Asbury Automotive Group Reports First Quarter Financial Results
Income from Continuing Operations Increases 19%, Excluding 2006 Stock-Based Compensation and 2005 Restructuring Costs
Adjusted SG&A as a Percent of Gross Profit Decreases 180 Basis Points
NEW YORK, April 27 -- 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, 2006.
Income from continuing operations for the first quarter rose 38 percent to $13.6 million, or $0.41 per diluted share, from $9.9 million, or $0.30 per diluted share, in the corresponding period last year. During the first quarter of 2006, Asbury adopted Statement of Financial Accounting Standards No. 123(R). For the quarter, the after-tax impact of stock-based compensation was $0.9 million, or approximately $0.02 per diluted share. Results for the first quarter of 2005 included after-tax expenses of approximately $2.3 million, or $0.07 per diluted share, related to the Company's regional reorganization. Excluding these items, first quarter earnings per diluted share from continuing operations was $0.43 compared with $0.37 a year ago.
A summary of our financial results for the first quarter of 2006, as compared to the prior year period, included:
- Total revenue for the quarter was approximately $1.4 billion, up 8
percent. Total gross profit was $211.5 million, up 9 percent.
- Same-store retail revenue and gross profit (excluding fleet and
wholesale businesses) were up 6 percent and 7 percent, respectively.
- New vehicle retail revenue increased 7 percent (4 percent same-store),
and unit sales increased 5 percent (2 percent same-store). New vehicle
retail gross profit rose 9 percent (7 percent same-store).
- Used vehicle retail revenue increased 13 percent (9 percent same-store),
and unit sales increased 7 percent (3 percent same-store). Used vehicle
retail gross profit increased 18 percent (14 percent same-store).
- Parts, service and collision repair (fixed operations) revenue increased
12 percent (10 percent same-store), and gross profit increased 10
percent (8 percent same-store).
- Net finance and insurance (F&I) revenue was flat. F&I per vehicle
retailed (PVR) decreased 5 percent to $890, while dealership-generated
F&I PVR was down 4 percent to $865.
- Selling, general and administrative (SG&A) expenses as a percentage of
gross profit was 78.3 percent for the quarter, compared with 81.4
percent a year ago. Excluding stock-based compensation in the current
year and expenses related to the regional reorganization a year ago SG&A
expenses as a percentage of gross profit was 77.7 percent, compared to
79.5 percent for the prior year period.
President and CEO Kenneth B. Gilman said, "I am pleased to report that income from continuing operations for the first quarter was up 19 percent on a comparable basis from the prior year. We've been able to overcome much of the increase in interest rates because of the solid execution of our operational strategy which has allowed us to consistently post industry-leading results.
"Our strong momentum in both used vehicles and fixed operations during 2005 clearly carried over into the new year, as these businesses continued to generate substantial same-store gross profit increases. In addition, our new vehicle business turned in a very solid performance, as we continued to benefit from the strength of our brand mix. Currently, 78 percent of our new passenger vehicle sales are derived from the more desirable luxury and mid- line import brands. We believe that we're located in the right geographic areas and have some of the best general managers in the industry."
J. Gordon Smith, Senior Vice President and CFO, said, "As we expected, Asbury is benefiting in 2006 from the regional reorganization we completed a year ago and our continued focus on expense control. Excluding stock-based compensation in the current year and costs related to the reorganization last year, SG&A expenses for the first quarter improved by 180 basis points as a percentage of gross profit. We've reduced our advertising PVR during the quarter by $31, without sacrificing market share, by moving away from the traditional mindset and methods of advertising. Coupled with our operational improvements, these savings drove a 20 basis point improvement in pre-tax income as a percentage of sales despite a 40 percent increase in floorplan expense and a 14 percent increase in debt costs."
Commenting on earnings guidance for 2006, the Company noted it has raised its expected range of estimates for earnings per share from continuing operations to between $1.90 and $1.95, before considering the impact of stock- based compensation, which it estimates will total $0.10 per diluted share. The guidance assumes the Fed Funds Rate will increase to 5 percent by May and remain stable through the remainder of 2006. This increase, coupled with last year's increases, will have a $0.15 per diluted share impact on 2006 earnings. In addition, the Company had three swaps that expired in March and will have a $0.08 per diluted share negative impact on 2006 earnings.
