Group 1 Automotive Reports Fourth Quarter and Full Year 2016 Financial Results

HOUSTON, Feb. 2, 2017 /PRNewswire/ -- Group 1 Automotive, Inc. GPI, ("Group 1" or the "Company"), an international, Fortune 500 automotive retailer, today reported 2016 fourth quarter net income of $30.8 million, diluted earnings per common share of $1.44, adjusted net income (a non-GAAP measure) of $37.3 million, and adjusted diluted earnings per common share (a non-GAAP measure) of $1.74.

As shown in the attached non-GAAP reconciliation tables, the 2016 fourth quarter adjusted results exclude approximately $6.4 million of net after-tax adjustments, or $0.30 per share, for non-core items. These adjustments primarily consist of non-cash asset impairment charges of approximately $12.8 million after-tax, or $0.59 per share; and severance costs of approximately $1.2 million after-tax, or $0.06 per share. These adjustments were partially offset by gains related to both a settlement with an OEM of approximately $7.3 million after-tax, or $0.34 per share; and real estate and dealership transactions of approximately $0.3 million after-tax, or $0.01 per share.

For the full year of 2016, net income increased 56.5 percent from the comparable prior-year period, to $147.1 million; and diluted earnings per common share increased 71.0 percent, to $6.67. Full year 2016 adjusted net income decreased 1.1 percent, to $163.7 million; and adjusted diluted earnings per common share increased 8.0 percent, to an all-time high of $7.42. Total revenue grew 2.4 percent (4.7 percent on a constant currency basis), to a record $10.9 billion.

"We are pleased with our overall performance in 2016 given the economic and political challenges we faced in each of our regions. Despite those headwinds, we delivered record revenue of $10.9 billion and grew adjusted diluted earnings per share 8 percent to a new, all-time record of $7.42. We closed the year on a strong note, with fourth quarter adjusted EPS growth of 15 percent over last year, reflecting improved new vehicle margins and strong cost control," said Earl J. Hesterberg, Group 1's president and chief executive officer. "In addition, the progress we delivered on both our cost structure during the fourth quarter and the reduction of our U.S. new vehicle inventory, which ended the Quarter with a 65 day supply, has us well positioned as we enter 2017."

Consolidated Results for Fourth Quarter 2016 (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 was flat at $2.7 billion (2.6 percent).
• Total gross profit grew 2.4 percent (4.4 percent), to $389.2 million.
• New vehicle revenues decreased 1.7 percent (0.8 percent). New vehicle gross profit improved 3.7 percent (6.4 percent), to $83.1 million. While total new vehicles sales volume decreased, new vehicle gross profit per retail unit (PRU) grew 7.2 percent (10.1 percent), to $1,976.
• Retail used vehicle revenues increased 0.8 percent (3.6 percent) on 0.5 percent higher unit sales. Retail used vehicle gross profit decreased 4.1 percent ((2.2) percent), to $39.0 million.
• Parts and service gross profit increased 4.4 percent (6.5 percent) on revenue growth of 4.6 percent (6.5 percent). Same Store parts and service gross profit increased 3.6 percent (5.0 percent) on revenue growth of 4.0 percent (5.1 percent). U.S. Same Store parts and service gross profit increased 4.1 percent on revenue growth of 5.1 percent.
• Finance and Insurance (F&I) gross profit PRU increased 4.8 percent (6.5 percent), to $1,440. U.S. F&I gross profit PRU increased $129, or 8.5 percent, to an all-time record of $1,644.
• Selling, General and Administrative (SG&A) expenses as a percent of gross profit improved 190 basis points, to 71.7 percent. Adjusted SG&A expenses as a percent of gross profit improved 90 basis points, to 74.4 percent.

Consolidated Results for Full Year 2016 (year-over-year comparable basis)

• Total revenue increased 2.4 percent (4.7 percent), to a record $10.9 billion.
• Total gross profit grew 4.0 percent (5.7 percent).
• New vehicle gross profit increased 3.6 percent (6.2 percent) on 0.7 percent (3.1 percent) higher revenues, as the Company retailed 172,053 new vehicles in 2016.
• Retail used vehicle gross profit was 1.7 percent (3.3 percent) higher on a 4.5 percent (6.7 percent) revenue increase, as the Company retailed 129,131 used units in 2016, a 4.0 percent increase over 2015 levels.
• Parts and service gross profit rose 5.9 percent (7.7 percent) on 6.3 percent (8.1 percent) higher revenues.
• F&I revenues rose 2.9 percent (4.1 percent) on 0.8 percent more retail unit sales; U.S. F&I gross PRU was $1,599, an increase of $74 over 2015.
• SG&A expenses as a percent of gross profit increased 30 basis points, to 73.4 percent. Adjusted U.S. SG&A expenses as a percent of gross profit improved 40 basis points, to 71.7 percent.
• Operating margin improved 50 basis points to 3.1 percent. Adjusted operating margin remained flat at 3.4 percent.

