SOURCE: Group 1 Automotive, Inc.

Group 1 Automotive, Inc.

April 28, 2009 07:00 ET

Group 1 Automotive Reports Profitable First Quarter

Exceeds Expense and Inventory Reduction Targets; Reduces Debt and Strengthens Balance Sheet

HOUSTON, TX--(Marketwire - April 28, 2009) - Group 1 Automotive, Inc. (NYSE: GPI), a Fortune 500 automotive retailer, today reported net income from continuing operations before the adoption of Accounting Principles Bulletin 14-1, (APB 14-1), of $14.7 million, or $0.64 per diluted share, for the first quarter ended March 31, 2009, as compared to $17.2 million, or $0.76 per diluted share, in the first quarter of 2008. For comparison purposes, the 2009 first-quarter results included an after-tax loss on a dealership disposition of $0.5 million, or $0.02 per diluted share; and the periods ending March 31, 2009 and 2008, had gains on debt repurchases of $0.42 and $0.01 per diluted share, respectively. As shown in the attached reconciliation table, excluding the disposition charge and the gain on debt repurchases first-quarter profit from continuing operations before the adoption of APB 14-1 was $0.24 per diluted share.

"Our ability to report a profit in a very difficult operating environment is a credit to the hard work of our team and sacrifices by our employees," said Earl J. Hesterberg, Group 1's president and chief executive officer. "We responded to the drastic drop of more than 35 percent in new vehicle sales with a series of aggressive and painful cost cuts. These cost reductions are on pace to exceed our $100 million annual plan by over $20 million. Our actions to strengthen our balance sheet by reducing debt and inventory levels are also critical as they provide added flexibility in the coming months and further improve our covenant compliance."

Effective Jan. 1, 2009, Group 1 was required to adopt APB 14-1, generating an additional non-cash interest charge relative to the company's 2.25 percent convertible notes and a reduction to the calculated gains on redemptions. APB 14-1 was required to be retrospectively applied to all prior periods. After applying APB 14-1, first-quarter 2009 net income from continuing operations was $8.4 million, or $0.37 per diluted share, on a GAAP basis.

First-Quarter Operating Results

First-quarter 2009 same-store revenues declined 32.4 percent from the prior-year period, as the macro-economic conditions continued to pressure the automotive industry. Revenues declined in each of Group 1's businesses, with new vehicle revenues falling 38.6 percent on 37.1 percent fewer units, and retail used vehicle sales decreasing 26.5 percent, as 23.5 percent fewer units were retailed. Wholesale used vehicle gross profit per unit sold grew $145, to $153 per unit, on 35.2 percent fewer units, as increased demand and lower used vehicle availability combined to drive wholesale prices higher. Consistent with the retail unit sales declines, finance and insurance revenues fell 39.0 percent. Group 1's same-store parts and service business held moderately stable, with sales down 5.6 percent.

Same-store gross margin improved 140 basis points, to 17.9 percent from the prior-year first quarter. The gross margin improvement was attributed to improved used vehicle margins, as well as a favorable mix shift to the higher-margin parts and service business, from the lower-margin new vehicle business.

On a consolidated basis, selling, general and administrative (SG&A) expenses as a percent of gross profit increased 510 basis points, to 83.9 percent, as lower gross profit more than offset the $41.8 million, or 21.4 percent, reduction in SG&A expenses from the prior-year period. Given the amount of cost reductions accomplished through the first quarter, the company has exceeded the pace required to achieve its original full-year SG&A cost-reduction target of $100 million and is increasing the target to $120 million.

Inventory Reductions

Group 1 reported new vehicle inventory was at $484 million as of March 31.

"At this level, Group 1's new vehicle inventory was reduced by $209 million from end-of-year levels, significantly beating the $150 million reduction target previously established," said Hesterberg.

Corporate Development Recap and Outlook

Group 1 previously announced that it augmented its Houston portfolio by acquiring a Hyundai franchise in April with estimated annual revenues of approximately $36.7 million.

Group 1 also previously announced that it sold one of its Ford dealerships in March with trailing-12-month revenues of $38.9 million. The disposal included the sale of the property that reduced the company's mortgage facility debt by $10.4 million in addition to generating excess cash.

