SOURCE: Group 1 Automotive, Inc.

Group 1 Automotive, Inc.

April 26, 2011 07:00 ET

Group 1 Automotive Reports 49 Percent Increase in First-Quarter Profits

Parts and Service Business Remains Strong

HOUSTON, TX--(Marketwire - Apr 26, 2011) - Group 1 Automotive, Inc. (NYSE: GPI), a Fortune 500 automotive retailer, today reported a first-quarter adjusted net income increase of 48.5 percent to $15.5 million, or $0.67 per diluted share, for the quarter ended March 31.

On a GAAP basis (see attached reconciliation for reported adjustments), including $0.1 million of net after-tax adjustments, first-quarter net income was $15.4 million, or $0.66 per diluted share.

Total company revenues for the quarter increased 18.3 percent to $1.4 billion, primarily driven by higher new vehicle sales. Gross profit grew 8.4 percent to $221.8 million, reflecting increases in all business segments. Selling, general and administrative (SG&A) expense as a percent of gross profit improved 210 basis points to 79.3 percent, as the company continued to leverage its reduced cost structure.

First-Quarter Operating Highlights

  • New vehicle revenues increased 21.5 percent on a 19.7 percent increase in unit sales.
  • Used vehicle revenues were 19.6 percent higher.
  • Parts and service revenues increased 5.1 percent.
  • Retail new vehicle and used vehicle gross profit increased 8.6 percent and 9.3 percent, respectively.
  • Retail used vehicle gross margin expanded 70 basis points sequentially to 8.9 percent.
  • Finance and insurance gross profit per retail unit increased $16 to $1,068.
  • Selling, general and administrative (SG&A) expense as a percent of revenues improved 150 basis points, to 12.5 percent.

"These results demonstrate our continuing focus on growing top-line revenues in all business segments while leveraging our improved cost structure," said Earl J. Hesterberg, Group 1's president and chief executive officer.

Japan Supply Update
"Everyone at Group 1 would like to extend our sympathies to the victims and their families of March's earthquake and tsunami that devastated northeastern Japan," said Hesterberg. "Our thoughts are with those who suffered losses in this disaster.

"Group 1 anticipates some near-term impact to new car deliveries and sales in the coming months. Although the manufacturers are working diligently to assess the situation, it is still too early to determine the severity or length of the production disruptions. We do know that the major issues relate to Japanese brands and there is a probability of a 30 percent to 50 percent reduction of deliveries of some Japanese models this summer. Group 1 had adequate new vehicle inventory at March 31, with 51 days' of total supply on hand and 50 days' supply of our Japanese brands. If deliveries are reduced to the extent mentioned above, it is likely that inventory levels will constrain sales for the second quarter and possibly third quarter. Fortunately, we know how to manage the business in a low-inventory environment, particularly with the import brands, as those inventories have historically been in very short supply from time to time during the last 10 years. For stores that could be impacted by limited new vehicle inventory, we are adjusting advertising and other expenses, and expect to achieve higher new vehicle gross margins in the coming months. Although there have been a few replacement parts where orders are being filled on a 'need' basis, there has not been an impact on our parts and service business. During the coming months, we will continue to monitor the situation and will shift more of our focus to our higher-margin used vehicle and parts-and-service businesses, which account for more than 65 percent of our total gross profit."

Corporate Development Update
As previously announced, Group 1 has acquired Ford, Volkswagen, BMW and MINI franchises in 2011 that are expected to generate $150.0 million in total estimated annualized revenues.

First-Quarter Earnings Conference Call
Group 1's senior management will host a conference call today at 10 a.m. ET to discuss the first-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: 888.329.8905
International: 719.325.2461
Participant Passcode: 3356291

A telephonic replay will be available following the call through May 3 by dialing:

Domestic: 888.203.1112
International: 719.457.0820
Replay Passcode: 3356291

About Group 1 Automotive, Inc.
Group 1 owns and operates 103 automotive dealerships, 133 franchises, and 27 collision service centers in the United States and the United Kingdom that offer 30 brands of automobiles. Through its dealerships, the company sells new and used cars and light trucks; arranges related financing, vehicle service and insurance contracts; provides maintenance and repair services; and sells replacement parts.

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

This press release contains "forward-looking statements," 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," "may" or "will" and similar expressions. 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. These factors, as well as additional factors that could affect our forward-looking statements, are described in our Form 10-K under the headings "Business - Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." We urge you to carefully consider this information. We undertake no duty to update our forward-looking statements, including our earnings outlook, whether as a result of new information, future developments or otherwise, except as may be required by law.

