Asbury Automotive Group Reports Third Quarter Financial Results
- Income from Continuing Operations Increases 34%, with Same-Store Gross Profit Up 12%, SG&A as a Percent of Gross Profit Down 250 Basis Points -
NEW YORK, Oct. 26 -- 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, 2005.
Income from continuing operations for the third quarter rose 34 percent to $17.5 million, or $0.53 per diluted share (including a $0.01 charge from the previously announced regional reorganization program), from $13.1 million, or $0.40 per diluted share, in last year's third quarter. The analysts' consensus estimate of earnings per share from continuing operations was $0.48. Net income for the third quarter of 2005 was $15.0 million, or $0.45 per diluted share, compared with $12.1 million, or $0.37 per diluted share, a year ago.
For the first nine months of 2005, income from continuing operations was $45.5 million, or $1.38 per diluted share, including net after-tax costs of approximately $1.3 million, or $0.04 per diluted share, related to the reorganization program. Excluding the reorganization impact, income from continuing operations increased 21 percent to $46.8 million, or $1.42 per diluted share, from $38.7 million, or $1.18 per diluted share, a year ago. Net income for the first nine months of 2005 was $40.6 million, or $1.24 per diluted share, compared to $37.2 million, or $1.14 per diluted share, in the corresponding period last year.
Other financial highlights for the third quarter of 2005, as compared to the prior year period, included:
-- Total revenue for the quarter was approximately $1.4 billion,
up 13 percent. Total gross profit was $220.0 million, up 15 percent.
-- Same-store retail revenue and gross profit (excluding fleet and
wholesale) were up 11 and 12 percent, respectively.
-- New vehicle retail revenue increased 12 percent (9 percent same-
store), and unit sales increased 14 percent (10 percent same-store).
New vehicle retail gross profit increased 11 percent (9 percent
same-store).
-- Used vehicle retail revenue increased 22 percent (19 percent
same-store), and unit sales increased 17 percent (13 percent
same-store). Used vehicle retail gross profit increased 32 percent
(28 percent same-store).
-- Parts, service and collision repair revenue increased 13 percent
(12 percent same-store), and gross profit increased 12 percent
(10 percent same-store).
-- Net finance and insurance (F&I) revenue increased 12 percent
(9 percent same-store). F&I per vehicle retailed (PVR) decreased
2 percent to $883 while dealership generated F&I PVR was down
1 percent to $857.
-- Selling, general and administrative (SG&A) expenses, as a percentage
of gross profit, were 77.5 percent for the quarter, a 250 basis point
improvement from 80.0 percent a year ago, or a 280 basis point
improvement excluding the reorganization costs.
President and CEO Kenneth B. Gilman said, "This was the fourth quarter in a row in which Asbury delivered a strong, balanced performance across all four of our business lines. While our excellent third quarter comparisons in part reflect the negative impact of the hurricanes last year, the quarter's results were a true reflection of our strong operational performance as well as our ability to gain traction on the expense front. Our best estimate is that excluding the hurricane impact our operating income was up 14 percent for the quarter.
"Our service businesses -- fixed operations and finance and insurance -- again delivered double-digit same-store gross profit growth. On the new vehicle front, the key for us was the strategic strength of our brand mix which emphasizes mid-line import and luxury brands. We achieved a 10 percent increase in same-store new unit sales versus less than 5 percent for the market nationally with no gross margin erosion."
Mr. Gilman continued, "Over the last few years we have focused considerable efforts to position Asbury to increase our used car market share. I am particularly pleased with our performance this past quarter. In the face of a very challenging market with volatile used car wholesale pricing, particularly for trucks and large SUV's, we were able to increase same-store used unit sales by 13 percent, improve gross profit margin by 90 basis points and reduce wholesale losses. Clearly, we were able to strike the right balance at retail when valuing trades so that we didn't make new car deals at the expense of hurting the used car business."
J. Gordon Smith, Senior Vice President and CFO, commented, "I am very pleased with the progress we have made on the expense front. Our reduction in SG&A as a percent of gross profit, excluding the reorganization costs, is attributed to the regional realignment, which drove personnel costs down 40 basis points; a 90 basis point decrease in advertising; and a 90 basis point reduction in insurance costs as a result of our strategic initiatives in this area."
