Asbury Automotive Group Reports Second Quarter Financial Results
NEW YORK, July 29 -- Asbury Automotive Group, Inc. , one of the largest automotive retail and service companies in the U.S., today reported financial results for the quarter ended June 30, 2004.
Net income from continuing operations increased 6.6 percent to $15.2 million, or $0.47 per share, from $14.2 million, or $0.44 per share, for the second quarter of 2003. Net income increased 20.2 percent to $14.7 million, or $0.45 per share, from $12.3 million, or $0.38 per share, in the prior year period. For the first six months of the year, net income from continuing operations increased 15.4 percent to $25.9 million, or $0.79 per share, from $22.4 million, or $0.68 per share, a year ago. Net income for the first half of the year increased 29.6 percent to $25.1 million, or $0.77 per share, from $19.4 million, or $0.59 per share, in the prior year period.
The Company noted that net income for the quarter was affected by a severe hailstorm at its St. Louis platform, which adversely impacted earnings by approximately $0.02 per share.
Other financial highlights for the second quarter of 2004, as compared to the prior year period, included:
* Total revenues for the quarter were approximately $1.4 billion, up 13.0
percent. Total gross profit was $211.3 million, up 12.2 percent.
* Same-store retail revenue (excluding fleet and wholesale business)
increased 1.3 percent to $1.2 billion, while same-store retail gross
profit rose 1.7 percent to $191.5 million.
* New vehicle retail revenue increased 14.2 percent (2.8 percent same-
store), and unit sales increased 11.2 percent (flat on a same-store
basis). New vehicle retail gross profit increased 9.1 percent (down
3.8 percent same-store).
* Used vehicle retail revenue increased 4.6 percent (down 5.1 percent
same-store), and unit sales increased 3.8 percent (down 4.2 percent
same-store). Used vehicle retail gross profit increased 7.4 percent
(down 1.5 percent same-store).
* Parts, service and collision repair revenues and gross profit increased
13.8 percent and 14.3 percent (2.7 and 3.9 percent same-store),
respectively. The Company attributed the solid performance of its
fixed operations during the quarter to an increase in its "customer
pay" and warranty parts and service businesses, collectively up
approximately 9 percent on a same-store basis, which were partially
offset by lower increases in wholesale parts and outsourced service
sales and a 15 percent reduction in body shop business, which was
boosted a year ago in the wake of a major hailstorm in Texas.
* Net finance and insurance (F&I) revenue rose 17.3 percent (8.6 percent
same-store). F&I per vehicle retailed (PVR) increased 8.2 percent to
$875, and platform F&I PVR rose 3.0 percent to $833.
* As a percentage of gross profit, selling, general and administrative
(SG&A) expenses for the quarter were 78.8 percent, compared to 77.3
percent in the prior year period. The Company cited an incremental
$1.1 million of same-store advertising expense, as well as start-up
costs associated with new dealership locations and its entrance into
the Southern California market, for the year over year increase in its
expense ratio.
* The Company's effective tax rate for the quarter was 36.8 percent,
compared to 39.8 percent in the prior year quarter. For the year, the
Company expects its effective tax rate to be between 37 and 37.5
percent, which compares to 38.0 percent in 2003 after adjusting for the
impact of an impairment charge.
* In early July 2004, the Company entered into a sale-leaseback
transaction, pursuant to which it sold certain land and buildings with
a net book value of $100.6 million to an unaffiliated third party for
$116.0 million and entered into long-term operating leases for the
related facilities. The proceeds were used, in part, to repay the
$63.7 million of related mortgage debt.
President and CEO Kenneth B. Gilman commented, "We are pleased with the way our business model performed during the quarter, with solid overall gross profit production despite lower-than-expected vehicles sales, especially in June. Our service businesses again performed particularly well, with strong increases in income from both F&I and fixed operations -- especially the customer pay and warranty portion of our business. The steady growth in these businesses has effectively offset challenges we faced in new and used vehicle sales, and enabled us to produce nearly a two percent increase in same-store retail gross profit for the quarter."
J. Gordon Smith, Senior Vice President and CFO, stated, "So far this year we have achieved a 15 percent increase in income from continuing operations, in line with our business model. However, our SG&A expenses as a percent of gross profit rose approximately 150 basis points during the quarter due to several management decisions designed to grow the business. Our actions included a step up in advertising spending in an effort to sustain market share, as well as our strategic entrance into the Southern California market. Additionally, we incurred start-up costs related to the opening of several large volume stores, including one of the largest Honda dealerships in the country, as well as the largest Lexus dealership in the Southeast."
Mr. Smith continued, "We did notice that the volatility of vehicle sales during the quarter put a strain on our cost structure. Variable expenses simply did not adjust as we would have liked them to in some of our dealerships, and as a result we did not get the productivity we were looking for. With a bit more work in this area, we could certainly deliver more to the bottom line."