The company announced that it does not anticipate completing any further acquisitions in 2009.

Balance Sheet / Debt Covenant Update

Group 1 announced that it has remained in compliance with all of its debt covenants as of March 31. Further detail may be found on Group 1's website at www.Group1Auto.com.

"In addition to lowering our floorplan balances by more than $200 million as we reduced inventory, we repurchased an additional $30 million of our debt and repaid $10 million of our mortgage facility debt during the quarter," said John C. Rickel, Group 1's senior vice president and chief financial officer. "We also ended the quarter with strong liquidity of $182 million and further improved our covenant compliance, as the actions the operating team implemented continued to strengthen the business."

2009 Full-Year Guidance

Given the continued uncertainty surrounding the overall economy, consumer lending and the automotive industry, Group 1 determined that it is not feasible to issue reliable earnings guidance at this time.

Group 1 did issue the following key assumptions for 2009:

--  Industry seasonally adjusted annual sales rate (SAAR) of 10.0 to 10.3
    million vehicles
--  SG&A expenses as a percent of gross profit at 80 percent to 83.5
    percent, excluding any one-time items, as lower sales revenues are expected
    to offset cost improvements
--  Total year-over-year reduction in SG&A expenses of $120 million at 10
    million SAAR level
--  Tax rate of 40.0 percent
--  Estimated average diluted shares outstanding of 23.2 million
--  Capital expenditures of $30 million or less
    

On a same-store basis:

--  Vehicle margins consistent with fourth-quarter 2008 levels
--  Parts and service revenues 3 to 5 percent lower
--  Finance and insurance gross profit at $1,000 to $1,025 per retail unit
    

First-Quarter Earnings Conference Call

Group 1's senior management will host a conference call today at 10 a.m. EDT to discuss the first-quarter financial results and the company's 2009 outlook and strategy.

The conference call will be simulcast live on the Internet at www.group1auto.com through the Investor Relations section. 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: 877-681-3376
        International: 719-325-4745
        Confirmation code: 4131302

A telephonic replay will be available following the call through May 12 by dialing:

        Domestic: 888-203-1112
        International: 719-457-0820
        Confirmation code: 4131302

About Group 1 Automotive, Inc.

Group 1 owns and operates 99 automotive dealerships, 133 franchises, and 24 collision service 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 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. 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" or "will." Any such forward-looking statements are not assurances of future performance and involve risks and uncertainties that may cause 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.

FINANCIAL TABLES TO FOLLOW

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


                                             Three Months Ended March 31,
                                           -------------------------------
                                             2009       2008     % Change
                                           ---------  ---------  --------
REVENUES:
New vehicle retail sales                   $ 547,292  $ 888,781     (38.4)%
Used vehicle retail sales                    224,859    303,995     (26.0)
Used vehicle wholesale sales                  34,736     67,227     (48.3)
Parts and service                            180,865    190,835      (5.2)
Finance and insurance                         32,065     52,424     (38.8)
                                           ---------  ---------  --------
      Total revenues                       1,019,817  1,503,262     (32.2)%

COST OF SALES:
New vehicle retail sales                     517,818    831,638     (37.7)%
Used vehicle retail sales                    200,253    270,412     (25.9)
Used vehicle wholesale sales                  33,792     67,168     (49.7)
Parts and service                             85,300     86,466      (1.3)
                                           ---------  ---------  --------
      Total cost of sales                    837,163  1,255,684     (33.3)%

                                           ---------  ---------  --------
GROSS PROFIT                                 182,654    247,578     (26.2)%

SELLING, GENERAL AND
 ADMINISTRATIVE EXPENSES                     153,234    195,062     (21.4)

DEPRECIATION AND
 AMORTIZATION EXPENSE                          6,508      5,817      11.9

                                           ---------  ---------  --------
OPERATING INCOME                              22,912     46,699     (50.9)%

OTHER INCOME (EXPENSE):
Floorplan interest expense                    (8,962)   (12,008)    (25.4)
Other interest expense, net                   (5,412)    (7,765)    (30.3)
Gain on redemption of senior subordinated
 and convertible notes                        15,988        409   3,809.0
Other income, net                                  3        350     (99.1)

