Used cars boost Asbury's Q3 profits, sales

Asbury Automotive Group Inc. today reported a 10 percent increase in net income in the third quarter on a 17 percent rise in revenue. Used-car operations paced both revenue and profits.Net income for the quarter was $22.7 million in the quarter, up from $20.7 million a year earlier. Revenue totaled $1.4 billion.Asbury also updated a three-year business plan it unveiled last year.Asbury said it was on pace to meet its goal of about $500 million in annual revenue through acquisitions, and it said it expects to continue its acquisition pace through 2016."We are planning our business around a slowly improving economy, a favorable financing environment and a modestly improving [industry sales rate] of around 16 million over the course of the next three years," Asbury CFO Scott Krenz said.Asbury, No. 7 on the list of the top 125 dealership groups in the country based on retail new-vehicle sales, said it has gained $175 million in annualized revenue through the acquisition of five dealerships so far this year.The group also said it plans to spend $35 million to $45 million annually on capital expenditures in the next three years.Lease buyoutsAsbury spent $19 million last quarter to purchase property it had been leasing -- a move Asbury said will save it $2 million annually in rent. The company said it now owns 66 percent of its real estate.It ultimately hopes to own three-quarters of its own dealership real estate and plans to spend $10 million annually on lease buyouts through 2016. But CEO Craig Monaghan said it is difficult to predict when the company might reach that 75 percent goal."We can only buy out leases when the holder of those properties is a willing seller," Monaghan said, noting that if a lender is unwilling to sell a property Asbury is interested in, the group will build a new facility nearby. "On our cash flow statement, that shows up as a capital expenditure, but effectively it's a lease buyout."Used cars drive profitsAsbury's 10 percent rise in net income was driven by used-car sales. Used-vehicle revenue jumped 33 percent, with a 17 percent increase in gross profit. Asbury's used-vehicle sales rose 29 percent to 18,715 units.COO Michael Kearney said the group has increased its inventory and expanded its reconditioning hours to meet used-vehicle demand. But he said he was unsure if the used-vehicle business would continue to grow at that rate."I don't know if we can continue to grow at this pace. But there's a substantial opportunity out there, and we'll continue to refine our process," Kearney said.Asbury's finance and insurance revenue rose 24 percent, while parts and service revenue rose 9 percent from the year-earlier period.

Used cars boost Asbury's Q3 profits, sales

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