HOUSTON, Oct. 29, 2020 /PRNewswire/ -- Group 1 Automotive, Inc. (NYSE: GPI), ("Group 1" or the "Company"), an international, Fortune 500 automotive retailer, today reported 2020 third quarter net income of $126.4 million, diluted earnings per common share of $6.83, adjusted net income (a non-GAAP measure) of $129.0 million, and adjusted diluted earnings per common share (a non-GAAP measure) of $6.97.  This compares to diluted earnings per common share of $2.04 and adjusted diluted earnings per common share (a non-GAAP measure) of $3.02 in 2019.  The Company's 2020 third quarter total revenue was $3.0 billion.

Third quarter 2020 adjusted net income and diluted earnings per share excluded a net after-tax adjustment related to a loss on debt redemption of $3.3 million, or $0.14 per share.  Third quarter 2019 adjusted net income and diluted earnings per share excluded approximately $18.4 million net after-tax adjustments, or $0.98 per common share. These adjustments consist primarily of $9.0 million related to catastrophic weather events, or $0.48 per common share; non-cash asset impairments of $8.3 million, or $0.44 per common share; and $1.1 million related to dealership and real estate transactions, or $0.06 per common share. Reconciliations of non-GAAP financial measures are included in the attached financial tables. Certain disclosures may not compute due to rounding.

"Our record earnings are a function of our hard working, resilient teammates and a responsive and creative management team that quickly reacted to the realities of the pandemic.  As we rebuilt our U.S. and U.K. businesses from the extreme furlough levels in April, we targeted a 20% efficiency improvement in our sales and service processes, which drove our key cost metric, SG&A as a percent of gross profit, below 60% for the first time in our history.  Lower U.S. vehicle sales were offset by improved F&I performance and higher margins supported by lower inventory levels.  Additionally, our U.K. business turned in a record performance with year-over-year growth in service and vehicle sales," said Earl J. Hesterberg, Group 1's President and Chief Executive Officer. 

Liquidity & Capital Resources Update

As of September 30, 2020, the Company's total cash liquidity was $193 million.  There was also $273 million of borrowing capacity on the Company's U.S. syndicated acquisition line, bringing total immediate liquidity to $466 million at the end of the third quarter 2020. 

As previously announced, the Company redeemed all $550 million of its outstanding 5.00% notes due 2022 during the third quarter of 2020.  This redemption was funded with $550 million of newly issued 4.00% notes due 2028.  Along with the April 2020 redemption of the 5.25% notes due 2023, the Company now has no material debt maturities before its U.S. Credit Facility matures in June of 2024.  The debt restructuring undertaken this year will save the Company over $15 million in annual interest expense. 

During the third quarter of 2020, the Company generated $25 million of operating cash flow ($121 million of adjusted operating cash flow), which brings the year-to-date operating cash flow to $713 million ($358 million of adjusted operating cash flow).  This cash generation has been partially used to reduce non-floorplan debt by $159 million since the end of 2019.  Additionally, the Company's U.S. credit facility rent-adjusted leverage ratio was reduced to 2.5 times at the end of September 2020, or down from 3.3 times at the end of 2019.

Share Repurchase Authorization & Dividend

On October 6, 2020, the Company announced a new $200 million share repurchase program.  Purchases 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.  The Company expects to reinstate a quarterly cash dividend following its board meeting in mid-November 2020, and payable in mid-December 2020.

Consolidated Results for Third Quarter 2020 (year-over-year comparable basis)

For ease of comparison, constant currency metrics (a non-GAAP measure) are included below (shown in parenthesis) and within the financial tables that follow:

• Total revenue decreased 2.5 percent (-2.9 percent), to $3.0 billion.
• Total gross profit increased 10.0 percent (9.8 percent), to $512.0 million.
• New vehicle revenues decreased 4.3 percent (-4.6 percent) on a 10.7 percent decrease in unit sales.
• Retail used vehicle revenues decreased 0.3 percent (-1.1 percent) on 7.1 percent lower unit sales.
• Parts and service gross profit decreased 0.9 percent (-1.1 percent) on revenue decrease of 2.1 percent (-2.0 percent).
• Finance and Insurance (F&I) gross profit per retail unit (PRU) increased 11.5 percent (11.3 percent), to $1,655.
• Selling, General and Administrative (SG&A) expenses as a percent of gross profit decreased 1,630 basis points, to 59.7 percent.

 

Segment Results for Third Quarter 2020 (year-over-year comparable basis)

• United States:
  
  The Company's U.S. operations accounted for 73.8 percent of total revenues and 81.1 percent of total gross profit. Total U.S. revenues decreased 7.4 percent, to $2.2 billion. Total gross profit increased 7.4 percent, to $415.7 million. Same Store U.S. total gross profit increased 6.4 percent, to $409.5 million.
  • Same Store new vehicle revenue declined 9.9 percent, with units decreasing 15.7 percent. New vehicle gross profit increased 34.3 percent as gross profit per unit increased $1,052, a 59.3 percent increase, to $2,824, as higher new vehicle margins more than offset the gross profit impact from lower volumes.
  • Same Store total used vehicle revenue declined 8.5 percent, with total used units decreasing 13.9 percent, as inventory shortages hampered sales later in the quarter. Same Store total used gross profit increased 26.6 percent as higher gross profit per unit (used retail gross profit per unit increased $510, a 36.7 percent increase, to $1,898).
  • Parts and service revenues decreased 2.7 percent and gross profit decreased by 3.1 percent. Same Store parts and service revenues decreased 3.3 percent. Same Store parts and service gross profit decreased 4.0 percent, to $163.8 million.
  • F&I revenues decreased 0.3 percent, to $113.0 million. F&I gross profit PRU grew $285, to $2,030, or 16.3 percent. Same Store F&I gross profit PRU increased $290, to $2,041, or 16.6 percent.
  • SG&A expenses as a percent of gross profit decreased 1,470 basis points, to 59.0 percent.
     
