SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
February 25, 2004
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Asbury Automotive Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
5511 01-0609375
- ------------------------ -----------------------------------
(Commission File Number) (IRS Employer Identification No.)
Three Landmark Square, Suite 500, Stamford, CT 06901
- ------------------------------------------------------ ------------------
(Address of principal executive offices) (Zip Code)
(203) 356-4400
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(Registrant's telephone number, including area code)
None
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(Former name or former address, if changed since last report)
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit No. Description
99.1 Press Release dated February 25, 2004.
Item 12. Results of Operations and Financial Condition.
The registrant issued a press release on February 25, 2004, announcing
its earnings for the fourth quarter and year ended December 31, 2003, which
press release is attached hereto as Exhibit 99.1.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ASBURY AUTOMOTIVE GROUP, INC.
Date: February 24, 2004 By: /s/ Kenneth B. Gilman
-----------------------------------
Name: Kenneth B. Gilman
Title: Chief Executive Officer
EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release dated February 25, 2004
Investors May Contact:
Stacey Yonkus
Director, Investor Relations
(203) 356-4424
syonkus@asburyauto.com
Reporters May Contact:
David Shein
RFBinder Partners
(212) 994-7514
david.shein@rfbinder.com
Asbury Automotive Group Reports
Fourth Quarter and 2003 Financial Results
Stamford, Conn., February 25, 2004 - Asbury Automotive Group, Inc. (NYSE: ABG),
one of the largest automotive retail and service companies in the U.S., today
reported financial results for the fourth quarter and year ended December 31,
2003.
For the year, net income from continuing operations was $50.5 million, or $1.55
per share, before taking into account the impact of a previously announced after
tax charge related to the termination of the Bob Baker acquisition agreement,
and a non-cash goodwill impairment charge related to the Company's Oregon
platform. Including the recognition of the charge related to the Baker
transaction and the goodwill impairment charge, net income from continuing
operations for the year was $19.8 million, or $0.61 per share. Net income for
the year was $15.2 million, or $0.47 per share, which includes a $0.14 loss per
share from discontinued operations, as well as the aforementioned charge related
to the Baker transaction of $0.05 per share and the goodwill impairment charge
of $0.89 per share.
For the fourth quarter of 2003, net income from continuing operations was $10.9
million, or $0.34 per share, excluding the charges related to the Baker
transaction and the goodwill impairment, a 44 percent increase over the prior
year quarter. Including the charges related to the Baker transaction and the
goodwill impairment the Company's net loss from continuing operations for the
fourth quarter of 2003 was $19.8 million, or $0.61 per share. The net loss for
the fourth quarter of 2003 was $20.4 million, or $0.63 per share, which includes
a $0.02 loss per share from discontinued operations, as well as the charges
related to the Baker transaction and the goodwill impairment.
The non-cash goodwill impairment charge of $37.9 million ($29.2 million
after-tax) was recorded after the completion of the Company's annual assessment
of goodwill and other intangible assets as required by Statement of Financial
Accounting Standard No. 142. As previously announced and discussed with
investors, this charge reduces the carrying value of goodwill associated with
Asbury's Oregon platform. The Company anticipates that based upon management
changes in 2003 and the implementation of its operational improvement plan,
financial performance in its Oregon platform should improve in 2004. In the
event that the turnaround called for by this plan takes longer than anticipated
or is only partially successful, the Company believes that Oregon's current
performance run rate, which includes the impact of expense reduction initiatives
already implemented, is sufficient to sustain the remaining goodwill.
