Asbury Automotive Group Reports First Quarter Financial Results
- Excluding Previously Announced Restructuring Costs, Income from Continuing Operations Rose 12% -
- Same-Store Retail Gross Profit Increased 7% -
NEW YORK, April 26 -- 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, 2005.
Income from continuing operations for the first quarter was $9.7 million, or $0.30 per diluted share, which includes $3.6 million ($2.2 million after-tax) of costs related to the previously announced regional restructuring. Excluding the restructuring costs, income from continuing operations increased 12 percent to $11.9 million, or $0.36 per diluted share, from $10.7 million, or $0.33 per diluted share, in the prior year period.
Financial highlights for the first quarter of 2005, as compared to the corresponding prior year period, included:
* Total revenue for the quarter was approximately $1.4 billion, up
14 percent. Total gross profit was $210.5 million, a 13 percent
increase.
* Same-store retail revenue and gross profit (excluding fleet and
wholesale revenue) both increased 7 percent.
* New vehicle retail revenue rose 13 percent (6 percent same-store), and
unit sales increased 10 percent (3 percent same-store). New vehicle
retail gross profit increased 7 percent (flat on a same-store basis).
* Used vehicle retail revenue increased 12 percent (7 percent
same-store), and unit sales rose 5 percent (flat on a same-store
basis). Used vehicle retail gross profit increased 11 percent
(7 percent same-store).
* Parts, service and collision repair revenue and gross profit both
increased 15 percent (10 percent same-store).
* Net finance and insurance (F&I) revenue rose 17 percent (11 percent
same-store). F&I per vehicle retailed (PVR) increased 9 percent to
$923, and platform F&I PVR rose 9 percent to $894.
* As a percentage of gross profit, selling, general and administrative
(SG&A) expenses for the quarter, excluding the restructuring costs and
rent expense, were 74.2 percent, down 120 basis points compared to the
prior year. Rent expense in 2005 is higher due to a sale-leaseback
transaction in July 2004 that had the effect of increasing rent while
reducing interest and depreciation expense.
President and CEO Kenneth B. Gilman said, "Our business model turned in another well balanced performance during the first quarter. Operationally, the quarter was solid -- with many outstanding aspects, as all four business lines posted upper single to double-digit same-store sales increases. Results again were strongest in our service businesses, led by a 10 percent same-store gross profit increase in our parts and service business, which truly reflects a concerted effort in this area. About two years ago, we formed a view that new vehicle margins would be coming under sustained pressure, and therefore set very aggressive growth goals for our parts and service operations. With a focused approach to training and investments in equipment and capacity expansion, we're seeing our efforts pay off.
"The retail side of the business also performed well, as our new vehicle unit volume outperformed the industry during the quarter. By virtue of our strong brand mix, focused on luxury and mid-line import brands, we were able to capitalize on an improved environment at the end of the quarter. We're also confident that our seven percent increase in same-store used vehicle gross profit is industry leading as well."
J. Gordon Smith, Senior Vice President and CFO said, "During the quarter we made significant progress in reorganizing the Company into regions and attaining our targeted annual cost savings. Consistent with our original estimates, we continue to expect the restructuring will reduce earnings by approximately $0.02 to $0.04 per share on a net basis this year, and will increase earnings by approximately $0.10 per share next year."
Mr. Smith continued, "It is important to note, however, that the goal of the restructuring is not simply cost reduction. We have already begun to reap the operational benefits of our new structure, and are pleased with the performance of most of our regional operations during the quarter, especially Florida. Our Florida management team has done an excellent job of integrating the operations of our former Jacksonville and Tampa platforms, as well as strengthening the dealership teams of several of our largest Florida stores."
Mr. Gilman concluded, "While pleased with the quarter's results, we still need to maintain our sales momentum. In addition, the continued implementation of our regional structure and a vigilant focus on expense control will be key in meeting our objectives for the balance of the year."
Commenting on guidance for 2005, the Company noted that it remains comfortable with estimates for earnings per share from continuing operations between $1.70 and $1.78. This range does not reflect the net costs resulting from the regional reorganization nor the potential adoption of Statement of Financial Accounting Standard 123(R).
