SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 4, 2003
Group 1 Automotive, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 1-13461 76-0506313
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
950 Echo Lane, Suite 100
Houston, Texas 77024
(Address of principal executive offices) (Zip code)
(713) 647-5700
(Registrant's telephone number including area code)
Item 12. Results of Operations and Financial Condition
The following sets forth certain information regarding certain
historical non-GAAP financial measures (within the meaning of Regulation G and
Item 10 of Regulation S-K) of the Company as well as reconciliations of such
non-GAAP financial measures to the financial measures of the Company calculated
and presented in accordance with GAAP that are most directly comparable to such
non-GAAP financial measures.
Non-GAAP Financial Measures
Adjusted EBITDA means net income plus income taxes, non-floorplan interest
expense (other interest expense, net), and depreciation and amortization.
Adjusted EBITDAR means net income plus income taxes, non-floorplan interest
expense, depreciation and amortization and rent expense. EBITDAR means net
income plus income taxes, interest expense, depreciation and amortization and
rent expense. EBITDA means net income plus income taxes, interest expense and
depreciation and amortization. Rent Adjusted Total Debt means non-floorplan
long-term debt plus 8 times the annualized rent expense. Adjusted EBITDA,
Adjusted EBITDAR, EBITDAR and EBITDA are not measures of financial performance
or liquidity under accounting principles generally accepted in the United States
("GAAP"). Rent Adjusted Total Debt is not a measure of indebtedness under GAAP.
Accordingly, these measures should not be considered as substitutes for net
income, income from operations, net cash provided by operating activities, total
indebtedness or any other operating, liquidity, indebtedness or capitalization
measure prepared in accordance with GAAP. Additionally, our Adjusted EBITDA,
Adjusted EBITDAR, EBITDAR, EBITDA and Rent Adjusted Total Debt computations may
not be comparable to other similarly titled measures of other companies.
We believe that Adjusted EBITDA, Adjusted EBITDAR, EBITDAR, EBITDA and Rent
Adjusted Total Debt and any ratios using Adjusted EBITDA, Adjusted EBITDAR,
EBITDAR, EBITDA and Rent Adjusted Total Debt provide additional information
regarding our ability to assess and evaluate the performance of our operations,
our ability to meet our future debt service, capital expenditures and working
capital requirements and the amount of our cash available for discretionary
spending. These measures are widely used by investors and rating agencies in the
valuation, comparison, rating and investment recommendations of companies.
EBITDA and Adjusted EBITDA are also financial measurements that are reported to
our lenders under our credit facilities and our other debt instruments.
Our calculation of Adjusted EBITDA and Adjusted EBITDAR are different than
the calculation of EBITDA and EBITDAR in that in arriving at Adjusted EBITDA and
Adjusted EBITDAR we do not add back floorplan interest expense. We view
floorplan financing more akin to trade payables that debt. The reasons for this
view include: (1) floorplan financing is readily available from numerous
sources, including vehicle manufacturers and a large number of commercial
lenders, (2) loan-to-value ratios are typically 100%, (3) repayment is generally
not required until the vehicles are sold and (4) the balance outstanding
generally tracks recent sales activity. As a result, we believe that Adjusted
EBITDA and Adjusted EBITDAR provide additional useful information as to our
ability to meet our future non-floorplan debt service requirements.
Our calculation for Adjusted EBITDAR adds back rent expense to Adjusted
EBITDA. We believe Adjusted EBITDAR provides additional information as to our
ability to meet future non-floorplan debt service requirements and make rent
payments.
Our calculation for Rent Adjusted Total Debt provides additional
information to evaluate our indebtedness including our off-balance sheet
operating leases.
While we believe that Adjusted EBITDA, Adjusted EBITDAR, EBITDAR, EBITDA
and Rent Adjusted Total Debt may provide additional information with respect to
our ability to meet our future debt service, capital expenditures and working
capital requirements and the amount of our cash available for discretionary
spending, certain functional or legal requirements of our business may require
us to use our available funds for other purposes.
