UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended June 30, 2006 |
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OR |
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-31262
ASBURY AUTOMOTIVE GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware |
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01-0609375 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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622 Third Avenue, 37th Floor |
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New York, New York |
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10017 |
(Address of principal executive offices) |
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(Zip Code) |
(212) 885-2500
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer o Accelerated Filer x Non-Accelerated Filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: The number of shares of common stock outstanding as of August 4, 2006, was 33,197,382 (net of 1,586,587 treasury shares).
ASBURY AUTOMOTIVE
GROUP, INC.
INDEX
2
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
ASBURY AUTOMOTIVE
GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
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June 30, |
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December 31, |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
89,097 |
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$ |
57,194 |
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Contracts-in-transit |
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102,696 |
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122,250 |
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Accounts receivable (net of allowance of $811 and $1,216, respectively) |
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162,468 |
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167,203 |
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Inventories |
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779,817 |
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709,791 |
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Deferred income taxes |
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19,825 |
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19,825 |
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Prepaid and other current assets |
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57,390 |
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57,419 |
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Assets held for sale |
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19,677 |
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51,498 |
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Total current assets |
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1,230,970 |
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1,185,180 |
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PROPERTY AND EQUIPMENT, net |
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198,825 |
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193,457 |
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GOODWILL |
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450,362 |
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457,405 |
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OTHER LONG-TERM ASSETS |
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94,130 |
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94,758 |
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Total assets |
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$ |
1,974,287 |
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$ |
1,930,800 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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CURRENT LIABILITIES: |
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Floor plan notes payablemanufacturer affiliated |
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$ |
331,025 |
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$ |
204,044 |
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Floor plan notes payablenon-manufacturer affiliated |
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326,303 |
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410,338 |
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Current maturities of long-term debt |
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26,257 |
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24,522 |
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Accounts payable |
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65,620 |
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72,432 |
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Accrued liabilities |
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86,228 |
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100,043 |
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Liabilities associated with assets held for sale |
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5,659 |
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26,847 |
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Total current liabilities |
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841,092 |
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838,226 |
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LONG-TERM DEBT |
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470,743 |
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472,427 |
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DEFERRED INCOME TAXES |
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44,403 |
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44,287 |
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OTHER LONG-TERM LIABILITIES |
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30,419 |
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28,094 |
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COMMITMENTS AND CONTINGENCIES (Note 14) |
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SHAREHOLDERS EQUITY: |
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Preferred stock, $.01 par value per share, 10,000,000 shares authorized |
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Common stock, $.01 par value per share, 90,000,000 shares authorized, 34,709,443 and 34,435,252 shares issued, including shares held in treasury, respectively |
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347 |
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344 |
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Additional paid-in capital |
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423,795 |
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417,055 |
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Retained earnings |
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180,543 |
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148,986 |
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Treasury stock, at cost; 1,586,587 shares held |
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(15,032 |
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(15,032 |
) |
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Accumulated other comprehensive loss |
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(2,023 |
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(3,587 |
) |
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Total shareholders equity |
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587,630 |
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547,766 |
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Total liabilities and shareholders equity |
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$ |
1,974,287 |
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$ |
1,930,800 |
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See Notes to Condensed Consolidated Financial Statements.
3
ASBURY AUTOMOTIVE
GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
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For the Three Months |
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For the Six Months |
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2006 |
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2005 |
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2006 |
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2005 |
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REVENUES: |
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New vehicle |
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$ |
918,116 |
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$ |
872,308 |
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$ |
1,739,153 |
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$ |
1,643,577 |
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Used vehicle |
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384,561 |
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348,416 |
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742,667 |
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668,872 |
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Parts, service and collision repair |
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172,036 |
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157,999 |
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341,924 |
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309,672 |
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Finance and insurance, net |
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43,224 |
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39,064 |
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78,844 |
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74,554 |
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Total revenues |
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1,517,937 |
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1,417,787 |
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2,902,588 |
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2,696,675 |
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COST OF SALES: |
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New vehicle |
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854,390 |
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812,339 |
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1,617,630 |
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1,530,845 |
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Used vehicle |
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349,923 |
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318,479 |
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675,102 |
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610,233 |
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Parts, service and collision repair |
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84,842 |
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77,510 |
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169,744 |
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151,641 |
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Total cost of sales |
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1,289,155 |
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1,208,328 |
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2,462,476 |
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2,292,719 |
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GROSS PROFIT |
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228,782 |
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209,459 |
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440,112 |
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403,956 |
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OPERATING EXPENSES: |
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Selling, general and administrative |
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171,715 |
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160,185 |
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337,364 |
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318,552 |
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Depreciation and amortization |
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5,113 |
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4,768 |
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10,088 |
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9,460 |
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Income from operations |
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51,954 |
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44,506 |
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92,660 |
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75,944 |
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OTHER INCOME (EXPENSE): |
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Floor plan interest expense |
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(11,239 |
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(7,458 |
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(20,401 |
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(13,988 |
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Other interest expense |
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(11,139 |
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(10,269 |
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(22,043 |
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(19,869 |
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Interest income |
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1,021 |
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171 |
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1,748 |
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435 |
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Other income, net |
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481 |
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332 |
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825 |
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441 |
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Total other expense, net |
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(20,876 |
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(17,224 |
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(39,871 |
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(32,981 |
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Income before income taxes |
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31,078 |
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27,282 |
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52,789 |
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42,963 |
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INCOME TAX EXPENSE |
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11,654 |
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10,231 |
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19,796 |
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16,111 |
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INCOME FROM CONTINUING OPERATIONS |
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19,424 |
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17,051 |
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32,993 |
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26,852 |
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DISCONTINUED OPERATIONS, net of tax |
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(420 |
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(1,065 |
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(1,436 |
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(1,225 |
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NET INCOME |
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$ |
19,004 |
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$ |
15,986 |
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$ |
31,557 |
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$ |
25,627 |
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EARNINGS PER COMMON SHARE: |
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Basic |
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Continuing operations |
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$ |
0.59 |
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$ |
0.52 |
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$ |
1.00 |
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$ |
0.82 |
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Discontinued operations |
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(0.02 |
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(0.03 |
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(0.04 |
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(0.03 |
) |
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Net income |
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$ |
0.57 |
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$ |
0.49 |
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$ |
0.96 |
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$ |
0.79 |
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Diluted |
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Continuing operations |
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$ |
0.58 |
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$ |
0.52 |
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$ |
0.98 |
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$ |
0.82 |
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Discontinued operations |
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(0.02 |
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(0.03 |
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(0.04 |
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(0.04 |
) |
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Net income |
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$ |
0.56 |
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$ |
0.49 |
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$ |
0.94 |
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$ |
0.78 |
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: |
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Basic |
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33,077 |
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32,604 |
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33,000 |
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32,596 |
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Diluted |
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33,709 |
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32,725 |
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33,680 |
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32,753 |
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See Notes to Condensed Consolidated Financial Statements.
