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.