INCOME FROM CONTINUING OPERATIONS
 BEFORE INCOME TAXES AND                   ---------  ---------  --------
 ADOPTION OF APB 14-1                         24,529     27,685     (11.4)%

PROVISION FOR INCOME TAXES                    (9,805)   (10,531)     (6.9)

INCOME FROM CONTINUING OPERATIONS          ---------  ---------  --------
 BEFORE ADOPTION OF APB 14-1                  14,724     17,154     (14.2)%

ADOPTION OF APB 14-1:
Adjustment to gain on redemption of
 convertible notes                            (8,607)         -     100.0
Amortization of convertible notes discount    (1,551)    (1,998)    (22.4)
Income tax benefit related to adoption of
 APB 14-1                                      3,809        749     408.5
                                           ---------  ---------  --------
LOSS RELATED TO ADOPTION OF APB 14-1          (6,349)    (1,249)    408.4

                                           ---------  ---------  --------
INCOME FROM CONTINUING OPERATIONS              8,375     15,905     (47.3)%

DISCONTINUED OPERATIONS:
Loss related to discontinued operations            -     (1,114)   (100.0)
Income tax benefit related to loss on
 discontinued operations                           -        387    (100.0)
                                           ---------  ---------  --------
LOSS RELATED TO DISCONTINUED OPERATIONS            -       (727)   (100.0)%

                                           ---------  ---------  --------
NET INCOME                                 $   8,375  $  15,178     (44.8)%
                                           =========  =========  ========

DILUTED INCOME PER SHARE:
Income per share from continuing
 operations before adoption of APB 14-1    $    0.64  $    0.76     (15.8)%
Loss per share related to adoption of APB
 14-1                                          (0.27)     (0.05)    440.0
                                           ---------  ---------  --------
Income per share from continuing
 operations                                     0.37       0.71     (47.9)
Loss per share related to discontinued
 operations                                        -      (0.03)   (100.0)
                                           ---------  ---------  --------
Income per share                           $    0.37  $    0.67     (44.8)%
                                           =========  =========  ========

Weighted average diluted shares
 outstanding                                  22,923     22,548       1.7%




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

                                    March 31,    December 31,
                                       2009         2008         % Change
                                   -----------  -------------  ----------

ASSETS:

CURRENT ASSETS:
  Cash and cash equivalents        $    21,610  $      23,144        (6.6)%
  Contracts in transit and vehicle
   receivables, net                     85,909        102,834       (16.5)
  Accounts and notes receivable,
   net                                  55,522         67,350       (17.6)
  Inventories                          638,358        845,944       (24.5)
  Deferred income taxes                 17,321         18,474        (6.2)
  Prepaid expenses and other
   current assets                       33,044         38,878       (15.0)
                                   -----------  -------------  ----------
      Total current assets             851,764      1,096,624       (22.3)
PROPERTY AND EQUIPMENT, net            501,501        514,891        (2.6)
GOODWILL AND OTHER INTANGIBLES         654,870        655,784        (0.1)
OTHER ASSETS                            19,996         20,815        (3.9)
                                   -----------  -------------  ----------
      Total assets                 $ 2,028,131  $   2,288,114       (11.4)%
                                   ===========  =============  ==========

LIABILITIES AND STOCKHOLDERS'
 EQUITY:

CURRENT LIABILITIES:
  Floorplan notes payable - credit
   facility                        $   540,891  $     738,551       (26.8)%
     Offset account related to
      floorplan notes payable -
      credit facility                  (62,278)       (44,859)       38.8
  Floorplan notes payable -
   manufacturer affiliates             103,196        128,580       (19.7)
  Current maturities of long-term
   debt                                 13,039         13,594        (4.1)
  Accounts payable                      71,752         74,235        (3.3)
  Accrued expenses                      86,012         94,395        (8.9)
                                   -----------  -------------  ----------
      Total current liabilities        752,612      1,004,496       (25.1)
2.25% CONVERTIBLE SENIOR NOTES
 (principal of $194,500
 and $224,500, respectively)           136,070        155,333       (12.4)
8.25% SENIOR SUBORDINATED NOTES         73,036         72,962         0.1
MORTGAGE FACILITY, net of current
 maturities                            156,420        168,583        (7.2)
OTHER REAL ESTATE RELATED AND
 LONG-TERM DEBT, net of current
 maturities                             49,540         50,444        (1.8)
CAPITAL LEASE OBLIGATIONS RELATED
 TO REAL ESTATE, net of current
 maturities                             38,984         39,401        (1.1)
ACQUISITION LINE                        60,000         50,000        20.0
DEFERRED INCOME TAXES                    7,021          2,768       153.6
LIABILITIES FROM INTEREST RATE
 RISK MANAGEMENT ACTIVITIES             46,658         44,655         4.5
OTHER LIABILITIES                       27,486         27,135         1.3
                                   -----------  -------------  ----------
      Total liabilities before
       deferred revenues             1,347,827      1,615,777       (16.6)
                                   -----------  -------------  ----------

