, or $1.55 per share, before taking into account the impact of a previously announced after tax charge related to the termination of the Bob Baker acquisition agreement, and a non-cash goodwill impairment charge related to the Company's Oregon platform. Including the recognition of the charge related to the Baker transaction and the goodwill impairment charge, net income from continuing operations for the year was $19.8 million, or $0.61 per share. Net income for the year was $15.2 million, or $0.47 per share, which includes a $0.14 loss per share from discontinued operations, as well as the aforementioned charge related to the Baker transaction of $0.05 per share and the goodwill impairment charge of $0.89 per share.
For the fourth quarter of 2003, net income from continuing operations was $10.9 million, or $0.34 per share, excluding the charges related to the Baker transaction and the goodwill impairment, a 44 percent increase over the prior year quarter. Including the charges related to the Baker transaction and the goodwill impairment the Company's net loss from continuing operations for the fourth quarter of 2003 was $19.8 million, or $0.61 per share. The net loss for the fourth quarter of 2003 was $20.4 million, or $0.63 per share, which includes a $0.02 loss per share from discontinued operations, as well as the charges related to the Baker transaction and the goodwill impairment.
The non-cash goodwill impairment charge of $37.9 million ($29.2 million after-tax) was recorded after the completion of the Company's annual assessment of goodwill and other intangible assets as required by Statement of Financial Accounting Standard No. 142. As previously announced and discussed with investors, this charge reduces the carrying value of goodwill associated with Asbury's Oregon platform. The Company anticipates that based upon management changes in 2003 and the implementation of its operational improvement plan, financial performance in its Oregon platform should improve in 2004. In the event that the turnaround called for by this plan takes longer than anticipated or is only partially successful, the Company believes that Oregon's current performance run rate, which includes the impact of expense reduction initiatives already implemented, is sufficient to sustain the remaining goodwill.
Other financial highlights for the year and fourth quarter, as compared to the corresponding periods in 2002, included:
* The Company's total revenues for the year increased 8.2 percent, while
same-store retail sales (excluding fleet and wholesale business) rose
3.5 percent. For the fourth quarter, total revenues increased
9.8 percent, while same-store retail sales rose 1.4 percent.
* Total retail gross profit dollars for the year increased 6.2 percent,
while same-store retail gross profit rose 1.4 percent. For the fourth
quarter, gross profit increased 7.0 percent, and decreased 0.7 percent
on a same-store basis.
* For the year, new vehicle retail sales increased 10.0 percent in
dollars (5.1 percent same-store), and increased 3.6 percent in units
(down 0.7 percent same-store). For the fourth quarter, new vehicle
retail sales increased 13.8 percent in dollars (5.2 percent same-store)
and rose 6.0 percent in units (down 0.9 percent same-store).
* For the year, used vehicle retail sales increased 1.5 percent in
dollars (down 3.1 percent same-store), and increased 2.0 percent in
units (down 2.1 percent same-store). For the fourth quarter, used
vehicle retail sales decreased 5.1 percent in dollars (12.8 percent
same-store) and declined 3.9 percent in units (10.0 percent same-
store). Consistent with prior announcements, the Company noted that
the used vehicle retail environment remained challenging during the
quarter, which was due in large part to the highly promotional new
vehicle market.
* Parts, service and collision repair revenues and gross profit for the
year increased 10.9 percent and 10.2 percent (5.5 percent and
4.5 percent same-store), respectively. For the fourth quarter,
revenues and gross profit increased 13.5 percent and 9.3 percent (4.7
percent and 0.9 percent same-store), respectively. The Company noted
that the increase in gross profit during the quarter was lower than the
rate of sales increase primarily due to a shift in the business mix.
* For the year, net finance and insurance (F&I) income rose 14.2 percent
(10.2 percent same-store), with a 10.9 percent increase in F&I per
vehicle retailed (PVR), and a 8.7 percent increase in F&I PVR generated
at the platform level. For the quarter, net F&I income rose
12.9 percent (6.6 percent same-store), with a 10.4 percent increase in
F&I PVR, and a 5.5 percent increase in F&I PVR generated at the
platform level.