FINANCIAL TABLES TO FOLLOW

                         Group 1 Automotive, Inc.
                  Consolidated Statements of Operations
                                (Unaudited)
                 (In thousands, except per share amounts)


                                             Three Months Ended March 31,
                                           -------------------------------
                                             2011       2010     % Change
                                           ---------  ---------  --------
REVENUES:
New vehicle retail sales                   $ 784,714  $ 646,121      21.5 %
Used vehicle retail sales                    323,447    279,609      15.7
Used vehicle wholesale sales                  61,951     42,512      45.7
Parts and service                            194,950    185,435       5.1
Finance and insurance                         44,240     37,476      18.0
                                           ---------  ---------  --------
  Total revenues                           1,409,302  1,191,153      18.3

COST OF SALES:
New vehicle retail sales                     741,942    606,747      22.3
Used vehicle retail sales                    294,547    253,172      16.3
Used vehicle wholesale sales                  59,457     40,849      45.6
Parts and service                             91,581     85,864       6.7
                                           ---------  ---------  --------
  Total cost of sales                      1,187,527    986,632      20.4

                                           ---------  ---------  --------
GROSS PROFIT                                 221,775    204,521       8.4

SELLING, GENERAL AND ADMINISTRATIVE 
 EXPENSES                                    175,884    166,406       5.7

DEPRECIATION AND AMORTIZATION EXPENSE          6,455      6,485      (0.5)

ASSET IMPAIRMENTS                                222          -     100.0
                                           ---------  ---------  --------
OPERATING INCOME                              39,214     31,630      24.0

OTHER EXPENSE:
Floorplan interest expense                    (6,760)    (7,566)    (10.7)

Other interest expense, net                   (7,942)    (7,104)     11.8

Loss on redemption of long-term debt               -     (3,872)   (100.0)
                                           ---------  ---------  --------

INCOME BEFORE INCOME TAXES                    24,512     13,088      87.3

PROVISION FOR INCOME TAXES                    (9,150)    (5,107)     79.2

                                           ---------  ---------  --------
NET INCOME                                 $  15,362  $   7,981      92.5 %
                                           =========  =========  --------


DILUTED INCOME PER SHARE                   $    0.66  $    0.34      94.1 %

Weighted average dilutive shares
 outstanding                                  23,264     23,688      (1.8)%






                         Group 1 Automotive, Inc.
                        Consolidated Balance Sheets
                          (Dollars in thousands)


                                       March 31,   December 31,
                                          2011         2010      % Change
                                      -----------  ------------  --------
ASSETS:                               (Unaudited)

CURRENT ASSETS:
  Cash and cash equivalents           $    44,804  $     19,843     125.8 %
  Contracts in transit and
   vehicle receivables, net               117,593       113,846       3.3
  Accounts and notes receivable, net       68,428        75,623      (9.5)
  Inventories                             784,142       777,771       0.8
  Deferred income taxes                    15,517        14,819       4.7
  Prepaid expenses and other
   current assets                          10,541        17,332     (39.2)
                                      -----------  ------------  --------
    Total current assets                1,041,025     1,019,234       2.1
PROPERTY AND EQUIPMENT, net               539,922       506,288       6.6
GOODWILL AND INTANGIBLE FRANCHISE
 RIGHTS                                   669,120       666,656       0.4
OTHER ASSETS                                9,843         9,786       0.6
                                      -----------  ------------  --------
    Total assets                      $ 2,259,910  $  2,201,964       2.6 %
                                      ===========  ============  --------

LIABILITIES AND STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:
  Floorplan notes payable -
   credit facility                    $   689,037  $    690,051      (0.1)%
    Offset account related to
     floorplan notes payable -
     credit facility                     (107,718)     (129,211)    (16.6)
  Floorplan notes payable -
   manufacturer affiliates                102,810       103,345      (0.5)
  Current maturities of mortgage
   facility                                42,600        42,600         -
  Current maturities of
   long-term debt                          10,482        10,589      (1.0)
  Current liabilities from
   interest rate risk management
   activities                                 709         1,098     (35.4)
  Accounts payable                         99,752        92,799       7.5
  Accrued expenses                         87,668        83,663       4.8
                                      -----------  ------------  --------
    Total current liabilities             925,340       894,934       3.4
2.25% CONVERTIBLE SENIOR NOTES
 (aggregate principal of $182,753 at
 March 31, 2011 and December 31,
 2010)                                    139,814       138,155       1.2
3.00% CONVERTIBLE SENIOR NOTES
 (aggregate principal of $115,000 at
 March 31, 2011 and December 31,
 2010)                                     75,099        74,365       1.0
OTHER REAL ESTATE RELATED AND
 LONG-TERM DEBT, net of current
 maturities                               160,175       161,611      (0.9)
CAPITAL LEASE OBLIGATIONS RELATED
 TO REAL ESTATE, net of current
 maturities                                38,442        38,819      (1.0)
DEFERRED INCOME TAXES                      67,661        58,970      14.7
LIABILITIES FROM INTEREST RATE
 RISK MANAGEMENT ACTIVITIES                14,630        16,426     (10.9)
OTHER LIABILITIES                          32,274        31,036       4.0
DEFERRED REVENUES                           2,779         3,280     (15.3)

