GROUP 1 AUTOMOTIVE INC - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - GROUP 1 AUTOMOTIVE INC	d426473d8k.htm

Exhibit 99.1

LOGO

FOR IMMEDIATE RELEASE

Group 1 Automotive Reports All-Time Record Profits On 26 Percent Revenue Increase

HOUSTON, Oct. 25, 2012 — Group 1 Automotive, Inc. (NYSE: GPI), a Fortune 500 automotive retailer, today reported record 2012 third-quarter net income of $31.3 million and record diluted earnings per common share of $1.32 for the period ended Sept. 30, 2012. Net income increased 31.6 percent from the comparable, adjusted prior-year period which, as shown in the attached reconciliation table, excluded a non-cash asset impairment charge.

Year-to-date 2012 adjusted net income increased 31.4 percent, to a record $84.2 million. Adjusted diluted earnings per common share were $3.54, making this the best first nine-month results in the company’s history.

“Group 1 reported all-time, record-setting revenues, gross profit, net income and diluted earnings per common share in the third quarter, driven by strong growth in all segments of the business, including record results in finance and insurance,” said Earl J. Hesterberg, Group 1’s president and chief executive officer. “Group 1’s new vehicle unit sales continue to outpace industry retail sales, reflecting the strength of our brand mix and strong execution by our operating team. In addition, I am especially proud of the growth our team has delivered in used retail unit sales, where we have significantly outperformed the market this year as well.”

Third-Quarter 2012 Results (on a year-over-year basis unless otherwise noted)

•

Setting new all-time records, total gross profit grew 17.1 percent on 25.9 percent higher revenues of $2.0 billion.

•

New vehicle gross profit increased 18.5 percent on 32.3 percent higher revenues, as the company retailed 34.0 percent more units. Average vehicle selling price declined 1.2 percent, to $33,050, as the mix shifted from luxury and trucks to mid-line imports.

•

Retail used vehicle average selling price increased 2.6 percent, to $20,612, and the company retailed 19.5 percent more units, driving the 17.7 percent gross profit and 22.6 percent revenue growth.

•

Parts and service gross profit increased 8.1 percent on revenue growth of 7.1 percent.

•

Finance and insurance gross profit per retail unit increased $64, to an all-time record $1,220, as penetration rates improved in both finance and vehicle service contracts.

•

Selling, general and administrative expenses as a percent of revenues improved 110 basis points, to 10.9 percent.

•

Selling, general and administrative expenses as a percent of gross profit improved to 74.2 percent, from both the prior-year period and the second quarter on a comparable basis, as the company continued to leverage gross profit growth.

•

Operating margin remained flat, at 3.4 percent, from the prior-year and second-quarter periods on a comparable basis.

Corporate Development

During the third quarter, Group 1 purchased a Hyundai franchise in Houston that is estimated to generate $30.0 million in annual revenues. The company also disposed of a Lincoln franchise in Houston that generated trailing-12-month revenues of $17.6 million.

In October, Group 1 acquired a Hyundai dealership in Oklahoma City, Okla., that is estimated to generate $45.0 million in annual revenues. The company also disposed of a Nissan dealership and a Mazda dealership in the Boston area that generated $67.2 million in combined annual revenues during the last 12 months.

Year to date, Group 1 has acquired 14 franchises that are expected to generate $580.0 million in annual revenues and disposed of three franchises that generated $84.8 million of annual revenues.

Group 1 Automotive, Inc.

Third-Quarter Earnings Conference Call

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/news/events.aspx. A replay will be available for 30 days.

The conference call will also be available live by dialing in 10 minutes prior to the start of the call at:

Domestic: 1.877.317.6789

International: 1.412.317.6789

Conference ID: 10019588

A telephonic replay will be available following the call through Nov. 2 at 9 a.m. ET by dialing:

Domestic: 1.877.344.7529

International: 1.412.317.0088

Conference ID: 10019588

About Group 1 Automotive, Inc.

Group 1 owns and operates 121 automotive dealerships, 158 franchises, and 30 collision centers in the United States and the United Kingdom that offer 32 brands of automobiles. Through its dealerships, the company sells new and used cars and light trucks; arranges related vehicle financing, service and insurance contracts; provides automotive maintenance and repair services; and sells vehicle parts.

Group 1 Automotive can be reached on the Internet at www.group1auto.com.

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.

SOURCE: Group 1 Automotive, Inc.

Group 1 Automotive, Inc.