* During the fourth quarter, the Company continued to make progress with
its productivity initiatives, as selling, general and administrative
expenses declined 40 basis points as a percentage of gross profit, and
70 basis points on a same-store basis.
* The Company's effective tax rate for the full year was 38.0 percent,
before taking into account the impact of the goodwill impairment
charge. Including the charge, the Company's effective tax rate for the
year was 51.8 percent.
The Company noted that in 2003 it had completed acquisitions representing $415 million in annualized revenues, of which $150 million was reflected in its 2003 results. Thus far in 2004, the Company completed acquisitions to acquire three franchises with annual revenues of $170 million, with approximately $155 million to be reflected in 2004 results. In addition, the Company noted that it had executed contracts to acquire three additional franchises with annual revenues of $160 million. These pending transactions are subject in all cases to manufacturer consent.
Commenting on expectations for 2004, the Company noted that it was comfortable with the analysts' consensus earnings estimate of $1.76 per share from continuing operations for the full 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 2003 revenues of $4.8 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 100 retail auto stores, encompassing 142 franchises for the sale and servicing of 35 different brands of American, European and Asian automobiles. Asbury believes that its product mix contains a higher proportion of the more desirable luxury and mid-line import brands than most public 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, December 31,
ASSETS 2003 2002
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $106,711 $22,613
Contracts-in-transit 93,881 91,190
Accounts receivable, net 114,201 96,090
Inventories 650,397 591,839
Prepaid and other current assets 46,819 47,857
Total current assets 1,012,009 849,589
PROPERTY AND EQUIPMENT, net 266,991 257,305
GOODWILL 404,143 402,133
OTHER ASSETS 101,603 66,758
ASSETS HELD FOR SALE 29,533 29,859
Total assets $1,814,279 $1,605,644
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Floor plan notes payable $602,167 $528,591
Current maturities of long-term debt 33,250 36,412
Accounts payable and accrued liabilities 121,609 117,445
Total current liabilities 757,026 682,448
LONG-TERM DEBT 559,128 438,740
OTHER LIABILITIES 39,686 45,552
LIABILITIES ASSOCIATED WITH ASSETS HELD FOR SALE 24,732 11,953
STOCKHOLDERS' EQUITY 433,707 426,951
Total liabilities and stockholders'
equity $1,814,279 $1,605,644
ASBURY AUTOMOTIVE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except per share data) - (unaudited)
For the Three Months
Ended For the Years Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2003 2002 2003 2002 2002
Pro Forma(a) Actual
REVENUES:
New vehicle $724,412 $637,546 $2,909,641 $2,644,798 $2,644,798
Used vehicle 268,057 270,897 1,183,901 1,158,144 1,158,144
Parts, service
and collision
repair 141,373 124,547 551,498 497,164 497,164
Finance and
insurance, net 30,968 27,439 131,465 115,159 115,159
Total
revenues 1,164,810 1,060,429 4,776,505 4,415,265 4,415,265
COST OF SALES:
New vehicle 670,757 587,567 2,694,777 2,430,494 2,430,494
Used vehicle 246,150 247,336 1,079,314 1,053,878 1,053,878
Parts, service
and collision
repair 68,414 57,783 262,110 234,575 234,575
Total cost of
sales 985,321 892,686 4,036,201 3,718,947 3,718,947
GROSS PROFIT 179,489 167,743 740,304 696,318 696,318
OPERATING EXPENSES:
Selling,
