================================================================================
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): October 31, 2002
ASBURY AUTOMOTIVE GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 5511 58-2241119 (State or
Other (Primary Standard Industrial (IRS Employer
Jurisdiction of Classification Code Number) Number)
Identification
Incorporation)
3 Landmark Square
Suite, 500
Stamford, CT 06901
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (203) 356-4400
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit No. Description
- ----------- -----------
99.1 Press Release dated October 30, 2002
99.2 Press Release dated October 30, 2002
ITEM 9. REGULATION FD DISCLOSURE.
The registrant issued two press releases yesterday announcing (a) the
registrant's earnings for the third quarter ending September 30, 2002, which
press release is attached hereto as Exhibit 99.1 and (b) that the registrant's
Board of Directors has authorized the registrant to expend up to $15 million
to repurchase outstanding shares of its common stock, which press release is
attached hereto as Exhibit 99.2.
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.
By: /s/ Thomas F. Gilman
-------------------------------
Name: Thomas F. Gilman
Title: Chief Financial Officer
Date: October 31 , 2002
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Press Release dated October 30, 2002
99.2 Press Release dated October 30, 2002
Exhibit 99.1
Contact Information: Stacey Yonkus
Asbury Automotive
203356-4424
INVESTOR@ASBURYAUTO.COM
-----------------------
ASBURY AUTOMOTIVE GROUP REPORTS RECORD
THIRD QUARTER FINANCIAL RESULTS
STAMFORD, Conn. - October 30, 2002 - Asbury Automotive Group, Inc. (NYSE:
ABG), one of the largest automotive retail and service companies in the U.S.,
today reported record financial results for the third quarter and nine months
ended September 30, 2002.
Net income from continuing operations for the quarter, excluding certain costs
associated with the Company's Price 1 pilot program and a one-time expense for
auditing services (required when a predecessor auditor has ceased operations
as discussed below), was $16.9 million, or $0.50 per diluted share. Reported
net income from continuing operations, including those expenses, was $14.9
million, or $0.44 per share. Asbury's quarterly net income totals for 2002 are
not comparable with those from 2001 due to Asbury's conversion from a
partnership to a "C" corporation in conjunction with the Company's initial
public offering earlier this year. Income from continuing operations before
taxes, minority interest, goodwill amortization (a year ago), and the items
mentioned above increased $7.6 million, or 37.2% from last year's third
quarter.
"Asbury's core businesses performed very well in the third quarter," said
Kenneth B. Gilman, president and CEO. "Our strong sales and profitability
through these challenging economic times underscore the fundamental stability
and growth potential of our automotive retailing and services business model.
Once again this quarter, total new and used vehicle unit volume, sales and
gross profits all increased. We also continued to experience steady growth in
our finance and insurance business, as well as our parts and service
operations - two of our consistent and key long-term profit drivers.
"Strategically," Mr. Gilman continued, "we achieved an important milestone
during the quarter with our agreement to acquire the Bob Baker Auto Group. The
Bob Baker Group holds a clear leadership position in one of the nation's
largest and most rapidly growing auto retailing markets, and is run by one of
the most respected professionals in the industry. More importantly, this
acquisition will provide a key foothold for future tuck-in acquisitions in the
attractive Southern California market.
"Additionally, during the quarter, we continued to refine the approach we are
taking in our Price 1 pilot program. We have gained a better understanding of
our target customer, which has allowed us to adjust our inventory mix at the
appropriate price points. We continue to believe the upside potential of Price
1 offers an attractive risk/reward trade-off versus the relatively modest net
costs we are currently incurring, which totaled $0.04 per share in the third
quarter."
Financial highlights for the quarter included:
o The Company's total revenues were $1.2 billion, up 12.8% from a year
ago. On a same-store basis, total retail revenues were up 6.8%.
o Same-store retail gross profit, the Company's preferred productivity metric,
increased 6.6%. o New vehicle retail sales rose 13.2%, and new vehicle retail
gross profit increased 8.5%. On a same-store
basis, new vehicle sales increased 9.6%.
o Used vehicle retail sales were up 7.9%, with related gross profit
rising 13.0%. On a same-store basis, used vehicle sales decreased
0.2%.
o Parts and service revenues increased 6.5%, with related gross profit
increasing 8.4%. On a same-store basis, parts and service revenue
increased 3.1%, while gross profit rose 4.8%.