4
ASBURY AUTOMOTIVE
GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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For the Six Months |
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2006 |
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2005 |
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CASH FLOW FROM OPERATING ACTIVITIES: |
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Net income |
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$ |
31,557 |
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$ |
25,627 |
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Adjustments to reconcile net income to net cash provided by (used in) operating activities- |
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Depreciation and amortization |
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10,088 |
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9,460 |
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Depreciation and amortization from discontinued operations |
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175 |
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1,129 |
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Stock-based compensation |
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2,296 |
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Amortization of deferred financing fees |
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1,158 |
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1,013 |
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Change in allowance for doubtful accounts |
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(405 |
) |
151 |
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Gain on sale of discontinued operations, net |
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(2,617 |
) |
(10 |
) |
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Deferred income taxes |
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(860 |
) |
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Other adjustments |
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4,222 |
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2,993 |
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Changes in operating assets and liabilities, net of acquisitions and divestitures- |
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Contracts-in-transit |
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19,554 |
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(7,072 |
) |
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Accounts receivable |
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(5,221 |
) |
(10,375 |
) |
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Proceeds from the sale of accounts receivable |
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9,318 |
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8,126 |
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Inventories |
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(65,565 |
) |
31,705 |
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Prepaid and other current assets |
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(9,156 |
) |
(13,190 |
) |
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Floor plan notes payablemanufacturer affiliated |
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126,981 |
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(141,120 |
) |
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Accounts payable and accrued liabilities |
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(19,371 |
) |
13,097 |
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Excess tax benefits from share-based payment arrangements |
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(519 |
) |
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Other long-term assets and liabilities |
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4,050 |
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770 |
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Net cash provided by (used in) operating activities |
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105,685 |
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(77,696 |
) |
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CASH FLOW FROM INVESTING ACTIVITIES: |
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Capital expendituresinternally financed |
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(16,184 |
) |
(16,942 |
) |
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Capital expendituresexternally financed |
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(7,115 |
) |
(18,236 |
) |
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Construction reimbursements associated with sale-leaseback agreements |
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3,118 |
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2,595 |
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Acquisitions |
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(11,562 |
) |
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Proceeds from the sale of assets |
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42,122 |
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7,989 |
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Other investing activities |
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(746 |
) |
(878 |
) |
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Net cash provided by (used in) investing activities |
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21,195 |
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(37,034 |
) |
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CASH FLOW FROM FINANCING ACTIVITIES: |
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Floor plan borrowingsnon-manufacturer affiliated |
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1,273,177 |
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1,753,115 |
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Floor plan repaymentsnon-manufacturer affiliated |
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(1,371,358 |
) |
(1,629,643 |
) |
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Proceeds from borrowings |
|
987 |
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20,734 |
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Repayments of debt |
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(2,226 |
) |
(41,989 |
) |
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Payments of debt issuance costs |
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(4,927 |
) |
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Proceeds from the exercise of stock options |
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3,924 |
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396 |
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Excess tax benefits from share-based payment arrangements |
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519 |
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Net cash (used in) provided by financing activities |
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(94,977 |
) |
97,686 |
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Net increase (decrease) in cash and cash equivalents |
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31,903 |
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(17,044 |
) |
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CASH AND CASH EQUIVALENTS, beginning of period |
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57,194 |
|
28,093 |
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CASH AND CASH EQUIVALENTS, end of period |
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$ |
89,097 |
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$ |
11,049 |
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See Note 13 for supplemental cash flow information
See Notes to Condensed Consolidated Financial Statements
5
ASBURY AUTOMOTIVE
GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Asbury Automotive Group, Inc. is a national automotive retailer, operating 119 franchises (86 dealership locations) in 21 metropolitan markets within 10 states as of June 30, 2006. We offer an extensive range of automotive products and services, including new and used vehicles, vehicle maintenance, replacement parts, collision repair services, and financing, insurance and service contracts. We offer 33 domestic and foreign brands of new vehicles, including four heavy truck brands. We also operate 24 collision repair centers that serve our markets.
Our retail network is organized into principally four regions and includes ten dealership groups, each marketed under different local brands: (i) Florida (comprising our Coggin dealerships, operating primarily in Jacksonville and Orlando, and our Courtesy dealerships operating in Tampa), (ii) West (comprising our McDavid dealerships operating throughout Texas and our Spirit dealership operating in Los Angeles, California), (iii) Mid-Atlantic (comprising our Crown dealerships operating in North Carolina, South Carolina and Southern Virginia) and (iv) South (comprising our Nalley dealerships operating in Atlanta, Georgia, and our North Point dealerships operating in Little Rock, Arkansas). Our Plaza dealerships operating in St. Louis, Missouri, our Gray Daniels dealerships operating in Jackson, Mississippi and our Northern California Dealerships operating in Sacramento and Fresno, California remain standalone operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), and reflect the condensed consolidated accounts of Asbury Automotive Group, Inc. and our wholly owned subsidiaries.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Accordingly, actual results could differ from these estimates. Estimates and assumptions are reviewed quarterly and the effects of revisions are reflected in the condensed consolidated financial statements in the period they are determined to be necessary. Refer to Critical Accounting Estimates in Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations for more information on our critical estimates. All intercompany transactions have been eliminated in consolidation.
In the opinion of management, all adjustments (consisting only of normal, recurring adjustments) considered necessary for a fair presentation of the unaudited interim condensed consolidated financial statements as of June 30, 2006, and for the three and six months ended June 30, 2006 and 2005 have been included. The results of operations for the three and six months ended June 30, 2006 are not necessarily indicative of the results that may be expected for the full year. Our interim unaudited condensed consolidated financial statements should be read together with our consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2005.
Revenue Recognition
Revenue from the sale of new and used vehicles is recognized upon delivery, passage of title, signing of the sales contract and approval of financing. Revenue from the sale of parts, service and collision repair is recognized upon delivery of parts to the customer or at the time vehicle service or repair work is completed. Manufacturer incentives and rebates, including manufacturer holdbacks, floor plan interest assistance and certain advertising assistance, are recognized as a reduction of new vehicle cost of sales when earned, generally at the time the related vehicles are sold.
6
We receive commissions for arranging customer financing and for the sale of vehicle service contracts, credit life insurance and disability insurance to customers (collectively F&I). We may be charged back (chargebacks) for F&I commissions in the event a contract is terminated. F&I commissions are recorded at the time the vehicles are sold and a reserve for future chargebacks is established based on historical operating results and the termination provisions of the applicable contracts. F&I commissions, net of estimated chargebacks, are included in Finance and insurance, net in the accompanying Condensed Consolidated Statements of Income.
Goodwill and Other Intangible Assets
Goodwill represents the excess cost of the businesses acquired over the fair market value of the identifiable net assets. We have determined that based on how we operate our business, allocate resources, and regularly review our financial data and operating results that we qualify as a single reporting unit for purposes of testing goodwill for impairment. We evaluate our operations and financial results in the aggregate by dealership. The dealership general managers implement the strategy as determined by the corporate office in conjunction with our regional management team, and have the independence and flexibility to respond effectively to local market conditions.
