Asbury Automotive Group Reports Second Quarter Financial Results
- Income from Continuing Operations Increased 9% -
- Same-Store Retail Revenue Rose 9%; Same-Store Retail Gross Profit Increased 7% -
NEW YORK, July 28 -- 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, 2005.
Income from continuing operations for the second quarter increased 9 percent to $17.5 million, or $0.54 per diluted share, compared with $16.0 million, or $0.49 per diluted share, in last year's second quarter. Net income for the second quarter was $16.0 million, or $0.49 per diluted share compared to $14.7 million, or $0.45 per diluted share, for the second quarter of 2004.
For the first six months of 2005, income from continuing operations was $28.0 million, or $0.85 per diluted share, including after-tax costs of $2.2 million, or $0.07 per diluted share, related to the Company's regional restructuring. Excluding the restructuring costs, income from continuing operations increased 12 percent to $30.2 million, or $0.92 per diluted share, from $26.9 million, or $0.82 per diluted share, in the prior year-to-date period. Net income for the first half of 2005 was $25.6 million, or $0.78 per diluted share, as compared to $25.1 million, or $0.77 per diluted share, for the first half of 2004.
Additional financial highlights for the second quarter of 2005, as compared to the corresponding period a year ago, included:
-- Total revenue for the quarter was approximately $1.5 billion, up 12
percent. Total gross profit was $221.4 million, a 10 percent increase.
-- Same-store retail revenue and gross profit (excluding fleet and
wholesale revenue) increased 9 and 7 percent, respectively.
-- New vehicle retail revenue rose 10 percent (6 percent same-store), and
unit sales increased 7 percent (3 percent same-store). New vehicle
retail gross profit increased 6 percent (3 percent same-store).
-- Used vehicle retail revenue increased 19 percent (16 percent same-
store), and unit sales rose 10 percent (6 percent same-store). Used
vehicle retail gross profit increased 12 percent (10 percent same-
store).
-- Parts, service and collision repair revenue increased 13 percent (11
percent same-store), while the related gross profit rose 10 percent (8
percent same-store).
-- Net finance and insurance (F&I) revenue rose 11 percent (7 percent
same-store). F&I per vehicle retailed (PVR) increased 3 percent to
$913, and platform F&I PVR rose 5 percent to $883.
-- As a percentage of gross profit, selling, general and administrative
(SG&A) expenses for the quarter were 77.0 percent, compared to 77.5
percent in the prior year. Excluding rent expense, SG&A expenses were
71.4 percent, down 180 basis points compared to the prior year. Rent
expense was higher in 2005 principally 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 commented, "I am pleased with our ability to achieve solid top and bottom-line results this quarter. During a very promotional new car environment, which was highlighted by General Motors' generous "employee discount" program, our business model once again turned in a solid performance. Of particular note is the performance of our used car operations where we achieved substantial gains in both same-store retail revenue and gross profit. We believe these gains can be attributed to earlier programs put in place to develop this area of the business. Despite this success, I still believe additional opportunity exists in used cars, especially in the lower-priced end of the market."
Mr. Gilman continued, "Our services businesses once again turned in strong performances and, when combined with our used vehicle business, more than offset continued pressure on new vehicle gross margins. For the quarter, fixed operations and finance and insurance generated 8 and 7 percent gains in same-store gross profit, respectively, well ahead of our ongoing objective of 3 to 5 percent increases. Our parts and service business continues to benefit from our decision two years ago to focus more resources on targeted investments in people, capacity expansion, new equipment and better training for our service advisors."
J. Gordon Smith, Senior Vice President and CFO, said, "We remained on track during the quarter with the implementation of our regional reorganization program, and have already achieved most of the expected cost savings. We continue to believe the restructuring will deliver cost reductions in the second half of 2005 and into 2006, with annualized savings of approximately $0.10 per share. In addition, cost containment initiatives that were put in place several quarters ago have begun to yield tangible results, and we believe will continue to produce additional savings in the future."
Mr. Smith continued, "Portfolio management has been another important focus during the year. The further streamlining of our dealership portfolio through the divestiture of under-performing stores eliminates some considerable distractions and enhances the Company's overall productivity. Specifically, three stores that we decided to sell in the second quarter of 2005 lost approximately $0.02 per diluted share during the quarter, which is included in discontinued operations. The remaining $0.03 loss from discontinued operations principally relates to stores sold in 2005 but placed in discontinued operations in 2004. On the acquisition front, we've been a bit selective in our approach, unwilling to pay above market prices to induce owners to sell. As a result, we expect the year to come in below the low end of our previously announced acquisition target of adding $300 million in annualized revenues."