Commenting on guidance for 2004, the Company said it is comfortable with the average range of analysts' earnings expectations for the full year of between $1.70 and $1.75 per share. Factored into the range of expectations for the remainder of the year are anticipated reductions in gross profit of up to $1.5 million at the Company's St. Louis platform as it sells through the balance of the vehicles that sustained substantial damage during the hailstorm.
Mr. Gilman said, "Based on performance through the first half of the year, as well as expectations for the remainder of the year, we see no reason to adjust our forecast due to a lackluster June. We are working under the assumption that the onset of additional manufacturer incentives in July, as well as the continued strengthening in the economy, will drive additional traffic into our dealerships.
"Our growth model calls for 15 percent annual earnings growth, with half of that driven organically by the services side of the business, and the other half fueled by acquisitions. The business model continues to perform, as we posted double-digit earnings growth during the first half of the year despite the difficult retail sales environment," concluded Mr. Gilman.
The Company also noted that during the second quarter it acquired three dealerships, Nissan, Honda and Dodge franchises in southern California, with annualized revenues of approximately $145 million. On a year-to-date basis, the Company has acquired dealerships that represent approximately $315 million of annualized revenues, within its previously targeted range of $300 million to $500 million for the full year.
Asbury will host a conference call to discuss its 2004 second quarter results this morning at 11:00 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 800-381-2652; international callers, please dial 312-461-0745; no access code is required.
A conference call replay will be available two hours following the call for 14 days and can be accessed by calling 888-203-1112 (domestic), or 719-457-0820 (international); access code 510025.
About Asbury Automotive Group
Asbury Automotive Group, Inc., headquartered in New York City, 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 139 franchises for the sale and servicing of 34 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.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
For the Three For the Six
Months Ended Months Ended
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
REVENUES:
New vehicle $861,798 $755,097 $1,586,166 $1,379,172
Used vehicle 335,136 306,771 652,470 593,803
Parts, service and collision
repair 155,235 136,381 302,323 263,640
Finance and insurance, net 39,015 33,249 71,831 61,714
Total revenues 1,391,184 1,231,498 2,612,790 2,298,329
COST OF SALES:
New vehicle 800,257 699,072 1,471,068 1,276,228
Used vehicle 306,544 279,600 595,752 539,085
Parts, service and collision
repair 73,034 64,459 143,978 124,645
Total cost of sales 1,179,835 1,043,131 2,210,798 1,939,958
GROSS PROFIT 211,349 188,367 401,992 358,371
OPERATING EXPENSES:
Selling, general and
administrative 166,574 145,593 319,934 282,426
Depreciation and amortization 5,407 4,985 10,543 9,722
Income from operations 39,368 37,789 71,515 66,223
OTHER INCOME (EXPENSE):
Floor plan interest expense (5,434) (4,799) (10,206) (9,022)
Other interest expense (10,189) (9,996) (20,512) (19,950)
Interest income 112 80 387 260
Loss on sale of assets (100) (47) (142) (338)
Other income (expense) 261 637 101 88
Total other expense, net (15,350) (14,125) (30,372) (28,962)
Income from continuing
operations before income
taxes and discontinued
operations 24,018 23,664 41,143 37,261
INCOME TAX EXPENSE 8,830 9,418 15,252 14,830
Net income from continuing
operations 15,188 14,246 25,891 22,431
DISCONTINUED OPERATIONS, net of
tax (440) (1,973) (779) (3,061)
Net income $14,748 $12,273 $25,112 $19,370
EARNINGS PER COMMON SHARE (basic
and diluted):
Continuing operations $0.47 $0.44 $0.79 $0.68
Discontinued operations (0.02) (0.06) (0.02) (0.09)
Net income $0.45 $0.38 $0.77 $0.59
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 32,470 32,701 32,452 32,876
Diluted 32,656 32,714 32,688 32,881
ASBURY AUTOMOTIVE GROUP, INC.
SELECTED DATA
(In thousands, except vehicle and per vehicle data)
(Unaudited)
As Reported
For the Three Months Ended June 30,
2004 2003
RETAIL VEHICLES SOLD:
New units 28,538 64.0% 25,669 62.4%
Used units 16,033 36.0 15,448 37.6
Total units 44,571 100.0% 41,117 100.0%
REVENUE:
New retail $ 843,681 60.6% $ 738,921 60.0%
Used retail 248,841 17.9 237,884 19.3
Parts, service and collision
repair 155,235 11.2 136,381 11.1
Finance and insurance, net 39,015 2.8 33,249 2.7
Total retail revenue 1,286,772 1,146,435
Fleet 18,117 1.3 16,176 1.3
Wholesale 86,295 6.2 68,887 5.6
Total revenue $1,391,184 100.0% $1,231,498 100.0%
GROSS PROFIT:
New retail $ 60,870 28.8% $ 55,797 29.6%
Used retail 29,429 13.9 27,393 14.5
Parts, service and collision
repair 82,201 38.9 71,922 38.2
Finance and insurance, net 39,015 18.5 33,249 17.7
Total retail gross profit 211,515 188,361
Fleet 671 0.3 228 0.1
Wholesale (837) (0.4) (222) (0.1)
Total gross profit 211,349 100.0% 188,367 100.0%
Selling, general and
administrative expense 166,574 145,593
SG&A as a percent of gross
profit 78.8% 77.3%
GROSS PROFIT PER VEHICLE
RETAILED:
New retail (including floor
plan interest credits) $ 2,133 $ 2,174
Used retail 1,836 1,773
Finance and insurance, net 875 809
Platform finance and insurance,
net 833 809
ASBURY AUTOMOTIVE GROUP, INC.