DEFERRED REVENUES                        8,979         10,220       (12.1)

STOCKHOLDERS' EQUITY:
  Common stock                             261            261           -
  Additional paid-in capital           349,446        351,405        (0.6)
  Retained earnings                    445,443        437,087         1.9
  Accumulated other comprehensive
   loss                                (39,728)       (38,109)        4.2
  Treasury stock                       (84,097)       (88,527)       (5.0)
                                   -----------  -------------  ----------
      Total stockholders' equity       671,325        662,117         1.4
                                   -----------  -------------  ----------
      Total liabilities and
       stockholders' equity        $ 2,028,131  $   2,288,114       (11.4)%
                                   ===========  =============  ==========

KEY DEBT COVENANT METRICS: *
  Senior secured leverage ratio
   (must be less than 2.75)               1.54           1.49
  Total leverage ratio (must be
   less than 4.50)                        3.35           3.46
  Fixed charge coverage ratio
   (must be greater than 1.25)            1.68           1.59
  Current ratio (must be greater
   than 1.15)                             1.24           1.18

  * Refer to website, www.group1auto.com, for debt covenant calculation
    definitions.




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


                                                            Three Months
                                                                Ended
                                                              March 31,
                                                          ----------------
                                                            2009     2008
                                                          -------  -------
NEW VEHICLE UNIT SALES GEOGRAPHIC MIX:
  Region                   Geographic Market
  ------                   -----------------
  Eastern                  Massachusetts                     13.8%    11.6%
                           New Jersey                         7.0      6.4
                           New York                           4.3      4.1
                           New Hampshire                      3.7      3.3
                           Georgia                            3.6      3.5
                           Louisiana                          3.4      3.7
                           Florida                            2.1      3.0
                           Mississippi                        1.6      1.5
                           Maryland                           0.9        -
                           Alabama                            0.7      1.0
                           South Carolina                     0.3      0.3
                                                          -------  -------
                                                             41.4     38.4

  Central                  Texas                             31.9     33.0
                           Oklahoma                           8.3      9.2
                           Kansas                             1.0      1.2
                                                          -------  -------
                                                             41.2     43.4

  Western                  California                        15.6     16.5

  International            United Kingdom                     1.8      1.7
                                                          -------  -------
                                                            100.0%   100.0%

NEW VEHICLE UNIT SALES BRAND MIX:
  Toyota/Scion/Lexus                                         35.1%    35.0%
  Honda/Acura                                                13.6     13.0
  Nissan/Infiniti                                            11.7     13.2
  Ford                                                        9.2     10.9
  BMW/Mini                                                    9.1      7.2
  Chrysler                                                    6.9      6.8
  Mercedes-Benz                                               6.2      5.5
  GM                                                          3.9      4.9
  Other                                                       4.3      3.5
                                                          -------  -------
                                                            100.0%   100.0%

NEW VEHICLE UNIT OTHER MIX:
  Import                                                     55.6%    55.4%
  Luxury                                                     25.4     23.4
  Domestic                                                   19.0     21.2
                                                          -------  -------
                                                            100.0%   100.0%

  Car                                                        56.0%    55.2%
  Truck                                                      44.0     44.8
                                                          -------  -------
                                                            100.0%   100.0%




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


                                         Three Months Ended March 31,
                                     ------------------------------------
                                         2009         2008      % Change
                                     -----------  -----------  ----------
REVENUES:
  New vehicle retail sales           $   547,292  $   888,781       (38.4)%