Other financial highlights for the year and fourth quarter, as compared to the
corresponding periods in 2002, included:
o The Company's total revenues for the year increased 8.2 percent, while
same-store retail sales (excluding fleet and wholesale business) rose
3.5 percent. For the fourth quarter, total revenues increased 9.8
percent, while same-store retail sales rose 1.4 percent.
o Total retail gross profit dollars for the year increased 6.2 percent,
while same-store retail gross profit rose 1.4 percent. For the fourth
quarter, gross profit increased 7.0 percent, and decreased 0.7 percent
on a same-store basis.
o For the year, new vehicle retail sales increased 10.0 percent in
dollars (5.1 percent same-store), and increased 3.6 percent in units
(down 0.7 percent same-store). For the fourth quarter, new vehicle
retail sales increased 13.8 percent in dollars (5.2 percent same-store)
and rose 6.0 percent in units (down 0.9 percent same-store).
o For the year, used vehicle retail sales increased 1.5 percent in
dollars (down 3.1 percent same-store), and increased 2.0 percent in
units (down 2.1 percent same-store). For the fourth quarter, used
vehicle retail sales decreased 5.1 percent in dollars (12.8 percent
same-store) and declined 3.9 percent in units (10.0 percent
same-store). Consistent with prior announcements, the Company noted
that the used vehicle retail environment remained challenging during
the quarter, which was due in large part to the highly promotional new
vehicle market.
o Parts, service and collision repair revenues and gross profit for the
year increased 10.9 percent and 10.2 percent (5.5 percent and 4.5
percent same-store), respectively. For the fourth quarter, revenues and
gross profit increased 13.5 percent and 9.3 percent (4.7 percent and
0.9 percent same-store), respectively. The Company noted that the
increase in gross profit during the quarter was lower than the rate of
sales increase primarily due to a shift in the business mix.
o For the year, net finance and insurance (F&I) income rose 14.2 percent
(10.2 percent same-store), with a 10.9 percent increase in F&I per
vehicle retailed (PVR), and a 8.7 percent increase in F&I PVR generated
at the platform level. For the quarter, net F&I income rose 12.9
percent (6.6 percent same-store), with a 10.4 percent increase in F&I
PVR, and a 5.5 percent increase in F&I PVR generated at the platform
level.
o During the fourth quarter, the Company continued to make progress with
its productivity initiatives, as selling, general and administrative
expenses declined 40 basis points as a percentage of gross profit, and
70 basis points on a same-store basis.
o The Company's effective tax rate for the full year was 38.0 percent,
before taking into account the impact of the goodwill impairment
charge. Including the charge, the Company's effective tax rate for the
year was 51.8 percent.
The Company noted that in 2003 it had completed acquisitions representing $415
million in annualized revenues, of which $150 million was reflected in its 2003
results. Thus far in 2004, the Company completed acquisitions to acquire three
franchises with annual revenues of $170 million, with approximately $155 million
to be reflected in 2004 results. In addition, the Company noted that it had
executed contracts to acquire three additional franchises with annual revenues
of $160 million. These pending transactions are subject in all cases to
manufacturer consent.
Commenting on expectations for 2004, the Company noted that it was comfortable
with the analysts' consensus earnings estimate of $1.76 per share from
continuing operations for the full year.
About Asbury Automotive Group
Asbury Automotive Group, Inc., headquartered in Stamford, Connecticut, is one of
the largest automobile retailers in the U.S., with 2003 revenues of $4.8
billion. Built through a combination of organic growth and a series of strategic
acquisitions, Asbury now operates through nine geographically concentrated,
individually branded "platforms." These platforms currently operate 100 retail
auto stores, encompassing 142 franchises for the sale and servicing of 35
different brands of American, European and Asian automobiles. Asbury believes
that its product mix contains a higher proportion of the more desirable luxury
and mid-line import brands than most public automotive retailers. The Company
offers customers an extensive range of automotive products and services,
including new and used vehicle sales and related financing and insurance,
vehicle maintenance and repair services, replacement parts and service
contracts.