SELECTED DATA
(In thousands, except vehicle and per vehicle data)
(Unaudited)
Same Store
For the Three Months
Ended June 30,
2004 2003
RETAIL VEHICLES
SOLD:
New units 25,661 63.4% 25,669 62.4%
Used units 14,806 36.6 15,448 37.6
Total units 40,467 100.0 41,117 100.0%
REVENUE:
New retail $ 759,322 60.4% $ 738,921 60.0%
Used retail 225,843 18.0 237,884 19.3
Parts, service and
collision repair 140,025 11.1 136,381 11.1
Finance and
insurance, net 36,095 2.9 33,249 2.7
Total retail revenue 1,161,285 1,146,435
Fleet 17,882 1.4 16,176 1.3
Wholesale 77,623 6.2 68,887 5.6
Total revenue $1,256,790 100.0% $1,231,498 100.0%
GROSS PROFIT:
New retail $ 53,652 28.0% $ 55,797 29.6%
Used retail 26,969 14.1 27,393 14.5
Parts, service and
collision repair 74,762 39.1 71,922 38.2
Finance and
insurance, net 36,095 18.9 33,249 17.7
Total retail
gross profit 191,478 188,361
Fleet 671 0.3 228 0.1
Wholesale (824) (0.4) (222) (0.1)
Total gross profit $ 191,325 100.0% $188,367 100.0%
Selling, general and
administrative
expense 150,417 145,593
SG&A as a percent of
gross profit 78.6% 77.3%
GROSS PROFIT PER
VEHICLE RETAILED:
New retail
(including floor
plan interest
credits) $ 2,091 $ 2,174
Used retail 1,821 1,773
Finance and
insurance, net 892 809
Platform finance
and insurance, net 845 809
As of As of
June 30, December
2004 31, 2003
BALANCE SHEET HIGHLIGHTS:
Cash and cash equivalents $14,879 $106,711
Inventories 746,284 650,397
Total current assets 1,187,188 1,041,542
Floor plan notes payable 673,202 602,167
Total current liabilities 933,129 781,758
CAPITALIZATION:
Long-term debt (including current portion) $531,497 $592,378
Shareholders' equity 455,591 433,707
Total $987,088 $1,026,085
ASBURY AUTOMOTIVE GROUP, INC.
SELECTED DATA
(In thousands, except vehicle and per vehicle data)
(Unaudited)
As Reported
For the Six Months Ended June 30,
2004 2003
RETAIL VEHICLES SOLD:
New units 52,361 62.2% 47,385 61.1%
Used units 31,808 37.8 30,183 38.9
Total units 84,169 100.0% 77,568 100.0%
REVENUE:
New retail $1,553,183 59.4 $1,349,562 58.7
Used retail 487,923 18.7 461,376 20.1
Parts, service and collision
repair 302,323 11.6 263,640 11.5
Finance and insurance, net 71,831 2.7 61,714 2.7
Total retail revenue 2,415,260 2,136,292
Fleet 32,983 1.3 29,610 1.3
Wholesale 164,547 6.3 132,427 5.7
Total revenue $2,612,790 100.0% $2,298,329 100.0%
GROSS PROFIT:
New retail $114,053 28.3% $102,364 28.5%
Used retail 58,063 14.4 54,658 15.3
Parts, service and collision
repair 158,345 39.4 138,995 38.8
Finance and insurance, net 71,831 17.9 61,714 17.2
Total retail gross profit 402,292 357,731
Fleet 1,045 0.3 580 0.2
Wholesale (1,345) (0.3) 60 0.0
Total gross profit $401,992 100.0% $358,371 100.0%
Selling, general and administrative
expense 319,934 282,426
SG&A as a percent of gross profit 79.6% 78.8%
GROSS PROFIT PER VEHICLE
RETAILED:
New retail (including floor plan
interest credits) $2,178 $2,160
Used retail 1,825 1,811
Finance and insurance, net 853 796
Platform finance and insurance,
net 816 796
ASBURY AUTOMOTIVE GROUP, INC.
