Group 1 Automotive Reports Record Fourth-Quarter and Best-Ever Full-Year Financial Results; Full-Year Revenues Increase to $6.1 Billion

HOUSTON, Feb. 9, 2012 /PRNewswire/ -- Group 1 Automotive, Inc. (NYSE: GPI), a Fortune 500 automotive retailer, today reported record fourth-quarter adjusted net income of $22.0 million, a 49.3 percent increase from the prior-year period, and adjusted diluted earnings per common share of $0.94 for the period ended Dec. 31, 2011. As shown in the attached reconciliation table, the company recognized $1.1 million net after-tax adjustments for non-cash asset impairment charges and an accrual for a pending legal matter in the quarter ended Dec. 31, 2011. Before adjusting for these items, reported net income was $20.9 million, and diluted earnings per common share were $0.90.

Full-year 2011 adjusted net income increased 38.3 percent, to a record $86.0 million. Adjusted diluted earnings per common share were $3.62, making this the best full-year results in the company's history.

Fourth-Quarter 2011 Highlights

  • Total revenues increased 13.1 percent to $1.6 billion, and gross profit grew 13.3 percent to $245.9 million from the prior-year period.
  • New vehicle gross profit grew 23.6 percent on 13.5 percent higher revenues, as unit sales were 8.1 percent higher and the average selling price increased to $34,448.
  • Retail used vehicle gross profit grew 14.0 percent on 16.8 percent higher revenues, as the average selling price increased 3.7 percent, to $20,417, and the company retailed 12.7 percent more units.
  • Parts and service revenues increased 7.0 percent, reflecting increases in customer-pay, wholesale parts and collision businesses.
  • Finance and insurance gross profit per retail unit of $1,183 set another all-time record high for any quarter.
  • Selling, general and administrative (SG&A) expenses as a percent of gross profit (adjusted) improved 260 basis points on a comparable basis, to 76.1 percent, from the prior-year period.
  • Same-store operating margin (adjusted) improved to 3.2 percent, as higher gross profit outpaced expenses.

Full-Year 2011 Results

  • Total revenues increased 10.4 percent to $6.1 billion, and gross profit grew 9.5 percent, representing increases in all operating segments from the prior year.
  • Finance and insurance revenues increased 16.0 percent on 5.5 percent more retail unit sales; gross profit per unit of $1,135 was an all-time record.
  • Same-store new vehicle gross profit grew 15.0 percent on 6.4 percent higher revenues.
  • Same-store used vehicle gross profit was 5.6 percent higher on an 8.6 percent revenue increase.
  • Same-store parts and service revenues grew 2.5 percent.
  • Same-store SG&A expenses as a percent of gross profit (adjusted) improved 180 basis points on a comparable basis, to 76.2 percent.

"I am proud of the record fourth-quarter and full-year results that Group 1 reported today," said Earl J. Hesterberg, Group 1's president and chief executive officer, "especially given the supply challenges we faced with most of our Japanese brand stores for the majority of the year and in a sales environment that was about 25 percent lower than our previous record year in 2006. The strong results reflect the strength of our operating team as well as the significant improvements we have made to our operating model during the past several years. These improvements should continue to deliver operating leverage as new vehicle sales increase to a more normalized 15 million to 16 million unit selling environment in the next few years. Looking ahead, we anticipate new vehicle industry sales will increase by more than one million, to 14 million, units in 2012."

Corporate Development Recap

During the fourth quarter, Group 1 added six franchises to its portfolio including Lincoln, Cadillac, Buick, GMC and two Volkswagen franchises that are expected to add $218.0 million in annual revenues.

For the full year 2011, Group 1 added 14 franchises with total estimated annual revenues of $563.0 million and disposed of two franchises with trailing-12-month revenues of $4.1 million in 2011.

Thus far in 2012, Group 1 has acquired Volkswagen and BMW franchises with estimated aggregate annual revenues of $93.4 million.

Fourth-Quarter Earnings Conference Call

Group 1's senior management will host a conference call today at 10 a.m. ET to discuss the fourth-quarter financial results and the company's outlook and strategy.

The conference call will be simulcast live on the Internet at www.group1auto.com, then click on 'Investor Relations' and then 'Events' or through this link: http://www.group1corp.com/news/events.aspx. A replay will be available for 30 days.