Forward Looking Statements
This press release contains "forward-looking statements" as that term is defined
in the Private Securities Litigation Reform Act of 1995. The forward- looking
statements include statements relating to goals, plans, projections and guidance
regarding the Company's financial position, results of operations, market
position, product development, pending and potential future acquisitions and
business strategy. These statements are based on management's current
expectations and involve significant 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, market factors, the Company's
relationships with vehicle manufacturers and other suppliers which could cause
among other things acquisitions under contract or letters of intent to fail,
risks associated with the Company's substantial indebtedness, risks related to
pending and potential future acquisitions, general economic conditions both
nationally and locally and governmental regulations and legislation. There can
be no guarantees that the Company's plans for future operations will be
successfully implemented or that they will prove to be commercially successful.
These and other risk factors are discussed in the Company's annual report on
Form 10-K and in its other filings with the Securities and Exchange Commission.
We undertake no obligation to publicly update any forward-looking statement,
whether as a result of new information, future events or otherwise.
ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, December 31,
ASSETS 2003 2002
------------ ------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents ..................................... $ 106,711 $ 22,613
Contracts-in-transit .......................................... 93,881 91,190
Accounts receivable, net ...................................... 114,201 96,090
Inventories ................................................... 650,397 591,839
Prepaid and other current assets .............................. 46,819 47,857
---------- ----------
Total current assets .................................... 1,012,009 849,589
PROPERTY AND EQUIPMENT, net ...................................... 266,991 257,305
GOODWILL ......................................................... 404,143 402,133
OTHER ASSETS ..................................................... 101,603 66,758
ASSETS HELD FOR SALE ............................................. 29,533 29,859
---------- ----------
Total assets ............................................ $1,814,279 $1,605,644
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Floor plan notes payable ...................................... $ 602,167 $ 528,591
Current maturities of long-term debt .......................... 33,250 36,412
Accounts payable and accrued liabilities ...................... 121,609 117,445
---------- ----------
Total current liabilities ............................... 757,026 682,448
LONG-TERM DEBT ................................................... 559,128 438,740
OTHER LIABILITIES ................................................ 39,686 45,552
LIABILITIES ASSOCIATED WITH ASSETS HELD FOR SALE ................. 24,732 11,953
STOCKHOLDERS' EQUITY ............................................. 433,707 426,951
---------- ----------
Total liabilities and stockholders' equity .............. $1,814,279 $1,605,644
========== ==========
ASBURY AUTOMOTIVE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except per share data) - (unaudited)
For the Years Ended
For the Three Months Ended -------------------------------------------
--------------------------- December 31,
December 31, December 31, December 31, 2002 Pro December 31,
2003 2002 2003 Forma (a) 2002 Actual
------------ ------------ ------------ ------------ ------------
REVENUES:
New vehicle ......................................... $ 724,412 $ 637,546 $ 2,909,641 $ 2,644,798 $ 2,644,798
Used vehicle ........................................ 268,057 270,897 1,183,901 1,158,144 1,158,144
Parts, service and collision repair ................. 141,373 124,547 551,498 497,164 497,164
Finance and insurance, net .......................... 30,968 27,439 131,465 115,159 115,159
------------ ------------ ------------ ------------ -----------
Total revenues ................................ 1,164,810 1,060,429 4,776,505 4,415,265 4,415,265
COST OF SALES:
New vehicle ......................................... 670,757 587,567 2,694,777 2,430,494 2,430,494
Used vehicle ........................................ 246,150 247,336 1,079,314 1,053,878 1,053,878
Parts, service and collision repair ................. 68,414 57,783 262,110 234,575 234,575
------------ ------------ ------------ ------------ -----------
Total cost of sales ........................... 985,321 892,686 4,036,201 3,718,947 3,718,947
------------ ------------ ------------ ------------ -----------
GROSS PROFIT ........................................... 179,489 167,743 740,304 696,318 696,318
OPERATING EXPENSES:
Selling, general and administrative ................. 144,541 135,764 580,938 537,846 537,846
Depreciation and amortization ....................... 5,243 4,835 20,212 19,062 19,062
Impairment of goodwill .............................. 37,930 -- 37,930 -- --
------------ ------------ ------------ ------------ -----------
(Loss) income from operations ....................... (8,225) 27,144 101,224 139,410 139,410
OTHER INCOME (EXPENSE):
Floor plan interest expense ......................... (4,537) (4,801) (18,800) (17,860) (17,860)
Other interest expense .............................. (10,200) (9,674) (40,238) (38,423) (38,423)
Interest income ..................................... 49 255 499 1,200 1,200
Net losses from unconsolidated entities ............. -- -- -- (100) (100)
Other expense ....................................... (1,197) (340) (1,619) (499) (499)
------------ ------------ ------------ ------------ -----------
Total other expense, net ...................... (15,885) (14,560) (60,158) (55,682) (55,682)
------------ ------------ ------------ ------------ -----------
(Loss) income before income taxes and
discontinued operations ..................... (24,110) 12,584 41,066 83,728 83,728
INCOME TAX PROVISION:
Income tax (benefit) expense ........................ (4,294) 5,016 21,268 33,324 27,765
Tax adjustment upon conversion from an L.L.C.