The fair market value of our manufacturer franchise rights is determined at the acquisition date through discounting the projected cash flows specific to each franchise. We have determined that manufacturer franchise rights have an indefinite life as there are no legal, contractual, economic or other factors that limit their useful lives and they are expected to generate cash flows indefinitely due to the historically long lives of the manufacturers brand names. Due to the fact that manufacturer franchise rights are specific to the location in which we acquire a dealership, we have determined that the dealership is the reporting unit for purposes of testing for impairment.
Stock-Based Compensation
Effective January 2006, we adopted SFAS No. 123R Share-Based Payment under the modified prospective transition method and therefore we record stock-based compensation expense under the fair value method on a straight-line basis over the vesting period. Accordingly, prior periods have not been restated. Prior to January 2006, including the three and six months ended June 30, 2005, we recorded stock-based compensation expense in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. APB Opinion No. 25 required the use of the intrinsic value method, which measures compensation cost as the excess, if any, of the quoted market price of the stock at the measurement date over the amount an employee must pay to acquire the stock.
Derivative Instruments and Hedging Activities
We utilize derivative financial instruments to manage our capital structure. The types of risks hedged are those relating to the variability of cash flows and changes in the fair value of our financial instruments caused by movements in interest rates. We document our risk management strategy and assess hedge effectiveness at the inception and during the term of each hedge. Derivatives are reported at fair value on the accompanying Condensed Consolidated Balance Sheets.
The changes in fair value of the effective portion of cash flow hedges are reported as a component of accumulated other comprehensive income (loss). Amounts in accumulated other comprehensive income (loss) are reclassified to interest expense to the extent the hedge becomes ineffective. The change in fair value of fair value hedges are recorded as a component of interest expense. Changes in the fair value of the associated hedged exposures are also recorded as a component of interest expense.
Measurements of hedge effectiveness are based on comparisons between the gains or losses of the actual interest rate swaps and the gains or losses of hypothetical interest rate swaps which are designed to reflect the critical terms of the defined hedged exposures. Ineffective portions of these interest rate swaps are reported as a component of interest expense in the accompanying Condensed Consolidated Statements of Income. We recognized no ineffectiveness during the six months ended June 30, 2006 and minor ineffectiveness during the six months ended June 30, 2005.
Statements of Cash Flows
Borrowings and repayments of floor plan notes payable to a party unaffiliated with the manufacturer of a particular new vehicle, and all floor plan notes payable relating to pre-owned vehicles, are classified as financing activities on the accompanying Condensed Consolidated Statements of Cash Flows with borrowings reflected separately from repayments. The net change in floor plan notes payable to a party affiliated with the manufacturer of a particular new vehicle is classified as an operating activity on the accompanying Condensed Consolidated Statements of Cash Flows.
7
The net change in service loaner vehicle obligations is reflected as an operating activity in the accompanying Condensed Consolidated Statements of Cash Flows, as these borrowings and repayments are with lenders affiliated with the vehicle manufacturer from which we purchase the related vehicles.
Construction reimbursements in connection with sale-leaseback agreements for the construction of new dealership facilities or leasehold improvements to our existing dealership facilities are included in investing activities in the accompanying Condensed Consolidated Statements of Cash Flows.
Externally financed capital expenditures include all expenditures that we have financed during the reporting period or intend to finance in future reporting periods through sale-leaseback transactions or mortgage financing. Internally financed capital expenditures include all capital expenditures which were paid using available cash and for which we do not intend to seek external financing.
Tax benefits related to stock-based awards that are fully vested prior to the adoption of SFAS No. 123R are included as cash inflows from financing activities and cash outflows from operating activities on the accompanying Condensed Consolidated Statements of Cash Flows. Excess tax benefits related to stock-based awards that are partially vested upon or granted after the adoption of SFAS No. 123R are included as cash inflows from financing activities and cash outflows from operating activities on the accompanying Condensed Consolidated Statements of Cash Flows.
Recent Accounting Pronouncements
In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 48 Accounting for Uncertainty in Income Taxes. FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with FASB Statement No. 109 Accounting for Income Taxes. FIN No. 48 prescribes a recognition threshold and measurement of a tax position taken or expected to be taken in a tax return. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. Earlier application is encouraged if the enterprise has not yet issued financial statements, including interim financial statements, in the period of adoption. We are currently evaluating the impact of FIN No. 48 on our condensed consolidated financial statements and disclosures.
In October 2005, the FASB issued Staff Position (FSP) No. FAS 13-1, Accounting for Rental Costs Incurred during a Construction Period, which requires rental costs associated with ground or building operating leases that are incurred during a construction period to be recognized as rental expense. FSP No. FAS 13-1 is effective for reporting periods beginning after December 15, 2005. Accordingly, we adopted the provisions of FSP No. FAS 13-1 in January 2006 and currently expense all rent obligations incurred during the construction period.
We have established two stock-based compensation plans (the Plans) under which we may grant non-qualified stock options and restricted stock units to our directors, officers and employees at fair market value on the date of the grant. Stock options generally vest ratably over three years from the date of grant and expire ten years from the date of grant. Restricted stock units generally vest after two to three years from the date of grant and also expire ten years from the date of grant. We have granted a total of 4,310,954 non-qualified stock options and in January 2006, we granted 175,500 restricted stock units to certain of our key employees and officers. As of June 30, 2006, there were 2,636,362 non-qualified stock options and 175,500 restricted stock units outstanding. In addition, there were approximately 2,213,000 stock-based awards available for grant under our stock-based compensation plans as of June 30, 2006. We expect to continue to issue restricted stock units in lieu of non-qualified stock options.
Effective January 2006, we adopted SFAS No. 123R under the modified prospective transition method. As a result we have recorded stock-based compensation expense for the three and six months ended June 30, 2006, under the fair value method. Prior to January 2006, including the three and six months ended June 30, 2005, we accounted for stock-based awards under the intrinsic value method in accordance with APB Opinion No. 25. During the six months ended June 30, 2006, the adoption of SFAS No. 123R resulted in incremental stock-based compensation expense of $1.5 million (excluding $0.8 million associated with our decision to issue restricted stock units). The incremental stock-based compensation expense decreased income before income taxes by $1.5 million, net income by $0.9 million and basic and diluted earnings per common share by $0.03 per share. Net cash provided by operating activities decreased and net cash used in financing activities decreased by $0.5 million related to excess tax benefits from stock-based payment arrangements.