Investor Contacts:

Kim Paper Canning

Manager, Investor Relations

Group 1 Automotive, Inc.

713-647-5741 | kpaper@group1auto.com

Media Contacts:

Pete DeLongchamps

V.P. Financial Services and Manufacturer Relations

Group 1 Automotive, Inc.

713-647-5770 | pdelongchamps@group1auto.com

Clint Woods

Pierpont Communications, Inc.

713-627-2223 | cwoods@piercom.com

Group 1 Automotive, Inc.

Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended September 30,									Nine Months Ended September 30,
	2012			2011			% Change			2012			2011			% Change
REVENUES:
New vehicle retail sales	$	1,141,286		$	862,660			32.3		$	3,134,591		$	2,457,255			27.6
Used vehicle retail sales		462,395			377,115			22.6			1,333,603			1,053,609			26.6
Used vehicle wholesale sales		78,424			69,051			13.6			218,415			191,609			14.0
Parts and service		224,990			210,067			7.1			658,404			609,108			8.1
Finance and insurance		69,477			51,496			34.9			192,130			142,255			35.1

Total revenues		1,976,572			1,570,389			25.9			5,537,143			4,453,836			24.3

COST OF SALES:
New vehicle retail sales		1,074,736			806,498			33.3			2,951,379			2,304,057			28.1
Used vehicle retail sales		424,663			345,048			23.1			1,220,628			958,094			27.4
Used vehicle wholesale sales		79,067			69,254			14.2			216,031			187,651			15.1
Parts and service		106,875			100,836			6.0			312,106			289,295			7.9

Total cost of sales		1,685,341			1,321,636			27.5			4,700,144			3,739,097			25.7

GROSS PROFIT		291,231			248,753			17.1			836,999			714,739			17.1

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		216,082			188,185			14.8			629,521			547,120			15.1

DEPRECIATION AND AMORTIZATION EXPENSE		8,096			6,845			18.3			23,074			19,881			16.1

ASSET IMPAIRMENTS		—			3,644			(100.0	)		288			4,008			(92.8	)

OPERATING INCOME		67,053			50,079			33.9			184,116			143,730			28.1

OTHER EXPENSE:
Floorplan interest expense		(7,942	)		(6,964	)		14.0			(23,424	)		(20,245	)		15.7

Other interest expense, net		(9,619	)		(8,644	)		11.3			(27,849	)		(24,811	)		12.2

INCOME BEFORE INCOME TAXES		49,492			34,471			43.6			132,843			98,674			34.6

PROVISION FOR INCOME TAXES		(18,157	)		(12,977	)		39.9			(49,766	)		(37,135	)		34.0

NET INCOME	$	31,335		$	21,494			45.8		$	83,077		$	61,539			35.0

DILUTED INCOME PER SHARE	$	1.32		$	0.91			45.1		$	3.50		$	2.57			36.2

Weighted average dilutive common shares outstanding		22,458			22,219			1.1			22,501			22,533			(0.1	)
Weighted average participating securities		1,245			1,392			(10.6	)		1,257			1,392			(9.7	)

Total weighted average shares outstanding		23,703			23,611			0.4			23,758			23,925			(0.7	)

Group 1 Automotive, Inc.

Consolidated Balance Sheets

(Dollars in thousands)


	September 30, 2012			December 31, 2011			% Change
	(Unaudited)
ASSETS:

CURRENT ASSETS:
Cash and cash equivalents	$	38,822		$	14,895			160.6
Contracts in transit and vehicle receivables, net		150,170			167,507			(10.4	)
Accounts and notes receivable, net		98,106			92,775			5.7
Inventories, net		1,107,193			867,470			27.6
Deferred income taxes		19,223			16,012			20.1
Prepaid expenses and other current assets		33,217			16,925			96.3

Total current assets		1,446,731			1,175,584			23.1
PROPERTY AND EQUIPMENT, net		649,811			585,633			11.0
GOODWILL AND INTANGIBLE FRANCHISE RIGHTS		759,068			702,145			8.1
OTHER ASSETS		11,175			12,981			(13.9	)

Total assets	$	2,866,785		$	2,476,343			15.8

LIABILITIES AND STOCKHOLDERS’ EQUITY:

