One of the largest automotive retail and service companies in the U.S. Asbury Automotive Group, Inc reported financial results for the second quarter and six months ended June 30, 2008. Income from continuing operations for the second quarter was $11.6 million, or $0.36 per diluted share, compared to $21.1 million, or $0.63 per diluted share, a year ago.

Results for both periods included non-core items, as disclosed in the attached tables, including $0.03 per diluted share in expenses related to the departure of the Company's former CFO in this year's second quarter. The quarterly results a year ago included $0.03 per diluted share in expenses principally related to a debt refinancing and a secondary stock offering.

Net income for the second quarter totaled $10.9 million, or $0.34 per diluted share, compared with $20.6 million, or $0.62 per diluted share, a year ago, including the non-core items discussed above.

For the first six months of 2008, income from continuing operations was $22.8 million, or $0.71 per diluted share, compared with $23.4 million, or $0.69 per diluted share, in the corresponding period last year. Non-core items, as disclosed in the attached tables, reduced earnings by $0.03 per diluted share in the first half of 2008, and by $0.41 per diluted share in the six-month period a year ago.

President and CEO, Charles R. Oglesby, said, "The economic environment and low consumer confidence levels in the second quarter presented a challenging backdrop for the automotive retail business. Soft retail sales in our key Florida markets, in particular, resulted in a disproportionate decline in our profitability. The dramatic increase in gas prices added further complexity to the business, causing a rapid shift in customer preference toward fuel-efficient cars, which placed pressure on our new and used vehicle operations. Although I remain confident that over time we can effectively manage our business to changes in the retail environment, we were not able to adequately adjust our cost structure to match the swift decline in retail sales volumes during the quarter."

Mr. Oglesby continued, "We are accelerating our response to the challenges presented by the market and are decisively addressing costs at each level of our organization, including corporate, regional support and at the store-level. As part of this initiative we are executing a phased restructuring plan, the first step of which is the restructuring of our corporate overhead, shutting down our offices in New York, NY and Stamford, CT, and moving Asbury's headquarters to Atlanta, GA. This move will bring us closer to our dealership operations and will result in an estimated 20% reduction in our corporate personnel expense."

The Company is lowering its guidance for 2008 diluted earnings per share from continuing operations to a range between $1.20 and $1.40, from $1.80 to $2.00 as previously provided. This revised guidance is based on the assumption that the seasonally adjusted annual rate (SAAR) for U.S. new vehicle unit sales will be approximately 14.0 million for the second half of 2008, as well as continued weakness in Asbury's Florida markets.

The guidance includes the non-core items discussed above, as well as future expenses associated with Asbury's corporate restructuring plan. The Company estimates that the pre-tax expenses associated with the restructuring plan will total $5.5 million, of which an estimated $2.5 million, or approximately 5 cents per diluted share, will be incurred during the second half of 2008. Once complete, the restructuring plan is expected to result in approximately $3.5 million of pre-tax savings on an annualized basis.

Mr. Oglesby concluded, "While the automotive retailing industry faces significant near-term challenges, we continue to set the course for the long-term success of our organization. We made a significant step forward in this respect during the second quarter, with our acquisition of the real estate underlying more than 25% of our dealership locations. This purchase will enhance our operating flexibility and save us approximately 200 basis points in related financing costs. In the longer term, we remain confident that we can leverage Asbury's fundamental strengths--including our attractive brand mix and high-quality dealership portfolio--to grow the business, while implementing rigorous expense and capital management."

Courtesy: Asbury Automotive Group

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Posted by Naresh Koshti on 31 July, 2008 10:03:25 AM IST #