to a corporation .................................. -- -- -- -- 11,553
------------ ------------ ------------ ------------ -----------
(Loss) income from continuing operations ...... (19,816) 7,568 19,798 50,404 44,410
DISCONTINUED OPERATIONS, net of tax .................... (611) (2,070) (4,611) (6,325) (6,325)
------------ ------------ ------------ ------------ -----------
Net (loss) income ............................. $ (20,427) $ 5,498 $ 15,187 $ 44,079(b) $ 38,085
============ ============ ============ ============ ===========
EARNINGS PER COMMON SHARE:
Basic:
(Loss) income from continuing operations .......... $ (0.61) $ 0.22 $ 0.61 $ 1.48 $ 1.34
============ ============ ============ ============ ===========
Net (loss) income ................................. $ (0.63) $ 0.16 $ 0.47 $ 1.30 $ 1.15
============ ============ ============ ============ ===========
Diluted:
(Loss) income from continuing operations .......... $ (0.61) $ 0.22 $ 0.61 $ 1.48 $ 1.34
============ ============ ============ ============ ===========
Net (loss) income ................................. $ (0.62) $ 0.16 $ 0.46 $ 1.30 $ 1.15
============ ============ ============ ============ ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic ............................................... 32,431 33,810 32,648 33,952 33,065
============ ============ ============ ============ ===========
Diluted ............................................. 32,686 33,810 32,715 33,960 33,073
============ ============ ============ ============ ===========
(a) Pro forma column includes a tax provision as if the Company were a "C"
corporation for the entire period as well as assumes that all shares were
outstanding for the full period. This column excludes a one-time charge to
establish a net deferred tax liability upon the Company's conversion to a
"C" corporation as required by SFAS 109.
(b) Reconciliation of net income to pro forma net income:
GAAP net income from continuing operations $38,085
Tax adjustment upon conversion from an L.L.C.
to a corporation 11,553
Pro forma income tax charge (5,559) (c)
-------
Pro forma net income from continuing operations $44,079
=======
(c) Represents the pro forma tax charge from continuing operations for the time
during the period that the company was an L.L.C.
ASBURY AUTOMOTIVE GROUP, INC.