Commenting on earnings guidance for 2005, the Company noted that it has raised its expected range of estimates for earnings per share from continuing operations to between $1.74 and $1.80. This range does not reflect the net costs resulting from the regional reorganization currently estimated at $0.03 per share, 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 94 retail auto stores, encompassing 129 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 For the Six
Months Ended Months Ended
June 30, June 30,
2005 2004 2005 2004
REVENUES:
New vehicle $903,767 $814,427 $1,688,962 $1,494,018
Used vehicle 366,917 316,278 705,023 615,330
Parts, service and
collision repair 164,529 146,085 322,696 283,933
Finance and insurance,
net 41,646 37,453 79,334 68,374
Total revenues 1,476,859 1,314,243 2,796,015 2,461,655
COST OF SALES:
New vehicle 841,065 755,381 1,571,227 1,383,735
Used vehicle 335,403 289,033 643,015 561,044
Parts, service and
collision repair 79,016 68,224 154,701 134,172
Total cost of sales 1,255,484 1,112,638 2,368,943 2,078,951
GROSS PROFIT 221,375 201,605 427,072 382,704
OPERATING EXPENSES:
Selling, general and
administrative 170,551 156,332 338,358 300,694
Depreciation and
amortization 5,102 5,084 10,037 9,947
Income from operations 45,722 40,189 78,677 72,063
OTHER INCOME (EXPENSE):
Floor plan interest
expense (7,977) (4,883) (14,973) (9,128)
Other interest expense (10,131) (10,186) (19,619) (20,506)
Interest income 235 109 491 381
Other income (expense) 186 152 158 (59)
Total other expense,
net (17,687) (14,808) (33,943) (29,312)
Income before income
taxes 28,035 25,381 44,734 42,751
INCOME TAX EXPENSE 10,513 9,341 16,775 15,855
INCOME FROM CONTINUING
OPERATIONS 17,522 16,040 27,959 26,896
DISCONTINUED OPERATIONS,
net of tax (1,536) (1,292) (2,332) (1,784)
Net income $15,986 $14,748 $25,627 $25,112
BASIC EARNINGS PER
COMMON SHARE:
Continuing operations $ 0.54 $ 0.49 $ 0.86 $ 0.83
Discontinued operations (0.05) (0.04) (0.07) (0.06)
Net income $ 0.49 $ 0.45 $ 0.79 $ 0.77
DILUTED EARNINGS PER
COMMON SHARE:
Continuing operations $ 0.54 $ 0.49 $ 0.85 $ 0.82
Discontinued operations (0.05) (0.04) (0.07) (0.05)
Net income $ 0.49 $ 0.45 $ 0.78 $ 0.77
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 32,604 32,470 32,596 32,452
Diluted 32,725 32,656 32,753 32,688
Asbury Automotive Group, Inc.
Selected Data
(Dollars in thousands, except per share data)
(Unaudited)
As Reported for the
Three Months Ended June 30,
2005 2004
RETAIL VEHICLES SOLD:
New units 29,094 63.8% 27,114 64.3%
Used units 16,520 36.2% 15,072 35.7%
Total units 45,614 100.0% 42,186 100.0%
REVENUE:
New retail $879,202 59.5% $798,482 60.8%
Used retail 279,451 18.9% 234,321 17.8%
Parts, service and
collision repair 164,529 11.2% 146,085 11.1%
Finance and
insurance, net 41,646 2.8% 37,453 2.9%
Total retail
revenue 1,364,828 1,216,341
Fleet 24,565 1.7% 15,945 1.2%
Wholesale 87,466 5.9% 81,957 6.2%
Total revenue $1,476,859 100.0% $1,314,243 100.0%
GROSS PROFIT
New retail $61,903 28.0% $58,397 29.0%
Used retail 31,487 14.2% 28,050 13.9%
Parts, service and
collision repair 85,513 38.6% 77,861 38.6%
Finance and
insurance, net 41,646 18.8% 37,453 18.6%
Total retail gross
profit 220,549 201,761
Fleet 799 0.4% 649 0.3%
Wholesale 27 -- (805) (0.4%)
Total gross
profit $221,375 100.0% $201,605 100.0%
SG&A expenses
excluding rent
expense $158,007 $147,521
SG&A (excluding
rent expense) as
a percent of gross
profit 71.4% 73.2%
GROSS PROFIT PER VEHICLE
RETAILED:
New retail $ 2,128 $ 2,154
Used retail 1,906 1,861
Finance and
insurance, net 913 888
Platform finance and
insurance, net 883 843
Same Store for the
Three Months Ended June 30,
2005 2004
RETAIL VEHICLES SOLD:
New units 27,866 63.5% 27,114 64.3%
Used units 16,005 36.5% 15,072 35.7%
Total units 43,871 100.0% 42,186 100.0%
REVENUE:
New retail $848,376 59.3% $798,482 60.8%
Used retail 272,140 19.0% 234,321 17.8%
Parts, service and
collision repair 162,302 11.4% 146,085 11.1%
Finance and insurance,
net 40,082 2.8% 37,453 2.9%
Total retail revenue 1,322,900 1,216,341
Fleet 23,346 1.6% 15,945 1.2%
Wholesale 84,552 5.9% 81,957 6.2%
Total revenue $1,430,798 100.0% $1,314,243 100.0%
GROSS PROFIT
New retail $ 59,975 27.8% $ 58,397 29.0%
Used retail 30,763 14.3% 28,050 13.9%
Parts, service and
collision repair 84,015 38.9% 77,861 38.6%
Finance and insurance,
net 40,082 18.6% 37,453 18.6%
Total retail gross
profit 214,835 201,761
Fleet 808 0.4% 649 0.3%
Wholesale 52 -- (805) (0.4%)
Total gross profit $ 215,695 100.0% $ 201,605 100.0%
SG&A expenses excluding
rent expense $ 153,424 $ 147,060
SG&A (excluding rent
expense) as a percent
of gross profit 71.1% 72.9%
GROSS PROFIT PER VEHICLE
RETAILED:
New retail $2,152 $2,154
Used retail 1,922 1,861
Finance and insurance,
net 914 888
Platform finance and
insurance, net 882 843
Asbury Automotive Group, Inc.
Selected Data
(Dollars in thousands except per share data)
(Unaudited)
As Reported for the
Six Months Ended June 30,
2005 2004
RETAIL VEHICLES SOLD:
New units 53,997 62.8% 49,692 62.5%
Used units 32,027 37.2% 29,795 37.5%
Total units 86,024 100.0% 79,487 100.0%
REVENUE:
New retail $1,639,052 58.6% $1,467,999 59.6%
Used retail 531,931 19.0% 458,351 18.6%
Parts, service and
collision repair 322,696 11.6% 283,933 11.5%
Finance and
insurance, net 79,334 2.8% 68,374 2.8%
Total retail
revenue 2,573,013 2,278,657
Fleet 49,910 1.8% 26,019 1.1%
Wholesale 173,092 6.2% 156,979 6.4%
Total revenue $2,796,015 100.0% $2,461,655 100.0%
GROSS PROFIT
New retail $116,335 27.2% $109,268 28.5%
Used retail 60,870 14.3% 55,179 14.4%
Parts, service and
collision repair 167,995 39.3% 149,761 39.1%
Finance and insurance,
net 79,334 18.6% 68,374 17.9%
Total retail gross
profit 424,534 382,582
Fleet 1,400 0.3% 1,015 0.3%
Wholesale 1,138 0.3% (893) (0.2%)
Total gross profit $427,072 100.0% $382,704 100.0%
SG&A expenses excluding
reorganization
costs $309,493 $283,701
SG&A (excluding
reorganization costs
and rent)as a percent
of gross profit 72.5% 74.1%
GROSS PROFIT PER
VEHICLE RETAILED:
New retail $2,154 $2,199
Used retail 1,901 1,852
Finance and
insurance, net 9 22 860
Platform finance and
insurance, net 892 821
Same Store for the
Six Months Ended June 30,
2005 2004
RETAIL VEHICLES SOLD:
New units 51,264 62.4% 49,692 62.5%
Used units 30,908 37.6% 29,795 37.5%
Total units 82,172 100.0% 79,487 100.0%
REVENUE:
New retail $1,567,930 58.4% $1,467,999 59.6%
Used retail 514,403 19.1% 458,351 18.6%
Parts, service and
collision repair 313,819 11.7% 283,933 11.5%
Finance and insurance,
net 76,057 2.8% 68,374 2.8%
Total retail
revenue 2,472,209 2,278,657
Fleet 48,418 1.8% 26,019 1.1%
Wholesale 165,545 6.2% 156,979 6.4%
Total revenue $2,686,172 100.0% $2,461,655 100.0%
GROSS PROFIT
New retail $111,467 27.0% $109,268 28.5%
Used retail 59,150 14.4% 55,179 14.4%
Parts, service
and collision repair 163,134 39.6% 149,761 39.1%
Finance and insurance,
net 76,057 18.4% 68,374 17.9%
Total retail gross
profit 409,808 382,582
Fleet 1,404 0.3% 1,015 0.3%
Wholesale 1,125 0.3% (893) (0.2%)
Total gross profit $412,337 100.0% $382,704 100.0%
SG&A expenses excluding
reorganization
costs $297,134 $283,240
SG&A (excluding
reorganization costs
and rent)as a percent
of gross profit 72.1% 74.0%
GROSS PROFIT PER
VEHICLE RETAILED:
New retail $2,174 $2,199
Used retail 1,914 1,852
Finance and insurance,
net 926 860
Platform finance and
insurance, net 894 821
Asbury Automotive Group, Inc.