• United Kingdom:
  
  Constant currency metrics (a non-GAAP measure) are included below (shown in parenthesis) and within the financial tables that follow:
  
  The Company's U.K. operations accounted for 24.4 percent of total revenues and 17.1 percent of total gross profit. Same Store total revenues increased 22.6 percent (17.3 percent), to $707.0 million. Same Store total gross profit increased 31.6 percent (25.7 percent), to $82.8 million. Same Store SG&A expenses as a percent of gross profit decreased 2,600 basis points, to 60.6 percent.
   
• Brazil:
  
  Constant currency metrics (a non-GAAP measure) are included below (shown in parenthesis) and within the financial tables that follow:
  
  The Company's Brazilian operations accounted for 1.8 percent of total revenues and 1.7 percent of total gross profit. Same Store total revenues decreased 50.9 percent (-33.6 percent), driven by constant currency revenue decreases of 54.4 percent (-38.3 percent) in new vehicles, 50.6 percent (-33.1 percent) in total used vehicles, 41.1 percent (-20.3 percent) in F&I, and 32.5 percent (-8.4 percent) in parts and service. The decreases were driven by local shelter-in-place orders that, on average, completely closed the Company's Brazilian operations for over a month during the quarter and continues to restrict operating hours. Same Store SG&A expenses as a percent of gross profit decreased 290 basis points, to 79.8 percent.

 

Corporate Development

Year-to-date 2020, the Company disposed of a Nissan franchise in Mississippi during October, which generated approximately $30 million in trailing-twelve-month revenues.

Third Quarter 2020 Earnings Conference Call Details

Group 1's senior management will host a conference call today at 10 a.m. ET to discuss the third quarter 2020 financial results. 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:

Domestic:         1-888-609-1607
International:    1-862-298-0705
Passcode:         56690934

A telephonic replay will be available following the call through November 6, 2020 by dialing:

Domestic:         1-888-539-4649
International:    1-754-333-7735
Replay ID:       153906

ABOUT GROUP 1 AUTOMOTIVE, INC.

Group 1 owns and operates 185 automotive dealerships, 241 franchises, and 49 collision centers in the United States, the United Kingdom and Brazil that offer 31 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 include statements regarding our goals, plans, and business strategy to repurchase shares of Group 1 common stock, our expectations regarding the reinstatement of our quarterly dividend as well as other statements, and may include 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) board approval of future dividends, (b) general economic and business conditions, (c) the level of manufacturer incentives, (d) the future regulatory environment, (e) our ability to obtain an inventory of desirable new and used vehicles, (f) our relationship with our automobile manufacturers and the willingness of manufacturers to approve future acquisitions, (g) our cost of financing and the availability of credit for consumers, (h) our ability to complete acquisitions and dispositions and the risks associated therewith, (i) foreign exchange controls and currency fluctuations, (j) our ability to retain key personnel, (k) the impacts of COVID-19 on our business, (l) the impacts of any potential global recession, and (m) our ability to maintain sufficient liquidity to operate. 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, SAME STORE DATA, AND OTHER DATA

In addition to evaluating the financial condition and results of our operations in accordance with U.S. 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, profitability improvement initiatives, and other events outside of normal, or "core," business and operations, by considering alternative financial measures not prepared in accordance with U.S. GAAP. 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, out-of-period adjustments, legal matters, gains and losses on dealership franchise or real estate transactions, and catastrophic events, such as hailstorms, 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. This includes evaluating measures such as adjusted selling, general and administrative expenses, adjusted net income, adjusted diluted earnings per share, and constant currency. 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 U.S. 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 U.S. GAAP. We caution investors not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable U.S. GAAP measures.

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 U.S. 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. The Same Store amounts presented include the results of dealerships for the identical months in each period presented in comparison, commencing with the first full month in which the dealership was owned by us and, in the case of dispositions, ending with the last full month it was owned by us. Same Store results also include the activities of our corporate headquarters.

Certain amounts in the financial statements may not compute due to rounding.  All computations have been calculated using unrounded amounts for all periods presented.

 

Investor contacts:
Sheila Roth
Manager, Investor Relations
Group 1 Automotive, Inc.
713-647-5741 | sroth@group1auto.com

Media contacts:
Pete DeLongchamps
Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs
Group 1 Automotive, Inc.
713-647-5770 | pdelongchamps@group1auto.com
or
Clint Woods
Pierpont Communications, Inc.
713-627-2223 | cwoods@piercom.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SOURCE Group 1 Automotive, Inc.