general and
administrative 144,541 135,764 580,938 537,846 537,846
Depreciation and
amortization 5,243 4,835 20,212 19,062 19,062
Impairment of
goodwill 37,930 - 37,930 - -
(Loss) income from
operations (8,225) 27,144 101,224 139,410 139,410
OTHER INCOME (EXPENSE):
Floor plan interest
expense (4,537) (4,801) (18,800) (17,860) (17,860)
Other interest
expense (10,200) (9,674) (40,238) (38,423) (38,423)
Interest income 49 255 499 1,200 1,200
Net losses from
unconsolidated
entities - - - (100) (100)
Other expense (1,197) (340) (1,619) (499) (499)
Total other
expense, net (15,885) (14,560) (60,158) (55,682) (55,682)
(Loss) income
before income
taxes and
discontinued
operations (24,110) 12,584 41,066 83,728 83,728
INCOME TAX PROVISION:
Income tax (benefit)
expense (4,294) 5,016 21,268 33,324 27,765
Tax adjustment upon
conversion from
an L.L.C. to a
corporation - - - - 11,553
(Loss) income from
continuing
operations (19,816) 7,568 19,798 50,404 44,410
DISCONTINUED OPERATIONS,
net of tax (611) (2,070) (4,611) (6,325) (6,325)
Net (loss) income $(20,427) $5,498 $15,187 $44,079(b) $38,085
EARNINGS PER COMMON SHARE:
Basic:
(Loss) income
from continuing
operations $(0.61) $0.22 $0.61 $1.48 $1.34
Net (loss)
income $(0.63) $0.16 $0.47 $1.30 $1.15
Diluted:
(Loss) income
from continuing
operations $(0.61) $0.22 $0.61 $1.48 $1.34
Net (loss)
income $(0.62) $0.16 $0.46 $1.30 $1.15
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 32,431 33,810 32,648 33,952 33,065
Diluted 32,686 33,810 32,715 33,960 33,073
(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 net income to pro forma net income:
GAAP net income from continuing operations $38,085
Tax adjustment upon conversion from an L.L.C.
to a corporation 11,553
Pro forma income tax charge (5,559) (c)
Pro forma net income from continuing operations $44,079
(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.
SELECTED DATA
(in thousands except unit data)
(unaudited)
GAAP Results for the Same Store Results for the
Three Months Ended Three Months Ended
December 31, December 31,
2003 2002 2003 2002
RETAIL UNITS:
New 23,460 22,125 21,893 22,100
Used 13,066 13,597 12,208 13,564
Total 36,526 35,722 34,101 35,664
REVENUE:
New retail $713,535 $627,190 $659,271 $626,519
Used retail 199,555 210,370 183,017 209,917
Parts, service and
collision repair 141,373 124,547 130,268 124,400
Finance and
insurance, net 30,968 27,439 29,175 27,368
Fleet 10,877 10,356 10,550 10,356
Wholesale 68,502 60,527 62,183 60,493
Total $1,164,810 $1,060,429 $1,074,464 $1,059,053
GROSS PROFIT:
New retail $47,116 $44,051 $43,065 $44,015
Used retail 23,023 24,478 21,427 24,412
Parts, service and
collision repair 72,959 66,764 67,266 66,654
Finance and
insurance, net 30,968 27,439 29,175 27,368
Fleet 421 446 416 446
Wholesale (1,116) (917) (868) (920)
Floor plan interest
credits 6,118 5,482 5,789 5,469
Total $179,489 $167,743 $166,270 $167,444
GROSS MARGIN %:
New retail (including
floor plan interest
credits) 7.5% 7.9% 7.4% 7.9%
Used retail 11.5% 11.6% 11.7% 11.6%
Parts, service and
collision repair 51.6% 53.6% 51.6% 53.6%
Finance and
insurance, net 100.0% 100.0% 100.0% 100.0%
Total gross margin 15.4% 15.8% 15.5% 15.8%
GROSS PROFIT PER UNIT:
New retail (including
floor plan interest
credits) $2,269 $ 2,239 $2,231 $2,239
Used retail 1,762 1,800 1,755 1,800
Weighted average
total for new and
used retail 2,088 2,072 2,061 2,072
RECONCILIATION OF FINANCE AND INSURANCE GROSS
PROFIT TO PLATFORM FINANCE AND INSURANCE (a):
Finance and insurance,
net $30,968 $27,439 $ 29,175 $ 27,368
Less: corporate
finance and
