GROUP 1 AUTOMOTIVE INC - FORM 8-K - EX-99.1 - PRESS RELEASE OF GROUP 1 AUTOMOTIVE, INC., DATED AS OF JULY 26, 2012

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Exhibit 99.1

LOGO

FOR IMMEDIATE RELEASE

Group 1 Automotive Reports All-Time Record Quarterly Profits

Revenues Increase 29 Percent

HOUSTON, July 26, 2012 — Group 1 Automotive, Inc. (NYSE: GPI), a Fortune 500 automotive retailer, today reported record 2012 second-quarter adjusted net income of $29.7 million, a 20.1 percent increase from the prior-year period, and record adjusted diluted earnings per common share of $1.25 for the period ended June 30, 2012. As shown in the attached reconciliation table, the company recognized a $1.1 million net after-tax adjustment for insurance deductibles associated with property damage from a major hailstorm, and a non-cash asset impairment charge, partially offset by a net gain on real estate transactions in the quarter ended June 30, 2012. Before adjusting for these items, reported net income was $28.6 million and diluted earnings per common share were $1.20.

Year-to-date 2012 adjusted net income increased 31.3 percent, to a record $52.9 million. Adjusted diluted earnings per common share were $2.23, making this the best first six-month results in the company’s history.

“Group 1’s record-setting second-quarter performance was driven by strong same-store revenue growth in our new and used retail segments and another record-setting quarter in finance and insurance,” said Earl J. Hesterberg, Group 1’s president and chief executive officer. “Even with the impact of a major hailstorm that severely damaged about 2,200 units at seven of Group 1’s Oklahoma dealerships during the quarter, we outpaced the industry unit sales rate and further improved our expense leverage.”

Record-Setting Second-Quarter 2012 Highlights

•

Total revenues of $1.9 billion were a new any-quarter record high for the company –up 28.6 percent over prior year.

•

Total gross margin was 15.1 percent, as gross profit grew 16.8 percent from the prior year to an all-time record of $285.3 million.

•

New vehicle gross profit increased 17.7 percent on 33.4 percent higher revenues, as the company retailed 36.6 percent more units than in the prior-year period. Average vehicle selling price declined 2.3 percent, to $32,824.

•

Retail used vehicle unit sales surged 27.9 percent over the prior year, with the average selling price increasing 1.0 percent, to $20,734. Gross profit grew 12.4 percent on 29.2 percent higher revenues.

•

Parts and service revenues increased 7.9 percent from the prior year, reflecting continued growth in customer-pay, wholesale parts and collision sales.

•

Finance and insurance gross profit per retail unit increased $65 from the prior year, to a record $1,191.

•

Adjusted selling, general and administrative expenses as a percent of gross profit improved to 74.6 percent, compared with the prior-year period, and improved 190 basis points from the first quarter.

•

Adjusted operating margin was 3.4 percent, a 20 basis-point improvement from the first-quarter period.

Share Repurchases

As announced on July 11, Group 1 repurchased 241,991 shares of its common stock at an average price of $46.75 during the second quarter. Additionally, it was announced that the board authorized a new $50 million common share repurchase program that replaced the $5.4 million remaining at June 30 under the prior authorization.

Corporate Development Recap

During the second quarter, Group 1 acquired six Audi franchises in the United Kingdom and two Volkswagen and one Honda franchise in Florida. In total, these nine franchises are estimated to generate $361.0 million in annual revenues.

Year to date, Group 1 has acquired 12 franchises that are expected to generate $504.5 million in annual revenues.

Group 1 Automotive, Inc.

Second-Quarter Earnings Conference Call

Group 1’s senior management will host a conference call today at 10 a.m. ET to discuss the second-quarter financial results and the company’s outlook and strategy.

The conference call will be simulcast live on the Internet at www.group1auto.com, then click on ‘Investor Relations’ and then ‘Events’ or through this link: http://www.group1corp.com/news/events.aspx. A replay will be available for 30 days.

The conference call will also be available live by dialing in 10 minutes prior to the start of the call at:

Domestic: 1.877.317.6789

International: 1.412.317.6789

Conference ID: 10015858

A telephonic replay will be available following the call through Aug. 2 at 9 a.m. ET by dialing:

Domestic: 1.877.344.7529

International: 1.412.317.0088

Conference ID: 10015858

About Group 1 Automotive, Inc.