The conference call will also be available live by dialing in 10 minutes prior to the start of the call at:

Domestic: 1.877.317.6789
International: 1.412.317.6789
Conference ID: 10008954

Domestic: 1.877.344.7529
International: 1.412.317.0088
Conference ID: 10008954

A telephonic replay will be available following the call through Feb. 17 at 9 a.m. ET by dialing:

About Group 1 Automotive, Inc.

Group 1 owns and operates 111 automotive dealerships, 143 franchises, and 28 collision centers in the United States and the United Kingdom that offer 31 brands of automobiles. Through its dealerships, the company sells new and used cars and light trucks; arranges related vehicle financing, service and insurance contracts; provides automotive maintenance and repair services; and sells vehicle parts.

Group 1 Automotive can be reached on the Internet at www.group1auto.com.

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which are statements related to future, not past, events and are based on our current expectations and assumptions regarding our business, the economy and other future conditions. In this context, the forward-looking statements often include statements regarding our goals, plans, projections and guidance regarding our financial position, results of operations, market position, pending and potential future acquisitions and business strategy, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "should," "foresee," "may" or "will" and similar expressions. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. Any such forward-looking statements are not assurances of future performance and involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statements. These risks and uncertainties include, among other things, (a) general economic and business conditions, (b) the level of manufacturer incentives, (c) the future regulatory environment, (d) our ability to obtain an inventory of desirable new and used vehicles, (e) our relationship with our automobile manufacturers and the willingness of manufacturers to approve future acquisitions, (f) our cost of financing and the availability of credit for consumers, (g) our ability to complete acquisitions and dispositions and the risks associated therewith, (h) foreign exchange controls and currency fluctuations, and (i) our ability to retain key personnel. For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see our filings with SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.

Investor contacts:
Kim Paper Canning
Manager, Investor Relations
Group 1 Automotive Inc.
713-647-5741 | kpaper@group1auto.com

Media contacts:
Pete DeLongchamps
V.P. Financial Services and Manufacturer Relations
Group 1 Automotive Inc.
713-647-5770 | pdelongchamps@group1auto.com
or
Clint Woods
Pierpont Communications, Inc.
713-627-2223 | cwoods@piercom.com

Group 1 Automotive, Inc.

Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)
















Three Months Ended December 31,


Twelve Months Ended December 31,



2011


2010


% Change


2011


2010


% Change

REVENUES:












New vehicle retail sales

$  945,392


$  832,714


13.5


$ 3,402,647


$ 3,086,807


10.2

Used vehicle retail sales

362,911


310,663


16.8


1,416,520


1,271,039


11.4

Used vehicle wholesale sales

59,434


58,877


0.9


251,043


215,530


16.5

Parts and service

204,711


191,242


7.0


813,819


767,004


6.1

Finance and insurance

53,481


44,256


20.8


195,736


168,789


16.0


Total revenues

1,625,929


1,437,752


13.1


6,079,765


5,509,169


10.4














COST OF SALES:












New vehicle retail sales

888,252


786,479


12.9


3,192,309


2,909,012


9.7

Used vehicle retail sales

333,902


285,212


17.1


1,291,996


1,156,035


11.8

Used vehicle wholesale sales

59,312


59,268


0.1


246,963


212,833


16.0

Parts and service

98,602


89,772


9.8


387,897


354,256


9.5


Total cost of sales

1,380,068


1,220,731


13.1


5,119,165


4,632,136


10.5














GROSS PROFIT

245,861


217,021


13.3


960,600


877,033


9.5














SELLING, GENERAL AND












ADMINISTRATIVE EXPENSES

188,109


170,839


10.1


735,229


693,635


6.0














DEPRECIATION AND












AMORTIZATION EXPENSE

7,182


6,519


10.2


27,063


26,455


2.3














ASSET IMPAIRMENTS

797


7,719


(89.7)


4,805


10,840


(55.7)














OPERATING INCOME

49,773


31,944


55.8


193,503


146,103


32.4














OTHER EXPENSE:












Floorplan interest expense

(7,442)


(8,890)


(16.3)


(27,687)


(34,110)


(18.8)














