HOUSTON, Oct. 25, 2018 /PRNewswire/ -- Group 1 Automotive, Inc. (NYSE: GPI), ("Group 1" or the "Company"), an international, Fortune 500 automotive retailer, today reported 2018 third quarter net income of $34.8 million, diluted earnings per common share of $1.74, adjusted net income (a non-GAAP measure) of $49.2 million, and adjusted diluted earnings per common share (a non-GAAP measure) of $2.47.

Third quarter 2018 adjusted net income and diluted earnings per share exclude approximately $14.4 million of net after-tax adjustments, or $0.73 per common share. These adjustments are more than explained by non-cash asset impairments of $17.7 million and legal settlement reserve adjustments of $1.6 million, which were partially offset by gains on real estate and dealership transactions of $4.2 million and reduced tax liabilities of $0.7 million due to the corporate income tax rate enacted by the U.S. Tax Reform Bill.

"Although our results were impacted by some unusual factors, especially in the U.K., we are pleased with our quarterly results, which established a new all-time quarterly record of $2.47 per share on an adjusted basis," said Earl J. Hesterberg, Group 1's president and chief executive officer.  "Strong used vehicle results and good cost control contributed positively to the quarter.  However, the severe lack of 2019 model vehicles to sell in the U.K. during a major plate change sales month was unexpected and very damaging to our business.  We expect manufacturer supply to improve across the U.K. by year end."

Consolidated Results for Third Quarter 2018 (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 decreased 4.1 percent (decreased 3.1 percent) to $2.9 billion.
• Total gross profit increased 0.9 percent (increased 1.8 percent), to $435.1 million.
• New vehicle revenues decreased 10.0 percent (decreased 8.9 percent) on a 9.8 percent decrease in unit sales, reflecting difficult year-over-year comparisons as a result of very strong replacement demand from Hurricane Harvey in the third quarter 2017 and emission testing-related supply constraints in the UK in September 2018. New vehicle gross profit decreased 12.1 percent (decreased 10.5 percent), to $77.6 million.
• Retail used vehicle revenues increased 6.6 percent (7.5 percent) on 9.7 percent higher unit sales. Retail used vehicle gross profit increased 6.4 percent (7.2 percent), to $50.2 million. Total used vehicle gross profit was up 6.2 percent (7.1 percent), to $49.8 million.
• Parts and service gross profit increased 3.5 percent (4.2 percent) on revenue growth of 3.3 percent (4.2 percent). Same Store parts and service gross profit increased 1.8 percent (2.5 percent) on Same Store parts and service revenue growth of 2.0 percent (2.9 percent).
• Finance and Insurance (F&I) gross profit per retail unit (PRU) increased 6.4 percent (7.0 percent), to $1,429.
• Selling, General and Administrative (SG&A) expenses as a percent of gross profit decreased 330 basis points, to 72.8 percent. Adjusted Same Store SG&A as a percent of gross profit increased 110 basis points, to 73.3 percent.

Segment Results for Third Quarter 2018 (year-over-year comparable basis)

• United States:
  The Company's U.S. operations accounted for 76.1 percent of total revenues and 81.0 percent of total gross profit. Total U.S. revenues were $2.2 billion, a decrease of 4.4 percent, reflecting the aforementioned challenging year-over-year comparisons from Hurricane Harvey in 3Q17.  New vehicle revenues decreased 7.7 percent.  F&I revenues increased 5.4 percent, parts and service revenue increased 1.9 percent, and retail used vehicle revenue increased 1.8 percent.  
  
  F&I gross profit PRU increased $122, or 7.8 percent per unit, to $1,688; and total gross profit was about flat at $352.5 million.  New vehicle retail gross profit PRU decreased $104, to $1,787. Total used vehicle gross profit PRU increased $18, to $1,068.
  
  SG&A expenses as a percent of gross profit improved 530 basis points, to 68.7 percent; and operating margin expanded 30 basis points, to 3.3 percent. Adjusted SG&A expenses as a percent of gross profit increased 60 basis points, to 70.6 percent. Adjusted operating margin was flat at 4.1 percent.
   