Adjusted EBITDA, Adjusted EBITDAR, EBITDAR and EBITDA are calculated as follows:
Six Months Ended
Year Ended December 31, June 30,
------------------------------------------------- -----------------
1998 1999 2000 2001 2002 2002 2003
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Net income $20,719 $33,515 $40,812 $55,442 $67,065 $34,630 $34,796
Add:
Income taxes 14,502 22,174 25,014 33,980 40,217 20,338 20,436
Other interest expense, net,
excluding floorplan interest expense 4,027 10,052 15,500 13,863 9,925 5,191 4,703
Depreciation and amortization 6,426 10,616 16,038 17,358 11,940 5,621 6,941
------------------------------------------------- -----------------
Adjusted EBITDA 45,674 76,357 97,364 120,643 129,147 65,780 66,876
Add:
Rent expense 11,121 19,943 28,348 30,668 36,844 16,725 20,710
------------------------------------------------- -----------------
Adjusted EBITDAR 56,795 96,300 125,712 151,311 165,991 82,505 87,586
Add:
Floorplan interest expense 12,837 20,395 37,536 27,935 19,371 8,732 11,682
------------------------------------------------- -----------------
EBITDAR 69,632 116,695 163,248 179,246 185,362 91,237 99,268
Deduct:
Rent Expense (11,121) (19,943) (28,348) (30,668) (36,844) (16,725)(20,710)
------------------------------------------------- -----------------
EBITDA $58,511 $96,752 $134,900 $148,578 $148,518 $74,512 $78,558
================================================= =================
The following table reconciles net cash provided by operating activities to
Adjusted EBITDA, Adjusted EBITDAR, EBITDAR and EBITDA for the periods presented:
Six Months Ended
Year Ended December 31, June 30,
------------------------------------------------- -----------------
1998 1999 2000 2001 2002 2002 2003
------------------------------------------------- -----------------
Net cash provided by operating activities $9,520 $50,611 $74,591 $74,268 $73,539 $13,852 $15,256
Add (deduct):
Current income taxes 18,703 18,163 18,644 35,205 33,334 16,305 15,461
Other interest expense, net, excluding
floorplan interest expense 4,027 10,052 15,500 13,863 9,925 5,191 4,703
Provision for doubtful accounts (356) (1,153) (1,176) (1,732) (1,078) (406) (291)
Gain (loss) on sale of assets 115 53 87 (120) (483) (102) (158)
Gain on sale of franchises 1,048 414 414
Loss on repurchase of senior
subordinated notes (1,173)
Changes in operating assets
and liabilities, net of effects
of acquistions and dispositions:
Contracts-in-transit and vehicle
receivables 14,757 22,613 21,001 12,720 37,750 (2,922)(32,405)
Accounts receivable 4,544 4,717 1,930 4,996 3,055 5,013 1,402
Inventories (44) 49,079 78,480 (68,472) 107,487 52,858 53,190
Prepaids expenses and other assets 2,661 3,487 2,167 6,689 8,610 10,783 (1,010)
Floorplan notes payable 1,730 (68,584) (113,424) 81,126 (142,427) (26,812) 8,239
Accounts payable, accrued
expenses and deferred revenues (9,983) (12,681) (1,484) (37,900) 194 (8,394) 2,489
------------------------------------------------- -----------------
Adjusted EBITDA 45,674 76,357 97,364 120,643 129,147 65,780 66,876
Add:
Rent expense 11,121 19,943 28,348 30,668 36,844 16,725 20,710
------------------------------------------------- -----------------
Adjusted EBITDAR 56,795 96,300 125,712 151,311 165,991 82,505 87,586
Add:
Floorplan interest expense 12,837 20,395 37,536 27,935 19,371 8,732 11,682
------------------------------------------------- -----------------
EBITDAR 69,632 116,695 163,248 179,246 185,362 91,237 99,268
Deduct:
Rent Expense (11,121) (19,943) (28,348) (30,668) (36,844) (16,725)(20,710)
------------------------------------------------- -----------------
EBITDA $58,511 $96,752 $134,900 $148,578 $148,518 $74,512 $78,558
================================================= =================
Rent Adjusted Total Debt is calculated as follows:
December 31, June 30,
----------------------------------------------------------- --------
1998 1999 2000 2001 2002 2003
----------------------------------------------------------- --------
Current maturities of long-term debt 2,966 1,076 1,506 1,687 997 826
Debt, net of current maturities 42,821 15,285 45,949 10,497 9,073 8,612
Senior Subordinated Notes - 97,889 94,444 85,002 74,149 74,220
Rent Expense - Last Twelve Months (times 8) 88,968 159,544 226,784 245,344 294,752 326,632
----------------------------------------------------------- --------
Rent Adjusted Total Debt 134,755 273,794 368,683 342,530 378,971 410,290
=========================================================== ========
In accordance with General Instruction B.2. of Form 8-K, the
information contained in this report shall not be deemed "filed" for purposes
of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed
incorporated by reference in any filing under the Securities Act of 1933, except
as shall be expressly set forth by specific reference in such a filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Group 1 Automotive, Inc.
August 4, 2003 By: /s/Scott L. Thompson
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Date Scott L. Thompson, Executive Vice
President, Chief Financial
Officer and Treasurer