8
The fair value of each option award is estimated on the date of grant using the Black Scholes option valuation model. The fair value of each restricted stock unit is estimated using the market price of our common stock on the date of grant. Expected volatilities are based on the historical volatility of our common stock. We use historical data to estimate the rate of option exercises and employee turnover within the valuation model. The expected term of options granted represents the period of time that the related options are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
We recorded $0.9 million in compensation expense and an associated tax benefit of $0.3 million for the three months ended June 30, 2006; and $2.3 million in compensation expense and an associated tax benefit of $0.9 million for the six months ended June 30, 2006. We did not recognize any material stock-based compensation expense during the six months ended June 30, 2005. As of June 30, 2006, there was $4.6 million of total unrecognized stock-based compensation expense related to non-vested stock-based awards granted under the Plans. That cost is expected to be recognized over a weighted average period of 0.8 years. The following table illustrates the effect on net income and net income per share had our stock-based awards been recorded using the fair value method of SFAS No. 123R for the three and six months ended June 30, 2005:
|
For the Three |
|
For the Six |
|
|||
(In thousands, except per share data) |
|
2005 |
|
2005 |
|
||
|
|
|
|
|
|
||
Net income |
|
$ |
15,986 |
|
$ |
25,627 |
|
Adjustments to net income: |
|
|
|
|
|
||
Stock-based compensation expense included in net income, net of tax |
|
|
|
1 |
|
||
Pro forma stock-based compensation expense, net of tax |
|
(674 |
) |
(1,340 |
) |
||
Pro forma net income |
|
$ |
15,312 |
|
$ |
24,288 |
|
|
|
|
|
|
|
||
Net income per common sharebasic (as reported) |
|
$ |
0.49 |
|
$ |
0.79 |
|
|
|
|
|
|
|
||
Net income per common sharediluted (as reported) |
|
$ |
0.49 |
|
$ |
0.78 |
|
|
|
|
|
|
|
||
Pro forma net income per common sharebasic |
|
$ |
0.47 |
|
$ |
0.75 |
|
|
|
|
|
|
|
||
Pro forma net income per common sharediluted |
|
$ |
0.47 |
|
$ |
0.74 |
|
A summary of options outstanding and exercisable under the Plans as of June 30, 2006, and changes during the six months then ended is presented below:
|
|
Stock |
|
Weighted Average |
|
Weighted Average |
|
Aggregate Intrinsic |
|
||
Options outstanding - December 31, 2005 |
|
2,941,262 |
|
$ |
15.35 |
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
||
Exercised |
|
(274,191 |
) |
$ |
14.31 |
|
|
|
|
|
|
Expired / Forfeited |
|
(30,709 |
) |
$ |
15.09 |
|
|
|
|
|
|
Options outstandingJune 30, 2006 |
|
2,636,362 |
|
$ |
15.46 |
|
5.1 |
|
$ |
14,447,263 |
|
|
|
|
|
|
|
|
|
|
|
||
Options exercisableJune 30, 2006 |
|
2,219,822 |
|
$ |
15.57 |
|
4.6 |
|
$ |
11,920,444 |
|
* Based on the closing price of our common stock on June 30, 2006
Cash received from option exercises for the six months ended June 30, 2006 was $3.9 million. The actual intrinsic value of options exercised during the six months ended June 30, 2006 was $1.5 million. The actual tax benefit realized for the tax deductions from option exercises totaled $0.6 million for the six months ended June 30, 2006.
9
A summary of restricted stock units as of June 30, 2006, and changes during the six months then ended is presented below:
|
Shares |
|
Weighted Average |
|
||
Restricted Stock UnitsDecember 31, 2005 |
|
|
|
$ |
|
|
Granted |
|
175,500 |
|
$ |
16.86 |
|
Performance estimate |
|
43,875 |
|
$ |
16.86 |
|
Vested |
|
|
|
$ |
|
|
Forfeited |
|
|
|
$ |
|
|
Restricted Stock UnitsJune 30, 2006* |
|
219,375 |
|
$ |
16.86 |
|
* Includes an estimate of 43,875 out of a maximum of 140,400 issuable upon attaining certain performance metrics
Each restricted stock unit provides an opportunity for the employee to receive a number of shares of our common stock based on our performance during a three year period (the Performance Cycle) as measured against objective performance goals related to (1) new vehicle revenue growth as compared to peer companies, (2) used vehicle revenue growth as compared to peer companies, (3) finance and insurance revenue growth, (4) fixed operations gross profit and (5) earnings per share. Each equity award sets forth a target number of shares to be granted to the employee assuming the performance goals are met at the target level. The actual number of shares earned may range from 0% to 180% of the target number of shares depending upon achievement of the performance goals during the Performance Cycle. We currently estimate that we will achieve 125% of our performance goals.
Inventories consist of the following:
|
|
As of |
|
||||
(In thousands) |
|
June 30, |
|
December 31, |
|
||
|
|
|
|
|
|
||
New vehicles |
|
$ |
613,807 |
|
$ |
556,141 |
|
Used vehicles |
|
124,380 |
|
111,000 |
|
||
Parts and accessories |
|
41,630 |
|
42,650 |
|
||
Total inventories |
|
$ |
779,817 |
|
$ |
709,791 |
|
The lower of cost or market reserves for inventory totaled $5.3 million and $4.3 million as of June 30, 2006 and December 31, 2005, respectively. In addition to the inventories shown above, we have $3.4 million and $18.9 million of inventory as of June 30, 2006 and December 31, 2005, respectively, classified as Assets Held for Sale on the accompanying Condensed Consolidated Balance Sheets as they are associated with franchises held for sale at each balance sheet date.
We did not acquire any franchises during the six months ended June 30, 2006. During the six months ended June 30, 2005, we acquired one franchise (one dealership location) for an aggregate purchase price of $12.0 million, of which $4.7 million was paid in cash through the use of available funds; $6.8 million was borrowed from our floor plan facilities, with the remaining $0.5 million representing the fair value of future payments.
The allocation of purchase price for acquisitions is as follows:
|
For the Six |
|
||
(In thousands) |
|
2005 |
|
|
|
|
|
|
|
Inventories |
|
$ |
6,878 |
|
Fixed assets |
|
278 |
|
|
Goodwill |
|
3,539 |
|
|
Franchise rights |
|
1,352 |
|
|
Total purchase price |
|
$ |
12,047 |
|
10
The allocation of purchase price to assets acquired and liabilities assumed for certain current and prior year acquisitions was based on preliminary estimates of fair value and may be revised as additional information concerning valuation of such assets and liabilities becomes available.
6. GOODWILL AND MANUFACTURER FRANCHISE RIGHTS
During the six months ended June 30, 2006, we sold six franchises (five dealership locations) resulting in the removal of approximately $7.0 million of Goodwill from our Condensed Consolidated Balance Sheets. There were no manufacturer franchise rights associated with these franchises at the time of sale as these franchises were purchased prior to the adoption of SFAS No. 142 Goodwill and Other Intangibles. Manufacturer franchise rights totaled $41.8 million as of June 30, 2006 and December 31, 2005, and are included in Other Long-term Assets on the accompanying Condensed Consolidated Balance Sheets.
7. ASSETS AND LIABILITIES HELD FOR SALE
Assets and liabilities classified as held for sale include (i) assets and liabilities associated with discontinued operations held for sale at each balance sheet date, (ii) costs of completed construction projects included in pending sale-leaseback transactions where an unaffiliated third party reimburses us during construction or will reimburse us upon completion of the transaction.