Mr. Smith continued, "During the quarter, we completed the implementation of our regional reorganization program. We expect that the program will generate savings of approximately $0.10 per diluted share in 2006 compared to $0.05 per diluted share in 2005. Also, we made additional progress with our ongoing efforts to rebalance Asbury's portfolio of dealerships through the divestiture of under-performing stores. During the quarter, we entered into agreements to dispose of all our remaining operations in Oregon. We anticipate completing these transactions in the fourth quarter. The sale is expected to generate approximately $60 million in cash and result in a gain of $0.05 to $0.07 per diluted share that will be included in discontinued operations."
Commenting on earnings guidance for 2005 and the current fourth quarter environment, the Company reconfirmed its previously announced range of estimates for earnings per share from continuing operations of between $1.71 to $1.77, which includes the net cost of the regional reorganization of approximately $0.03 per diluted share (costs of $0.08, net of expected savings of $0.05); however, due to soft October new vehicle sales and general uncertainty surrounding fourth quarter OEM incentive programs, the Company is more comfortable with the lower end of its earnings guidance range.
Mr. Gilman concluded, "I am pleased with how we have managed both our store disposal program and our regional reorganization over the last nine months. My expectation is that these simultaneously executed initiatives will continue to deliver shareholder value in terms of capital redeployment and operating effectiveness. With respect to current operations, as I noted, our business model has performed exceptionally well over the past four quarters, and we expect to see many of these positive trends continue. Despite a fourth quarter that is starting out slowly in new vehicle sales, the fact that we still expect to fall within our previously announced guidance range is a very positive reflection on Asbury's business strengths including brand mix and geographic locations."
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 Months Ended For the Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
REVENUES:
New vehicle $878,323 $789,241 $ 2,501,669 $ 2,220,780
Used vehicle 361,889 303,447 1,035,201 887,037
Parts, service
and collision
repair 167,789 148,580 482,801 425,081
Finance and
insurance, net 40,434 36,024 115,642 99,353
Total
revenues 1,448,435 1,277,292 4,135,313 3,632,251
COST OF SALES:
New vehicle 816,952 734,204 2,327,426 2,060,964
Used vehicle 329,440 279,534 943,839 813,065
Parts, service
and collision
repair 82,013 71,877 233,881 203,111
Total cost of
sales 1,228,405 1,085,615 3,505,146 3,077,140
GROSS PROFIT 220,030 191,677 630,167 555,111
OPERATING EXPENSES:
Selling, general
and administrative 170,506 153,290 493,289 437,979
Depreciation and
amortization 4,945 4,432 14,434 13,757
Income from
operations 44,579 33,955 122,444 103,375
OTHER INCOME (EXPENSE):
Floor plan interest
expense (6,598) (4,867) (20,745) (13,698)
Other interest
expense (10,317) (8,632) (30,188) (29,028)
Interest income 275 223 763 597
Other income, net 29 205 481 413
Total other
expense, net (16,611) (13,071) (49,689) (41,716)
Income before
income taxes 27,968 20,884 72,755 61,659
INCOME TAX EXPENSE 10,488 7,831 27,283 22,945
INCOME FROM CONTINUING
OPERATIONS 17,480 13,053 45,472 38,714
DISCONTINUED OPERATIONS,
net of tax (2,527) (937) (4,893) (1,486)
Net income $14,953 $12,116 $40,579 $37,228
BASIC EARNINGS PER
COMMON SHARE:
Continuing
operations $0.53 $0.40 $1.39 $1.19
Discontinued
operations (0.07) (0.03) (0.15) (0.04)
Net income $0.46 $0.37 $1.24 $1.15
DILUTED EARNINGS PER
COMMON SHARE:
Continuing
operations $0.53 $0.40 $1.38 $1.18
Discontinued
operations (0.08) (0.03) (0.14) (0.04)
Net income $0.45 $0.37 $1.24 $1.14
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING:
Basic 32,737 32,540 32,644 32,482
Diluted 33,032 32,647 32,847 32,675
Asbury Automotive Group, Inc.