CURRENT LIABILITIES:
Floorplan notes payable - credit facility	$	910,849		$	718,945			26.7
Offset account related to floorplan notes payable - credit facility		(128,264	)		(109,207	)		17.5
Floorplan notes payable - manufacturer affiliates		172,738			155,980			10.7
Current maturities of long-term debt and short-term financing		30,293			14,663			106.6
Current liabilities from interest rate risk management activities		361			7,273			(95.0	)
Accounts payable		164,922			148,048			11.4
Accrued expenses		117,892			109,245			7.9

Total current liabilities		1,268,791			1,044,947			21.4
2.25% CONVERTIBLE SENIOR NOTES (aggregate principal of $182,753 at September 30, 2012 and December 31, 2011)		150,465			144,985			3.8
3.00% CONVERTIBLE SENIOR NOTES (aggregate principal of $115,000 at September 30, 2012 and December 31, 2011)		79,854			77,401			3.2
MORTGAGE FACILITY, net of current maturities		54,401			38,873			39.9
OTHER REAL ESTATE RELATED AND LONG-TERM DEBT, net of current maturities		224,787			184,237			22.0
CAPITAL LEASE OBLIGATIONS RELATED TO REAL ESTATE, net of current maturities		36,587			37,105			(1.4	)
DEFERRED INCOME TAXES		90,548			78,459			15.4
LIABILITIES FROM INTEREST RATE RISK MANAGEMENT ACTIVITIES		44,708			26,766			67.0
OTHER LIABILITIES		41,047			36,470			12.6
COMMITMENTS AND CONTINGENCIES

TEMPORARY EQUITY - REDEEMABLE EQUITY PORTION OF THE 3.00% CONVERTIBLE SENIOR NOTES		33,313			—			100.0

STOCKHOLDERS’ EQUITY:
Common stock		260			260			—
Additional paid-in capital		334,942			363,375			(7.8	)
Retained earnings		664,124			591,037			12.4
Accumulated other comprehensive loss		(34,288	)		(29,236	)		17.3
Treasury stock		(122,754	)		(118,336	)		3.7

Total stockholders’ equity		842,284			807,100			4.4

Total liabilities and stockholders’ equity	$	2,866,785		$	2,476,343			15.8

KEY DEBT COVENANT METRICS:

Senior secured adjusted leverage ratio (must be less than 3.75)		2.38			2.46
Total adjusted leverage ratio (must be less than 5.50)		3.43			3.65
Fixed charge coverage ratio (must be greater than 1.35)		2.04			1.94

Group 1 Automotive, Inc.

Consolidated Statements of Adjusted Cash Flows from Operating Activities

(Unaudited)

(In thousands)


	Three Months Ended September 30,									Nine Months Ended September 30,
	2012			2011			% Change			2012			2011			% Change
Net income	$	31,335		$	21,494			45.8		$	83,077		$	61,539			35.0
Adjustments to reconcile net income to net cash provided by operating activities:
Asset impairments		—			3,644			(100.0	)		288			4,008			(92.8	)
Depreciation and amortization		8,096			6,845			18.3			23,074			19,881			16.1
Deferred income taxes		4,680			2,170			115.7			10,755			16,280			(33.9	)
Gain on disposition of assets and franchise		(543	)		(181	)		200.0			(2,131	)		(967	)		120.4
Stock-based compensation		3,028			2,775			9.1			8,943			8,333			7.3
Amortization of debt discount and issue costs		3,271			3,023			8.2			9,659			8,871			8.9
Other		537			87			517.2			594			(15	)		4,060.0
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Accounts payable and accrued expenses		1,671			14,833			(88.7	)		19,294			39,722			(51.4	)
Accounts and notes receivable		21,400			(55	)		39,009.1			6,680			3,908			70.9
Inventories		(33,063	)		58,901			(156.1	)		(193,145	)		111,704			(272.9	)
Contracts-in-transit and vehicle receivables		1,264			5,398			(76.6	)		25,135			13,525			85.8
Prepaid expenses and other assets		360			(4,477	)		108.0			6,575			(3,454	)		290.4
Floorplan notes payable - credit facility ⁽¹⁾		24,214			(83,371	)		129.0			175,795			(156,657	)		212.2
Floorplan notes payable - manufacturer affiliates ⁽²⁾		(2,902	)		(13,416	)		(78.4	)		(5,979	)		(7,550	)		(20.8	)
Deferred revenues		(704	)		(297	)		137.0			(110	)		(1,245	)		(91.2	)

Adjusted net cash provided by operating activities	$	62,644		$	17,373			260.6		$	168,504		$	117,883			42.9

⁽¹⁾	Excludes net acquisition/(disposition) related activity of $397 and $16,109 and for the three and nine months ended September 30, 2012, respectively, and $20,476 for the nine months ended September 30, 2011.