Assets and liabilities associated with discontinued operations include one franchise in North Carolina and one ancillary business in Florida as of June 30, 2006. As of December 31, 2005, assets and liabilities associated with discontinued operations included two franchises (two dealership locations) in Oregon and two franchises (two dealership locations) in Southern California. During the six months ended June 30, 2006, we sold the franchises that had been held for sale as of December 31, 2005 as well as two additional franchises (one dealership location) in Florida for proceeds of $42.0 million, resulting in a net gain of $2.6 million. Assets associated with discontinued operations totaled $17.2 million and $39.6 million, and liabilities associated with discontinued operations totaled $3.5 million and $16.8 million as of June 30, 2006 and December 31, 2005, respectively.
Included in Assets Held for Sale as of June 30, 2006 was $2.5 million of costs associated with one completed project included in a pending sale-leaseback transaction. Included in Assets Held for Sale as of December 31, 2005, was $11.9 million of costs associated with two completed projects included in pending sale-leaseback transactions. As of June 30, 2006 and December 31, 2005, Liabilities Associated with Assets Held for Sale included $2.2 million and $10.0 million, respectively, of reimbursements associated with completed construction projects. During the six months ended June 30, 2006 we completed one sale-leaseback transaction resulting in (i) the sale of $11.0 million of assets; (ii) the receipt of the remaining $3.1 million of reimbursements and (iii) the commencement of long-term operating leases for the assets sold. We expect to receive the final reimbursement of costs related to the remaining completed construction project and complete the associated sale-leaseback transaction during the second half of 2006.
A summary of assets and liabilities held for sale is as follows:
|
|
As of |
|
||||
(In thousands) |
|
June 30, |
|
December 31, |
|
||
Assets: |
|
|
|
|
|
||
Inventories |
|
$ |
3,369 |
|
$ |
18,940 |
|
Property and equipment, net |
|
15,241 |
|
32,558 |
|
||
Other assets |
|
1,067 |
|
|
|
||
Total assets |
|
19,677 |
|
51,498 |
|
||
Liabilities: |
|
|
|
|
|
||
Floor plan notes payable |
|
2,629 |
|
16,775 |
|
||
Other liabilities |
|
3,030 |
|
10,072 |
|
||
Total liabilities |
|
5,659 |
|
26,847 |
|
||
Net assets held for sale |
|
$ |
14,018 |
|
$ |
24,651 |
|
Included in Prepaid and Other Current Assets on the accompanying Condensed Consolidated Balance Sheets are costs associated with construction projects, which we intend to sell through sale-leaseback transactions but have not been completed and therefore are not available for sale. In connection with these construction projects, we have entered into sale-leaseback agreements whereby an unaffiliated third party purchased the land and is reimbursing us, or will reimburse us, for the cost of construction of dealership facilities being constructed on the land. We capitalize the cost of the construction
11
during the construction period and record a corresponding liability equal to the amount of any reimbursed funds. Upon completion of the construction, we will execute the sale-leaseback transaction and remove the cost of construction and the related liability from our Condensed Consolidated Balance Sheets. The book value of assets associated with construction projects that have not been completed as of June 30, 2006 and December 31, 2005 totaled $7.3 million and $2.9 million, respectively. As of June 30, 2006 and December 31, 2005, there were no liabilities associated with these construction projects.
Long-term debt consists of the following:
|
|
As of |
|
||||
(In thousands) |
|
June 30, |
|
December 31, |
|
||
|
|
|
|
|
|
||
9% Senior Subordinated Notes due 2012 |
|
$ |
250,000 |
|
$ |
250,000 |
|
8% Senior Subordinated Notes due 2014 ($200.0 million face value, net of hedging activity of $9,188 and $8,028, respectively) |
|
190,812 |
|
191,972 |
|
||
Mortgage notes payable |
|
27,321 |
|
26,764 |
|
||
Loaner vehicle obligations |
|
24,110 |
|
21,676 |
|
||
Capital lease obligations |
|
3,843 |
|
4,548 |
|
||
Other notes payable |
|
914 |
|
1,989 |
|
||
|
|
497,000 |
|
496,949 |
|
||
Lesscurrent portion |
|
(26,257 |
) |
(24,522 |
) |
||
Long-term debt |
|
$ |
470,743 |
|
$ |
472,427 |
|
In March 2006, we amended our Committed Credit Facility to include DaimlerChrysler Financial Services (DCFS) as a lender and extended its maturity to March 2009. In addition, DCFS has agreed to provide a maximum of $120.0 million of floor plan financing outside of the Committed Credit Facility to finance inventory purchases at our Mercedes, Chrysler, Dodge and Jeep dealerships (DaimlerChrysler Dealerships). As a result of the execution of this amendment, floor plan borrowings from DCFS are now included in Floor Plan Notes Payable Manufacturer Affiliated on our Condensed Consolidated Balance Sheets. The DCFS floor plan facility has no stated termination date. Borrowings will accrue interest based on LIBOR. Further, we reduced our working capital borrowing capacity of our Committed Credit Facility from $150.0 million to $125.0 million and reduced the floor plan borrowing capacity of our Committed Credit Facility from $650.0 million to $425.0 million.
In connection with the amendment to our Committed Credit Facility in March 2006, we refinanced the floor plan notes payable at our DaimlerChrysler Dealerships through the repayment of $85.4 million of floor plan notes payable non-manufacturer affiliated with borrowings from DCFS, a manufacturer affiliated lender. As a result, floor plan notes payable at our DaimlerChrysler Dealerships are included in floor plan notes payable manufacturer affiliated on the accompanying Condensed Consolidated Balance Sheets as of June 30, 2006. Floor plan notes payable at our DaimlerChrysler Dealerships totaled $91.3 million and $95.4 million as of June 30, 2006 and December 31, 2005, respectively. In addition, during the six months ended June 30, 2006, our floor plan repayments non-manufacturer affiliated and floor plan notes payable manufacturer affiliated each increased by $85.4 million on the accompanying Condensed Consolidated Statements of Cash Flows.
As of June 30, 2006 and December 31, 2005, we had $660.0 million and $631.2 million of floor plan notes payable outstanding, respectively, including $2.6 million and $16.8 million classified as Liabilities Associated with Assets Held for Sale on the accompanying Condensed Consolidated Balance Sheets.
10. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITY
Three of our interest rate swap agreements expired in March 2006, which resulted in a cash payment of $13.7 million, which equaled the fair market value of the swap agreements. Included in Accumulated Other Comprehensive Loss on our Condensed Consolidated Balance Sheet as of June 30, 2006 was $2.4 million of unrecognized amortization related to our two expired cash flow swaps, which are being amortized over eight years as a component of Floor Plan Interest Expense on the accompanying Condensed Consolidated Statements of Income. In addition, included as a reduction to our 8% Senior Subordinated Notes due 2014 (8 % Notes) as of June 30, 2006 was $9.2 million of unrecognized amortization related to our
12
expired fair value swap, which is being amortized over eight years as a component of Other Interest Expense on the accompanying Condensed Consolidated Statements of Income. The expiration of these three swap agreements will increase floor plan and other interest expense by $0.7 million and $1.0 million, respectively, during 2006.
