Asbury Automotive Group posted a loss in 2008 -- its first red ink for a full year since it became publicly traded -- and received a warning from auditors that it may not remain current in its debt covenants.
The warning came out late Monday when Asbury filed its 2008 report with the Securities and Exchange Commission.
The company said auditors from Deloitte & Touche LLP think the uncertainty over the debt covenents raises substantial doubt about the company's ability to continue as a going concern.
Auditors' "going concern" warnings typically occur for companies at risk of filing for bankruptcy protection.
"This was such a body blow," CEO Charles Oglesby told Automotive News in an interview today. "We are making sure we are focused on the prize. We can't be distracted right now. We must keep moving forward."
Two other auto companies said today that would get the warning: Supplier Visteon Corp. and dealer group Sonic Automotive Inc. General Motors and supplier American Axle & Manufacturing Holdings Inc. also have received such warnings this month. More suppliers are expected to join that group.
Asbury reported a $365.4 million net loss in the fourth quarter, down from $11 million in net income in the same period in 2007. That quarter dragged the dealership group to an annual net loss of $338 million, compared with a $51 million net gain in 2007.
The annual loss was Asburys first since going public in 2002, and the quarterly loss was the second in that period, according to Bloomberg data. The dealership groups other fourth-quarter loss came in 2003.
Receiving a going-concern warning constitutes a default on some of Asbury's debts, the company said in a release. But Asbury received waivers from 11 lenders on short notice to prevent the automatic default, CFO Craig Monaghan said in a statement.
"Our lenders are the ones committing money to Asbury and they are standing behind us unanimously," Monaghan told Automotive News in an interview today. "That speaks volumes."
In a note to investors, Wachovia Capital Markets analyst Rich Kwas said, The lender waivers should mute investor worries regarding the auditors going-concern comment.
Asbury's stock rose 23.1 percent today to $2.82 a share. On March 17, 2008, the stock was worth $13.48.
Asbury broke even in January and February, said Efraim Levy, a Standard and Poor's equity analyst who listened to the company's conference call.
During the fourth quarter, Asbury cut same-store operating costs 17 percent, Oglesby said in a statement. The company also repurchased $60 million in debt and decreased its outstanding debts by 10 percent.
Asbury also moved its headquarters from New York to suburban Atlanta in the fourth quarter and eliminated a quarter of its corporate staff. The company also cut 10 percent of its national jobs, Oglesby said.
The restructuring means Asbury has eliminated its regional management setup and made Michael Kearney, formerly CEO of Asburys east region, COO in charge of dealership operations, Oglesby said.
Last month, Asbury said Oglesby, Monaghan, Vice President of Human Resources Philip Johnson and Vice President of Finance Keith Style would take 10 percent pay cuts for the rest of 2009.
Asbury said it was current with its debts as of the end of 2008. Monaghan said the 87-store group had $116 million in borrowing capacity and $92 million in cash at year end, and none of its major debts mature until 2012.
Asburys same-store revenue from new light vehicles fell 38 percent in the fourth quarter as U.S. auto demand hit 26-year lows. For the full year, light-vehicle revenue was down 22 percent. Same-store revenue from used-car retail sales fell 30 percent last quarter and 23 percent for 2008.
Lithia narrows losses
Also today, publicly held Lithia Motors Inc. reported a $4.3 million net loss in the fourth quarter. That was an improvement from a $4.78 million net loss in the same period the previous year.
The loss contributed to a $252.6 million net loss for 2008, down from a $21.5 million net gain in 2007.
The Medford, Ore., dealership group saw revenue from same-store sales of new vehicles during the quarter fall 39.2 percent, while revenue from used-vehicle retail sales at its 93 stores fell 17.4 percent.
Lithia saw same-store revenue fall 24.1 percent in 2008, while retail revenue from used sales fell 15.8 percent.
Lithia's stock price fell 4.2 percent to $2.75, down from $9.68 on March 17, 2008.
Donna Harris contributed to this story