  Used vehicle retail sales              224,859      303,995       (26.0)
  Used vehicle wholesale sales            34,736       67,227       (48.3)
                                     -----------  -----------
    Total used                           259,595      371,222       (30.1)
  Parts and service                      180,865      190,835        (5.2)
  Finance and insurance                   32,065       52,424       (38.8)
                                     -----------  -----------
    Total                            $ 1,019,817  $ 1,503,262       (32.2)%

GROSS MARGIN:
  New vehicle retail sales                   5.4%         6.4%

  Used vehicle retail sales                 10.9         11.0
  Used vehicle wholesale sales               2.7          0.1
    Total used                               9.8          9.1
  Parts and service                         52.8         54.7
  Finance and insurance                    100.0        100.0
    Total                                   17.9%        16.5%

GROSS PROFIT :
  New vehicle retail sales           $    29,474  $    57,143       (48.4)%

  Used vehicle retail sales               24,606       33,583       (26.7)
  Used vehicle wholesale sales               944           59
                                     -----------  -----------
    Total used                            25,550       33,642       (24.1)
  Parts and service                       95,565      104,369        (8.4)
  Finance and insurance                   32,065       52,424       (38.8)
                                     -----------  -----------
    Total                            $   182,654  $   247,578       (26.2)%

UNITS SOLD:
  Retail new vehicles sold                17,931       28,519       (37.1)%

  Retail used vehicles sold               13,092       17,105       (23.5)
  Wholesale used vehicles sold             6,429        9,948       (35.4)
                                     -----------  -----------
    Total used                            19,521       27,053       (27.8)%

GROSS PROFIT PER UNIT SOLD:
  New vehicle retail sales           $     1,644  $     2,004       (18.0)%

  Used vehicle retail sales                1,879        1,963        (4.3)
  Used vehicle wholesale sales               147            6
    Total used                             1,309        1,244         5.2
  Finance and insurance (per retail
   unit)                             $     1,034  $     1,149       (10.0)%

OTHER:
  SG&A expenses                      $   153,234  $   195,062       (21.4)%
  SG&A as % revenues                        15.0%        13.0%
  SG&A as % gross profit                    83.9%        78.8%
  Operating margin                           2.2%         3.1%
  Pretax margin                              2.4%         1.8%

  Floorplan interest                 $    (8,962) $   (12,008)      (25.4)%
  Floorplan assistance                     4,534        7,726       (41.3)
                                     -----------  -----------
    Net floorplan expense            $    (4,428) $    (4,282)        3.4 %




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


                                         Three Months Ended March 31,
                                     ------------------------------------
                                         2009         2008      % Change
                                     -----------  -----------  ----------
REVENUES:
  New vehicle retail sales           $   540,674  $   879,875       (38.6)%

  Used vehicle retail sales              220,949      300,753       (26.5)
  Used vehicle wholesale sales            34,217       66,516       (48.6)
                                     -----------  -----------
    Total used                           255,166      367,269       (30.5)
  Parts and service                      177,816      188,271        (5.6)
  Finance and insurance                   31,748       52,071       (39.0)
                                     -----------  -----------
    Total                            $ 1,005,404  $ 1,487,486       (32.4)%

GROSS MARGIN:
  New vehicle retail sales                   5.4%         6.5%

  Used vehicle retail sales                 10.9         11.0
  Used vehicle wholesale sales               2.8          0.1
    Total used                               9.9          9.0
  Parts and service                         52.8         54.7
  Finance and insurance                    100.0        100.0
    Total                                   17.9%        16.5%

GROSS PROFIT:
  New vehicle retail sales           $    29,230  $    56,754       (48.5)%

  Used vehicle retail sales               24,191       33,153       (27.0)
  Used vehicle wholesale sales               974           79
                                     -----------  -----------
    Total used                            25,165       33,232       (24.3)
  Parts and service                       93,923      102,912        (8.7)
  Finance and insurance                   31,748       52,071       (39.0)
                                     -----------  -----------
    Total                            $   180,066  $   244,969       (26.5)%

UNITS SOLD:
  Retail new vehicles sold                17,744       28,224       (37.1)%