We have an interest rate swap agreement with a notional principal amount of $14.4 million as of June 30, 2006, as a hedge against future changes in the interest rate of our variable rate mortgage notes payable. Under the terms of the swap agreement, we are required to make payments at a fixed rate of 6.08% and receive a variable rate based on LIBOR. This swap agreement was designated and qualifies as a cash flow hedge of changes in the interest rate of our variable rate mortgage notes payable and will contain minor ineffectiveness. As of June 30, 2006 and December 31, 2005, the swap agreement had a fair value of $0.7 million and $0.3 million, respectively, which is included in Other Long-Term Assets on the accompanying Condensed Consolidated Balance Sheets.
The following table provides a reconciliation of net income to comprehensive income:
|
|
For the Three Months |
|
For the Six Months |
|
||||||||
(In thousands) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
19,004 |
|
$ |
15,986 |
|
$ |
31,557 |
|
$ |
25,627 |
|
|
|
|
|
|
|
|
|
|
|
||||
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
||||
Change in fair value of cash flow swaps |
|
164 |
|
(8,368 |
) |
2,185 |
|
(5,279 |
) |
||||
Amortization of expired cash flow swaps |
|
239 |
|
|
|
318 |
|
|
|
||||
Income tax expense (benefit) associated with cash flow swaps |
|
(151 |
) |
3,138 |
|
(939 |
) |
1,980 |
|
||||
Comprehensive income |
|
$ |
19,256 |
|
$ |
10,756 |
|
$ |
33,121 |
|
$ |
22,328 |
|
During the six months ended June 30, 2006, we placed three franchises (one dealership location) and one ancillary business into discontinued operations and sold six franchises (five dealership locations) for proceeds of approximately $42.0 million, resulting in a net gain of $2.6 million. As of June 30, 2006, one franchise and one ancillary business were pending disposition. The accompanying Condensed Consolidated Statements of Income for the three and six months ended June 30, 2005, have been reclassified to reflect the status of our discontinued operations as of June 30, 2006.
The following table provides further information regarding our discontinued operations as of June 30, 2006, and includes the results of businesses sold between January 1, 2005 and June 30, 2006, and businesses pending disposition as of June 30, 2006:
|
|
For the Three Months |
|
For the Three Months |
|
||||||||||||||
(Dollars in thousands) |
|
Sold |
|
Pending |
|
Total |
|
Sold(a) |
|
Pending |
|
Total |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Franchises: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mid-line Domestic |
|
1 |
|
|
|
1 |
|
9 |
|
|
|
9 |
|
||||||
Mid-line Import |
|
1 |
|
|
|
1 |
|
3 |
|
|
|
3 |
|
||||||
Value |
|
1 |
|
|
|
1 |
|
2 |
|
|
|
2 |
|
||||||
Luxury |
|
|
|
1 |
|
1 |
|
|
|
1 |
|
1 |
|
||||||
Total |
|
3 |
|
1 |
|
4 |
|
14 |
|
1 |
|
15 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Ancillary Businesses |
|
|
|
1 |
|
1 |
|
1 |
|
1 |
|
2 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenues |
|
$ |
5,431 |
|
$ |
4,231 |
|
$ |
9,662 |
|
$ |
105,178 |
|
$ |
3,382 |
|
$ |
108,560 |
|
Cost of sales |
|
5,059 |
|
1,990 |
|
7,049 |
|
90,173 |
|
1,084 |
|
91,257 |
|
||||||
Gross profit |
|
372 |
|
2,241 |
|
2,613 |
|
15,005 |
|
2,298 |
|
17,303 |
|
||||||
Operating expenses |
|
3,524 |
|
1,630 |
|
5,154 |
|
15,603 |
|
1,828 |
|
17,431 |
|
||||||
Income (loss) from operations |
|
(3,152 |
) |
611 |
|
(2,541 |
) |
(598 |
) |
470 |
|
(128 |
) |
||||||
Other expense, net |
|
(273 |
) |
(32 |
) |
(305 |
) |
(1,183 |
) |
(17 |
) |
(1,200 |
) |
||||||
13
Gain (Loss) on disposition of discontinued operations, net |
|
2,564 |
|
|
|
2,564 |
|
(376 |
) |
|
|
(376 |
) |
||||||
Income (loss) before income taxes |
|
(861 |
) |
579 |
|
(282 |
) |
(2,157 |
) |
453 |
|
(1,704 |
) |
||||||
Income tax (expense) benefit |
|
79 |
|
(217 |
) |
(138 |
) |
809 |
|
(170 |
) |
639 |
|
||||||
Discontinued operations, net of tax |
|
$ |
(782 |
) |
$ |
362 |
|
$ |
(420 |
) |
$ |
(1,348 |
) |
$ |
283 |
|
$ |
(1,065 |
) |
(a) Businesses were sold between April 1, 2005 and June 30, 2006.
(b) Businesses were pending disposition as of June 30, 2006.
|
|
For the Six Months |
|
For the Six Months |
|
||||||||||||||
(Dollars in thousands) |
|
Sold |
|
Pending |
|
Total |
|
Sold(a) |
|
Pending |
|
Total |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Franchises: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mid-line Domestic |
|
3 |
|
|
|
3 |
|
10 |
|
|
|
10 |
|
||||||
Mid-line Import |
|
2 |
|
|
|
2 |
|
3 |
|
|
|
3 |
|
||||||
Value |
|
1 |
|
|
|
1 |
|
2 |
|
|
|
2 |
|
||||||
Luxury |
|
|
|
1 |
|
1 |
|
1 |
|
1 |
|
2 |
|
||||||
Total |
|
6 |
|
1 |
|
7 |
|
16 |
|
1 |
|
17 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Ancillary Businesses |
|
|
|
1 |
|
1 |
|
1 |
|
1 |
|
2 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenues |
|
$ |
33,415 |
|
$ |
8,127 |
|
$ |
41,542 |
|
$ |
205,282 |
|
$ |
6,441 |
|
$ |
211,723 |
|
Cost of sales |
|
29,329 |
|
3,841 |
|
33,170 |
|
175,044 |
|
1,917 |
|
176,961 |
|
||||||
Gross profit |
|
4,086 |
|
4,286 |
|
8,372 |
|
30,238 |
|
4,524 |
|
34,762 |
|
||||||
Operating expenses |
|
8,937 |
|
3,353 |
|
12,290 |
|
31,049 |
|
3,608 |
|
34,657 |
|
||||||
Income (loss) from operations |
|
(4,851 |
) |
933 |
|
(3,918 |
) |
(811 |
) |
916 |
|
105 |
|
||||||
Other expense, net |
|
(542 |
) |
(65 |
) |
(607 |
) |
(2,045 |
) |
(31 |
) |
(2,076 |
) |
||||||
Gain on disposition of discontinued operations, net |
|
2,617 |
|
|
|
2,617 |
|
10 |
|
|
|
10 |
|
||||||
Income (loss) before income taxes |
|
(2,776 |
) |
868 |
|
(1,908 |
) |
(2,846 |
) |
885 |
|
(1,961 |
) |
||||||
Income tax (expense) benefit |
|
797 |
|
(325 |
) |
472 |
|
1,068 |
|
(332 |
) |
736 |
|
||||||
Discontinued operations, net of tax |
|
$ |
(1,979 |
) |
$ |
543 |
|
$ |
(1,436 |
) |
$ |
(1,778 |
) |
$ |
553 |
|
$ |
(1,225 |
) |
(a) Businesses were sold between January 1, 2005 and June 30, 2006.