Selected Data
(Dollars in thousands except per share data)
(Unaudited)
As Reported for the Three Months Ended
September 30,
2005 2004
RETAIL VEHICLES SOLD:
New units 29,256 63.9% 25,742 64.6%
Used units 16,533 36.1% 14,088 35.4%
Total units 45,789 100.0% 39,830 100.0%
REVENUE:
New retail $867,808 59.9% $773,720 60.6%
Used retail 273,840 18.9% 223,740 17.5%
Parts, service and collision
repair 167,789 11.7% 148,580 11.6%
Finance and insurance, net 40,434 2.8% 36,024 2.9%
Total retail revenue 1,349,871 1,182,064
Fleet 10,515 0.7% 15,521 1.2%
Wholesale 88,049 6.0% 79,707 6.2%
Total revenue $1,448,435 100.0% $1,277,292 100.0%
GROSS PROFIT:
New retail $60,658 27.6% $54,414 28.4%
Used retail 33,301 15.1% 25,226 13.2%
Parts, service and collision
repair 85,776 39.0% 76,703 40.0%
Finance and insurance, net 40,434 18.4% 36,024 18.8%
Total retail gross profit 220,169 192,367
Fleet 713 0.3% 623 0.3%
Wholesale (852) (0.4%) (1,313) (0.7%)
Total gross profit $220,030 100.0% $191,677 100.0%
SG&A expenses excluding
reorganization costs
and rent $157,834 $142,347
SG&A expenses excluding
reorganization costs and rent
as a percent of gross profit 71.7% 74.3%
GROSS PROFIT PER VEHICLE
RETAILED:
New retail $2,073 $2,114
Used retail 2,014 1,791
Finance and insurance, net 883 904
Dealership generated finance
and insurance, net 857 869
GROSS PROFIT MARGIN:
New retail 7.0% 7.0%
Used retail 12.2% 11.3%
Parts, service and collision
repair 51.1% 51.6%
Same Store for the Three Months Ended
September 30,
2005 2004
RETAIL VEHICLES SOLD:
New units 28,246 63.9% 25,742 64.6%
Used units 15,961 36.1% 14,088 35.4%
Total units 44,207 100.0% 39,830 100.0%
REVENUE:
New retail $842,423 59.8% $773,720 60.6%
Used retail 265,273 18.8% 223,740 17.5%
Parts, service and collision
repair 165,814 11.9% 148,580 11.6%
Finance and insurance, net 39,206 2.8% 36,024 2.9%
Total retail revenue 1,312,716 1,182,064
Fleet 10,151 0.7% 15,521 1.2%
Wholesale 85,161 6.0% 79,707 6.2%
Total revenue $1,408,028 100.0% $1,277,292 100.0%
GROSS PROFIT:
New retail $59,258 27.5% $54,414 28.4%
Used retail 32,351 15.0% 25,226 13.2%
Parts, service and collision
repair 84,635 39.3% 76,703 40.0%
Finance and insurance, net 39,206 18.2% 36,024 18.8%
Total retail gross profit 215,450 192,367
Fleet 696 0.3% 623 0.3%
Wholesale (811) (0.3%) (1,313) (0.7%)
Total gross profit $215,335 100.0% $191,677 100.0%
SG&A expenses excluding
reorganization costs
and rent $154,376 $141,778
SG&A expenses excluding
reorganization costs and rent
as a percent of gross profit 71.7% 74.0%
GROSS PROFIT PER VEHICLE
RETAILED:
New retail $2,098 $2,114
Used retail 2,027 1,791
Finance and insurance, net 887 904
Dealership generated finance
and insurance, net 860 869
GROSS PROFIT MARGIN:
New retail 7.0% 7.0%
Used retail 12.2% 11.3%
Parts, service and collision
repair 51.0% 51.6%
Asbury Automotive Group, Inc.