⁽²⁾	Excludes net acquisition/(disposition) related activity of $26,578 and for the nine months ended September 30, 2011.

Group 1 Automotive, Inc.

Additional Information - Consolidated

(Unaudited)


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2012 (%)		2011 (%)		2012 (%)		2011 (%)
NEW VEHICLE UNIT SALES GEOGRAPHIC MIX:
Region	Geographic Market
East	Massachusetts		9.6		11.2		10.0		11.6
	New Jersey		5.0		4.8		5.0		5.5
	Georgia		3.8		3.1		3.5		3.5
	New Hampshire		2.8		2.8		2.9		3.1
	New York		2.5		3.5		3.0		3.7
	Louisiana		2.1		2.7		2.5		3.0
	Mississippi		1.8		2.0		2.0		2.0
	South Carolina		1.7		1.4		1.8		1.4
	Florida		1.7		0.7		1.2		0.7
	Alabama		0.9		1.4		1.0		1.2
	Maryland		0.6		0.7		0.6		0.8

			32.5		34.3		33.5		36.5

West	Texas		36.2		38.2		36.7		34.9
	California		14.5		12.9		14.5		14.0
	Oklahoma		8.0		8.5		7.8		8.3
	Kansas		1.4		0.9		1.4		1.0

			60.1		60.5		60.4		58.2

International	United Kingdom		7.4		5.2		6.1		5.3

			100.0		100.0		100.0		100.0

NEW VEHICLE UNIT SALES BRAND MIX:
Toyota/Scion/Lexus			30.8		28.7		30.9		30.6
Nissan/Infiniti			12.0		15.2		11.9		14.0
Honda/Acura			11.1		9.3		11.2		11.1
BMW/MINI			10.1		13.1		10.7		13.2
Ford			8.8		10.1		9.2		8.5
Volkswagen/Audi/Porsche			8.3		2.8		6.5		2.5
GM			5.5		6.2		5.8		5.3
Daimler			4.3		5.0		4.6		5.5
Chrysler			4.3		5.0		4.4		4.5
Other			4.8		4.6		4.8		4.8

			100.0		100.0		100.0		100.0

NEW VEHICLE UNIT SALES OTHER MIX:
Import			54.7		52.1		55.0		54.3
Luxury			27.6		26.7		26.4		27.6
Domestic			17.7		21.2		18.6		18.1

			100.0		100.0		100.0		100.0

Car			57.4		53.5		57.0		55.1
Truck			42.6		46.5		43.0		44.9

			100.0		100.0		100.0		100.0

Group 1 Automotive, Inc.

Additional Information - Consolidated

(Unaudited)

(Dollars in thousands, except per unit amounts)


	Three Months Ended September 30,									Nine Months Ended September 30,
	2012			2011			% Change			2012			2011			% Change
REVENUES:
New vehicle retail sales	$	1,141,286		$	862,660			32.3		$	3,134,591		$	2,457,255			27.6

Used vehicle retail sales		462,395			377,115			22.6			1,333,603			1,053,609			26.6
Used vehicle wholesale sales		78,424			69,051			13.6			218,415			191,609			14.0

Total used		540,819			446,166			21.2			1,552,018			1,245,218			24.6
Parts and service		224,990			210,067			7.1			658,404			609,108			8.1
Finance and insurance		69,477			51,496			34.9			192,130			142,255			35.1

Total	$	1,976,572		$	1,570,389			25.9		$	5,537,143		$	4,453,836			24.3

GROSS MARGIN %:
New vehicle retail sales		5.8			6.5						5.8			6.2
Used vehicle retail sales		8.2			8.5						8.5			9.1
Used vehicle wholesale sales		(0.8	)		(0.3	)					1.1			2.1
Total used		6.9			7.1						7.4			8.0
Parts and service		52.5			52.0						52.6			52.5
Finance and insurance		100.0			100.0						100.0			100.0
Total		14.7			15.8						15.1			16.0

GROSS PROFIT:
New vehicle retail sales	$	66,550		$	56,162			18.5		$	183,212		$	153,198			19.6

Used vehicle retail sales		37,732			32,067			17.7			112,975			95,515			18.3
Used vehicle wholesale sales		(643	)		(203	)		216.7			2,384			3,958			(39.8	)