(b) Businesses were pending disposition as of June 30, 2006.
13. SUPPLEMENTAL CASH FLOW INFORMATION
During the six months ended June 30, 2006 and 2005, we made interest payments, net of amounts capitalized, totaling $41.4 million and $36.3 million, respectively. During the six months ended June 30, 2006 and 2005, we received $0.5 million and $2.5 million, respectively, of proceeds associated with our interest rate swap agreement that was entered into in connection with the issuance of our 8% Notes.
During the six months ended June 30, 2006 and 2005, we made income tax payments totaling $13.5 million and $8.2 million, respectively.
During the six months ended June 30, 2006 and 2005, we completed sale-leaseback transactions resulting in the sale of $11.0 million and $15.7 million of Assets Held for Sale and the removal of the corresponding liabilities from our Condensed Consolidated Balance Sheets, respectively.
14. COMMITMENTS AND CONTINGENCIES
A significant portion of our vehicle business involves the sale of vehicles, parts or vehicles composed of parts that are manufactured outside the United States of America. As a result, our operations are subject to customary risks of importing merchandise, including fluctuations in the relative values of currencies, import duties, exchange controls, trade
14
restrictions, work stoppages and general political and socio-economic conditions in foreign countries. The United States of America or the countries from which our products are imported may, from time to time, impose new quotas, duties, tariffs or other restrictions, or adjust presently prevailing quotas, duties or tariffs, which may affect our operations and our ability to purchase imported vehicles and/or parts at reasonable prices.
Manufacturers may direct us to implement costly capital improvements to dealerships as a condition upon entering into franchise agreements with them. Manufacturers also typically require that their franchises meet specific standards of appearance. These factors, either alone or in combination, could cause us to divert our financial resources to capital projects from uses that management believes may be of higher long-term value, such as acquisitions.
Substantially all of our facilities are subject to federal, state and local provisions regarding the discharge of materials into the environment. Compliance with these provisions has not had, nor do we expect such compliance to have, any material effect upon our capital expenditures, net earnings, financial condition, liquidity or competitive position. We believe that our current practices and procedures for the control and disposition of such materials comply with applicable federal, state and local requirements.
From time to time, we and our dealerships are named in claims involving the manufacture and sale or lease of motor vehicles, including but not limited to the charging of administrative fees, the operation of dealerships, contractual disputes and other matters arising in the ordinary course of our business. With respect to certain of these claims, the sellers of our acquired dealerships have indemnified us. We do not expect that any potential liability from these claims will materially affect our financial condition, liquidity, results of operations or financial statement disclosures.
Our dealerships hold dealer agreements with a number of vehicle manufacturers. In accordance with the individual dealer agreements, each dealership is subject to certain rights and restrictions typical of the industry. The ability of the manufacturers to influence the operations of the dealerships or the loss of a dealer agreement could have a negative impact on our operating results.
15. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Our 8% Senior Subordinated Notes due 2014 and our Committed Credit Facility are guaranteed by all of our current subsidiaries, other than our current Toyota and Lexus dealership subsidiaries, and all of our future domestic restricted subsidiaries, other than our future Toyota and Lexus dealership facilities. The following tables set forth, on a condensed consolidating basis, our balance sheets, statements of income and statements of cash flows, for our guarantor and non-guarantor subsidiaries for all financial statement periods presented in our interim Condensed Consolidated financial statements.
15
Condensed
Consolidating Balance Sheet
As of June 30, 2006
(In thousands)
|
|
Parent |
|
Guarantor |
|
Non-guarantor |
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
|
|
$ |
89,097 |
|
$ |
|
|
$ |
|
|
$ |
89,097 |
|
Inventories |
|
|
|
721,105 |
|
58,712 |
|
|
|
779,817 |
|
|||||
Other current assets |
|
|
|
309,252 |
|
33,127 |
|
|
|
342,379 |
|
|||||
Assets held for sale |
|
|
|
19,677 |
|
|
|
|
|
19,677 |
|
|||||
Total current assets |
|
|
|
1,139,131 |
|
91,839 |
|
|
|
1,230,970 |
|
|||||
Property and equipment, net |
|
|
|
192,348 |
|
6,477 |
|
|
|
198,825 |
|
|||||
Goodwill |
|
|
|
397,160 |
|
53,202 |
|
|
|
450,362 |
|
|||||
Other assets |
|
|
|
93,857 |
|
273 |
|
|
|
94,130 |
|
|||||
Investment in subsidiaries |
|
587,630 |
|
78,021 |
|
|
|
(665,651 |
) |
|
|
|||||
Total assets |
|
$ |
587,630 |
|
$ |
1,900,517 |
|
$ |
151,791 |
|
$ |
(665,651 |
) |
$ |
1,974,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Floor plan notes payable manufacturer affiliated |
|
$ |
|
|
$ |
331,025 |
|
$ |
|
|
$ |
|
|
$ |
331,025 |
|
Floor plan notes payable nonmanufacturer affiliated |
|
|
|
281,240 |
|
45,063 |
|
|
|
326,303 |
|
|||||
Other current liabilities |
|
|
|
149,453 |
|
28,652 |
|
|
|
178,105 |
|
|||||
Liabilities associated with assets held for sale |
|
|
|
5,659 |
|
|
|
|
|
5,659 |
|
|||||
Total current liabilities |
|
|
|
767,377 |
|
73,715 |
|
|
|