SELECTED DATA
(in thousands except unit data)
(unaudited)
GAAP Results for the Three Same Store Results for the
Months Ended December 31, Three Months Ended December 31,
---------------------------- -------------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
RETAIL UNITS:
New .................................................... 23,460 22,125 21,893 22,100
Used ................................................... 13,066 13,597 12,208 13,564
----------- ----------- ----------- -----------
Total ................................................ 36,526 35,722 34,101 35,664
=========== =========== =========== ===========
REVENUE:
New retail ............................................. $ 713,535 $ 627,190 $ 659,271 $ 626,519
Used retail ............................................ 199,555 210,370 183,017 209,917
Parts, service and collision repair .................... 141,373 124,547 130,268 124,400
Finance and insurance, net ............................. 30,968 27,439 29,175 27,368
Fleet .................................................. 10,877 10,356 10,550 10,356
Wholesale .............................................. 68,502 60,527 62,183 60,493
----------- ----------- ----------- -----------
Total ............................................ $ 1,164,810 $ 1,060,429 $ 1,074,464 $ 1,059,053
=========== =========== =========== ===========
GROSS PROFIT:
New retail ............................................. $ 47,116 $ 44,051 $ 43,065 $ 44,015
Used retail ............................................ 23,023 24,478 21,427 24,412
Parts, service and collision repair .................... 72,959 66,764 67,266 66,654
Finance and insurance, net ............................. 30,968 27,439 29,175 27,368
Fleet .................................................. 421 446 416 446
Wholesale .............................................. (1,116) (917) (868) (920)
Floor plan interest credits ............................ 6,118 5,482 5,789 5,469
----------- ----------- ----------- -----------
Total ............................................ $ 179,489 $ 167,743 $ 166,270 $ 167,444
=========== =========== =========== ===========
GROSS MARGIN %:
New retail (including floor plan interest credits) ..... 7.5% 7.9% 7.4% 7.9%
Used retail ............................................ 11.5% 11.6% 11.7% 11.6%
Parts, service and collision repair .................... 51.6% 53.6% 51.6% 53.6%
Finance and insurance, net ............................. 100.0% 100.0% 100.0% 100.0%
Total gross margin ..................................... 15.4% 15.8% 15.5% 15.8%
GROSS PROFIT PER UNIT:
New retail (including floor plan interest credits) ..... $ 2,269 $ 2,239 $ 2,231 $ 2,239
Used retail ............................................ 1,762 1,800 1,755 1,800
Weighted average total for new and used retail ......... 2,088 2,072 2,061 2,072
RECONCILIATION OF FINANCE AND INSURANCE GROSS PROFIT
TO PLATFORM FINANCE AND INSURANCE (a):
Finance and insurance, net ............................. $ 30,968 $ 27,439 $ 29,175 $ 27,368
Less: corporate finance and insurance ................. (1,393) -- (1,393) --
----------- ----------- ----------- -----------
Platform finance and insurance, net ............... $ 29,575 $ 27,439 $ 27,782 $ 27,368
=========== =========== =========== ===========
Platform finance and insurance per vehicle retailed ....... $ 810 $ 768 $ 815 $ 767
=========== =========== =========== ===========
RECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED EBITDA (b):
Net (loss) income .................................... $ (20,427) $ 5,498
Add:
Depreciation and amortization ................... 5,243 4,835
Impairment of goodwill .......................... 37,930 --
Other interest expense .......................... 10,200 9,674
Income tax (benefit) expense .................... (4,294) 5,016
----------- -----------
Adjusted EBITDA ........................................... $ 28,652 $ 25,023
=========== ===========
GAAP Results for the Three
Months Ended December 31
--------------------------
2003 2002
------------ -----------
RECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED INCOME FROM
CONTINUING OPERATIONS:
Net (loss) income .......................................................... $(20,427) $ 5,498
Discontinued operations .................................................... 611 2,070
--------- -------
(Loss) income from continuing operations ................................... (19,816) 7,568
Tax affected impairment of goodwill (c) ....................................... 29,180 --
Tax affected charge for Bob Baker (d) ......................................... 1,552 --
--------- -------
Adjusted income from continuing operations .................................... $ 10,916 $ 7,568
========= =======
RECONCILIATION OF NET (LOSS) INCOME PER COMMON SHARE (BASIC) TO ADJUSTED INCOME
FROM CONTINUING OPERATIONS PER COMMON SHARE (BASIC):