Total used		37,089			31,864			16.4			115,359			99,473			16.0
Parts and service		118,115			109,231			8.1			346,298			319,813			8.3
Finance and insurance		69,477			51,496			34.9			192,130			142,255			35.1

Total	$	291,231		$	248,753			17.1		$	836,999		$	714,739			17.1

UNITS SOLD:
Retail new vehicles sold		34,532			25,777			34.0			95,386			74,578			27.9

Retail used vehicles sold		22,433			18,770			19.5			65,186			52,700			23.7
Wholesale used vehicles sold		12,049			9,697			24.3			33,287			27,246			22.2

Total used		34,482			28,467			21.1			98,473			79,946			23.2

AVERAGE RETAIL SALES PRICE:
New vehicle retail	$	33,050		$	33,466			(1.2	)	$	32,862		$	32,949			(0.3	)
Used vehicle retail	$	20,612		$	20,091			2.6		$	20,458		$	19,993			2.3

GROSS PROFIT PER UNIT SOLD:
New vehicle retail sales	$	1,927		$	2,179			(11.6	)	$	1,921		$	2,054			(6.5	)
Used vehicle retail sales		1,682			1,708			(1.5	)		1,733			1,812			(4.4	)
Used vehicle wholesale sales		(53	)		(21	)		152.4			72			145			(50.3	)
Total used		1,076			1,119			(3.8	)		1,171			1,244			(5.9	)
Finance and insurance (per retail unit)	$	1,220		$	1,156			5.5		$	1,197		$	1,118			7.1

OTHER: ⁽¹⁾
SG&A expenses	$	216,082		$	188,185			14.8		$	627,942		$	547,120			14.8
SG&A as % revenues		10.9			12.0						11.3			12.3
SG&A as % gross profit		74.2			75.7						75.0			76.5
Operating margin %		3.4			3.4						3.4			3.3
Pretax margin %		2.5			2.4						2.4			2.3

FLOORPLAN EXPENSE:
Floorplan interest	$	(7,942	)	$	(6,964	)		14.0		$	(23,424	)	$	(20,245	)		15.7
Floorplan assistance		9,204			6,740			36.6			25,276			18,836			34.2

Net floorplan income (expense)	$	1,262		$	(224	)		663.4		$	1,852		$	(1,409	)		231.4

⁽¹⁾

These amounts have been adjusted to exclude the impact of certain items to provide additional information regarding the performance of our operations and improve period-to-period comparability. Refer to our Reconciliation of Certain Non-GAAP Financial Measures for a description of the aforementioned adjustments.

Group 1 Automotive, Inc.

Additional Information - Same Store⁽¹⁾

(Unaudited)

(Dollars in thousands, except per unit amounts)


	Three Months Ended September 30,									Nine Months Ended September 30,
	2012			2011			% Change			2012			2011			% Change
REVENUES:
New vehicle retail sales	$	1,036,633		$	862,661			20.2		$	2,856,681		$	2,452,455			16.5

Used vehicle retail sales		425,287			377,115			12.8			1,228,597			1,051,812			16.8
Used vehicle wholesale sales		68,160			69,051			(1.3	)		192,587			191,528			0.6

Total used		493,447			446,166			10.6			1,421,184			1,243,340			14.3
Parts and service		210,839			210,066			0.4			615,547			607,733			1.3
Finance and insurance		64,996			51,508			26.2			178,771			141,994			25.9

Total	$	1,805,915		$	1,570,401			15.0		$	5,072,183		$	4,445,522			14.1

GROSS MARGIN %:
New vehicle retail sales		5.7			6.5						5.8			6.2
Used vehicle retail sales		8.3			8.5						8.5			9.1
Used vehicle wholesale sales		(0.7	)		(0.3	)					1.3			2.1
Total used		7.0			7.1						7.5			8.0
Parts and service		52.3			52.0						52.5			52.5
Finance and insurance		100.0			100.0						100.0			100.0
Total		14.9			15.8						15.3			16.0

GROSS PROFIT:
New vehicle retail sales	$	59,171		$	56,164			5.4		$	165,138		$	152,862			8.0

Used vehicle retail sales		35,141			32,066			9.6			104,090			95,246			9.3
Used vehicle wholesale sales		(453	)		(203	)		123.2			2,445			3,940			(37.9	)