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 2005 revenue of approximately $5.5 billion. Built through a combination of organic growth and a series of strategic acquisitions, the Company currently operates 87 retail auto stores, encompassing 120 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.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
For the Three
Months Ended
March 31,
2006 2005
REVENUES:
New vehicle $823,164 $772,444
Used vehicle 358,106 320,457
Parts, service and collision repair 170,051 151,843
Finance and insurance, net 35,648 35,511
Total revenues 1,386,969 1,280,255
COST OF SALES:
New vehicle 765,242 719,596
Used vehicle 325,179 291,755
Parts, service and collision repair 85,000 74,220
Total cost of sales 1,175,421 1,085,571
GROSS PROFIT 211,548 194,684
OPERATING EXPENSES:
Selling, general and administrative 165,714 158,426
Depreciation and amortization 4,975 4,693
Income from operations 40,859 31,565
OTHER INCOME (EXPENSE):
Floor plan interest expense (9,204) (6,552)
Other interest expense (10,905) (9,601)
Interest income 727 264
Other income, net 344 110
Total other expense, net (19,038) (15,779)
Income before income taxes 21,821 15,786
INCOME TAX EXPENSE 8,183 5,920
INCOME FROM CONTINUING OPERATIONS 13,638 9,866
DISCONTINUED OPERATIONS, net of tax (1,085) (226)
NET INCOME $12,553 $9,640
BASIC EARNINGS PER COMMON SHARE:
Continuing operations $0.41 $0.30
Discontinued operations (0.03) --
Net income $0.38 $0.30
DILUTED EARNINGS PER COMMON SHARE:
Continuing operations $0.41 $0.30
Discontinued operations (0.04) (0.01)
Net income $0.37 $0.29
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 32,922 32,588
Diluted 33,584 32,781
Asbury Automotive Group, Inc.
Selected Data
(Dollars in thousands, except per vehicle data)
(Unaudited)
As Reported for the
Three Months Ended March 31,
2006 2005
RETAIL VEHICLES SOLD:
New units 24,582 61.3% 23,500 61.8%
Used units 15,490 38.7% 14,500 38.2%
Total units 40,072 100.0% 38,000 100.0%
REVENUE:
New retail $773,108 55.7% $725,706 56.7%
Used retail 270,146 19.5% 238,606 18.6%
Parts, service and collision
repair 170,051 12.3% 151,843 11.9%
Finance and insurance, net 35,648 2.6% 35,511 2.8%
Total retail revenue 1,248,953 1,151,666
Fleet 50,056 3.6% 46,738 3.6%
Wholesale 87,960 6.3% 81,851 6.4%
Total revenue $1,386,969 100.0% $1,280,255 100.0%
GROSS PROFIT:
New retail $57,100 27.0% $52,289 26.9%
Used retail 32,518 15.4% 27,611 14.2%
Parts, service and collision
repair 85,051 40.2% 77,623 39.9%
Finance and insurance, net 35,648 16.8% 35,511 18.2%
Total retail gross profit 210,317 193,034
Fleet 822 0.4% 559 0.3%
Wholesale 409 0.2% 1,091 0.5%
Total gross profit $211,548 100.0% $194,684 100.0%
SG&A expenses excluding
reorganization expense and
stock compensation expense $164,345 $154,802
SG&A expenses excluding
reorganization expense and stock
compensation expense as a
percentage of gross profit 77.7% 79.5%
REVENUE PER VEHICLE RETAILED:
New retail $31,450 $30,881
Used retail 17,440 16,456
GROSS PROFIT PER VEHICLE RETAILED:
New retail $2,323 $2,225
Used retail 2,099 1,904
Finance and insurance, net 890 935
Dealership generated finance and
insurance, net 865 903
GROSS PROFIT MARGIN:
New retail 7.4% 7.2%
Used retail 12.0% 11.6%
Parts, service and collision
repair 50.0% 51.1%
Same Store for the
Three Months Ended March 31,
2006 2005
RETAIL VEHICLES SOLD:
New units 23,949 61.7% 23,500 61.8%
Used units 14,889 38.3% 14,500 38.2%
Total units 38,838 100.0% 38,000 100.0%
REVENUE:
New retail $756,146 55.8% $725,706 56.7%
Used retail 260,622 19.2% 238,606 18.6%
Parts, service and collision 167,531 12.4% 151,843 11.9%
repair
Finance and insurance, net 34,728 2.6% 35,511 2.8%
Total retail revenue 1,219,027 1,151,666
Fleet 49,646 3.7% 46,738 3.6%
Wholesale 86,131 6.3% 81,851 6.4%
Total revenue $1,354,804 100.0% $1,280,255 100.0%
GROSS PROFIT:
New retail $55,967 27.0% $52,289 26.9%
Used retail 31,366 15.1% 27,611 14.2%
Parts, service and collision
repair 83,792 40.5% 77,623 39.9%
Finance and insurance, net 34,728 16.8% 35,511 18.2%
Total retail gross profit 205,853 193,034
Fleet 831 0.4% 559 0.3%
Wholesale 364 0.2% 1,091 0.5%
Total gross profit $207,048 100.0% $194,684 100.0%
SG&A expenses excluding
reorganization expense and
stock compensation expense $161,262 $154,802
SG&A expenses excluding
reorganization expense and stock
compensation expense as a
percentage of gross profit 77.9% 79.5%
REVENUE PER VEHICLE RETAILED:
New retail $31,573 $30,881
Used retail 17,504 16,456
GROSS PROFIT PER VEHICLE RETAILED:
New retail $2,337 $2,225
Used retail 2,107 1,904
Finance and insurance, net 894 935
Dealership generated finance and
insurance, net 869 903
GROSS PROFIT MARGIN:
New retail 7.4% 7.2%
Used retail 12.0% 11.6%
Parts, service and collision repair 50.0% 51.1%
Asbury Automotive Group, Inc.