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 2004 revenue of approximately $5.3 billion. Built through a combination of organic growth and a series of strategic acquisitions, the Company currently operates 95 retail auto stores, encompassing 131 franchises for the sale and servicing of 33 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 Months
Ended March 31,
2005 2004
REVENUES:
New vehicle $806,490 $706,759
Used vehicle 345,472 306,924
Parts, service and collision repair 161,709 140,856
Finance and insurance, net 38,290 32,687
Total revenues 1,351,961 1,187,226
COST OF SALES
New vehicle 750,065 654,053
Used vehicle 314,237 279,939
Parts, service and collision repair 77,165 67,349
Total cost of sales 1,141,467 1,001,341
GROSS PROFIT 210,494 185,885
OPERATING EXPENSES:
Selling, general and administrative 173,084 148,959
Depreciation and amortization 5,250 5,071
Income from operations 32,160 31,855
OTHER INCOME (EXPENSE):
Floor plan interest expense (7,412) (4,514)
Other interest expense (9,490) (10,321)
Interest income 258 273
Other expense (22) (202)
Total other expense, net (16,666) (14,764)
Income from continuing operations before income taxes 15,494 17,091
INCOME TAX EXPENSE 5,810 6,409
INCOME FROM CONTINUING OPERATIONS 9,684 10,682
DISCONTINUED OPERATIONS, net of tax (44) (318)
Net income $9,640 $10,364
BASIC EARNINGS PER COMMON SHARE:
Continuing operations $0.30 $0.33
Discontinued operations - (0.01)
Net income $0.30 $0.32
DILUTED EARNINGS PER COMMON SHARE:
Continuing operations $0.30 $0.33
Discontinued operations (0.01) (0.01)
Net income $0.29 $0.32
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 32,588 32,435
Diluted 32,781 32,721
Asbury Automotive Group, Inc.
Selected Data
(Dollars in thousands except per share data)
(Unaudited)
As Reported for the
Three Months Ended March 31,
2005 2004
RETAIL VEHICLES SOLD:
New units 25,604 61.7% 23,312 60.6%
Used units 15,862 38.3% 15,158 39.4%
Total units 41,466 100.0% 38,470 100.0%
REVENUE:
New retail $779,577 57.7% $692,744 58.3%
Used retail 258,198 19.1% 230,573 19.4%
Parts, service and
collision repair 161,709 12.0% 140,856 11.9%
Finance and
insurance, net 38,290 2.8% 32,687 2.8%
Total retail revenue 1,237,774 1,096,860
Fleet 26,913 2.0% 14,015 1.2%
Wholesale 87,274 6.4% 76,351 6.4%
Total revenue $1,351,961 100.0% $1,187,226 100.0%
GROSS PROFIT
New retail $55,838 26.5% $52,348 28.2%
Used retail 30,110 14.3% 27,053 14.5%
Parts, service and
collision repair 84,544 40.2% 73,507 39.5%
Finance and
insurance, net 38,290 18.2% 32,687 17.6%
Total retail
gross profit 208,782 185,595
Fleet 587 0.3% 358 0.2%
Wholesale 1,125 0.5% (68) -%
Total gross profit $210,494 100.0% $185,885 100.0%
SG&A expenses excluding
reorganization costs
and rent 156,101 140,250
SG&A (excluding
reorganization costs
and rent) as a
percent of gross profit 74.2% 75.4%
GROSS PROFIT PER VEHICLE
RETAILED:
New retail $2,181 $2,246
Used retail 1,898 1,785
Finance and insurance, net 923 850
Platform finance and
insurance, net 894 817
Same Store for the
Three Months Ended March 31,
2005 2004
RETAIL VEHICLES SOLD:
New units 23,911 61.1% 23,312 60.6%
Used units 15,202 38.9% 15,158 39.4%
Total units 39,113 100.0% 38,470 100.0%
REVENUE:
New retail $734,111 57.3% $692,744 58.3%
Used retail 247,201 19.3% 230,573 19.4%
Parts, service and
collision repair 154,622 12.1% 140,856 11.9%
Finance and
insurance, net 36,437 2.8% 32,687 2.8%
Total retail revenue 1,172,371 1,096,860
Fleet 26,640 2.1% 14,016 1.2%
Wholesale 82,066 6.4% 76,060 6.4%
Total revenue $1,281,077 100.0% $ 1,186,936 100.0%
GROSS PROFIT
New retail $52,608 26.2% $52,348 28.2%
Used retail 28,990 14.5% 27,053 14.5%
Parts, service and
collision repair 80,906 40.3% 73,507 39.5%
Finance and
insurance, net 36,437 18.2% 32,687 17.6%
Total retail
gross profit 198,941 185,595
Fleet 583 0.3% 358 0.2%
Wholesale 1,083 0.5% (68) -%
Total gross profit $200,607 100.0% $185,885 100.0%
SG&A expenses excluding
reorganization costs
and rent 147,248 140,250
SG&A (excluding
reorganization costs
and rent) as a percent
of gross profit 73.4% 75.4%
GROSS PROFIT PER VEHICLE RETAILED:
New retail $2,200 $2,246
Used retail 1,907 1,785
Finance and insurance, net 932 850
Platform finance
and insurance, net 901 817
As of As of
March 31, December 31,
2005 2004
BALANCE SHEET HIGHLIGHTS:
Cash and cash equivalents $39,253 $28,093
Inventories 800,479 761,557
Total current assets 1,174,008 1,143,506
Floor plan notes payable 690,319 650,948
Total current liabilities 889,628 847,510
CAPITALIZATION:
Long-term debt (including current portion) $504,492 $526,415
Stockholders' equity 493,608 481,733
Total $998,100 $1,008,148
ASBURY AUTOMOTIVE GROUP, INC.
SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
(In thousands, except vehicle data)
(Unaudited)
The Company evaluates finance and insurance gross profit performance on a per-vehicle retailed basis by dividing total finance and insurance gross profit by the number of retail vehicles sold. During 2003, the Company renegotiated a contract with a third party finance and insurance product provider, which resulted in the recognition of income that was not attributable to retail vehicles sold during the year. The Company believes that platform finance and insurance, which excludes the additional revenue derived from contracts negotiated by the corporate office, provides a more accurate measure of the Company's 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 Same Store For
the Three the Three
Months Ended Months Ended
March 31, March 31,
2005 2004 2005 2004
RECONCILIATION OF FINANCE AND INSURANCE
GROSS PROFIT TO PLATFORM FINANCE AND
INSURANCE:
Finance and insurance, net $38,290 $32,687 $36,437 $32,687
Less: corporate finance and insurance (1,203) (1,243) (1,203) (1,243)
Platform finance and insurance, net $37,087 $31,444 $35,234 $31,444
RETAIL VEHICLES SOLD:
New retail units 25,604 23,312 23,911 23,312
Used retail units 15,862 15,158 15,202 15,158
Total units 41,466 38,470 39,113 38,470
The Company's operating income was largely impacted by restructuring costs incurred during the first quarter of 2005 and an incremental rent expense associated with a sale-leaseback transaction that was entered into in the third quarter of 2004. The Company believes that excluding the restructuring costs and rent expense from the selling, general and administrative expenses provides a more meaningful basis to measure the results of the Company's operations compared to that of the prior year period. A reconciliation of the Company's adjusted selling, general and administrative expenses is presented below.
As Reported As Reported
for the for the
Three Months Three Months
Ended Ended
March 31, 2005 March 31, 2004 Variance
SG&A expenses $173,084 $148,959 $24,125
Less: Restructuring costs (3,624) - (3,624)
Rent expense (13,359) (8,709) (4,650)
Adjusted SG&A expenses $156,101 $140,250 $15,851
Same Store Same Store
Results for Results for
the Three the Three
Months Ended Months Ended
March 31, 2005 March 31, 2004 Variance
SG&A expenses $162,888 $148,959 $13,929
Less: Restructuring costs (3,624) - (3,624)
Rent expense (12,016) (8,709) (3,307)
Adjusted SG&A expenses $147,248 $140,250 $6,998
The Company defines income from continuing operations as net income less discontinued operations. We believe that excluding certain items from income from continuing operations for the three months ended March 31, 2005 provides a more meaningful basis to measure the results of our operations. A reconciliation of our net income to adjusted income from continuing operations is presented below.
For the Three Months
Ended March 31,
2005 2004
RECONCILIATION OF NET INCOME TO ADJUSTED INCOME FROM
CONTINUING OPERATIONS:
Net income $9,640 $10,364
Discontinued operations 44 318
Income from continuing operations 9,684 10,682
Tax affected reorganization costs (a) 2,265 -
Adjusted income from continuing operations $11,949 $10,682
RECONCILIATION OF NET INCOME PER DILUTED COMMON SHARE
TO ADJUSTED INCOME FROM CONTINUING OPERATIONS PER
DILUTED COMMON SHARE:
Net income $0.29 $0.32
Discontinued operations 0.01 0.01
Income from continuing operations 0.30 0.33
Tax affected reorganization costs (a) 0.06 -
Adjusted income from continuing operations $0.36 $0.33
Weighted average common shares outstanding (diluted): 32,781 32,721
(a) During the first quarter of 2005, the Company incurred severance costs
of $3,624 ($2,265 net of tax) associated with our previously announced
reorganization.