Other interest expense, net

(8,911)


(6,952)


28.2


(33,722)


(27,217)


23.9














Loss on redemption of long-term debt

-


-


-


-


(3,872)


(100.0)














INCOME BEFORE INCOME TAXES

33,420


16,102


107.6


132,094


80,904


63.3














PROVISION FOR INCOME TAXES

(12,565)


(5,533)


127.1


(49,700)


(30,600)


62.4














NET INCOME

$    20,855


$    10,569


97.3


$      82,394


$      50,304


63.8














DILUTED INCOME PER COMMON SHARE

$        0.90


$        0.45


101.0


$          3.47


$          2.09


65.8














Weighted average dilutive common shares outstanding

22,040


22,467


(1.9)


22,409


22,788


(1.7)

Weighted average participating securities

1,276


1,284


(0.6)


1,377


1,284


7.3

Total weighted average shares outstanding

23,316


23,751


(1.8)


23,786


24,072


(1.2)



Group 1 Automotive, Inc.

Consolidated Balance Sheets

(Dollars in thousands)







December 31,


December 31,






2011


2010


% Change

ASSETS:


(Unaudited)













CURRENT ASSETS:







Cash and cash equivalents

$          14,895


$          19,843


(24.9)


Contracts in transit and vehicle receivables, net

167,507


113,846


47.1


Accounts and notes receivable, net

92,775


75,623


22.7


Inventories

867,470


777,771


11.5


Deferred income taxes

16,012


14,819


8.1


Prepaid expenses and other current assets

16,925


17,332


(2.3)



Total current assets

1,175,584


1,019,234


15.3

PROPERTY AND EQUIPMENT, net

585,633


506,288


15.7

GOODWILL AND INTANGIBLE FRANCHISE RIGHTS

702,145


666,656


5.3

OTHER ASSETS

12,981


9,786


32.6



Total assets

$     2,476,343


$     2,201,964


12.5









LIABILITIES AND STOCKHOLDERS' EQUITY:














CURRENT LIABILITIES:







Floorplan notes payable - credit facility

$        718,945


$        690,051


4.2



Offset account related to floorplan notes payable - credit facility

(109,207)


(129,211)


(15.5)


Floorplan notes payable - manufacturer affiliates

155,980


103,345


50.9


Current maturities of long-term debt

14,663


53,189


(72.4)


Current liabilities from interest rate risk management activities

7,273


1,098


562.4


Accounts payable

148,048


92,799


59.5


Accrued expenses

109,245


83,663


30.6



Total current liabilities

1,044,947


894,934


16.8

2.25% CONVERTIBLE SENIOR NOTES (aggregate principal of







$182,753 at December 31, 2011 and December 31, 2010)

144,985


138,155


4.9

3.00% CONVERTIBLE SENIOR NOTES (aggregate principal of







$115,000 at December 31, 2011 and December 31, 2010)

77,401


74,365


4.1

MORTGAGE FACILITY, net of current maturities

38,873


-


100.0

OTHER REAL ESTATE RELATED AND LONG-TERM DEBT,







net of current maturities

184,237


161,611


14.0

CAPITAL LEASE OBLIGATIONS RELATED TO REAL ESTATE,







net of current maturities

37,105


38,819


(4.4)

DEFERRED INCOME TAXES

78,459


58,970


33.0

LIABILITIES FROM INTEREST RATE RISK MANAGEMENT ACTIVITIES

26,766


16,426


62.9

OTHER LIABILITIES

36,470


34,316


6.3

COMMITMENTS AND CONTINGENCIES














STOCKHOLDERS' EQUITY:







Common stock

260


261


(0.4)


Additional paid-in capital

363,375


363,966


(0.2)


Retained earnings

591,037


519,843


13.7


Accumulated other comprehensive loss

(29,236)


(18,755)


55.9


Treasury stock

(118,336)


(80,947)


46.2



Total stockholders' equity

807,100


784,368


2.9



Total liabilities and stockholders' equity

$     2,476,343


$     2,201,964


12.5



Group 1 Automotive, Inc.