o Net finance and insurance (F&I) income was up 18.7% from a year ago,
while F&I per vehicle retailed rose 11.2% to $793.
o During the quarter, the Company sold 27,040 new retail units and
15,923 used retail units as compared to 24,702 and 15,527 a year
ago, respectively.
o Total non-floor plan interest expense declined 4.7% from a year ago,
reflecting lower average borrowings during the current quarter.
o Income from continuing operations before taxes, minority interest,
costs associated with Price 1 and the one-time expense for auditing
services was $28.1 million, a 37.2% increase from a year ago (after
adjusting for the elimination of goodwill amortization). Income from
continuing operations after these charges was $24.7 million, a 20.7%
increase from a year ago (after adjusting for the elimination of
goodwill amortization).
o During the three months ended September 30, 2002, the Company used
its recently developed cash management system to reduce senior
secured debt by $30 million, thereby helping to reduce its long-term
debt to total capitalization percentage to 51.5%, from 53.9% last
quarter.
During the month of August, the Auditing Standards Board ("ASB") issued a
draft interpretation of Statement of Auditing Standards No. 79, to give
guidance when opining on companies whose previously issued financial
statements were audited by auditors whose firm has ceased to exist. In this
interpretation, the ASB details five conditions that would cause a company's
previously issued financial statements to be re-audited. One of those
conditions is the reporting of discontinued operations. As a result of this
interpretation, the recent dissolution of Arthur Andersen L.L.P, and the fact
that the Company adopted SFAS 144, reporting discontinued operations in 2002,
the Company has decided to engage our current auditors, Deloitte & Touche
L.L.P, to re-audit fiscal years 2001 and 2000. Consequently, the Company has
accrued $1.0 million in audit fees (included in SG&A), or $0.02 per share,
during this quarter. The Company does not anticipate any prior year
restatements.
The Company's pro-forma net income from continuing operations for the nine
months ending September 30, 2002 excludes a non-recurring deferred income tax
provision required by SFAS 109 related to Asbury's change in tax status from a
limited liability company to a "C" corporation, and assumes that the Company
was a "C" corporation for the entire period. The Company's pro-forma net
income from continuing operations for this period was $44.1 million, or $1.30
per share, excluding Price 1 and the re-audit fees.
On a GAAP basis, without giving effect to these adjustments, income from
continuing operations before taxes, minority interest and extraordinary loss
was $66.8 million, up 42.4 percent from the same period last year after
adjusting for goodwill amortization. Related net income for the first nine
months of 2002 was $32.6 million, or $0.99 per share.
The Company has updated its estimated earnings per share guidance for Fiscal
2002 as follows:
Prior Current
Guidance Guidance
-------- --------
Earnings from core operations $1.65 $1.66
Loss from Price 1 (0.07) (0.14)
Non-recurring audit service fee - (0.02)
--------- ----------
2002 Pro forma GAAP guidance: $1.58 $1.50
Mr. Gilman stated, "Looking forward to 2003, we are in the midst of our
planning and budgeting cycle and would anticipate announcing earnings guidance
for 2003 when our year-end 2002 results are released. However, on a
preliminary basis, I would like to share with you the earnings goal we have
set internally for 2003. These early thoughts should not be interpreted as
`guidance' in the conventional sense but simply a view into our internal
planning process. The purpose of establishing and publicly announcing our
earnings goal at this time is to demonstrate to investors both the clarity of
our business model and Asbury's plans to grow the business in a consistent,
quality manner. Our intention is to disclose, on a regular basis during 2003,
operational results and other data so that investors can measure and assess
Asbury's progress in achieving our goals for the year."
The Company has based its planning around a range of estimates for national
new light vehicle sales and has not considered, for these goal setting
purposes, the possible impact on results of operations of dramatic changes in
the economic environment or other factors such as war or significant oil price
and interest rate increases. The Company has established its earnings goals
for 2003 as follows:
o Earnings per share goal for 2003 of $1.80-$1.90 built upon the
earnings guidance for 2002 of $1.50, as defined above.
o New light vehicle sales for 2003 in the range of 16.5 to 15.0
million, or an estimated 2% to 10% decrease from 2002 levels.
o Organic income growth, including parts and service revenue and F&I
income, of 4% to 8%, generating $0.04 to $0.08 per share.
o Successful completion of the Bob Baker platform acquisition and
other previously announced tuck-in acquisitions, adding $0.12 to
$0.17 per share.
o Platform and tuck-in acquisition related synergies of $0.01 to $0.03
per share.
o The anticipated execution of a $15 million share repurchase program,
which should add $0.05 to $0.08 per share.
o Price 1 improvement of $0.05 to $0.07 per share.
o The exclusion of nonrecurring IPO expenses and audit related costs
of $0.04 per share in 2002.