  Retail used vehicles sold               12,934       16,901       (23.5)
  Wholesale used vehicles sold             6,362        9,815       (35.2)
                                     -----------  -----------
    Total used                            19,296       26,716       (27.8)%

GROSS PROFIT PER UNIT SOLD:
  New vehicle retail sales           $     1,647  $     2,011       (18.1)%

  Used vehicle retail sales                1,870        1,962        (4.7)
  Used vehicle wholesale sales               153            8
    Total used                             1,304        1,244         4.8
  Finance and insurance (per retail
   unit)                             $     1,035  $     1,154       (10.3)%

OTHER:
  SG&A expenses                      $   150,247  $   192,223       (21.8)%
  SG&A as % revenues                        14.9%        12.9%
  SG&A as % gross profit                    83.4%        78.5%
  Operating margin                           2.3%         3.2%

  Floorplan interest                 $    (8,915) $   (11,866)      (24.9)%
  Floorplan assistance                     4,516        7,638       (40.9)
                                     -----------  -----------
    Net floorplan expense            $    (4,399) $    (4,228)        4.0%

(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)


NET INCOME (LOSS) FROM CONTINUING OPERATIONS
 RECONCILIATION:
                                              Three Months Ended March 31,
                                              ----------------------------
                                                2009      2008   % Change
                                              --------  --------  -------

   Reported net income from continuing
    operations                                $  8,375  $ 15,905    (47.3)%
     Adjustments for the Adoption of APB
      14-1:
       Non-cash convertible note discount
        amortization                               969     1,249
       Adjustment to gain on convertible note
        redemption                               5,380         -
                                              --------  --------

         Net income from continuing operations
          before adoption of APB 14-1           14,724    17,154

     Other Adjustments:
       Loss on dealership disposition              549         -
       Pre-APB 14-1 gain on debt redemption     (9,597)     (253)
                                              --------  --------

         Adjusted net income from continuing
          operations (1)                      $  5,676  $ 16,901    (66.4)%

DILUTED INCOME (LOSS) PER SHARE FROM
 CONTINUING OPERATIONS RECONCILIATION:

                                              Three Months Ended March 31,
                                              ----------------------------
                                                2009      2008   % Change
                                              --------  --------  -------

   Reported income per share from continuing
    operations                                $   0.37  $   0.71    (47.9)%
     Adjustments for the Adoption of APB
      14-1:
       Non-cash convertible note discount
        amortization                              0.04      0.05
       Adjustment to gain on convertible note
        redemption                                0.23         -
                                              --------  --------

         Diluted income per share from
          continuing operations before
          adoption of APB 14-1                    0.64      0.76

     Other Adjustments:
       Loss on dealership disposition             0.02         -
       Pre-APB 14-1 gain on debt redemption      (0.42)    (0.01)
                                              --------  --------

         Adjusted diluted income per share
          from continuing operations (1)          0.24      0.75    (68.0)%

 (1)  Adjusted net income from continuing operations and adjusted diluted
      earnings per share from continuing operations means net income from
      continuing operations or diluted earnings per share from continuing
      operations, as the case may be, plus the adjustments noted above.
      We use adjusted net income from continuing operations and adjusted
      diluted earnings per share from continuing operations in our
      evaluation of the performance of the company, as we believe that they
      provide additional information regarding the performance of our
      operations.  We believe the presentation of these measures is
      relevant and useful to investors because they improve period-to-
      period comparability.  Neither of these measures is a measure of
      financial performance under GAAP.  Accordingly, they should not be
      considered as substitutes for net income from continuing operations
      or diluted earnings per share from continuing operations 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 net income from continuing operations and diluted
      earnings per share from continuing operations calculated in
      accordance with GAAP.  Therefore, we typically use these adjusted
      numbers in conjunction with our GAAP results to address these
      limitations.

Contact Information

  • AT GROUP 1:
    President and CEO
    Earl J. Hesterberg
    (713) 647-5700

    Senior Vice President and CFO
    John C. Rickel
    (713) 647-5700

    Manager, Investor Relations
    Kim Paper Canning
    (713) 647-5700

    AT Fleishman-Hillard:
    Investors
    John Roper
    (713) 513-9505

    AT Pierpont Communications:
    Media
    Clint L. Woods
    (713) 627-2223