Consolidated Statements of Adjusted Cash Flows from Operating Activities

(Unaudited)

(In thousands)






Three Months Ended December 31,


Twelve Months Ended December 31,



2011


2010


% Change


2011


2010


% Change














Net income

$  20,855


$ 10,569


97.3


$   82,394


$   50,304


63.8

Adjustments to reconcile net income to net cash provided












  by operating activities:













Asset impairments

797


7,719


(89.7)


4,805


10,840


(55.7)


Depreciation and amortization

7,182


6,519


10.2


27,063


26,455


2.3


Deferred income taxes

8,544


1,050


713.7


24,824


23,274


6.7


Loss on redemption of long-term debt

-


-


-


-


3,872


(100.0)


(Gain) loss on disposition of assets and franchise

6


(2,322)


100.3


(961)


848


(213.3)


Stock-based compensation

2,586


2,437


6.1


10,919


9,942


9.8


Amortization of debt discount and issue costs

3,119


3,986


(21.8)


11,990


10,322


16.2


Other

292


(30)


1,073.3


277


824


(66.4)

Changes in operating assets and liabilities, net of effects












  of acquisitions and dispositions:













Accounts payable and accrued expenses

37,305


6,506


473.4


77,027


16,130


377.5


Accounts and notes receivable

(21,783)


(9,097)


139.5


(17,875)


(13,844)


29.1


Inventories

(119,114)


(21,302)


459.2


(7,410)


(174,249)


(95.7)


Contracts-in-transit and vehicle receivables

(67,346)


(21,330)


215.7


(53,821)


(27,218)


97.7


Prepaid expenses and other assets

(7,792)


(138)


5,546.4


(11,246)


6,922


(262.5)


Floorplan notes payable - credit facility (1)

143,307


33,350


329.7


(13,350)


193,430


(106.9)


Floorplan notes payable - manufacturer affiliates (2)

26,595


(299)


8,994.6


19,045


(12,790)


248.9


Deferred revenues

(182)


(549)


(66.8)


(1,427)


(2,308)


(38.2)

Adjusted net cash provided by operating activities

$  34,371


$ 17,069


101.4


$ 152,254


$ 122,754


24.0
















(1)

Excludes net acquisition/(disposition) related activity of $41,860 for the twelve months ended December 31, 2011, and $4,729 for the twelve months ended December 31, 2010.

(2)

Excludes net acquisition/(disposition) related activity of $33,712 for the twelve months ended December 31, 2011, and $2,210 for the twelve months ended December 31, 2010.



Group 1 Automotive, Inc.

Additional Information - Consolidated

(Unaudited)














Three Months Ended


Twelve Months Ended




December 31,


December 31,




2011 (%)


2010 (%)


2011 (%)


2010 (%)

NEW VEHICLE UNIT SALES GEOGRAPHIC MIX:









Region

Geographic Market









East

Massachusetts

10.0


12.2


11.3


14.3



New Jersey

5.3


5.9


5.5


6.3



New York

4.2


3.9


3.8


3.8



Georgia

3.3


3.8


3.4


3.9



New Hampshire

2.8


3.7


3.0


4.0



Louisiana

2.5


3.6


2.8


3.2



Mississippi

2.0


1.7


2.0


1.7



South Carolina

1.7


1.9


1.5


1.3



Alabama

1.3


1.1


1.2


1.2



Maryland

0.8


0.8


0.8


0.8



Florida

0.8


0.7


0.7


1.2




34.7


39.3


36.0


41.7












West

Texas

38.6


32.6


36.0


31.2



California

13.7


14.5


13.9


13.7



Oklahoma

8.0


7.4


8.2


7.8



Kansas

0.9


0.9


0.9


0.9




61.2


55.4


59.0


53.6












International

United Kingdom

4.1


5.3


5.0


4.7




100.0


100.0


100.0


100.0











NEW VEHICLE UNIT SALES BRAND MIX:









Toyota/Scion/Lexus

29.8


35.5


30.4


35.5


Nissan/Infiniti


12.7


12.6


13.7


14.1


BMW/MINI


12.7


13.3


13.1


11.9


Ford


9.9


7.4


8.9


7.8


Honda/Acura


9.4


11.6


10.7


12.0


Daimler


6.8


6.3


5.9


5.8


GM


6.4


4.3


5.6


4.0


Chrysler


4.8


3.3


4.5


3.0


Other


7.5


5.7


7.2


5.9




100.0


100.0


100.0


100.0











NEW VEHICLE UNIT SALES OTHER MIX:









Import


50.4


55.1


53.2


57.5


Luxury


29.4


30.1


28.1


27.8


Domestic


20.2


14.8


18.7


14.7




100.0


100.0


100.0


100.0












Car


51.4


56.4


54.1


58.2


Truck


48.6


43.6


45.9


41.8




100.0


100.0


100.0


100.0



Group 1 Automotive, Inc.