Group 1 owns and operates 122 automotive dealerships, 159 franchises, and 28 collision centers in the United States and the United Kingdom that offer 32 brands of automobiles. Through its dealerships, the company sells new and used cars and light trucks; arranges related vehicle financing, service and insurance contracts; provides automotive maintenance and repair services; and sells vehicle parts.

Group 1 Automotive can be reached on the Internet at www.group1auto.com.

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which are statements related to future, not past, events and are based on our current expectations and assumptions regarding our business, the economy and other future conditions. In this context, the forward-looking statements often include statements regarding our goals, plans, projections and guidance regarding our financial position, results of operations, market position, pending and potential future acquisitions and business strategy, and often contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “should,” “foresee,” “may” or “will” and similar expressions. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. Any such forward-looking statements are not assurances of future performance and involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statements. These risks and uncertainties include, among other things, (a) general economic and business conditions, (b) the level of manufacturer incentives, (c) the future regulatory environment, (d) our ability to obtain an inventory of desirable new and used vehicles, (e) our relationship with our automobile manufacturers and the willingness of manufacturers to approve future acquisitions, (f) our cost of financing and the availability of credit for consumers, (g) our ability to complete acquisitions and dispositions and the risks associated therewith, (h) foreign exchange controls and currency fluctuations, and (i) our ability to retain key personnel. For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see our filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.

SOURCE: Group 1 Automotive, Inc.

Group 1 Automotive, Inc.

Investor Contacts:

Kim Paper Canning

Manager, Investor Relations

Group 1 Automotive, Inc.

713-647-5741 | kpaper@group1auto.com

Media Contacts:

Pete DeLongchamps

V.P. Financial Services and Manufacturer Relations

Group 1 Automotive, Inc.

713-647-5770 | pdelongchamps@group1auto.com

Clint Woods

Pierpont Communications, Inc.

713-627-2223 | cwoods@piercom.com

Group 1 Automotive, Inc.

Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended June 30,									Six Months Ended June 30,
	2012			2011			% Change			2012			2011			% Change
REVENUES:
New vehicle retail sales	$	1,080,710		$	809,881			33.4		$	1,993,305		$	1,594,595			25.0
Used vehicle retail sales		456,234			353,047			29.2			871,208			676,494			28.8
Used vehicle wholesale sales		73,134			60,607			20.7			139,991			122,558			14.2
Parts and service		220,313			204,091			7.9			433,414			399,041			8.6
Finance and insurance		65,435			46,519			40.7			122,653			90,759			35.1

Total revenues		1,895,826			1,474,145			28.6			3,560,571			2,883,447			23.5

COST OF SALES:
New vehicle retail sales		1,016,868			755,617			34.6			1,876,643			1,497,559			25.3
Used vehicle retail sales		417,388			318,499			31.0			795,965			613,046			29.8
Used vehicle wholesale sales		72,811			58,940			23.5			136,964			118,397			15.7
Parts and service		103,415			96,878			6.7			205,231			188,459			8.9

Total cost of sales		1,610,482			1,229,934			30.9			3,014,803			2,417,461			24.7

GROSS PROFIT		285,344			244,211			16.8			545,768			465,986			17.1

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		214,327			183,051			17.1			413,439			358,935			15.2
DEPRECIATION AND AMORTIZATION EXPENSE		7,742			6,581			17.6			14,978			13,036			14.9
ASSET IMPAIRMENTS		187			142			31.7			288			364			(20.9	)

OPERATING INCOME		63,088			54,437			15.9			117,063			93,651			25.0

OTHER EXPENSE:
Floorplan interest expense		(7,863	)		(6,521	)		20.6			(15,482	)		(13,281	)		16.6
Other interest expense, net		(9,190	)		(8,225	)		11.7			(18,230	)		(16,167	)		12.8

INCOME BEFORE INCOME TAXES		46,035			39,691			16.0			83,351			64,203			29.8

PROVISION FOR INCOME TAXES		(17,410	)		(15,008	)		16.0			(31,609	)		(24,158	)		30.8

NET INCOME	$	28,625		$	24,683			16.0		$	51,742		$	40,045			29.2

DILUTED INCOME PER SHARE	$	1.20		$	1.03			16.5		$	2.18		$	1.66			31.3

Weighted average dilutive common shares outstanding		22,513			22,651			(0.6	)		22,522			22,693			(0.8	)
Weighted average participating securities		1,317			1,393			(5.5	)		1,263			1,393			(9.3	)

Total weighted average shares outstanding		23,830			24,044			(0.9	)		23,785			24,086			(1.2	)

Group 1 Automotive, Inc.

