Classified in: Transportation, Business
Subjects: ERN, CCA, FVT

Group 1 Automotive Announces First Quarter 2018 Financial Results

HOUSTON, April 26, 2018 /PRNewswire/ -- Group 1 Automotive, Inc. (NYSE: GPI), ("Group 1" or the "Company"), an international, Fortune 500 automotive retailer, today reported 2018 first quarter net income of $35.8 million, and diluted earnings per common share of $1.70. There were no non-GAAP adjustments for the first quarter of 2018.

In comparison, Group 1 generated $33.9 million of net income, $32.8 million of adjusted net income (a non-GAAP measure), $1.58 of diluted earnings per common share and $1.53 of adjusted diluted earnings per common share (a non-GAAP measure) for the first quarter of 2017. First quarter 2017 adjusted net income and diluted earnings per share exclude a non-core benefit of approximately $1.1 million after-tax, or $0.05 per share, related to a settlement with an Original Equipment Manufacturer (OEM). Reconciliations of non-GAAP financial measures are included in the attached financial tables.

"An acceleration of our U.S. business in March allowed us to deliver record first quarter revenue of $2.9 billion, which coupled with the benefits from the new U.S. tax law, drove record first quarter earnings per share of $1.70," said Earl J. Hesterberg, Group 1's president and chief executive officer. "We also received a major contribution from our U.K. operations despite an extremely weak new vehicle sales market, which declined 12.4 percent in the first quarter. We generated a 26 percent increase in overall gross profit for the quarter in the U.K. on a constant currency basis, driven by an impressive 5 percent increase in same store used vehicle unit sales and the efficient integration of two recent dealer group acquisitions. Additionally, we are pleased to report continued recovery in the Brazilian market, where Same Store total revenue increased 20 percent on a constant currency basis."

Consolidated Results for First Quarter 2018 (year-over-year comparable basis)
For ease of comparison, we have included constant currency metrics (a non-GAAP measure) both below (shown in parenthesis) and in the financial tables that follow:

• Total revenue grew 13.5 percent (10.8 percent) to $2.9 billion.
• Total gross profit grew 9.4 percent (7.5 percent), to $419.8 million.
• New vehicle revenues increased 13.2 percent (10.4 percent) on 7.6 percent higher unit sales. New vehicle gross profit improved 9.0 percent (6.1 percent), to $75.4 million.
• Retail used vehicle revenues increased 18.1 percent (15.0 percent) on 14.7 percent higher unit sales. Retail used vehicle gross profit decreased 3.4 percent (decreased 5.3 percent), to $43.5 million, with the decline more than offset by stronger wholesale used vehicle gross profit, which increased $1.6 million. Total used vehicle gross profit was up slightly, to $45.2 million.
• Parts and service gross profit increased 8.4 percent (6.6 percent) on revenue growth of 9.3 percent (7.6 percent). Same Store parts and service gross profit increased 3.3 percent (1.9 percent) on revenue growth of 4.6 percent (3.3 percent).
• Finance and Insurance (F&I) gross profit per retail unit (PRU) increased 4.7 percent (3.3 percent), to $1,451 and total F&I gross profit increased $15.5 million, or 16.0 percent (14.4 percent), reflecting strong new and used retail unit growth, as well as the improvement in PRU.
• Selling, General and Administrative (SG&A) expenses as a percent of gross profit increased 170 basis points, to 77.3 percent. Compared with adjusted 2017 SG&A expense levels, SG&A as a percent of gross profit increased 130 basis points, to 77.3 percent. As disclosed in the Company's press release on March 19, 2018, included within the 2018 first quarter results are $3 million of costs associated with a one-time bonus to qualified U.S. employees and approximately $3 million of costs associated with the Company's new strategic initiatives.
• Provision for income taxes declined 40.0 percent to $10.4 million, or 22.4 percent of income before income taxes, primarily reflecting the impact of the U.S. Tax Reform Bill that reduced the U.S. corporate income tax rate.