Additional Information - Consolidated

(Unaudited)

(Dollars in thousands, except per unit amounts)













Three Months Ended December 31,


Twelve Months Ended December 31,




2011


2010


% Change


2011


2010


% Change

REVENUES:













New vehicle retail sales

$    945,392


$    832,714


13.5


$ 3,402,647


$ 3,086,807


10.2


Used vehicle retail sales

362,911


310,663


16.8


1,416,520


1,271,039


11.4


Used vehicle wholesale sales

59,434


58,877


0.9


251,043


215,530


16.5



Total used

422,345


369,540


14.3


1,667,563


1,486,569


12.2


Parts and service

204,711


191,242


7.0


813,819


767,004


6.1


Finance and insurance

53,481


44,256


20.8


195,736


168,789


16.0



Total

$ 1,625,929


$ 1,437,752


13.1


$ 6,079,765


$ 5,509,169


10.4















GROSS MARGIN %:













New vehicle retail sales

6.0


5.6




6.2


5.8




Used vehicle retail sales

8.0


8.2




8.8


9.0




Used vehicle wholesale sales

0.2


(0.7)




1.6


1.3





Total used

6.9


6.8




7.7


7.9




Parts and service

51.8


53.1




52.3


53.8




Finance and insurance

100.0


100.0




100.0


100.0





Total

15.1


15.1




15.8


15.9

















GROSS PROFIT:













New vehicle retail sales

$      57,140


$      46,235


23.6


$    210,338


$    177,795


18.3


Used vehicle retail sales

29,009


25,451


14.0


124,524


115,004


8.3


Used vehicle wholesale sales

122


(391)


131.2


4,080


2,697


51.3



Total used

29,131


25,060


16.2


128,604


117,701


9.3


Parts and service

106,109


101,470


4.6


425,922


412,748


3.2


Finance and insurance

53,481


44,256


20.8


195,736


168,789


16.0



Total

$    245,861


$    217,021


13.3


$    960,600


$    877,033


9.5















UNITS SOLD:













Retail new vehicles sold

27,444


25,383


8.1


102,022


97,511


4.6


Retail used vehicles sold

17,775


15,771


12.7


70,475


66,001


6.8


Wholesale used vehicles sold

8,751


8,808


(0.6)


35,997


33,524


7.4



Total used

26,526


24,579


7.9


106,472


99,525


7.0















AVERAGE RETAIL SALES PRICE:













New vehicle retail

$      34,448


$      32,806


5.0


$      33,352


$      31,656


5.4


Used vehicle retail

$      20,417


$      19,698


3.7


$      20,100


$      19,258


4.4















GROSS PROFIT PER UNIT SOLD:













New vehicle retail sales

$        2,082


$        1,821


14.3


$        2,062


$        1,823


13.1


Used vehicle retail sales

1,632


1,614


1.1


1,767


1,742


1.4


Used vehicle wholesale sales

14


(44)


131.8


113


80


41.3



Total used

1,098


1,020


7.6


1,208


1,183


2.1


Finance and insurance (per retail unit)

$        1,183


$        1,075


10.0


$        1,135


$        1,032


10.0















OTHER (1):













SG&A expenses

$    187,109


$    170,839


9.5


$    734,229


$    689,320


6.5


SG&A as % revenues

11.5


11.9




12.1


12.5




SG&A as % gross profit

76.1


78.7




76.4


78.6




Operating margin %

3.2


2.8




3.3


2.9




Pretax margin %

2.2


1.7




2.3


1.8

















FLOORPLAN EXPENSE:













Floorplan interest

$      (7,442)


$      (8,890)


(16.3)


$    (27,687)


$    (34,110)


(18.8)


Floorplan assistance

7,308


6,162


18.6


26,144


23,998


8.9



Net floorplan expense

$         (134)


$      (2,728)


(95.1)


$      (1,543)


$    (10,112)


(84.7)

















(1)

These amounts have been adjusted to exclude the impact of certain items to provide additional information regarding the performance of our operations and improve period-to-period comparability. Refer to our Reconciliation of Certain Non-GAAP Financial Measures for a description of the aforementioned adjustments.