841,092 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-term debt |
|
|
|
470,688 |
|
55 |
|
|
|
470,743 |
|
|||||
Other liabilities |
|
|
|
74,822 |
|
|
|
|
|
74,822 |
|
|||||
Shareholders equity |
|
587,630 |
|
587,630 |
|
78,021 |
|
(665,651 |
) |
587,630 |
|
|||||
Total liabilities and shareholders equity |
|
$ |
587,630 |
|
$ |
1,900,517 |
|
$ |
151,791 |
|
$ |
(665,651 |
) |
$ |
1,974,287 |
|
16
Condensed
Consolidating Balance Sheet
As of December 31, 2005
(In thousands)
|
|
Parent |
|
Guarantor |
|
Non-guarantor |
|
Eliminations |
|
Condensed |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
$ |
|
|
$ |
57,194 |
|
$ |
|
|
$ |
|
|
$ |
57,194 |
|
Inventories |
|
|
|
658,820 |
|
50,971 |
|
|
|
709,791 |
|
|||||
Other current assets |
|
|
|
334,403 |
|
32,294 |
|
|
|
366,697 |
|
|||||
Assets held for sale |
|
|
|
51,498 |
|
|
|
|
|
51,498 |
|
|||||
Total current assets |
|
|
|
1,101,915 |
|
83,265 |
|
|
|
1,185,180 |
|
|||||
Property and equipment, net |
|
|
|
187,077 |
|
6,380 |
|
|
|
193,457 |
|
|||||
Goodwill |
|
|
|
404,203 |
|
53,202 |
|
|
|
457,405 |
|
|||||
Other assets |
|
|
|
94,470 |
|
288 |
|
|
|
94,758 |
|
|||||
Investment in subsidiaries |
|
547,766 |
|
71,809 |
|
|
|
(619,575 |
) |
|
|
|||||
Total assets |
|
$ |
547,766 |
|
$ |
1,859,474 |
|
$ |
143,135 |
|
$ |
(619,575 |
) |
$ |
1,930,800 |
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|||||
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Floor plan notes payable - manufacturer affiliated |
|
$ |
|
|
$ |
204,044 |
|
$ |
|
|
$ |
|
|
$ |
204,044 |
|
Floor plan notes payable - non-manufacturer affiliated |
|
|
|
368,213 |
|
42,125 |
|
|
|
410,338 |
|
|||||
Other current liabilities |
|
|
|
167,929 |
|
29,068 |
|
|
|
196,997 |
|
|||||
Liabilities associated with assets held for sale |
|
|
|
26,847 |
|
|
|
|
|
26,847 |
|
|||||
Total current liabilities |
|
|
|
767,033 |
|
71,193 |
|
|
|
838,226 |
|
|||||
Long-term debt |
|
|
|
472,359 |
|
68 |
|
|
|
472,427 |
|
|||||
Other liabilities |
|
|
|
72,316 |
|
65 |
|
|
|
72,381 |
|
|||||
Shareholders equity |
|
547,766 |
|
547,766 |
|
71,809 |
|
(619,575 |
) |
547,766 |
|
|||||
Total liabilities and shareholders equity |
|
$ |
547,766 |
|
$ |
1,859,474 |
|
$ |
143,135 |
|
$ |
(619,575 |
) |
$ |
1,930,800 |
|
17
Condensed
Consolidating Statement of Income
For the Three Months Ended June 30, 2006
(In thousands)
|
|
Parent |
|
Guarantor |
|
Non-guarantor |
|
Eliminations |
|
Consolidated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Revenues |
|
$ |
|
|
$ |
1,334,558 |
|
$ |
187,293 |
|
$ |
(3,914 |
) |
$ |
1,517,937 |
|
Cost of sales |
|
|
|
1,133,790 |
|
159,279 |
|
(3,914 |
) |
1,289,155 |
|
|||||
Gross profit |
|
|
|
200,768 |
|
28,014 |
|
|
|
228,782 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Selling, general and administrative |
|
|
|
152,492 |
|
19,223 |
|
|
|
171,715 |
|
|||||
Depreciation and amortization |
|
|
|
4,640 |
|
473 |
|
|
|
5,113 |
|
|||||
Income from operations |
|
|
|
43,636 |
|
8,318 |
|
|
|
51,954 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|||||
Floor plan interest expense |
|
|
|
(10,483 |
) |
(756 |
) |
|
|
(11,239 |
) |
|||||
Other interest expense |
|
|
|
(9,584 |
) |
(1,555 |
) |
|
|
(11,139 |
) |
|||||
Other income, net |
|
|
|
1,367 |
|
135 |
|
|
|
1,502 |
|
|||||
Equity in earnings of subsidiaries |
|
19,004 |
|
3,839 |
|
|
|
(22,843 |
) |
|
|
|||||
Total other expense, net |
|
19,004 |
|
(14,861 |
) |
(2,176 |
) |
(22,843 |
) |
(20,876 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income before income taxes |
|
19,004 |
|
28,775 |
|
6,142 |
|
(22,843 |
) |
31,078 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income tax expense |
|
|
|
9,351 |
|
2,303 |
|
|
|
11,654 |
|
|||||
Income from continuing operations |
|
19,004 |
|
19,424 |
|
3,839 |
|
(22,843 |
) |
19,424 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Discontinued operations, net of tax |
|
|
|
(420 |
) |
|
|
|
|
(420 |
) |
|||||
Net income |
|
$ |
19,004 |
|
$ |
19,004 |
|
$ |
3,839 |
|
$ |
(22,843 |
) |
$ |
19,004 |
|
18
Condensed
Consolidating Statement of Income
For the Three Months Ended June 30, 2005
(In thousands)
|
|
Parent |
|
Guarantor |
|
Non-guarantor |
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Revenues |
|
$ |
|
|
$ |
1,251,003 |
|
$ |
168,612 |
|
$ |
(1,828 |
) |
$ |
1,417,787 |
|
Cost of sales |
|
|
|
1,065,858 |
|
144,298 |
|
(1,828 |
) |
1,208,328 |
|
|||||
|
|
|
185,145 |
|
24,314 |
|
|
|
209,459 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Selling, general and administrative |
|
|
|
143,038 |
|
17,147 |
|
|
|
160,185 |
|
|||||
Depreciation and amortization |
|
|
|
4,413 |
|
355 |
|
|
|
4,768 |
|
|||||
Income from operations |
|
|
|
37,694 |
|
6,812 |
|
|
|
44,506 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|||||
Floor plan interest expense |
|
|
|
(7,029 |
) |
(429 |
) |
|
|
(7,458 |
) |
|||||
Other interest expense |
|
|
|
(8,968 |
) |
(1,301 |
) |
|
|
(10,269 |
) |
|||||
Other income, net |
|
|
|
498 |
|
5 |
|
|
|
503 |
|
|||||
Equity in earnings of subsidiaries |
|
15,986 |
|
3,065 |
|
|
|
(19,051 |
) |
|
|
|||||
Total other expense, net |
|
15,986 |
|
(12,434 |
) |
(1,725 |
) |
(19,051 |
) |
(17,224 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income before income taxes |
|
15,986 |
|
25,260 |
|
5,087 |
|
(19,051 |
) |
27,282 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Income tax expense |
|
|
|
8,322 |
|
1,909 |
|
|
|
10,231 |
|
|||||
Income from continuing operations |
|
15,986 |
|
16,938 |
|
3,178 |
|
(19,051 |
) |
17,051 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Discontinued operations, net of tax |
|
|
|
(952 |
) |
(113 |
) |
|
|
(1,065 |
) |
|||||
Net income |
|
$ |
15,986 |
|
$ |
15,986 |
|
$ |
3,065 |
|
$ |
(19,051 |
) |
$ |
15,986 |
|
19