Consolidated Balance Sheets

(Dollars in thousands)


	June 30, 2012			December 31, 2011			% Change
	(Unaudited)
ASSETS:

CURRENT ASSETS:
Cash and cash equivalents	$	9,544		$	14,895			(35.9	)
Contracts in transit and vehicle receivables, net		150,978			167,507			(9.9	)
Accounts and notes receivable, net		114,361			92,775			23.3
Inventories, net		1,071,927			867,470			23.6
Deferred income taxes		18,147			16,012			13.3
Prepaid expenses and other current assets		20,154			16,925			19.1

Total current assets		1,385,111			1,175,584			17.8
PROPERTY AND EQUIPMENT, net		638,971			585,633			9.1
GOODWILL AND INTANGIBLE FRANCHISE RIGHTS		758,716			702,145			8.1
OTHER ASSETS		12,459			12,981			(4.0	)

Total assets	$	2,795,257		$	2,476,343			12.9

LIABILITIES AND STOCKHOLDERS’ EQUITY:

CURRENT LIABILITIES:
Floorplan notes payable - credit facility	$	886,237		$	718,945			23.3
Offset account related to floorplan notes payable - credit facility		(101,760	)		(109,207	)		(6.8	)
Floorplan notes payable - manufacturer affiliates		174,783			155,980			12.1
Current maturities of long-term debt and short-term financing		25,184			14,663			71.8
Current liabilities from interest rate risk management activities		2,119			7,273			(70.9	)
Accounts payable		166,127			148,048			12.2
Accrued expenses		117,625			109,245			7.7

Total current liabilities		1,270,315			1,044,947			21.6
2.25% CONVERTIBLE SENIOR NOTES (aggregate principal of $182,753 at June 30, 2012 and December 31, 2011)		148,603			144,985			2.5
3.00% CONVERTIBLE SENIOR NOTES (aggregate principal of $115,000 at June 30, 2012 and December 31, 2011)		79,018			77,401			2.1
MORTGAGE FACILITY, net of current maturities		54,984			38,873			41.4
OTHER REAL ESTATE RELATED AND LONG-TERM DEBT, net of current maturities		199,387			184,237			8.2
CAPITAL LEASE OBLIGATIONS RELATED TO REAL ESTATE, net of current maturities		34,978			37,105			(5.7	)
DEFERRED INCOME TAXES		83,295			78,459			6.2
LIABILITIES FROM INTEREST RATE RISK MANAGEMENT ACTIVITIES		38,201			26,766			42.7
OTHER LIABILITIES		40,702			36,470			11.6
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Common stock		261			260			0.4
Additional paid-in capital		368,069			363,375			1.3
Retained earnings		636,182			591,037			7.6
Accumulated other comprehensive loss		(33,160	)		(29,236	)		13.4
Treasury stock		(125,578	)		(118,336	)		6.1

Total stockholders’ equity		845,774			807,100			4.8

Total liabilities and stockholders’ equity	$	2,795,257		$	2,476,343			12.9

KEY DEBT COVENANT METRICS:

Senior secured adjusted ratio (must be less than 3.75)		2.36			2.46
Total leverage ratio (must be less than 5.50)		3.44			3.65
Fixed charge coverage ratio (must be greater than 1.35)		1.97			1.94

Group 1 Automotive, Inc.