Segment Results for First Quarter 2018 (year-over-year comparable basis)

• United States:
  The Company's U.S. operations accounted for 73.0 percent of total revenues and 80.0 percent of total gross profit. Total U.S. revenues were $2.1 billion, an increase of 6.1 percent, driven by increases in new vehicle revenue (up 7.0 percent), used retail (up 8.0 percent), parts and service (up 4.9 percent), and a 12.1 percent increase in F&I revenue. F&I gross profit PRU grew $81, or 4.9 percent per unit, to an all-time record of $1,718; and total gross profit grew 4.7 percent, to $335.7 million.
  
  New vehicle retail gross profit PRU decreased $9, to $1,853. Used vehicle retail gross profit PRU declined $296, to $1,226. This decline was significantly more pronounced in our luxury brands, and primarily in our certified pre-owned (CPO) business as we work with our OEM partners to absorb an increased supply of off-lease and loaner vehicles. Additionally, a portion of the decline relates to the continuing shift in consumer demand from cars to trucks. 
  
  SG&A expenses as a percent of gross profit increased 170 basis points to 75.4 percent and operating margin decreased 40 basis points to 3.3 percent. These costs include $3 million for the one-time bonus paid to our U.S. non-managerial staff, as well as approximately $3 million associated with our new initiatives in used and parts and service.
  
  "As we announced in March, we have launched several important strategic initiatives in our U.S. market that are designed to expand our used car sales and further strengthen our parts and service operations. Although it is still very early, we are encouraged by the initial results," said Daryl Kenningham, Group 1's president of U.S. operations. "Same Store used retail unit sales increased 7.7 percent in the U.S. during the quarter, the highest growth we have seen in ten quarters. In addition, we have installed our new work schedule in 65 of our U.S. dealerships as of March 31, 2018, and we are already seeing an improvement in retention and hiring, with a 17 percent increase in our service advisor headcount from the same period last year. Although these actions have added some costs in the near-term, we remain confident these investments will allow us to accelerate growth later this year and going forward."
  
  
• United Kingdom:
  The Company's U.K. operations accounted for 23.1 percent of total revenues and 17.0 percent of total gross profit. Total U.K. revenues increased 46.7 percent (30.3 percent), to $660.5 million, driven by double-digit revenue growth across each business segment, despite the industry decreasing by over 12 percent. Total gross profit increased 42.1 percent (26.2 percent), to $71.5 million.
  
  SG&A expenses as a percent of gross profit increased 60 basis points to 83.4 percent and operating margin decreased 30 basis points to 1.3 percent.
  
  
•  Brazil:
  The Company's Brazilian operations were approximately breakeven during the first quarter (traditionally the weakest quarter of the year) and accounted for 3.9 percent of total revenues and 3.0 percent of total gross profit. The Company's Same Store new vehicle revenue grew 23.5 percent on a constant currency basis, with units up 23.3 percent, which significantly outpaced the industry's unit sales increase of 14.7 percent. On a Same Store basis, total revenues grew 19.9 percent, driven by revenue growth of the aforementioned 23.5 percent in new vehicles, 16.6 percent in total used vehicles, 10.4 percent in parts & service, and 8.5 percent in F&I.
  
  SG&A expenses as a percent of gross profit improved 60 basis points to 93.5 percent.

Share Repurchase Authorization

For the first quarter of 2018, the Company repurchased 135,605 shares at an average price per common share of $67.83 for a total of $9.2 million. As of April 26, 2018, $40.4 million remains available under the Company's common stock share repurchase authorization.

Future repurchases may be made from time to time, based on market conditions, legal requirements and other corporate considerations, in the open market or in privately negotiated transactions, and subject to Board approval and covenant restrictions.

Corporate Development

As previously announced in 2018, the Company:

• Acquired Toyota Alpha Trevo Automoveis Ltda in western São Paulo of Brazil in April 2018, which will operate as T-Drive Toyota Alphaville, and is expected to generate approximately $45 million in annualized revenues;
• Acquired five Mercedes-Benz franchises and three Smart franchises northeast of London in the U.K. at the end of February 2018, which are expected to generate approximately $260 million in annualized revenues;
• Acquired Audi El Paso and Subaru El Paso in January 2018 in West Texas, which are expected to generate approximately $65 million in annualized revenues; and
• Opened a Land Rover franchise in January 2018 in Watford, a North London suburb in the U.K., which is expected to generate approximately $35 million in annualized revenues.

