Group 1 Automotive Reports First-Quarter Earnings; Company Reaffirms 2004 Guidance; New Franchise Acquired

Business Wire, April 29, 2004

Business Editors/Automotive Writers

HOUSTON--(BUSINESS WIRE)--April 29, 2004

Group 1 Automotive, Inc. (NYSE:GPI), a Fortune 500 specialty retailer, today reported first-quarter net income of $10.5 million, or $0.45 per diluted share. This includes an after-tax charge of $4.0 million, or $0.17 per diluted share, resulting from the previously announced redemption of the company's 10 7/8% senior subordinated notes in March 2004. Revenues for the quarter were $1.1 billion.

First-Quarter Highlights:

-- New vehicle revenues increased 13.8 percent

-- Parts & service revenues grew 11.6 percent

-- Gross profit increased to $183.4 million from $169.4 million

-- Same store revenues increased 5.7 percent

           Summary Results of Operations (Unaudited)
            (In millions, except per share amounts)

                                             Three Months Ended
                                                 March 31,
                                            --------------------
                                              2004       2003
                                            ---------- ---------
      Revenues                              $1,147.0   $1,029.8
      Gross Profit                            $183.4     $169.4
      Income from Operations                   $32.7      $31.4
      Net Income                               $10.5      $14.8
      Diluted Earnings per Share               $0.45      $0.64

Results for the First Quarter

During the first quarter, revenues grew 11.4 percent to $1.1 billion from $1.0 billion during the same period last year. Same store revenues increased 5.7 percent, compared with a 7.8 percent decrease in the first quarter of 2003.

"We delivered a second consecutive quarter of same store growth reflecting our continued focus on improving operations and the benefits of an improving used vehicle market," said B.B. Hollingsworth Jr., Group 1's chairman, president and chief executive officer.

Hollingsworth noted that from a brand standpoint Acura, Lexus, Infiniti and Nissan were among the strongest performers. "We had outstanding performances from our New Mexico and Central Texas platforms, and continued weak performance in Atlanta," he added.

New vehicle revenues grew 13.8 percent on a unit sales increase of 10.2 percent. Used vehicle retail revenues increased 2.4 percent on unit sales that were 0.8 percent lower. Parts and service and finance and insurance revenues grew 11.6 percent and 3.8 percent, respectively. Gross margin for the quarter was 16.0 percent compared with 16.5 percent during the year-ago period, primarily due to new vehicle sales growing more rapidly than higher-margin parts and service and finance and insurance businesses.

Income from operations was $32.7 million versus $31.4 million, a 4.2 percent increase. Operating margin was 2.8 percent compared with 3.0 percent during the year-ago period.

The company incurred an after-tax charge of $4.0 million, or $0.17 per diluted share, in association with the previously announced redemption of all of its 10 7/8% senior subordinated notes on March 1, 2004.

Net income decreased to $10.5 million from $14.8 million, and diluted average shares outstanding increased 1.6 percent to 23.4 million shares. Diluted earnings per share were $0.45, including the $0.17 negative impact from the notes redemption, compared with $0.64 a year ago.

Acquisition Update

In March 2004, the company completed the acquisition of a new Toyota franchise in Boston. This franchise became the third Toyota dealership for the Ira Motor Group and is expected to generate annual revenues of $55 million. The dealership will sell Scion vehicles in addition to Toyota.

Management's Outlook

Group 1 anticipates growth in the new vehicle, used vehicle, and parts and service markets during the second quarter, as there appear to be signs of a recovery in the used vehicle market, as well as an increase in manufacturers' incentives driving new vehicle sales. The company reaffirmed its FY2004 earnings guidance of $3.20 to $3.40 per diluted share excluding future acquisitions and the $0.17 per diluted share impact of the March 2004 notes redemption. This equates to $3.03 to $3.23 per diluted share excluding future acquisitions and including the redemption impact.

The company continues to seek strategic tuck-in acquisitions to augment its current markets, as well as platform acquisitions to enter new markets. Including the $315 million revenues acquired during the first quarter, the company is targeting to add dealerships with aggregate annual revenues of approximately $1 billion in 2004.

Hollingsworth stated, "Our acquisition pipeline continues to contain attractive, qualified candidates that fit our stringent criteria."

First-Quarter Conference Call

Group 1 will hold a conference call to discuss the first-quarter results at 10 a.m. EDT on Thursday, April 29, 2004. The call can be accessed live and will be available for replay over the Internet at www.vcall.com, or through Group 1's Web site, www.group1auto.com, for 30 days. In addition, an updated slide presentation will be available on Group 1's Web site.