|Edgar Online, Inc.|
This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements because of various factors. See "Cautionary Statement about Forward-Looking Statements."
We are a leading operator in the automotive retail industry. As of
March 31, 2012, we owned and operated 134 franchises, representing 31 brands of automobiles, at 107 dealership locations and 25 collision service centers in the U.S. and ten franchises at five dealerships and three collision centers in the U.K.Through our dealerships, we sell new and used cars and light trucks; arrange related vehicle financing; sell service and insurance contracts; provide automotive maintenance and repair services; and sell vehicle parts. Our operations are primarily located in major metropolitan areas in Alabama, California, Florida, Georgia, Kansas, Louisiana, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, Oklahoma, South Carolinaand Texasin the U.S. and in the towns of Brighton, Farnborough, Hailsham, Hindhead and Worthing in the U.K.As of March 31, 2012, our U.S. retail network consisted of the following two regions (with the number of dealerships they comprised): (i) the East (43 dealerships in Alabama, Florida, Georgia, Louisiana, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New Yorkand South Carolina) and (ii) the West (64 dealerships in California, Kansas, Oklahomaand Texas). Each region is managed by a regional vice president who reports directly to our Chief Executive Officer and is responsible for the overall performance of their regions, as well as for overseeing the market directors and dealership general managers that report to them. Each region is also managed by a regional chief financial officer who reports directly to our Chief Financial Officer. Our dealerships in the U.K.are also managed locally with direct reporting responsibilities to our corporate management team.
September 2008through most of 2009, the U.S. and global economies suffered from, among other things, a substantial decline in consumer confidence, a rise in unemployment and a tightening of credit availability. As a result, the retail automotive industry was negatively impacted by decreasing customer demand for new and used vehicles, vehicle margin pressures and higher inventory levels. Through 2011 and the first three months of 2012, economic trends have stabilized and consumer demand for new and used vehicles has shown improvement. According to industry experts, the March 2012seasonally adjusted annual rate of sales (or "SAAR") was 14.4 million units, compared to 13.0 million units a year ago. But given the depth of the downturn, we believe the recovery to historically normalized industry selling levels will probably be extended. Our operations have, and we believe that our operations will continue to generate positive cash flow. As such, we are focused on maximizing the return on the capital that we generate from our operations and positioning our balance sheet to take advantage of investment opportunities as they arise. We believe that the stabilizing economic trends provide opportunities for us to improve our operating results as we: (i) expand our new and used vehicle sales results and improve our sales efficiency; (ii) continue to focus on our higher margin parts and service business by enhancing the cost effectiveness of our marketing efforts, implementing strategic selling methods, and improving operational efficiencies; (iii) invest capital where necessary to support the anticipated growth, particularly in our parts and service business; and (iv) further leverage of our revenue and gross profit growth through continued cost rationalization. We continue to closely scrutinize all planned future capital spending and work closely with our manufacturer partners in this area to make prudent investment decisions that are expected to generate an adequate return and/or improve the customer experience. We anticipate that 2012 capital spending will be less than $55.0 million, which includes $15.0 millionfor specific growth initiatives in our parts and service business. We remain committed to our growth-by-acquisition strategy, and with the prolonged nature of the anticipated economic recovery, we believe that significant opportunities exist to enhance our portfolio with dealerships that meet our stringent investment criteria. During the first three months of 2012, we completed the acquisition of three dealerships. We will continue to pursue dealership investment opportunities that we believe will add value for our stockholders.
Financial and Operational Highlights