HOUSTON — Group 1 Automotive Inc. reported second quarter adjusted net income from continuing operations of $10.3 million, down 42.4 percent, or $17.8 million, from the year-ago period.
"In addition to the stable profitability of Group 1's parts and service business, the cost cutting measures we completed in the first quarter coupled with our ongoing inventory management efforts delivered better-than-anticipated results in the second quarter," said Earl J. Hesterberg, Group 1's president and chief executive officer. "Group 1's operating team has been working diligently to reduce expenses and new vehicle inventories, resulting in more-streamlined operations that run profitably at current selling rates."
Group 1 reported it reduced its new-vehicle inventory during the quarter by $109.7 million, to $374.4 million as of June 30. In addition, the company reduced non-floorplan debt by an additional $41.3 million during the quarter, reflecting primarily the repurchase of $6.7 million of its 2.25 percent convertible bonds, paying down its acquisition line by $30.0 million and reducing its mortgage debt by $4.7 million. The company ended the quarter with overall available liquidity of $172.7 million.
Same-store new vehicle margins expanded 40 basis points from the first quarter, to 5.8 percent, as lower inventory levels across the industry begin to reduce selling pressure. Same-store gross margin improved 130 basis points, to 17.2 percent, from second quarter 2008. The gross margin improvement was attributed to improved total used vehicle margins, as well as a favorable mix shift to the higher-margin parts and service business from the lower-margin new vehicle business.
Group 1's same-store parts and service business held relatively stable, with a gross margin of 52.6 percent on 3.7 percent lower sales.
On a consolidated basis, selling, general and administrative expenses were reduced $44.2 million in the quarter, bringing the total expense reduction to $86.1 million this year.
"The combination of improving operating performance and significant reductions in debt continues to strengthen the balance sheet and ensure strong compliance with our debt covenants," said John C. Rickel, Group 1's senior vice president and chief financial officer.