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): September 2, 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 (I.R.S. Employer
incorporation or organization) Number) 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
Return on Invested Capital
--------------------------
Return on Invested Capital (ROIC) is a measurement of the return received
on all capital invested in the company, including stockholders' equity,
long-term debt and the present value of future rents. It is computed by dividing
the net operating profit after tax (NOPAT) by the average invested capital.
NOPAT equals operating income minus floorplan interest expense and interest
income on excess cash, plus rent expense and amortization expense, net of tax.
The average invested capital equals the average of the beginning of the year and
end of the year total invested capital, which is the sum of stockholders' equity
plus accumulated goodwill amortization, long-term debt and the present value of
future rents, minus excess cash. NOPAT is not a measure of operating income
under GAAP and invested capital is not a measure of capitalization under GAAP.
Additionally, our ROIC, NOPAT and invested capital computations may not be
comparable to other similarly titled measures of other companies.
We believe that ROIC provides additional information regarding our ability
to assess the performance of our operations and the effectiveness of our
deployment of capital. These measures are widely used by investors in the
valuation, comparison, rating and investment recommendations of companies.
Return on Invested Capital is calculated as follows:
The following table reconciles Net Operating Profit after Tax (NOPAT) to
Operating Income for the periods presented:
Year Ended December 31,
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1998 1999 2000 2001 2002
---- ---- ---- ---- ----
(dollars in 000's)
Operating Income $ 52,046 $ 85,950 $ 117,720 $ 131,348 $ 137,623
Deduct: Floorplan interest expense (12,837) (20,395) (37,536) (27,935) (19,371)
Interest income on excess cash (A) (1,129) (1,318) (1,145) (2,621) (1,753)
Add: Rent expense 11,121 19,943 28,348 30,668 36,844
Amortization expense 2,643 5,763 8,451 9,142 1,838
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Adjusted operating income 51,844 89,943 115,838 140,602 155,181
Taxes on adjusted operating income (B) (21,360) (35,797) (44,018) (53,429) (58,193)
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NOPAT $ 30,484 $ 54,146 $ 71,819 $ 87,173 $ 96,988
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The following table reconciles Invested Capital to Stockholders' Equity for the
periods presented:
As of December 31,
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1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
(dollars in 000's)
Stockholders' equity $ 89,372 $ 136,184 $ 232,029 $ 247,416 $ 392,243 $ 443,417
Add: Accumulated goodwill amortization 299 2,504 7,045 13,960 21,448 21,448
Long-term debt 9,369 45,787 114,250 141,899 97,186 84,219
Present value of future rents (C) 66,400 88,968 159,544 226,784 245,344 294,752
Less: Excess cash (D) (20,000) (10,000) (30,000) - (100,000) (20,000)
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Total invested capital 145,440 263,443 482,868 630,059 656,221 823,836
Average invested capital $ 204,442 $ 373,156 $ 556,464 $ 643,140 $ 740,029
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Return on invested capital (NOPAT/Average
invested capital) 14.9% 14.5% 12.9% 13.6% 13.1%
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Notes:
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(A) Computed using the floorplan interest rate for the period times the average
excess cash balance for the year.
(B) Computed using the effective tax rate for the period times adjusted
operating income.
(C) Present value of future rents equals rent expense times 8.
(D) Represents cash in excess of the working capital needed to operate our
existing business. Excess cash is expected to be invested in acquisitions,
capital projects, share repurchases and debt retirements.
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.
September 2, 2003 By: /s/ Scott L. Thompson
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Date Scott L. Thompson, Executive Vice President,
Chief Financial Officer and Treasurer