Mr. Gilman concluded, "Since the Company's IPO seven months ago, Asbury has
delivered on all of its key objectives. With a franchise mix weighted towards
growing luxury and import brands in demographically attractive locations, we
are well-positioned to be one of the winners as the automotive retailing
industry continues to grow and consolidate in the years ahead. At the same
time, with our diverse income streams, we have the flexibility to weather
adversity and deliver strong cash flows over a wide variety of economic
conditions, as we have consistently demonstrated."
About Asbury Automotive Group
Asbury Automotive Group, Inc., headquartered in Stamford, Connecticut, is one
of the largest automobile retailers in the U.S., with 2001 revenues of $4.3
billion. Built through a combination of organic growth and a series of
strategic acquisitions over the past six years, Asbury now operates through
nine geographically concentrated, individually branded "platforms." These
platforms operate 90 retail auto stores, encompassing 128 franchises for the
sale and servicing of 36 different brands of American, European and Asian
automobiles. Asbury believes that its product mix includes one of the highest
proportions of luxury and mid-line import brands among leading U.S. automotive
public 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 and
projections regarding the Company's financial position, results of operations,
market position, product development 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, 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 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 registration statement on Form S-1 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.
SELECTED DATA
(dollars in thousands except per unit data)
(unaudited)
GAAP Results for the Same Store Results for GAAP Results for the Same Store Results for
Three Months Ended the Three Months Ended Nine Months Ended the Nine Months Ended
September 30, September 30, September 30, September 30,
----------------------------------------------------------------------------------------------------------
2002 2001 2002 2001 2002 2001 2002 2001
----------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
RETAIL UNITS:
New 27,040 24,702 26,207 24,606 73,951 69,614 69,935 69,208
Used 15,923 15,527 14,674 15,491 45,899 44,357 41,769 44,141
----------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
Total 42,963 40,229 40,881 40,097 119,850 113,971 111,704 113,349
REVENUE:
New retail 718,462 634,838 693,986 632,917 1,994,610 1,804,300 1,878,818 1,795,948
Used retail 243,502 225,588 224,719 225,177 696,957 650,067 633,539 646,967
Parts, service and
collision repair 130,310 122,414 125,513 121,758 379,669 354,625 359,422 352,729
Finance and insurance,
net 34,051 28,676 32,647 28,624 89,427 76,995 84,907 76,637
Fleet 10,827 5,052 10,096 7,398 32,970 24,867 23,717 27,213
Wholesale 76,975 60,041 69,282 59,903 213,947 186,738 194,732 185,931
----------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
Total 1,214,127 1,076,609 1,156,243 1,075,777 3,407,580 3,097,592 3,175,135 3,085,425
GROSS PROFIT
New retail 50,654 46,598 48,902 46,472 147,039 129,398 138,609 128,939
Used retail 29,800 26,368 27,929 26,316 84,327 75,865 77,733 75,536
Parts, Service and
collision repair 67,863 62,620 65,179 62,216 199,446 182,754 186,710 181,916
Finance and Insurance,
net 34,051 28,676 32,647 28,624 89,427 76,995 84,907 76,637
Fleet 374 498 373 498 994 1,690 788 1,690
Wholesale (2,119) (973) (1,756) (955) (2,426) (2,177) (1,787) (2,075)
Floor Plan Interest
Credit 6,473 6,031 6,262 6,019 17,892 17,471 16,711 17,402
----------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