Selected Data
(Dollars in thousands)
As of As of
March 31, December 31,
2006 2005
(Unaudited)
BALANCE SHEET HIGHLIGHTS:
Cash and cash equivalents $59,874 $57,194
Inventories 776,679 709,791
Total current assets 1,217,844 1,185,180
Floor plan notes payable 646,792 614,382
Total current liabilities 850,864 838,226
CAPITALIZATION:
Long-term debt (including current portion) $495,796 $496,949
Stockholders' equity 566,282 547,766
Total $1,062,078 $1,044,715
ASBURY AUTOMOTIVE GROUP, INC.
SUPPLEMENTAL DISCLOSURES REGARDING NON-GAAP FINANCIAL INFORMATION
(In thousands, except vehicle and per 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 2006 and 2005 that was not attributable to retail vehicles sold during 2006 and 2005. The Company believes that dealership generated finance and insurance PVR, 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 the necessary components to calculate dealership generated finance and insurance gross profit PVR.
As Reported For Same Store For
the Three the Three
Months Ended Months Ended
March 31, March 31,
2006 2005 2006 2005
RECONCILIATION OF FINANCE AND
INSURANCE GROSS PROFIT TO
DEALERSHIP GENERATED FINANCE AND
INSURANCE GROSS PROFIT:
Finance and insurance gross profit $35,648 $35,511 $34,728 $35,511
Less: corporate generated finance
and insurance gross profit (993) (1,203) (993) (1,203)
Dealership generated finance and
insurance gross profit $34,655 $34,308 $33,735 $34,308
RETAIL VEHICLES SOLD:
New retail units 24,582 23,500 23,949 23,500
Used retail units 15,490 14,500 14,889 14,500
Total retail units 40,072 38,000 38,838 38,000
Finance and insurance gross profit
PVR $890 $935 $894 $935
Dealership generated finance and
insurance gross profit PVR $865 $903 $869 $903
The Company's operating income was largely impacted by the adoption of Statement of Financial Accounting Standards No. 123R ("SFAS 123R") and our decision to issue restricted stock units instead of stock options during the first quarter of 2006 and expenses related to our regional reorganization during the first quarter of 2005. Effective January 1, 2006, we have adopted SFAS 123R under the modified prospective transition method and therefore have recorded stock compensation expense under the fair value method for the three months ended March 31, 2006. Prior to January 1, 2006, including the three month period ended March 31, 2005, we recorded stock compensation expense under the intrinsic value method. We have included two non-GAAP measures for adjusted SG&A, income from continuing operations, net income and net income per common share (1) excluding reorganization expense from the three months ended March 31, 2005 and stock compensation expense from the three months ended March 31, 2006 and (2) excluding reorganization expense from the three months ended March 31, 2005 and including stock compensation expense for the three months ended March 31, 2006 and 2005 using the fair value method. We consider adjusted net income to be a profitability measure which facilitates the forecasting of our operating results for future periods and allows for the comparison of our results to historical periods and to other companies in our industry.