Group 1 Automotive, Inc.

Additional Information - Same Store(1)

(Unaudited)

(Dollars in thousands, except per unit amounts)














Three Months Ended December 31,


Twelve Months Ended December 31,




2011


2010


% Change


2011


2010


% Change

REVENUES:













New vehicle retail sales

$    883,288


$    830,877


6.3


$ 3,252,960


$ 3,056,307


6.4


Used vehicle retail sales

344,775


309,732


11.3


1,361,006


1,261,856


7.9


Used vehicle wholesale sales

55,837


58,443


(4.5)


240,467


212,631


13.1



Total used

400,612


368,175


8.8


1,601,473


1,474,487


8.6


Parts and service

191,754


190,839


0.5


776,005


757,132


2.5


Finance and insurance

50,346


44,145


14.0


188,105


167,339


12.4



Total

$ 1,526,000


$ 1,434,036


6.4


$ 5,818,543


$ 5,455,265


6.7















GROSS MARGIN %:













New vehicle retail sales

6.1


5.6




6.2


5.8




Used vehicle retail sales

7.9


8.2




8.8


9.1




Used vehicle wholesale sales

0.4


(0.4)




1.8


1.4





Total used

6.9


6.8




7.7


8.0




Parts and service

52.6


53.0




53.0


53.9




Finance and insurance

100.0


100.0




100.0


100.0





Total

15.2


15.1




15.9


15.9

















GROSS PROFIT:













New vehicle retail sales

$      53,923


$      46,226


16.7


$    202,615


$    176,202


15.0


Used vehicle retail sales

27,313


25,390


7.6


119,568


114,305


4.6


Used vehicle wholesale sales

205


(229)


189.5


4,301


2,982


44.2



Total used

27,518


25,161


9.4


123,869


117,287


5.6


Parts and service

100,850


101,237


(0.4)


411,281


407,993


0.8


Finance and insurance

50,346


44,145


14.0


188,105


167,339


12.4



Total

$    232,637


$    216,769


7.3


$    925,870


$    868,821


6.6















UNITS SOLD:













Retail new vehicles sold

25,688


25,329


1.4


97,495


96,629


0.9


Retail used vehicles sold

16,838


15,718


7.1


67,647


65,417


3.4


Wholesale used vehicles sold

8,185


8,761


(6.6)


34,395


33,176


3.7



Total used

25,023


24,479


2.2


102,042


98,593


3.5















AVERAGE RETAIL SALES PRICE:













New vehicle retail

$      34,385


$      32,803


4.8


$      33,365


$      31,629


5.5


Used vehicle retail

$      20,476


$      19,706


3.9


$      20,119


$      19,289


4.3















GROSS PROFIT PER UNIT SOLD:













New vehicle retail sales

$        2,099


$        1,825


15.0


$        2,078


$        1,823


14.0


Used vehicle retail sales

1,622


1,615


0.4


1,768


1,747


1.2


Used vehicle wholesale sales

25


(26)


196.2


125


90


38.9



Total used

1,100


1,028


7.0


1,214


1,190


2.0


Finance and insurance (per retail unit)

$        1,184


$        1,075


10.1


$        1,139


$        1,033


10.3















OTHER (2):













SG&A expenses

$    176,588


$    169,978


3.9


$    705,558


$    677,843


4.1


SG&A as % revenues

11.6


11.9




12.1


12.4




SG&A as % gross profit

75.9


78.4




76.2


78.0




Operating margin %

3.2


2.8




3.3


3.0

















FLOORPLAN EXPENSE:













Floorplan interest

$      (6,917)


$      (8,873)


(22.0)


$    (26,493)


$    (33,756)


(21.5)


Floorplan assistance

6,676


6,129


8.9


24,968


23,663


5.5



Net floorplan expense

$         (241)


$      (2,744)


(91.2)


$      (1,525)


$    (10,093)


(84.9)

















(1)

Same Store amounts include the results for the identical months in each period presented in the comparison, commencing with the first full month we owned the dealership and, in the case of dispositions, ending with the last full month we owned it. Same Store results also include the activities of our corporate office.