Total 187,096 169,818 179,536 169,190 536,699 481,996 503,671 480,045
GROSS MARGIN %:
New retail 8.0% 8.3% 7.9% 8.3% 8.3% 8.1% 8.3% 8.1%
Used retail 12.2% 11.7% 12.4% 11.7% 12.1% 11.7% 12.3% 11.7%
Parts, service and 52.1% 51.2% 51.9% 51.1% 52.5% 51.5% 51.9% 51.6%
collision repair
Finance and insurance, net 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Total 15.4% 15.8% 15.5% 15.7% 15.8% 15.6% 15.9% 15.6%
GROSS PROFIT PER UNIT:
New retail 2,113 2,131 2,105 2,133 2,230 2,110 2,221 2,115
Used retail 1,872 1,698 1,903 1,699 1,837 1,710 1,861 1,711
Weighted average 2,023 1,964 2,033 1,965 2,080 1,954 2,086 1,957
F&I PVR $793 $713 $799 $714 $746 $676 $760 $676
EBITDA (a) 40,566 36,478 41,112 37,062 113,095 95,897 110,654 97,850
EBITDA % 3.3% 3.4% 3.6% 3.4% 3.3% 3.1% 3.5% 3.2%
OPERATING INCOME % 3.2% 3.1% 3.2% 3.0%
CAPITAL EXPENDITURES 14,479 11,603 38,102 38,751
FREE CASH FLOW (b) 21,429 2,916 31,779 34,707
September 30, 2002 December 31, 2001
------------------ -----------------
CAPITALIZATION:
Long-term debt
(including current
portion) 457,275 528,337
Stockholders'/members'
equity 430,939 347,907
------------------ -----------------
Total 888,214 876,244
(a) EBITDA is defined as earnings before income taxes, minority interest,
extraordinary loss, discontinued operations, other interest expense,
depreciation and amortization and net losses from unconsolidated affiliates.
(b) Free cash flow is defined as net cash provided by operating activities less
capital expenditures.
ASBURY AUTOMOTIVE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except per share data)
(unaudited)
For the Three Months For the Nine Months
Ended Ended
----------------------- -------------------------------------
September September September
September September 30, 2002 30, 2002 30, 2001
30, 2002 30, 2001 Pro Forma(a) Actual(b) Actual
----------- ---------- ----------- ----------- -------------
REVENUES:
New vehicle $ 729,289 $ 639,890 $2,027,580 $2,027,580 $1,829,167
Used vehicle 320,477 285,629 910,904 910,904 836,805
Parts, service and collision repair 130,310 122,414 379,669 379,669 354,625
Finance and insurance, net 34,051 28,676 89,427 89,427 76,995
----------- ---------- ----------- ----------- -------------
Total revenues 1,214,127 1,076,609 3,407,580 3,407,580 3,097,592
COST OF SALES
New vehicle 671,788 586,763 1,861,655 1,861,655 1,680,608
Used vehicle 292,796 260,234 829,003 829,003 763,117
Parts, service and collision repair 62,447 59,794 180,223 180,223 171,871
----------- ---------- ----------- ----------- -------------
Total cost of sales 1,027,031 906,791 2,870,881 2,870,881 2,615,596
----------- ---------- ----------- ----------- -------------
GROSS PROFIT 187,096 169,818 536,699 536,699 481,996
OPERATING EXPENSES:
Selling, general and administrative 142,595 128,182 411,144 411,144 366,443
Depreciation and amortization 5,732 7,869 17,498 17,498 22,492
----------- ---------- ----------- ----------- -------------
Income from operations 38,769 33,767 108,057 108,057 93,061
OTHER INCOME (EXPENSE):
Floor plan interest expense (4,399) (6,013) (13,155) (13,155) (22,121)
Other interest expense (10,104) (10,602) (28,838) (28,838) (34,031)
Interest income 283 443 945 945 2,208
Net losses from unconsolidated entities - - (100) (100) (1,000)
Other income (expense) 182 412 (155) (155) 1,257
----------- ---------- ----------- ----------- -------------
Total other expense, net (14,038) (15,760) (41,303) (41,303) (53,687)
----------- ---------- ----------- ----------- -------------
Income before income taxes, minority interest,
extraordinary loss and discontinued operations 24,731 18,007 66,754 66,754 39,374
INCOME TAX PROVISION:
Income tax expense 9,843 1,437 26,568 21,183 4,184
Tax adjustment upon conversion from an L.L.C.