STOCKHOLDERS' EQUITY:
  Common stock                                263           261       0.8
  Additional paid-in capital              365,294       363,966       0.4
  Retained earnings                       532,586       519,843       2.5
  Accumulated other comprehensive
   loss                                   (15,618)      (18,755)    (16.7)
  Treasury stock                          (78,829)      (80,947)     (2.6)
                                      -----------  ------------  --------
    Total stockholders' equity            803,696       784,368       2.5
                                      -----------  ------------  --------
    Total liabilities and
     stockholders' equity             $ 2,259,910  $  2,201,964       2.6 %
                                      ===========  ============  --------






                         Group 1 Automotive, Inc.
 Consolidated Statements of Adjusted Cash Flows from Operating Activities
                                (Unaudited)
                              (In thousands)


                                              Three Months Ended March 31,
                                              ----------------------------
                                                2011      2010    % Change
                                              --------  --------  --------

Net income                                    $ 15,362  $  7,981      92.5%
Adjustments to reconcile net income to net
 cash provided by operating activities:
  Asset impairments                                222         -     100.0
  Depreciation and amortization                  6,455     6,485      (0.5)
  Deferred income taxes                          7,048     4,330      62.8
  Loss on redemption of long-term debt               -     3,872    (100.0)
  Stock-based compensation                       2,744     2,697       1.7
  Amortization of debt discount and issue
   costs                                         2,878     1,635      76.0
  Other                                           (173)      349    (149.6)
Changes in operating assets and liabilities,
 net of effects of acquisitions and
 dispositions:
  Accounts payable and accrued expenses         10,436    22,960     (54.5)
  Accounts and notes receivable                  7,278    (3,091)    335.5
  Inventories                                    5,736   (48,234)    111.9
  Contracts-in-transit and vehicle
   receivables                                  (3,623)  (19,097)    (81.0)
  Prepaid expenses and other assets              1,397     1,622     (13.9)
  Floorplan notes payable - credit
   facility                                     (1,014)   67,547    (101.5)
  Floorplan notes payable - manufacturer
   affiliates                                     (804)     (693)     16.0
  Deferred revenues                               (501)     (898)    (44.2)
                                              --------  --------  --------
Adjusted net cash provided by operating
 activities                                   $ 53,441  $ 47,465      12.6%
                                              ========  ========  --------






                         Group 1 Automotive, Inc.
                  Additional Information - Consolidated
                                (Unaudited)


                                                       Three Months Ended
                                                            March 31,
                                                      --------------------
                                                        2011       2010
                                                      ---------  ---------
NEW VEHICLE UNIT SALES GEOGRAPHIC MIX:
   Region            Geographic Market
   Eastern           Massachusetts                         12.9%      15.3%
                     New Jersey                             5.9        6.5
                     Georgia                                4.0        3.7
                     New Hampshire                          3.4        4.6
                     New York                               3.3        3.7
                     Louisiana                              3.1        2.9
                     Mississippi                            2.1        1.9
                     South Carolina                         1.6        0.3
                     Alabama                                1.2        1.4
                     Maryland                               0.7        0.7
                     Florida                                0.6        1.9
                                                      ---------  ---------
                                                           38.8       42.9

   Central           Texas                                 31.8       30.9
                     Oklahoma                               8.1        7.7
                     Kansas                                 0.9        0.9
                                                      ---------  ---------
                                                           40.8       39.5

   Western           California                            15.3       13.8

   International     United Kingdom                         5.1        3.8
                                                      ---------  ---------
                                                          100.0%     100.0%

NEW VEHICLE UNIT SALES BRAND MIX:
   Toyota/Scion/Lexus                                      34.5%      34.8%
   Nissan/Infiniti                                         14.1       15.8
   Honda/Acura                                             12.8       12.6
   BMW/Mini                                                11.7       10.4
   Ford                                                     7.1        8.6
   Mercedes-Benz                                            5.3        5.6
   GM                                                       4.7        3.6
   Chrysler                                                 3.6        2.8
   Other                                                    6.2        5.8
                                                      ---------  ---------
                                                          100.0%     100.0%