Segment Results for Fourth Quarter 2016 (year-over-year comparable basis)

• United States:
  The Company's U.S. operations accounted for 81.2 percent of total revenues and 85.1 percent of total gross profit. Total U.S. revenues were $2.2 billion, a decrease of 4.1 percent, driven by a 6.8 percent decrease in retail new vehicle revenue. While new vehicle sales volume decreased, new vehicle gross profit PRU sold grew $225, or 12.3 percent per unit, to $2,049; and total gross profit of $331.3 million was only down 0.8 percent. New vehicle inventory improved 9 days from third-quarter levels and ended the quarter at 65 days' supply.
  
  SG&A expenses as a percent of gross profit improved 330 basis points to 68.6 percent and operating margin improved 90 basis points to 3.8 percent. Adjusted SG&A expenses as a percent of gross profit improved 210 basis points, to 71.9 percent. Adjusted operating margin improved 40 basis points to 3.8 percent.
  
  
• United Kingdom:
  The Company's U.K. operations accounted for 14.5 percent of total revenues and 11.4 percent of total gross profit. Total U.K. revenues increased 35.9 percent (66.1 percent), to $387.5 million, and gross profit increased 33.3 percent (62.4 percent), to $44.4 million. On a constant currency basis, Same Store total revenue increased 15.1 percent, driven by revenue growth of 21.3 percent in new vehicles, 18.0 percent in F&I, and 7.7 percent in parts and service.
  
  Same Store SG&A expenses as a percent of gross profit increased 90 basis points to 82.6 percent and operating margin decreased 10 basis points to 1.6 percent.
  
  
• Brazil:
  The Company's Brazilian operations were profitable during the fourth quarter and accounted for 4.3 percent of total revenues and 3.5 percent of total gross profit. The Company's Same Store new vehicle revenue declined 25.6 percent on a constant currency basis in a continued weak economic environment. Year-to-date, Brazil's new vehicle industry volumes have declined about 20 percent. On a constant currency basis, fourth quarter Same Store total revenue was down 19.1 percent, as F&I gross profit PRU growth of 19.7 percent partially offset the decline in new and used vehicles.
  
  The Company continues to improve its used vehicle operations in Brazil. On a Same Store constant currency basis, used vehicle retail margins increased 360 basis points to 7.1 percent and total used vehicle gross profit grew 97.3 percent.

Share Repurchase Authorization

For the full year of 2016, the Company repurchased 2,282,579 shares, or approximately 10 percent of its outstanding common shares, at an average price per common share of $55.90 for a total of $127.6 million. As of February 1, 2017, $22.4 million remains available under the Company's prior 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 October 2016, the Company acquired the Ford Basingstoke and Ford Newbury stores in the U.K., which were rebranded as Think Ford Basingstoke and Think Ford Newbury. These franchises are expected to generate approximately $65 million in annualized revenues.

During October 2016, the Company announced the divestiture of the Honda of Van Nuys store in California. Also during the fourth quarter, the Company disposed of Spire Skoda in the U.K. These franchises generated approximately $80 million in trailing-twelve-month revenues.

During 2016, the Company acquired a total of 21 franchises, which are expected to generate an estimated $660 million in annual revenues. The Company disposed of 10 franchises that generated approximately $240 million in trailing-twelve-month revenues.

Subsequently, in January 2017, the Company acquired a BMW motorcycle franchise in the state of Paraná in Brazil. The franchise, which is expected to generate approximately $5 million in annual revenues, will be moved into one of our existing BMW locations to expand dealership scale. On February 1, 2017, the Company disposed of its remaining two Nissan stores in Brazil, which generated approximately $25 million in trailing-twelve-month revenues.

Fourth Quarter 2016 Earnings Conference Call Details

Group 1's senior management will host a conference call today at 10 a.m. ET to discuss the fourth 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 February 9, 2017 by dialing:

 

About Group 1 Automotive, Inc.
Group 1 owns and operates 157 automotive dealerships, 208 franchises, and 38 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 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 | sroth@group1auto.com

Media contacts:
Pete DeLongchamps
V.P. 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE Group 1 Automotive, Inc.