SELECTED DATA
(In thousands, except vehicle and per vehicle data)
(Unaudited)
Same Store
For the Six Months Ended June 30,
2004 2003
RETAIL VEHICLES SOLD:
New units 47,411 61.8% 47,385 61.1%
Used units 29,339 38.2 30,183 38.9
Total units 76,750 100.0 77,568 100.0%
REVENUE:
New retail $1,406,109 59.3% $1,349,562 58.7%
Used retail 442,152 18.7 461,376 20.1
Parts, service and collision
repair 273,873 11.5 263,640 11.5
Finance and insurance, net 66,753 2.8 61,714 2.7
Total retail revenue 2,188,887 2,136,292
Fleet 32,748 1.4 29,610 1.3
Wholesale 148,808 6.3 132,427 5.7
Total revenue $2,370,443 100.0% $2,298,329 100.0%
GROSS PROFIT:
New retail $ 101,517 27.8% $ 102,364 28.5%
Used retail 53,122 14.5 54,658 15.3
Parts, service and collision
repair 144,132 39.4 138,995 38.8
Finance and insurance, net 66,753 18.3 61,714 17.2
Total retail gross profit 365,524 357,731
Fleet 1,044 0.3 580 0.2
Wholesale (1,266) (0.3) 60 0.0
Total gross profit $ 365,302 100.0% $ 358,371 100.0%
Selling, general and
administrative
expense 290,485 282,426
SG&A as a percent of gross
profit 79.5% 78.8%
GROSS PROFIT PER VEHICLE
RETAILED:
New retail (including floor
plan interest credits) $2,141 $2,160
Used retail 1,811 1,811
Finance and insurance, net 870 796
Platform finance and
insurance, net 829 796
ASBURY AUTOMOTIVE GROUP, INC.
SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
(In thousands, except vehicle data)
(Unaudited)
We evaluate our finance and insurance gross profit performance on a per vehicle retailed basis by dividing our total finance and insurance gross profit by the number of retail vehicles sold. During 2003, we renegotiated a contract with one of our third party finance and insurance product providers, which resulted in the recognition of income that was not attributable to retail vehicles sold during the year. We believe that platform finance and insurance, which excludes the additional revenue derived from contracts negotiated by our corporate office, provides a more accurate measure of our finance and insurance operating performance. The following table reconciles finance and insurance gross profit to platform finance and insurance gross profit, and provides necessary components to calculate platform finance and insurance gross profit per vehicle retailed.
As Reported For
the Three Same Store For
Months Ended the Three Months
June 30, Ended June 30,
2004 2003 2004 2003
RECONCILIATION OF FINANCE AND
INSURANCE GROSS PROFIT TO
PLATFORM FINANCE AND INSURANCE:
Finance and insurance, net $39,015 $33,249 $36,095 $33,249
Less: corporate finance and insurance (1,906) - (1,906) -
Platform finance and insurance,
net $37,109 $33,249 $34,189 $33,249
RETAIL VEHICLES SOLD:
New retail units 28,538 25,669 25,661 25,669
Used retail units 16,033 15,448 14,806 15,448
Total units 44,571 41,117 40,467 41,117
As Reported For Same Store For
the Six Months the Six Months
Ended June 30, Ended June 30,
2004 2003 2004 2003
RECONCILIATION OF FINANCE AND
INSURANCE GROSS PROFIT TO
PLATFORM FINANCE AND INSURANCE:
Finance and insurance, net $71,831 $61,714 $66,753 $61,714
Less: corporate finance and insurance (3,149) - (3,149) -
Platform finance and insurance,
net $68,682 $61,714 $63,604 $61,714
RETAIL VEHICLES SOLD:
New retail units 52,361 47,385 47,411 47,385
Used retail units 31,808 30,183 29,339 30,183
Total units 84,169 77,568 76,750 77,568
We define adjusted EBITDA as net income before other interest expense, income tax expense and depreciation and amortization expense. This definition of adjusted EBITDA may not be comparable to similarly titled measures of other companies. Adjusted EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States. We believe adjusted EBITDA provides a basis to measure our operating performance, apart from the expenses associated with our physical plant or capital structure. Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flow from operating activities or other measures of performance defined by accounting principles generally accepted in the United States. A reconciliation of adjusted EBITDA is presented below.
As As As As
Reported Reported Reported Reported
For the For the For the For the
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
RECONCILIATION OF NET INCOME TO
ADJUSTED EBITDA:
Net income $14,748 $12,273 $25,112 $19,370
Add:
Other interest expense 10,189 9,996 20,512 19,950
Income tax expense 8,830 9,418 15,252 14,830
Depreciation and
amortization 5,407 4,985 10,543 9,722
Adjusted EBITDA $39,174 $36,672 $71,419 $63,872