Selected Data
(Dollars in thousands except per share data)
(Unaudited)
As Reported for the Nine Months Ended
September 30,
2005 2004
RETAIL VEHICLES SOLD:
New units 80,430 63.3% 72,463 63.5%
Used units 46,670 36.7% 41,675 36.5%
Total units 127,100 100.0% 114,138 100.0%
REVENUE:
New retail $2,441,243 59.0% $2,179,239 60.0%
Used retail 780,959 18.9% 654,447 18.0%
Parts, service and collision
repair 482,801 11.7% 425,081 11.7%
Finance and insurance, net 115,642 2.8% 99,353 2.7%
Total retail revenue 3,820,645 3,358,120
Fleet 60,426 1.5% 41,541 1.2%
Wholesale 254,242 6.1% 232,590 6.4%
Total revenue $4,135,313 100.0% $3,632,251 100.0%
GROSS PROFIT:
New retail $172,130 27.3% $158,180 28.5%
Used retail 91,040 14.4% 76,237 13.7%
Parts, service and collision
repair 248,920 39.5% 221,970 40.0%
Finance and insurance, net 115,642 18.4% 99,353 17.9%
Total retail gross profit 627,732 555,740
Fleet 2,113 0.3% 1,636 0.3%
Wholesale 322 0.1% (2,265) (0.4%)
Total gross profit $630,167 100.0% $555,111 100.0%
SG&A expenses excluding
reorganization costs
and rent $453,253 $411,277
SG&A expenses excluding
reorganization costs and rent
as a percent of gross profit 71.9% 74.1%
GROSS PROFIT PER VEHICLE RETAILED:
New retail $2,140 $2,183
Used retail 1,951 1,829
Finance and insurance, net 910 870
Dealership generated finance
and insurance, net 880 831
GROSS PROFIT MARGIN:
New retail 7.1% 7.3%
Used retail 11.7% 11.6%
Parts, service and collision
repair 51.6% 52.2%
Same Store for the Nine Months Ended
September 30,
2005 2004
RETAIL VEHICLES SOLD:
New units 76,799 63.0% 72,463 63.5%
Used units 45,046 37.0% 41,675 36.5%
Total units 121,845 100.0% 114,138 100.0%
REVENUE:
New retail $2,347,923 58.8% $2,179,239 60.0%
Used retail 755,769 18.9% 654,447 18.0%
Parts, service and collision
repair 472,693 11.9% 425,081 11.7%
Finance and insurance, net 111,302 2.8% 99,353 2.7%
Total retail revenue 3,687,687 3,358,120
Fleet 58,570 1.5% 41,541 1.2%
Wholesale 244,396 6.1% 232,590 6.4%
Total revenue $3,990,653 100.0% $3,632,251 100.0%
GROSS PROFIT:
New retail $166,159 27.2% $158,180 28.5%
Used retail 88,492 14.5% 76,237 13.7%
Parts, service and collision
repair 243,271 39.8% 221,970 40.0%
Finance and insurance, net 111,302 18.2% 99,353 17.9%
Total retail gross profit 609,224 555,740
Fleet 2,100 0.3% 1,636 0.3%
Wholesale 351 -- (2,265) (0.4%)
Total gross profit $611,675 100.0% $555,111 100.0%
SG&A expenses excluding
reorganization costs
and rent $438,272 $410,247
SG&A expenses excluding
reorganization costs and rent
as a percent of gross profit 71.7% 73.9%
GROSS PROFIT PER VEHICLE RETAILED:
New retail $2,164 $2,183
Used retail 1,964 1,829
Finance and insurance, net 913 870
Dealership generated finance
and insurance, net 883 831
GROSS PROFIT MARGIN:
New retail 7.1% 7.3%
Used retail 11.7% 11.6%
Parts, service and collision
repair 51.5% 52.2%
Asbury Automotive Group, Inc.
Selected Data
(Dollars in thousands except per share data)
(Unaudited)
As of As of
September 30, 2005 December 31, 2004
BALANCE SHEET HIGHLIGHTS:
Cash and cash equivalents $25,998 $28,093
Inventories 623,444 761,557
Total current assets 1,009,519 1,143,506
Floor plan notes payable 498,938 650,948
Total current liabilities 714,062 847,510
CAPITALIZATION:
Long-term debt
(including current portion) $498,225 $526,415
Stockholders' equity 525,642 481,733
Total $ 1,023,867 $ 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 ("PVR") 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 in 2005 and 2004 that was not attributable to retail vehicles sold during 2005 and 2004. The Company believes that dealership generated 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 dealership generated finance and insurance gross profit, and provides necessary components to calculate dealership generated finance and insurance gross profit PVR.