Total used		34,688			31,863			8.9			106,535			99,186			7.4
Parts and service		110,183			109,230			0.9			323,420			319,327			1.3
Finance and insurance		64,996			51,508			26.2			178,771			141,994			25.9

Total	$	269,038		$	248,765			8.1		$	773,864		$	713,369			8.5

UNITS SOLD:
Retail new vehicles sold		31,463			25,777			22.1			87,154			74,414			17.1

Retail used vehicles sold		20,808			18,770			10.9			60,398			52,606			14.8
Wholesale used vehicles sold		10,763			9,697			11.0			29,925			27,232			9.9

Total used		31,571			28,467			10.9			90,323			79,838			13.1

AVERAGE RETAIL SALES PRICE:
New vehicle retail	$	32,948		$	33,467			(1.6	)	$	32,777		$	32,957			(0.5	)
Used vehicle retail	$	20,439		$	20,092			1.7		$	20,342		$	19,994			1.7

GROSS PROFIT PER UNIT SOLD:
New vehicle retail sales	$	1,881		$	2,179			(13.7	)	$	1,895		$	2,054			(7.7	)
Used vehicle retail sales		1,689			1,708			(1.1	)		1,723			1,811			(4.9	)
Used vehicle wholesale sales		(42	)		(21	)		100.0			82			145			(43.4	)
Total used		1,099			1,119			(1.8	)		1,179			1,242			(5.1	)
Finance and insurance (per retail unit)	$	1,243		$	1,156			7.5		$	1,212		$	1,118			8.4

OTHER: ⁽²⁾
SG&A expenses	$	198,852		$	188,230			5.6		$	578,619		$	546,415			5.9
SG&A as % revenues		11.0			12.0						11.4			12.3
SG&A as % gross profit		73.9			75.7						74.8			76.6
Operating margin %		3.5			3.4						3.4			3.3

FLOORPLAN EXPENSE:
Floorplan interest	$	(7,364	)	$	(6,964	)		5.7		$	(21,543	)	$	(20,166	)		6.8
Floorplan assistance		8,544			6,740			26.8			23,017			18,806			22.4

Net floorplan income (expense)	$	1,180		$	(224	)		626.8		$	1,474		$	(1,360	)		208.4

⁽¹⁾

Same store amounts include the results for the identical months in each period presented in the comparison, commencing with the first full month we owned the dealership and, in the case of dispositions, ending with the last full month we owned it. Same store results also include the activities of our corporate office.

⁽²⁾

Group 1 Automotive, Inc.

Reconciliation of Certain Non-GAAP Financial Measures

(Unaudited)

(Dollars in thousands, except per share amounts)


	Three Months Ended September 30,								Nine Months Ended September 30,
	2012		2011			% Change			2012			2011			% Change
NET INCOME RECONCILIATION:

As reported	$	31,335	$	21,494			45.8		$	83,077		$	61,539			35.0
After-tax adjustments:
Non-cash asset impairment charges⁽²⁾		—		2,309						115			2,534
Net gain on real estate transactions⁽³⁾		—		—						(659	)		—
Insurance deductibles for hail storm damage ⁽⁴⁾		—		—						1,658			—

Adjusted net income ⁽¹⁾	$	31,335	$	23,803			31.6		$	84,191		$	64,073			31.4

ADJUSTED NET INCOME ATTRIBUTABLE TO DILUTED COMMON SHARES RECONCILIATION:

Adjusted net income	$	31,335	$	23,803			31.6		$	84,191		$	64,073			31.4
Less: Adjusted earnings allocated to participating securities		1,641		1,392			17.9			4,432			3,697			19.9

Adjusted net income available to diluted common shares	$	29,694	$	22,411			32.5		$	79,759		$	60,376			32.1

DILUTED INCOME PER COMMON SHARE RECONCILIATION:

As reported	$	1.32	$	0.91			45.1		$	3.50		$	2.57			36.2
After-tax adjustments:
Non-cash asset impairment charges		—		0.10						—			0.11
Net gain on real estate transactions		—		—						(0.03	)		—
Insurance deductibles for hail storm damage		—		—						0.07			—

Adjusted diluted income per share ⁽¹⁾	$	1.32	$	1.01			30.7		$	3.54		$	2.68			32.1

SG&A RECONCILIATION:

As reported	$	216,082	$	188,185			14.8		$	629,521		$	547,120			15.1
Pre-tax adjustments:
Net gain on real estate transactions		—		—						1,071			—
Insurance deductibles for hail storm damage		—		—						(2,650	)		—