Selected Data
(Dollars in thousands, except per share data)
(Unaudited)
As of As of
June 30, 2005 December 31, 2004
BALANCE SHEET HIGHLIGHTS:
Cash and cash equivalents $ 11,049 $ 28,093
Inventories 722,160 761,557
Total current assets 1,116,385 1,143,506
Floor plan notes payable 613,137 650,948
Total current liabilities 829,333 847,510
CAPITALIZATION:
Long-term debt (including current
portion) $ 509,344 $ 526,415
Stockholders' equity 504,456 481,733
Total $1,013,800 $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 the Same Store For the
Three Months Ended Three Months Ended
June 30, June 30,
2005 2004 2005 2004
RECONCILIATION OF FINANCE AND
INSURANCE GROSS PROFIT TO
PLATFORM FINANCE AND
INSURANCE GROSS PROFIT:
Finance and insurance, net $41,646 $37,453 $40,082 $37,453
Less: corporate finance and
insurance (1,367) (1,906) (1,367) (1,906)
Platform finance and
insurance, net $40,279 $35,547 $38,715 $35,547
RETAIL VEHICLES SOLD:
New retail units 29,094 27,114 27,866 27,114
Used retail units 16,520 15,072 16,005 15,072
Total units 45,614 42,186 43,871 42,186
As Reported For the Same Store For the
Six Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
RECONCILIATION OF FINANCE AND
INSURANCE GROSS PROFIT TO
PLATFORM FINANCE AND
INSURANCE GROSS PROFIT:
Finance and insurance, net $79,334 $68,374 $76,057 $68,374
Less: corporate finance and
insurance (2,570) (3,149) (2,570) (3,149)
Platform finance and
insurance, net $76,764 $65,225 $73,487 $65,225
RETAIL VEHICLES SOLD:
New retail units 53,997 49,692 51,264 49,692
Used retail units 32,027 29,795 30,908 29,795
Total units 86,024 79,487 82,172 79,487
The Company's operating income was largely impacted by restructuring costs incurred during the first quarter of 2005 and 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 for the As Reported for the
Three Months Ended Three Months Ended
June 30, 2005 June 30, 2004 Variance
SG&A expenses $170,551 $156,332 $14,219
Less: Rent expense (12,544) (8,811) (3,733)
Adjusted SG&A expenses $158,007 $147,521 $ 10,486
Same Store Results Same Store Results
for the for the
Three Months Ended Three Months Ended
June 30, 2005 June 30, 2004 Variance
SG&A expenses $165,269 $155,855 $9,414
Less: Rent expense (11,845) (8,795) (3,050)
Adjusted SG&A expenses $153,424 $147,060 $6,364
As Reported for the As Reported for the
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2004 Variance
SG&A expenses $338,358 $300,694 $ 37,664
Less: Restructuring
costs (3,566) -- (3,566)
Rent expense (25,299) (16,993) (8,306)
Adjusted SG&A expenses $309,493 $283,701 $ 25,792
Same Store Results Same Store Results
for the for the
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2004 Variance
SG&A expenses $324,171 $300,217 $23,954
Less: Restructuring costs (3,566) -- (3,566)
Rent expense (23,471) (16,977) (6,494)
Adjusted SG&A expenses $297,134 $283,240 $13,894