As Reported For Same Store For
the Three Months the Three Months
Ended September 30, Ended September 30,
2005 2004 2005 2004
RECONCILIATION OF FINANCE
AND INSURANCE GROSS
PROFIT TO DEALERSHIP GENERATED
FINANCE AND INSURANCE
GROSS PROFIT:
Finance and insurance, net $40,434 $36,024 $39,206 $ 36,024
Less: corporate generated
finance and insurance (1,185) (1,408) (1,185) (1,408)
Dealership generated
finance and insurance,
net $39,249 $34,616 $38,021 $ 34,616
RETAIL VEHICLES SOLD:
New retail units 29,256 25,742 28,246 25,742
Used retail units 16,533 14,088 15,961 14,088
Total units 45,789 39,830 44,207 39,830
Finance and Insurance PVR $883 $904 $887 $904
Dealership generated finance
and insurance PVR $857 $869 $860 $869
As Reported For Same Store For
the Nine Months the Nine Months
Ended September 30, Ended September 30,
2005 2004 2005 2004
RECONCILIATION OF FINANCE
AND INSURANCE GROSS
PROFIT TO DEALERSHIP
GENERATED FINANCE AND
INSURANCE GROSS PROFIT:
Finance and insurance, net $ 115,642 $99,353 $111,302 $99,353
Less: corporate generated
finance and insurance (3,754) (4,556) (3,754) (4,556)
Dealership generated
finance and insurance,
net $ 111,888 $94,797 $107,548 $94,797
RETAIL VEHICLES SOLD:
New retail units 80,430 72,463 76,799 72,463
Used retail units 46,670 41,675 45,046 41,675
Total units 127,100 114,138 121,845 114,138
Finance and Insurance PVR $910 $870 $913 $870
Dealership generated
finance and insurance PVR $880 $831 $883 $831
The Company's operating income was largely impacted by reorganization costs incurred during 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 reorganization 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
September 30, 2005 September 30, 2004
SG&A expenses $170,506 $153,290
Less: Reorganization costs (591) --
Rent expense (12,081) (10,943)
Adjusted SG&A expenses $157,834 $142,347
Same Store Results for Same Store Results for
the Three Months Ended the Three Months Ended
September 30, 2005 September 30, 2004
SG&A expenses $166,694 $152,713
Less: Reorganization costs (591) --
Rent expense (11,727) (10,935)
Adjusted SG&A expenses $154,376 $141,778
As Reported for the As Reported for the
Nine Months Ended Nine Months Ended
September 30, 2005 September 30, 2004
SG&A expenses $493,289 $437,979
Less: Reorganization costs (4,157) --
Rent expense (35,879) (26,702)
Adjusted SG&A expenses $453,253 $411,277
Same Store Results for Same Store Results for
the Nine Months Ended the Nine Months Ended
September 30, 2005 September 30, 2004
SG&A expenses $476,247 $436,925
Less: Reorganization costs (4,157) --
Rent expense (33,818) (26,678)
Adjusted SG&A expenses $438,272 $410,247
The Company defines income from continuing operations as net income less discontinued operations, net of tax. We believe that excluding certain items from income from continuing operations for the three and nine months ended September 30, 2005 and 2004, 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.
RECONCILIATION OF NET INCOME TO
ADJUSTED INCOME FROM CONTINUING OPERATIONS: For the Three Months Ended
September 30,
2005 2004
Net income $14,953 $12,116
Discontinued operations 2,527 937
Income from continuing operations 17,480 13,053
Tax affected reorganization:
Costs 369 --
Savings (697) --
Adjusted income from continuing operations $17,152 $13,053
RECONCILIATION OF NET INCOME PER
DILUTED COMMON SHARE TO ADJUSTED INCOME
FROM CONTINUING OPERATIONS PER
DILUTED COMMON SHARE:
Net income $ 0.45 $0.37
Discontinued operations 0.08 0.03
Income from continuing operations 0.53 0.40
Tax affected reorganization:
Costs 0.01 --
Savings (0.02) --
Adjusted income from continuing operations $ 0.52 $0.40
Weighted average common shares
outstanding (diluted): 33,032 32,647
RECONCILIATION OF NET INCOME TO
ADJUSTED INCOME FROM CONTINUING OPERATIONS: For the Nine Months Ended
September 30,
2005 2004
Net income $40,579 $37,228
Discontinued operations 4,893 1,486
Income from continuing operations 45,472 38,714
Tax affected reorganization:
Costs 2,598 --
Savings (1,305) --
Adjusted income from continuing operations $46,765 $38,714
RECONCILIATION OF NET INCOME PER
DILUTED COMMON SHARE TO ADJUSTED INCOME
FROM CONTINUING OPERATIONS PER
DILUTED COMMON SHARE:
Net income $ 1.24 $1.14
Discontinued operations 0.14 0.04
Income from continuing operations 1.38 1.18
Tax affected reorganization:
Costs 0.08 --
Savings (0.04) --
Adjusted income from continuing operations $ 1.42 $1.18
Weighted average common shares
outstanding (diluted): 32,847 32,675