Consolidated Statements of Adjusted Cash Flows from Operating Activities

(Unaudited)

(In thousands)


	Three Months Ended June 30,									Six Months Ended June 30,
	2012			2011			% Change			2012			2011			% Change
Net income	$	28,625		$	24,683			16.0		$	51,742		$	40,045			29.2
Adjustments to reconcile net income to net cash provided by operating activities:
Asset impairments		187			142			31.7			288			364			(20.9	)
Depreciation and amortization		7,742			6,581			17.6			14,978			13,036			14.9
Deferred income taxes		3,012			7,062			(57.3	)		6,075			14,110			(56.9	)
Gain on disposition of assets and franchise		(1,580	)		(786	)		101.0			(1,588	)		(786	)		102.0
Stock-based compensation		3,021			2,814			7.4			5,915			5,558			6.4
Amortization of debt discount and issue costs		3,218			2,970			8.4			6,388			5,848			9.2
Other		128			71			80.3			57			(102	)		155.9
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Accounts payable and accrued expenses		9,785			14,453			(32.3	)		17,623			24,890			(29.2	)
Accounts and notes receivable		(21,859	)		(3,315	)		559.4			(14,720	)		3,963			(471.4	)
Inventories		(75,482	)		47,067			(260.4	)		(160,082	)		52,803			(403.2	)
Contracts-in-transit and vehicle receivables		5,825			11,750			(50.4	)		23,871			8,127			193.7
Prepaid expenses and other assets		1,763			(374	)		571.4			6,215			1,022			508.1
Floorplan notes payable - credit facility ⁽¹⁾		79,218			(69,722	)		213.6			151,581			(73,286	)		306.8
Floorplan notes payable - manufacturer affiliates ⁽²⁾		(1,423	)		10,829			(113.1	)		(3,077	)		5,866			(152.5	)
Deferred revenues		767			(447	)		271.6			594			(948	)		162.7

Adjusted net cash provided by operating activities	$	42,947		$	53,778			(20.1	)	$	105,860		$	100,510			5.3

⁽¹⁾	Excludes net acquisition/(disposition) related activity of $6,043 and $17,926 for the three months ended June 30, 2012 and 2011, respectively. Excludes net acquisition/(disposition) related activity of $15,712 and $20,476 for the six months ended June 30, 2012, and 2011, respectively.

⁽²⁾	Excludes net acquisition/(disposition) related activity of $22,419 for the three months ended June 31, 2011 and $26,578 for the six months ended June 30, 2011.

Group 1 Automotive, Inc.

Additional Information—Consolidated

(Unaudited)


		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2012 (%)		2011 (%)		2012 (%)		2011 (%)
NEW VEHICLE UNIT SALES GEOGRAPHIC MIX:
Region	Geographic Market
	Massachusetts		9.7		11.2		10.2		12.0
East	New Jersey		5.1		5.9		5.1		5.9
	Georgia		3.4		3.2		3.4		3.6
	New York		3.2		4.3		3.3		3.8
	New Hampshire		3.0		3.0		2.9		3.2
	Louisiana		2.5		3.0		2.6		3.1
	Mississippi		2.1		1.9		2.1		2.0
	South Carolina		1.9		1.2		1.8		1.4
	Florida		1.2		0.8		1.0		0.7
	Alabama		1.0		1.1		1.0		1.2
	Maryland		0.6		1.0		0.7		0.8

			33.7		36.6		34.1		37.7

West	Texas		36.0		34.6		36.8		33.3
	California		14.4		13.9		14.5		14.6
	Oklahoma		7.8		8.2		7.8		8.1
	Kansas		1.6		1.1		1.4		1.0

			59.8		57.8		60.5		57.0

International	United Kingdom		6.5		5.6		5.4		5.3

			100.0		100.0		100.0		100.0

NEW VEHICLE UNIT SALES BRAND MIX:
Toyota/Scion/Lexus			31.2		28.5		30.9		31.5
Honda/Acura			11.4		11.3		11.2		12.1
BMW/MINI			11.3		14.9		11.0		13.3
Nissan/Infiniti			10.8		12.7		11.8		13.4
Ford			8.8		8.3		9.5		7.7
Volkswagen/Audi/Porsche			6.6		3.1		5.4		2.4
GM			5.8		5.0		6.0		4.8
Daimler			4.8		6.4		4.7		5.8
Chrysler			4.4		4.7		4.4		4.1
Other			4.9		5.1		5.1		4.9

			100.0		100.0		100.0		100.0

NEW VEHICLE UNIT SALES OTHER MIX:
Import			54.7		52.2		55.2		55.5
Luxury			27.1		30.0		25.7		28.0
Domestic			18.2		17.8		19.1		16.5

			100.0		100.0		100.0		100.0

Car			57.4		55.9		56.7		56.0
Truck			42.6		44.1		43.3		44.0

			100.0		100.0		100.0		100.0

Group 1 Automotive, Inc.