Adjusted SG&A ⁽¹⁾	$	216,082	$	188,185			14.8		$	627,942		$	547,120			14.8

SG&A AS % REVENUES:

Unadjusted		10.9		12.0						11.4			12.3
Adjusted ⁽¹⁾		10.9		12.0						11.3			12.3

SG&A AS % OF GROSS PROFIT:

Unadjusted		74.2		75.7						75.2			76.5
Adjusted ⁽¹⁾		74.2		75.7						75.0			76.5

OPERATING MARGIN %:

Unadjusted		3.4		3.2						3.3			3.2
Adjusted ^{(1), (5)}		3.4		3.4						3.4			3.3

PRETAX MARGIN %:

Unadjusted		2.5		2.2						2.4			2.2
Adjusted ^{(1), (5)}		2.5		2.4						2.4			2.3

SAME STORE SG&A RECONCILIATION:

As reported
Pre-tax adjustments:	$	198,852	$	188,230			5.6		$	581,773		$	546,415			6.5
Loss on real estate transaction		—		—						(504	)		—
Insurance deductibles for hail storm damage		—		—						(2,650	)		—

Adjusted Same Store SG&A ⁽¹⁾	$	198,852	$	188,230			5.6		$	578,619		$	546,415			5.9

SAME STORE SG&A AS % REVENUES:

Unadjusted		11.0		12.0						11.5			12.3
Adjusted ⁽¹⁾		11.0		12.0						11.4			12.3

SAME STORE SG&A AS % OF GROSS PROFIT:

Unadjusted		73.9		75.7						75.2			76.6
Adjusted ⁽¹⁾		73.9		75.7						74.8			76.6

SAME STORE OPERATING MARGIN %:

Unadjusted		3.5		3.2						3.4			3.2
Adjusted ^{(1), (6)}		3.5		3.4						3.4			3.3

	Three Months Ended September 30,								Nine Months Ended September 30,
	2012		2011			% Change			2012			2011			% Change
CASH FLOWS FROM OPERATING ACTIVITIES RECONCILIATION:
Net cash provided by (used in) operating activities	$	38,430	$	100,744			(61.9	)	$	(7,291	)	$	301,118			(102.4	)
Change in floorplan notes payable-credit facility, excluding floorplan offset account and net acquisition and disposition related activity		24,214		(83,371	)					175,795			(156,657	)
Change in floorplan notes payable-manufacturer affiliates associated with net acquisition and disposition related activity		—		—						—			(26,578	)

Adjusted net cash provided by operating activities⁽¹⁾	$	62,644	$	17,373			260.6		$	168,504		$	117,883			42.9

⁽¹⁾

We have included certain non-GAAP financial measures as defined under SEC rules, which exclude certain items. These adjusted measures are not measures of financial performance under GAAP. As required by SEC rules, we provide reconciliations of these measures to the most directly comparable GAAP measures. We believe that these adjusted financial measures are relevant and useful to investors because they improve the transparency of our disclosure, provide a meaningful presentation of results from our core business operations and improve period-to-period comparability of our results from our core business operations.

⁽²⁾	Adjustment is net of tax benefit of $72 for the nine months ended September 30, 2012, and $1,335 and $1,474 for the three and nine months ended September 30, 2011, respectively, calculated utilizing the applicable federal and state tax rates for the adjustment.

⁽³⁾	Adjustment is net of tax provision of $412 for the nine months ended September 30, 2012, calculated utilizing the applicable federal and state tax rates for the adjustment.

⁽⁴⁾	Adjustment is net of tax benefit of $992 for the nine months ended September 30, 2012, calculated utilizing the applicable federal and state tax rates for the adjustment.

⁽⁵⁾	Excludes the impact of non-cash asset impairment charges for all periods, as well as a net gain on real estate transactions and insurance deductibles for hail storm damage in 2012.

⁽⁶⁾

Excludes the impact of Same Store non-cash asset impairment charges of $187 for the nine months ended September 30, 2012, and $3,644 and $3,964 for the three and nine months ended September 30, 2011, respectively. In addition, this excludes the impact of Same Store loss on real estate transaction of $504 and insurance deductibles of $2,650 for the nine months ended September 30, 2012. Adjusted Same Store operating income was $62,569, $53,689, $173,287, and $147,100 for the periods presented respectively.

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GROUP 1 AUTOMOTIVE INC Reports