insurance (1,393) - (1,393) -
Platform finance
and insurance,
net $29,575 $27,439 $ 27,782 $ 27,368
Platform finance and
insurance per vehicle
retailed $810 $768 $815 $767
RECONCILIATION OF NET (LOSS) INCOME
TO ADJUSTED EBITDA (b):
Net (loss) income $(20,427) $5,498
Add:
Depreciation
and amortization 5,243 4,835
Impairment of
goodwill 37,930 -
Other interest
expense 10,200 9,674
Income tax
(benefit) expense (4,294) 5,016
Adjusted EBITDA $28,652 $25,023
GAAP Results for the Three Months
Ended December 31,
2003 2002
RECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED
INCOME FROM CONTINUING OPERATIONS:
Net (loss) income $(20,427) $5,498
Discontinued operations 611 2,070
(Loss) income from continuing operations (19,816) 7,568
Tax affected impairment of goodwill (c) 29,180 -
Tax affected charge for Bob Baker (d) 1,552 -
Adjusted income from continuing operations $10,916 $7,568
RECONCILIATION OF NET (LOSS) INCOME PER COMMON
SHARE (BASIC) TO ADJUSTED INCOME FROM CONTINUING
OPERATIONS PER COMMON SHARE (BASIC):
Net (loss) income $(0.63) $0.16
Discontinued operations 0.02 0.06
(Loss) income from continuing operations (0.61) 0.22
Tax affected impairment of goodwill (c) 0.90 -
Tax affected charge for Bob Baker (d) 0.05 -
Adjusted income from continuing operations $ 0.34 $0.22
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 32,431 33,810
GAAP Results For Same Store Results
the Year Ended for the Year Ended
December 31, December 31,
2003 2002 2003 2002
RETAIL UNITS:
New 98,601 95,197 94,531 95,160
Used 59,211 58,076 56,824 58,027
Total 157,812 153,273 151,355 153,187
REVENUE:
New retail $2,861,746 $2,601,487 $2,731,889 $2,600,506
Used retail 903,113 889,579 861,175 888,858
Parts, service and
collision repair 551,498 497,164 524,416 496,928
Finance and insurance,
net 131,465 115,159 126,860 115,069
Fleet 47,895 43,311 47,372 43,311
Wholesale 280,788 268,565 266,539 268,530
Total $4,776,505 $4,415,265 $4,558,251 $4,413,202
GROSS PROFIT:
New retail $189,381 $189,755 $180,443 $189,699
Used retail 106,568 107,281 102,424 107,183
Parts, service and
collision repair 289,388 262,589 274,344 262,421
Finance and insurance,
net 131,465 115,159 126,860 115,069
Fleet 1,296 1,426 1,293 1,426
Wholesale (1,981) (3,015) (1,661) (3,018)
Floor plan interest
credits 24,187 23,123 23,462 23,109
Total $740,304 $696,318 $707,165 $695,889
GROSS MARGIN %:
New retail (including
floor plan interest
credits) 7.5% 8.2% 7.5% 8.2%
Used retail 11.8% 12.1% 11.9% 12.1%
Parts, service and
collision repair 52.5% 52.8% 52.3% 52.8%
Finance and insurance,
net 100.0% 100.0% 100.0% 100.0%
Total gross margin 15.5% 15.8% 15.5% 15.8%
GROSS PROFIT PER UNIT:
New retail (including
floor plan interest
credits) $2,166 $2,236 $2,157 $2,236
Used retail 1,800 1,847 1,802 1,847
Weighted average total
for new and used
retail 2,029 2,089 2,024 2,089
FREE CASH FLOW (e):
Net cash provided by
operating activities $95,344 $65,121
Less- Capital
expenditures (54,633) (57,477)
Add-
Financial capital
expenditures 11,026 5,447
Proceeds from
sale-leaseback
transactions,
including amounts
paid directly to the
Company's lenders 5,457 --
Total $57,194 $13,091
As of As of
December December
31, 2003 31, 2002
CAPITALIZATION:
Long-term debt
(including current
portion) $592,378 $475,152
Stockholders'
equity 433,707 426,951
Total $1,026,085 $902,103
GAAP Results For the Same Store Results For the
Year Ended Year Ended
December 31 December 31
2003 2002 2003 2002
RECONCILIATION OF FINANCE AND INSURANCE GROSS
PROFIT TO PLATFORM FINANCE AND INSURANCE (a):
Finance and insurance,
net $131,465 $115,159 $126,860 $115,069