Net (loss) income .......................................................... $ (0.63) $ 0.16
Discontinued operations .................................................... 0.02 0.06
--------- -------
(Loss) income from continuing operations ................................... (0.61) 0.22
Tax affected impairment of goodwill (c) .................................... 0.90 --
Tax affected charge for Bob Baker (d) ...................................... 0.05 --
--------- -------
Adjusted income from continuing operations ................................. $ 0.34 $ 0.22
========= =======
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic ...................................................................... 32,431 33,810
========= =======
GAAP Results for the Year Same Store Results for the
Ended December 31, Year Ended December 31,
--------------------------- ---------------------------
2003 2002 2003 2002
----------- ----------- ------------ -----------
RETAIL UNITS:
New ...................................................... 98,601 95,197 94,531 95,160
Used ..................................................... 59,211 58,076 56,824 58,027
----------- ----------- ------------ -----------
Total ............................................... 157,812 153,273 151,355 153,187
=========== =========== ============ ===========
REVENUE:
New retail ............................................... $ 2,861,746 $ 2,601,487 $ 2,731,889 $ 2,600,506
Used retail .............................................. 903,113 889,579 861,175 888,858
Parts, service and collision repair ...................... 551,498 497,164 524,416 496,928
Finance and insurance, net ............................... 131,465 115,159 126,860 115,069
Fleet .................................................... 47,895 43,311 47,372 43,311
Wholesale ................................................ 280,788 268,565 266,539 268,530
----------- ----------- ------------ -----------
Total .............................................. $ 4,776,505 $ 4,415,265 $ 4,558,251 $ 4,413,202
=========== =========== ============ ===========
GROSS PROFIT:
New retail ............................................... $ 189,381 189,755 $ 180,443 189,699
Used retail .............................................. 106,568 107,281 102,424 107,183
Parts, service and collision repair ...................... 289,388 262,589 274,344 262,421
Finance and insurance, net ............................... 131,465 115,159 126,860 115,069
Fleet .................................................... 1,296 1,426 1,293 1,426
Wholesale ................................................ (1,981) (3,015) (1,661) (3,018)
Floor plan interest credits .............................. 24,187 23,123 23,462 23,109
----------- ----------- ------------ -----------
Total .............................................. $ 740,304 696,318 $ 707,165 695,889
=========== =========== ============ ===========
GROSS MARGIN %:
New retail (including floor plan interest credits) ....... 7.5% 8.2% 7.5% 8.2%
Used retail .............................................. 11.8% 12.1% 11.9% 12.1%
Parts, service and collision repair ...................... 52.5% 52.8% 52.3% 52.8%
Finance and insurance, net ............................... 100.0% 100.0% 100.0% 100.0%
Total gross margin ....................................... 15.5% 15.8% 15.5% 15.8%
GROSS PROFIT PER UNIT:
New retail (including floor plan interest credits) ....... 2,166 2,236 2,157 2,236
Used retail .............................................. 1,800 1,847 1,802 1,847
Weighted average total for new and used retail ........... 2,029 2,089 2,024 2,089
FREE CASH FLOW (e):
Net cash provided by operating activities ................ $ 95,344 $ 65,121
Less- Capital expenditures ............................... (54,633) (57,477)
Add-
Financial capital expenditures ....................... 11,026 5,447
Proceeds from sale-leaseback transactions, including
amounts paid directly to the Company's lenders ....... 5,457 --
------------ ------------
Total .............................................. $ 57,194 $ 13,091
============ ===========
As of As of
December 31, December 31,
2003 2002
------------ ------------
CAPITALIZATION:
Long-term debt (including current portion) ............... $ 592,378 $ 475,152
Stockholders' equity ..................................... 433,707 426,951
----------- -----------
Total .................................................... $ 1,026,085 $ 902,103
=========== ===========
GAAP Results for the Year Same Store Results for the
Ended December 31, Year Ended December 31,
--------------------------- ---------------------------
2003 2002 2003 2002
----------- ----------- ------------ -----------
RECONCILIATION OF FINANCE AND INSURANCE GROSS PROFIT TO
PLATFORM FINANCE AND INSURANCE (a):
Finance and insurance, net $ 131,465 $ 115,159 $ 126,860 $ 115,069
Less: corporate finance and insurance (2,693) - (2,693) -