• United Kingdom:
  The Company's U.K. operations accounted for 20.3 percent of total revenues and 15.8 percent of total gross profit.  As of September 1, 2018, all light vehicles sold in the EU are subject to mandatory emissions standards testing known as the Worldwide Harmonised Light Vehicle Test Procedure ("WLTP").  This testing procedure created a serious inventory supply delay in the release of many 2019 model year vehicles for sale, which resulted in a 10.2 percent industry sales decrease for the third quarter 2018 and a 20.5 percent industry decrease in the important sales month of September.  Various brands were more impacted than others.  The Company's most significantly impacted brand was Audi, which experienced an industry sales decrease of 28.6 percent for the third quarter 2018.  This manufacturer supply issue resulted in a Same Store new vehicle revenues decrease of 26.2 percent (decreased 25.3 percent) and Same Store new vehicle units sold decrease of 21.5 percent.  On a constant currency basis, strong Same Store used sales (up 14.3 percent) and after sales growth (up 5.9 percent) were partial offsets. The Company's total U.K. revenues decreased 0.8 percent (no change), to $585.9 million.  Consistent with the quarterly industry decrease, Same Store U.K. revenues decreased 11.0 percent (decreased 10.1 percent), to $496.4 million. 
  
  Total gross profit increased 8.1 percent (9.0 percent), to $68.7 million, while Same Store gross profit decreased 4.3 percent (decreased 3.4 percent), to $58.0 million.
  
  SG&A expenses as a percent of gross profit increased 290 basis points, to 86.9 percent; and operating margin decreased 30 basis points, to 1.0 percent. Same Store SG&A expenses as a percent of gross profit increased 580 basis points, to 87.7 percent; and Same Store operating margin decreased 70 basis points, to 0.9 percent, reflecting the deleveraging impact of the reduced new vehicle volumes.
   
• Brazil:
  The Company's Brazilian operations accounted for 3.6 percent of total revenues and 3.2 percent of total gross profit.  The Company's Same Store new vehicle revenue decreased 24.3 percent (decreased 5.5 percent), with units down 8.9 percent. Same store total revenues decreased 19.4 percent (increased 0.5 percent), with the constant currency increase driven by revenue growth of 17.2 percent in F&I, 14.3 percent in total used vehicles, and 7.6 percent in parts & service. SG&A expenses as a percent of gross profit increased 14.6 percentage points, to 106.8 percent. Adjusted Same Store SG&A expenses as a percent of gross profit improved 460 basis points, to 85.1 percent

Share Repurchase Authorization

During the third quarter of 2018, the Company repurchased 789,509 shares at an average price per common share of $69.77, for a total of $55.1 million. Under SEC Rule 10b5-1, from October 1, 2018 to October 25, 2018, the Company repurchased an additional 399,872 shares at an average price per common share of $62.52, for a total of $25.0 million. Year-to-date through October 25, 2018, the Company has repurchased 1,935,738 shares at an average price per common share of $67.86, for a total of $131.4 million. These repurchases represented approximately 9.5 percent of the Company's share float at the beginning of the year and reduced the total outstanding share count to approximately 18.6 million common shares as of October 25, 2018.

On October 25, 2018, the Company's board of directors increased Group 1's common stock share repurchase authorization to $100.0 million.

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

In August 2018, the Company disposed of Ford Escondido, which generated approximately $60 million in trailing-twelve-month revenues.

Year-to-date 2018, the Company has acquired a total of 14 franchises, which are expected to generate an estimated $530 million in annual revenues; and the Company has disposed of 4 franchises that generated approximately $175 million in trailing-twelve-month revenues.

Third Quarter 2018 Earnings Conference Call Details

Group 1's senior management will host a conference call today at 10 a.m. ET to discuss the third quarter 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 November 1, 2018 by dialing:

ABOUT GROUP 1 AUTOMOTIVE, INC.
Group 1 owns and operates 181 automotive dealerships, 237 franchises, and 47 collision centers in the United States, the United Kingdom and Brazil that offer 32 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
Senior Vice President, Manufacturer Relations, Financial Services and Public Affairs
Group 1 Automotive, Inc.
713-647-5770 | pdelongchamps@group1auto.com
or
Clint Woods
Pierpont Communications, Inc.
713-627-2223 | cwoods@piercom.com