Less: corporate
finance and
insurance (2,693) - (2,693) -
Platform finance
and insurance,
net $128,772 $115,159 $124,167 $115,069
Platform finance and
insurance per vehicle
retailed $816 $751 $820 $751
GAAP Results for the Year Ended
December 31
2003 2002
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (b):
Net income $15,187 $38,085
Add:
Depreciation and amortization 20,212 19,062
Impairment of goodwill 37,930 -
Other interest expense 40,238 38,423
Income tax expense 21,268 39,318
Adjusted EBITDA $134,835 $134,888
RECONCILIATION OF NET INCOME TO ADJUSTED
INCOME FROM CONTINUING OPERATIONS:
Net income $15,187 $38,085
Discontinued operations 4,611 6,325
Income from continuing operations 19,798 44,410
Tax affected impairment of goodwill (c) 29,180 -
Tax affected charge for Bob Baker (d) 1,552 -
Adjusted income from continuing operations $50,530 $44,410
RECONCILIATION OF NET INCOME PER COMMON SHARE
(BASIC) TO ADJUSTED INCOME FROM CONTINUING
OPERATIONS PER COMMON SHARE (BASIC):
Net income $0.47 $1.15
Discontinued operations 0.14 0.19
Income from continuing operations 0.61 1.34
Tax affected impairment of goodwill (c) 0.89 -
Tax affected charge for Bob Baker (d) 0.05 -
Adjusted income from continuing operations $1.55 $1.34
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 32,648 33,065
(a) The Company believes that platform finance and insurance gross
profit provides a more accurate measure of the Company's finance and
insurance performance than finance and insurance PVR, as it excludes
revenue resulting from corporate negotiated contracts, which is not
attributable to retail units sold.
(b) The Company defines adjusted EBITDA as earnings before income taxes,
other interest expense, depreciation and amortization and the charge
associated with the impairment of goodwill. Adjusted EBITDA, which
excludes the charge associated with the impairment of goodwill,
provides a basis to measure the performance of the Company's
operations and the Company's ability to meet its fixed charges,
including interest. Adjusted EBITDA is not a measure of financial
performance under accounting principles generally accepted in the
United States and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
accounting principles generally accepted in the United States. The
Company's definition of adjusted EBITDA may not be comparable to
similarly titled measures of other companies.
(c) In connection with the Company's annual impairment test of goodwill
conducted in the fourth quarter of 2003, the Company recorded a non-
cash goodwill impairment charge of $37,930 (after tax charge of
$29,180) associated with the Company's Oregon platform. The
goodwill impairment charge is added back to arrive at adjusted net
income from continuing operations to provide a basis to measure the
Company's operating performance apart from the non-cash impairment
charge.
(d) In connection with the proposed acquisition of the Bob Baker Auto
Group, the Company incurred $2,503 of costs, including certain costs
capitalized in prior periods. In the fourth quarter of 2004, the
Company determined that the acquisition was no longer probable and
wrote-off such expenses. The corresponding $1,552 after tax charge
(tax affected for the year and the quarter at 38%) is added back to
arrive at adjusted net income from continuing operations, as the
Company views costs related to acquisition activity as investments
in the related acquisition not expenses associate with the
continuing operations of the Company.
(e) 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.