----------- ----------- ------------ -----------
Platform finance and insurance, net $ 128,772 $ 115,159 $ 124,167 $ 115,069
=========== =========== ============ ===========
Platform finance and insurance per vehicle retailed $816 $751 $820 $751
=========== =========== ============ ===========
GAAP Results for the Year
Ended December 31
--------------------------
2003 2002
------------ -----------
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (b):
Net income ............................................................. $ 15,187 $ 38,085
Add:
Depreciation and amortization ..................................... 20,212 19,062
Impairment of goodwill ............................................ 37,930 --
Other interest expense ............................................ 40,238 38,423
Income tax expense ................................................ 21,268 39,318
------------ -----------
Adjusted EBITDA ............................................................. $ 134,835 $ 134,888
RECONCILIATION OF NET INCOME TO ADJUSTED INCOME FROM
CONTINUING OPERATIONS:
Net income ............................................................... $ 15,187 $ 38,085
Discontinued operations .................................................. 4,611 6,325
----------- -----------
Income from continuing operations ........................................ 19,798 44,410
Tax affected impairment of goodwill (c) ................................. 29,180 --
Tax affected charge for Bob Baker (d) .................................... 1,552 --
----------- -----------
Adjusted income from continuing operations ............................... $ 50,530 $ 44,410
RECONCILIATION OF NET INCOME PER COMMON SHARE (BASIC) TO ADJUSTED INCOME FROM
CONTINUING OPERATIONS PER COMMON SHARE (BASIC):
Net income ............................................................... $ 0.47 $ 1.15
Discontinued operations .................................................. 0.14 0.19
------------ -----------
Income from continuing operations ........................................ 0.61 1.34
Tax affected impairment of goodwill (c) .................................. 0.89 --
Tax affected charge for Bob Baker (d) .................................... 0.05 --
------------ -----------
Adjusted income from continuing operations .................................. $ 1.55 $ 1.34
============ ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic .................................................................... 32,648 33,065
============ ===========
(a) The Company believes that platform finance and insurance gross profit
provides a more accurate measure of the Company's finance and insurance
performance than finance and insurance PVR, as it excludes revenue
resulting from corporate negotiated contracts, which is not
attributable to retail units sold.
(b) The Company defines adjusted EBITDA as earnings before income taxes, other
interest expense, depreciation and amortization and the charge associated
with the impairment of goodwill. Adjusted EBITDA, which excludes the charge
associated with the impairment of goodwill, provides a basis to measure the
performance of the Company's operations and the Company's ability to meet
its fixed charges, including interest. Adjusted EBITDA is not a measure of
financial performance under accounting principles generally accepted in the
United States and should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with accounting
principles generally accepted in the United States. The Company's
definition of adjusted EBITDA may not be comparable to similarly titled
measures of other companies.
(c) In connection with the Company's annual impairment test of goodwill
conducted in the fourth quarter of 2003, the Company recorded a
non-cash goodwill impairment charge of $37,930 (after tax charge of
$29,180) associated with the Company's Oregon platform. The goodwill
impairment charge is added back to arrive at adjusted net income from
continuing operations to provide a basis to measure the Company's
operating performance apart from the non-cash impairment charge.
(d) In connection with the proposed acquisition of the Bob Baker Auto
Group, the Company incurred $2,503 of costs, including certain costs
capitalized in prior periods. In the fourth quarter of 2004, the
Company determined that the acquisition was no longer probable and
wrote-off such expenses. The corresponding $1,552 after tax charge (tax
affected for the year and the quarter at 38%) is added back to arrive
at adjusted net income from continuing operations, as the Company views
costs related to acquisition activity as investments in the related
acquisition not expenses associate with the continuing operations of
the Company.
(e) Free cash flow is defined as net cash provided by operating activities
less capital expenditures plus proceeds from financing activities
associated with the related period's capital projects.