to a corporation - - - 11,553 -
MINORITY INTEREST - 328 - - 829
----------- ---------- ----------- ----------- -------------
Income before extraordinary loss and discontinued
operations 14,888 16,242 40,186 34,018 34,361
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT - - - - (1,433)
----------- ---------- ----------- ----------- -------------
DISCONTINUED OPERATIONS, net of tax (244) (54) - (1,432) 930
Net income $ 14,644 $ 16,188 $ 40,186 $ 32,586 $ 33,858
=========== ========== =========== =========== =============
EARNINGS PER COMMON SHARE:
Basic and Diluted
Income from continuing operations $ 0.44 $ 1.18 $ 1.04
=========== =========== ===========
Net income $ 0.43 $ 1.18 $ 0.99
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 34,000 34,000 32,813
=========== =========== ===========
Diluted 34,001 34,021 32,834
=========== =========== ===========
(a) Pro forma column includes a tax provision as if the Company were a "C"
corporation for the entire year as well as assumes that all shares were
outstanding for the full year. 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 GAAP net income to pro forma net income:
GAAP net income $ 32,586
Tax adjustment upon conversion from
an L.L.C. to a corporation 11,553
Pro forma income tax charge (5,385)(c)
Discontinued operations 1,432
---------
Pro forma net income 40,186
=========
(c) Represents the pro forma tax charge for the time period during the year
that the company was an L.L.C.
ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands except per share data)
ASSETS September 30, December 31,
2002 2001
---------------- -----------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 51,640 $ 60,506
Contracts-in-transit 80,603 93,044
Accounts receivable, net 94,472 81,347
Inventories 498,445 496,054
Prepaid and other current assets 39,473 26,663
---------------- -----------------
Total current assets 764,633 757,614
PROPERTY AND EQUIPMENT, net 273,350 256,402
GOODWILL, net 399,198 392,856
OTHER ASSETS 66,692 58,141
---------------- -----------------
Total assets $ 1,503,873 $ 1,465,013
================ =================
LIABILITIES AND STOCKHOLDERS'/MEMBERS' EQUITY
CURRENT LIABILITIES:
Floor plan notes payable $ 426,754 $ 451,375
Short-term debt 10,167 10,000
Current maturities of long-term
debt 43,264 35,789
Accounts payable and accrued
liabilities 128,901 112,833
---------------- -----------------
Total current liabilities 609,086 609,997
LONG-TERM DEBT 414,011 492,548
OTHER LIABILITIES 49,837 14,561
STOCKHOLDERS'/MEMBERS' EQUITY 430,939 347,907
---------------- -----------------
Total liabilities and
stockholders'/members' equity $ 1,503,873 $ 1,465,013
================ =================
Exhibit 99.2
AUBURY Contact Information: Stacey Yonkus
- ---------------- Asbury Automotive
AUTOMOTIVE GROUP 203-356-4424
INVESTOR@ASBURYAUTO.COM
-----------------------
ASBURY AUTOMOTIVE GROUP ANNOUNCES
STOCK REPURCHASE PROGRAM
STAMFORD, Conn. - October 30, 2002 - Asbury Automotive Group, Inc. (NYSE:
ABG), one of the largest automotive retail and service companies in the U.S.,
today announced that its Board of Directors has authorized the Company to
expend up to $15 million to repurchase outstanding shares of its common stock.
Purchases may be made from time to time, in the open market or in privately
negotiated transactions. As of September 30, 2002, Asbury Automotive had
34,000,000 shares outstanding.
"We believe Asbury shares are significantly undervalued in the marketplace,"
said Kenneth B. Gilman, President and CEO. "This stock repurchase program
represents an opportunity for us to increase earnings per share and enhance
shareholder value."
At present, the Company is limited as to the number of shares it may purchase
in order to be in compliance with the Company's Credit Agreement and the
indenture related to the Company's Senior Subordinated Notes issued earlier
this year. As a result, the Company may currently purchase up to $15 million
worth of shares.
About Asbury Automotive Group
Asbury Automotive Group, Inc., headquartered in Stamford, Connecticut, is one
of the largest automobile retailers in the U.S., with 2001 revenues of $4.3
billion. Built through a combination of organic growth and a series of
strategic acquisitions over the past six years, Asbury now operates through
nine geographically concentrated, individually branded "platforms." These
platforms operate 90 retail auto stores, encompassing 128 franchises for the
sale and servicing of 36 different brands of American, European and Asian
automobiles. Asbury believes that its product mix includes one of the highest
proportions of luxury and mid-line import brands among leading U.S. automotive
public 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 and
projections regarding the Company's financial position, results of operations,
market position, product development 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, 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 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 registration statement on
Form S-1 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.