(2)

These amounts have been adjusted to exclude the impact of certain items to provide additional information regarding the performance of our operations and improve period-to-period comparability. Refer to our Reconciliation of Certain Non-GAAP Financial Measures for a description of the aforementioned adjustments.



Group 1 Automotive, Inc.

Reconciliation of Certain Non-GAAP Financial Measures

(Unaudited)

(Dollars in thousands, except per share amounts)



































Three Months Ended December 31,


Twelve Months Ended December 31,

NET INCOME RECONCILIATION:

2011


2010


% Change


2011


2010


% Change


As reported

$    20,855


$   10,569


97.3


$   82,394


$   50,304


63.8


 After-tax adjustments:














Non-cash asset impairment charges (2)

461


4,947




2,994


6,930





Loss on dealership dispositions (3)

-


-




-


3,698





Loss on debt redemption (4)

-


-




-


2,458





Severance costs related to UK-dealership acquisitions (5)

-


-




-


405





Income tax benefit related to discrete items (6)

-


(810)




-


(810)





Gain on sale of real estate (7)

-


-




-


(761)





Accrual for pending legal matter (11)

641


-




641


-






Adjusted net income (1)

$    21,957


$   14,706


49.3


$   86,029


$   62,224


38.3
















ADJUSTED NET INCOME ATTRIBUTABLE TO DILUTED












COMMON SHARES RECONCILIATION:













Adjusted net income

$    21,957


$   14,706


49.3


$   86,029


$   62,224


38.3


Less: Adjusted earnings allocated to participating securities

1,182


785




4,931


3,309




Adjusted net income available to diluted common shares

$    20,775


$   13,921


49.2


$   81,098


$   58,915


37.7
















DILUTED INCOME PER COMMON SHARE RECONCILIATION:













As reported

$        0.90


$       0.45


100.0


$       3.47


$       2.09


66.0


 After-tax adjustments:














Non-cash asset impairment charges

0.02


0.21




0.13


0.29





Loss on dealership dispositions

-


-




-


0.15





Loss on debt redemption

-


-




-


0.10





Severance costs related to UK-dealership acquisitions

-


-




-


0.02





Income tax benefit related to discrete items

-


(0.04)




-


(0.03)





Gain on sale of real estate

-


-




-


(0.03)





Accrual for pending legal matter

0.02


-




0.02


-






Adjusted diluted income per share (1)

$        0.94


$       0.62


51.6


$       3.62


$       2.59


39.8
















SG&A RECONCILIATION:













As reported

$  188,109


$ 170,839


10.1


$ 735,229


$ 693,635


6.0


 Pre-tax adjustments:














Loss on dealership dispositions

-


-




-


(5,053)





Severance costs related to UK-dealership acquisitions

-


-




-


(562)





Gain on sale of real estate

-


-




-


1,300





Accrual for pending legal matter

(1,000)


-




(1,000)


-






Adjusted SG&A (1)

$  187,109


$ 170,839


9.5


$ 734,229


$ 689,320


6.5
















SG&A AS % REVENUES:













Unadjusted

11.6


11.9




12.1


12.6




Adjusted (1)

11.5


11.9




12.1


12.5


















SG&A AS % OF GROSS PROFIT:













Unadjusted

76.5


78.7




76.5


79.1




Adjusted (1)

76.1


78.7




76.4


78.6


















OPERATING MARGIN %:













Unadjusted

3.1


2.2




3.2


2.7




Adjusted (1), (8)

3.2


2.8




3.3


2.9


















PRETAX MARGIN %:













Unadjusted

2.1


1.1




2.2


1.5




Adjusted (1), (9)

2.2


1.7




2.3


1.8


















SAME STORE SG&A RECONCILIATION:













As reported

$  177,588


$ 169,978


4.5


$ 706,558


$ 678,405


4.1


 Pre-tax adjustments:














Severance costs related to UK-dealership acquisitions

-


-




-


(562)





Accrual for pending legal matter

(1,000)


-




(1,000)


-






Adjusted Same Store SG&A (1)

$  176,588


$ 169,978


3.9


$ 705,558


$ 677,843


4.1
















SAME STORE SG&A AS % REVENUES:













Unadjusted

11.6


11.9




12.1


12.4




Adjusted (1)

11.6


11.9




12.1


12.4


















SAME STORE SG&A AS % OF GROSS PROFIT:













Unadjusted

76.3


78.4




76.3


78.1




Adjusted (1)

75.9


78.4




76.2


78.0


















SAME STORE OPERATING MARGIN %:













Unadjusted

3.1


2.5




3.2


2.9




Adjusted (1), (10)

3.2


2.8




3.3


3.0






















Three Months Ended December 31,


Twelve Months Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

2011


2010


% Change


2011


2010


% Change

RECONCILIATION:













Net cash provided by (used in) operating activities

$ (101,802)


$ (16,281)


525.3


$ 199,316


$ (68,466)


391.1



Change in floorplan notes payable-credit facility,
   excluding floorplan offset account and net
   acquisition and disposition related activity

143,307


33,350




(13,350)


193,430





Change in floorplan notes payable-manufacturer
  affiliates associated with net acquisition and
  disposition related activity

(7,134)


-




(33,712)


(2,210)






Adjusted net cash provided by operating
  activities (1)

$    34,371


$   17,069


101.4


$ 152,254


$ 122,754


24.0


















(1)

We believe that these adjusted financial measures are relevant and useful to investors because they provide additional information regarding the performance of our operations and improve period-to-period comparability. These measures are not measures of financial performance under GAAP.  Accordingly, they should not be considered as substitutes for their unadjusted counterparts, which are prepared in accordance with GAAP.  Although we find these non-GAAP results useful in evaluating the performance of our business, our reliance on these measures is limited because the adjustments often have a material impact on our financial statements calculated in accordance with GAAP.  Therefore, we typically use these adjusted numbers in conjunction with our GAAP results to address these limitations.

(2)

Adjustments are net of tax benefit of $336 and $1,811 for the three and twelve months ended December 31, 2011, respectively, and $2,772 and $3,910 for the three and twelve months ended December 31, 2010 and are calculated utilizing the applicable federal and state tax rates for the adjustment.

(3)

Adjustment is net of tax benefit of $1,355 for the twelve months ended December 31, 2010, and is calculated utilizing the applicable federal and state tax rates for the adjustment.

(4)

Adjustment is net of tax benefit of $1,414 for the twelve months ended December 31, 2010, and is calculated utilizing the applicable federal and state tax rates for the adjustment.

(5)

Adjustment is net of a tax benefit of $157 for the twelve months ended December 31, 2010, and is calculated utilizing the applicable UK corporate tax rate for the adjustment.

(6)

The $0.8 million income tax benefit for the three and twelve months ended December 31, 2010 relates to the tax deductibility of goodwill written off in conjunction with the termination of a franchise.

(7)

Adjustment is net of a tax provision of $539 for the twelve months ended December 31, 2010, and is calculated utilizing the applicable federal and state tax rates for the adjustment.

(8)

Excludes the impact of non-cash asset impairment charges.







(9)

Excludes the impact of non-cash asset impairment charges, loss on dealership dispositions, loss on debt redemption, severance costs related to UK-dealership acquisitions, gain on sale of real estate and accrual for pending legal matter.

(10)

Excludes the impact of Same Store non-cash asset impairment charges of $341 and $4,038 and accrual for pending legal matter of $1,000 for the three and twelve months ended December 31, 2011, respectively, and $4,823 and $6,725 for the three and twelve months ended December 31, 2010. Adjusted Same Store operating income was $49,126 and $194,124 for the three and twelve months ended December 31, 2011, respectively, and $40,331 and $164,744 for the three and twelve months ended December 31, 2010.

(11)

Adjustment is net of tax benefit of $359 for the three and twelve months ended December 31, 2011, and is calculated utilizing the applicable federal and state tax rates for the adjustment.



SOURCE Group 1 Automotive, Inc.



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