Year-to-date 2018, the Company has acquired a total of 12 franchises, which are expected to generate an estimated $405 million in annual revenues.

First Quarter 2018 Earnings Conference Call Details

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/events. A webcast replay will be available for 30 days.

The conference call will also be available live by dialing in 15 minutes prior to the start of the call at:

A telephonic replay will be available following the call through May 3, 2018 by dialing:

ABOUT GROUP 1 AUTOMOTIVE, INC.
Group 1 owns and operates 181 automotive dealerships, 239 franchises, and 48 collision centers in the United States, the United Kingdom and Brazil that offer 32 brands of automobiles. Through its dealerships, the Company sells new and used cars and light trucks; arranges related vehicle financing; sells service contracts; provides automotive maintenance and repair services; and sells vehicle parts.

Investors please visit www.group1corp.com, www.group1auto.com, www.group1collision.com, www.facebook.com/group1auto, and www.twitter.com/group1auto, where Group 1 discloses additional information about the Company, its business, and its results of operations.

FORWARD-LOOKING STATEMENTS
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 the 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.

NON-GAAP FINANCIAL MEASURES
In addition to evaluating the financial condition and results of our operations in accordance with GAAP, from time to time our management evaluates and analyzes results and any impact on the Company of strategic decisions and actions relating to, among other things, cost reduction, growth, and profitability improvement initiatives, and other events outside of normal, or "core," business and operations, by considering alternative financial measures not prepared in accordance with GAAP. This includes evaluating measures such as adjusted selling, general and administrative expenses, adjusted net income and adjusted diluted earnings per share. These adjusted measures are not measures of financial performance under U.S. GAAP, but are instead considered non-GAAP financial performance measures. Non-GAAP measures do not have definitions under GAAP and may be defined differently by and not be comparable to similarly titled measures used by other companies. As a result, any non-GAAP financial measures considered and evaluated by management are reviewed in conjunction with a review of the most directly comparable measures calculated in accordance with GAAP. We caution investors not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measures. In our evaluation of results from time to time, we exclude items that do not arise directly from core operations, such as non-cash asset impairment charges, gains and losses on dealership franchise or real estate transactions, and catastrophic weather events such as hail storms, hurricanes, and snow storms. Because these non-core charges and gains materially affect the Company's financial condition or results in the specific period in which they are recognized, management also evaluates, and makes resource allocation and performance evaluation decisions based on, the related non-GAAP measures excluding such items.

In addition to using such non-GAAP measures to evaluate results in a specific period, management believes that such measures may provide more complete and consistent comparisons of operational performance on a period-over-period historical basis and a better indication of expected future trends. Our management also uses these adjusted measures in conjunction with U.S. GAAP financial measures to assess our business, including communication with our Board of Directors, investors and industry analysts concerning financial performance. We disclose these non-GAAP measures, and the related reconciliations, because we believe investors use these metrics in evaluating longer-term period-over-period performance, and to allow investors to better understand and evaluate the information used by management to assess operating performance. The exclusion of certain expenses in the calculation of non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. We anticipate excluding these expenses in the future presentation of our non-GAAP financial measures.

In addition, we evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our underlying business and results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our current period reported results for entities reporting in currencies other than United States dollars using comparative period exchange rates rather than the actual exchange rates in effect during the respective periods. The constant currency performance measures should not be considered a substitute for, or superior to, the measures of financial performance prepared in accordance with U.S. GAAP.

Investor contacts:
Sheila Roth
Manager, Investor Relations
Group 1 Automotive, Inc.
713-647-5741 | [email protected]

Media contacts:
Pete DeLongchamps
Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs
Group 1 Automotive, Inc.
713-647-5770 | [email protected] 
or
Clint Woods
Pierpont Communications, Inc.
713-627-2223 | [email protected]

 

 

 

 

 

 

 

 

 

 

 

 

 

SOURCE Group 1 Automotive, Inc.

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