NEW VEHICLE UNIT SALES OTHER MIX:
   Import                                                  58.6%      58.5%
   Luxury                                                  26.1       26.9
   Domestic                                                15.3       14.6
                                                      ---------  ---------
                                                          100.0%     100.0%

   Car                                                     56.1%      57.7%
   Truck                                                   43.9       42.3
                                                      ---------  ---------
                                                          100.0%     100.0%






                         Group 1 Automotive, Inc.
                  Additional Information - Consolidated
                                (Unaudited)
              (Dollars in thousands, except per unit amounts)


                                         Three Months Ended March 31,
                                     -------------------------------------
                                         2011         2010       % Change
                                     -----------  -----------  ----------
REVENUES:
  New vehicle retail sales           $   784,714  $   646,121        21.5 %

  Used vehicle retail sales              323,447      279,609        15.7
  Used vehicle wholesale sales            61,951       42,512        45.7
                                     -----------  -----------  ----------
    Total used                           385,398      322,121        19.6
  Parts and service                      194,950      185,435         5.1
  Finance and insurance                   44,240       37,476        18.0
                                     -----------  -----------  ----------
    Total                            $ 1,409,302  $ 1,191,153        18.3 %

GROSS MARGIN:
  New vehicle retail sales                   5.5%         6.1%
  Used vehicle retail sales                  8.9          9.5
  Used vehicle wholesale sales               4.0          3.9
    Total used                               8.1          8.7
  Parts and service                         53.0         53.7
  Finance and insurance                    100.0        100.0
    Total                                   15.7%        17.2%

GROSS PROFIT:
  New vehicle retail sales           $    42,772  $    39,374         8.6 %

  Used vehicle retail sales               28,900       26,437         9.3
  Used vehicle wholesale sales             2,494        1,663        50.0
                                     -----------  -----------  ----------
    Total used                            31,394       28,100        11.7
  Parts and service                      103,369       99,571         3.8
  Finance and insurance                   44,240       37,476        18.0
                                     -----------  -----------  ----------
    Total                            $   221,775  $   204,521         8.4 %

UNITS SOLD:
  Retail new vehicles sold                24,704       20,631        19.7 %

  Retail used vehicles sold               16,730       14,993        11.6
  Wholesale used vehicles sold             9,055        6,716        34.8
                                     -----------  -----------  ----------
    Total used                            25,785       21,709        18.8 %

GROSS PROFIT PER UNIT SOLD:
  New vehicle retail sales           $     1,731  $     1,908        (9.3)%
  Used vehicle retail sales                1,727        1,763        (2.0)
  Used vehicle wholesale sales               275          248        10.9
    Total used                             1,218        1,294        (5.9)
  Finance and insurance (per
   retail unit)                      $     1,068  $     1,052         1.5 %

OTHER:
  SG&A expenses                      $   175,884  $   166,406         5.7 %
  SG&A as % revenues                        12.5%        14.0%
  SG&A as % gross profit                    79.3%        81.4%
  Operating margin (1)                       2.8%         2.7%
  Pretax margin (1)                          1.8%         1.4%

FLOORPLAN EXPENSE:
  Floorplan interest                 $    (6,760) $    (7,566)      (10.7)%
  Floorplan assistance                     6,210        5,235        18.6
                                     -----------  -----------  ----------
    Net floorplan expense            $      (550) $    (2,331)      (76.4)%
                                     ===========  ===========  ----------

  (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 March 31,
                                     -------------------------------------
                                         2011         2010       % Change
                                     -----------  -----------  ----------
REVENUES:
  New vehicle retail sales           $   762,565  $   634,385        20.2 %

  Used vehicle retail sales              310,963      276,489        12.5
  Used vehicle wholesale sales            59,167       41,827        41.5
                                     -----------  -----------  ----------
    Total used                           370,130      318,316        16.3
  Parts and service                      188,777      181,087         4.2
  Finance and insurance                   43,503       36,873        18.0
                                     -----------  -----------  ----------
    Total                            $ 1,364,975  $ 1,170,661        16.6 %

GROSS MARGIN:
  New vehicle retail sales                   5.5%         6.1%
  Used vehicle retail sales                  9.0          9.5
  Used vehicle wholesale sales               4.2          4.0
    Total used                               8.3          8.8
  Parts and service                         53.4         53.9
  Finance and insurance                    100.0        100.0
    Total                                   15.9%        17.2%