As Reported As Reported
for the for the
Three Months Three Months Increase %
ADJUSTED SG&A EXPENSE Ended Ended (Decrease) Change
EXCLUDING REORGANIZATION March 31, March 31,
EXPENSE AND STOCK 2006 2005
COMPENSATION EXPENSE:
SG&A expenses $165,714 $158,426 $ 7,288 5%
Reorganization expense -- (3,624)
Stock compensation expense (1,369) --
Adjusted SG&A expenses $164,345 $154,802 $9,543 6%
Gross profit $211,548 $194,684 $16,864 9%
Adjusted SG&A expenses
as a percent of gross
profit 77.7% 79.5%
Same Store Same Store
Results Results
for the for the
Three Months Three Months Increase %
ADJUSTED SG&A EXPENSE Ended Ended (Decrease) Change
EXCLUDING REORGANIZATION March 31, March 31,
EXPENSE AND STOCK 2006 2005
COMPENSATION EXPENSE:
SG&A expenses $162,631 $158,426 $4,205 3%
Reorganization expense -- (3,624)
Stock compensation expense (1,369) --
Adjusted SG&A expenses $161,262 $154,802 $6,460 4%
Gross profit $207,048 $194,684 $12,364 6%
Adjusted SG&A expenses as a
percent of gross profit 77.9% 79.5%
As Reported As Reported
for the for the
Three Months Three Months Increase %
ADJUSTED SG&A EXPENSE Ended Ended (Decrease) Change
EXCLUDING REORGANIZATION March 31, March 31,
EXPENSE AND INCLUDING STOCK 2006 2005
COMPENSATION EXPENSE:
SG&A expenses $165,714 $158,426 $7,288 5%
Reorganization expense -- (3,624)
Stock compensation expense -- 888
Adjusted SG&A expenses $165,714 $155,690 $10,024 6%
Gross profit $211,548 $194,684 $16,864 9%
Adjusted SG&A expenses as a
percent of gross profit 78.3% 80.0%
Same Store Same Store
Results Results
for the for the
Three Months Three Months Increase %
ADJUSTED SG&A EXPENSE Ended Ended (Decrease) Change
EXCLUDING REORGANIZATION March 31, March 31,
EXPENSE AND INCLUDING STOCK 2006 2005
COMPENSATION EXPENSE:
SG&A expenses $162,631 $158,426 $4,205 3%
Reorganization expense -- (3,624)
Stock compensation expense -- 888
Adjusted SG&A expenses $162,631 $155,690 $6,941 4%
Gross profit $207,048 $194,684 $12,364 6%
Adjusted SG&A expenses as a
percent of gross profit 78.5% 80.0%
ADJUSTED INCOME FROM CONTINUING
OPERATIONS EXCLUDING For the Three
REORGANIZATION EXPENSE AND Months Ended Increase %
STOCK COMPENSATION EXPENSE: March 31, (Decrease) Change
2006 2005
Net income $12,553 $9,640 $2,913 30%
Discontinued operations, net of
tax 1,085 226
Income from continuing
operations 13,638 9,866 3,772 38%
Reorganization expense, net of
tax -- 2,265
Stock compensation expense, net
of tax 856 --
Adjusted income from continuing
operations $14,494 $12,131 $2,363 19%
Net income $0.37 $0.29 $0.08 28%
Discontinued operations, net of
tax 0.04 0.01
Income from continuing
operations 0.41 0.30 0.11 37%
Reorganization expense, net of
tax -- 0.07
Stock compensation expense, net
of tax 0.02 --
Adjusted income from continuing
operations $0.43 $0.37 $0.06 16%
Weighted average common shares
outstanding (diluted): 33,584 32,781
ADJUSTED INCOME FROM CONTINUING
OPERATIONS EXCLUDING For the Three
REORGANIZATION EXPENSE AND Months Ended Increase %
INCLUDING STOCK COMPENSATION March 31, (Decrease) Change
EXPENSE: 2006 2005
Net income $12,553 $9,640 $2,913 30%
Discontinued operations, net of
tax 1,085 226
Income from continuing
operations 13,638 9,866 3,772 38%
Reorganization expense, net of
tax -- 2,265
Stock compensation expense, net
of tax -- (555)
Adjusted income from continuing
operations $13,638 $11,576 $2,062 18%
Net income $0.37 $0.29 $0.08 28%
Discontinued operations, net of
tax 0.04 0.01
Income from continuing
operations 0.41 0.30 0.11 37%
Reorganization expense, net of
tax -- 0.07
Stock compensation expense, net
of tax -- (0.02)
Adjusted income from continuing
operations $0.41 $0.35 $0.06 17%
Weighted average common shares
outstanding (diluted): 33,584 32,781
Investors May Contact:
Stacey Yonkus
Director, Investor Relations
(212) 885-2512
investor@asburyauto.com
Reporters May Contact:
David Shein
RFBinder Partners
(212) 994-7514
David.Shein@RFBinder.com