GROSS PROFIT:
  New vehicle retail sales           $    41,667  $    38,644         7.8 %

  Used vehicle retail sales               28,083       26,202         7.2
  Used vehicle wholesale sales             2,478        1,653        49.9
                                     -----------  -----------  ----------
    Total used                            30,561       27,855         9.7
  Parts and service                      100,724       97,531         3.3
  Finance and insurance                   43,503       36,873        18.0
                                     -----------  -----------  ----------
    Total                            $   216,455  $   200,903         7.7 %

UNITS SOLD:
  Retail new vehicles sold                23,968       20,285        18.2 %

  Retail used vehicles sold               16,154       14,796         9.2
  Wholesale used vehicles sold             8,685        6,619        31.2
                                     -----------  -----------  ----------
    Total used                            24,839       21,415        16.0 %

GROSS PROFIT PER UNIT SOLD:
  New vehicle retail sales           $     1,738  $     1,905        (8.8)%
  Used vehicle retail sales                1,738        1,771        (1.9)
  Used vehicle wholesale sales               285          250        14.0
    Total used                             1,230        1,301        (5.5)
  Finance and insurance (per
   retail unit)                      $     1,084  $     1,051         3.1 %

OTHER:
  SG&A expenses                      $   170,416  $   161,861         5.3 %
  SG&A as % revenues                        12.5%        13.8%
  SG&A as % gross profit                    78.7%        80.6%
  Operating margin                           2.9%         2.8%

FLOORPLAN EXPENSE:
  Floorplan interest                 $    (6,626) $    (7,428)      (10.8)%
  Floorplan assistance                     6,142        5,096        20.5
                                     -----------  -----------  ----------
    Net floorplan expense            $      (484) $    (2,332)      (79.2)%
                                     ===========  ===========  ----------


(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.






                         Group 1 Automotive, Inc.
          Reconciliation of Certain Non-GAAP Financial Measures
                                (Unaudited)
             (Dollars in thousands, except per share amounts)



                                              Three Months Ended March 31,
                                              ----------------------------
NET INCOME RECONCILIATION:                      2011      2010    % Change
                                              --------  --------  --------
  As reported                                 $ 15,362  $  7,981      92.5%
    After-tax Adjustments:
      Non-Cash asset impairment charges(2)         140         -
      Loss on debt redemption (3)                    -     2,458
                                              --------  --------  --------
        Adjusted net income (1)               $ 15,502  $ 10,439      48.5%

DILUTED INCOME PER SHARE RECONCILIATION:
  As reported                                 $   0.66  $   0.34      94.1%
    After-tax Adjustments:
      Non-Cash asset impairment charges           0.01         -
      Loss on debt redemption                        -      0.10
                                              --------  --------  --------
        Adjusted diluted income per
         share(1)                             $   0.67  $   0.44      52.3%

OPERATING MARGIN:

  Unadjusted                                       2.8%      2.7%
  Adjusted (1), (4)                                2.8%      2.7%

PRETAX MARGIN:

  Unadjusted                                       1.7%      1.1%
  Adjusted (1), (5)                                1.8%      1.4%


                                              Three Months Ended March 31,
                                              ----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES            2011      2010    % Change
RECONCILIATION:                               --------  --------  --------
  Net cash provided by (used in)
   operating activities                        $ 54,455 $(20,082)    371.2%
      Change in floorplan notes
       payable-credit facility,
       excluding floorplan offset
       account                                  (1,014)   67,547
                                              --------  --------  --------
        Adjusted net cash provided by
         operating activities (1)             $ 53,441  $ 47,465      12.6%


 (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)  Adjustment is net of tax benefit of $82 for the three months ended
      March 31, 2011 and is calculated utilizing the applicable federal and
      state tax rates for the adjustment.

 (3)  Adjustment is net of tax benefit of $1,414 for the three months ended
      March 31, 2010 and is calculated utilizing the applicable federal and
      state tax rates for the adjustment.

 (4)  Excludes the impact of non-cash asset impairment charges.

 (5)  Excludes the impact of non-cash asset impairment charges and loss on
      debt redemption.

Contact Information

  • Investor contacts:
    Kim Paper Canning
    Manager, Investor Relations
    Group 1 Automotive Inc.
    713-647-5741 | Email Contact

    Media contacts:
    Pete DeLongchamps
    VP, Manufacturer Relations and
    Public Affairs
    Group 1 Automotive Inc.
    713-647-5770 | Email Contact
    or
    Clint Woods
    Pierpont Communications, Inc.
    713-627-2223 | Email Contact