Additional Information—Consolidated

(Unaudited)

(Dollars in thousands, except per unit amounts)


	Three Months Ended June 30,									Six Months Ended June 30,
	2012			2011			% Change			2012			2011			% Change
REVENUES:
New vehicle retail sales	$	1,080,710		$	809,881			33.4		$	1,993,305		$	1,594,595			25.0

Used vehicle retail sales		456,234			353,047			29.2			871,208			676,494			28.8
Used vehicle wholesale sales		73,134			60,607			20.7			139,991			122,558			14.2

Total used		529,368			413,654			28.0			1,011,199			799,052			26.5
Parts and service		220,313			204,091			7.9			433,414			399,041			8.6
Finance and insurance		65,435			46,519			40.7			122,653			90,759			35.1

Total	$	1,895,826		$	1,474,145			28.6		$	3,560,571		$	2,883,447			23.5

GROSS MARGIN %:
New vehicle retail sales		5.9			6.7						5.9			6.1
Used vehicle retail sales		8.5			9.8						8.6			9.4
Used vehicle wholesale sales		0.4			2.8						2.2			3.4
Total used		7.4			8.8						7.7			8.5
Parts and service		53.1			52.5						52.6			52.8
Finance and insurance		100.0			100.0						100.0			100.0
Total		15.1			16.6						15.3			16.2

GROSS PROFIT:
New vehicle retail sales	$	63,842		$	54,264			17.7		$	116,662		$	97,036			20.2

Used vehicle retail sales		38,846			34,548			12.4			75,243			63,448			18.6
Used vehicle wholesale sales		323			1,667			(80.6	)		3,027			4,161			(27.3	)

Total used		39,169			36,215			8.2			78,270			67,609			15.8
Parts and service		116,898			107,213			9.0			228,183			210,582			8.4
Finance and insurance		65,435			46,519			40.7			122,653			90,759			35.1

Total	$	285,344		$	244,211			16.8		$	545,768		$	465,986			17.1

UNITS SOLD:
Retail new vehicles sold		32,924			24,097			36.6			60,854			48,801			24.7
Retail used vehicles sold		22,004			17,200			27.9			42,753			33,930			26.0
Wholesale used vehicles sold		11,244			8,494			32.4			21,238			17,549			21.0

Total used		33,248			25,694			29.4			63,991			51,479			24.3

AVERAGE RETAIL SALES PRICE:
New vehicle retail	$	32,824		$	33,609			(2.3	)	$	32,756		$	32,676			0.2
Used vehicle retail	$	20,734		$	20,526			1.0		$	20,378		$	19,938			2.2

GROSS PROFIT PER UNIT SOLD:
New vehicle retail sales	$	1,939		$	2,252			(13.9	)	$	1,917		$	1,988			(3.6	)
Used vehicle retail sales		1,765			2,009			(12.1	)		1,760			1,870			(5.9	)
Used vehicle wholesale sales		29			196			(85.2	)		143			237			(39.7	)
Total used		1,178			1,409			(16.4	)		1,223			1,313			(6.9	)
Finance and insurance (per retail unit)	$	1,191		$	1,126			5.8		$	1,184		$	1,097			7.9

OTHER: ⁽¹⁾
SG&A expenses	$	212,748		$	183,051			16.2		$	411,860		$	358,935			14.7
SG&A as % revenues		11.2			12.4						11.6			12.4
SG&A as % gross profit		74.6			75.0						75.5			77.0
Operating margin %		3.4			3.7						3.3			3.3
Pretax margin %		2.5			2.7						2.4			2.2

FLOORPLAN EXPENSE:
Floorplan interest	$	(7,863	)	$	(6,521	)		20.6		$	(15,482	)	$	(13,281	)		16.6
Floorplan assistance		8,658			5,886			47.1			16,072			12,096			32.9

Net floorplan income (expense)	$	795		$	(635	)		225.2		$	590		$	(1,185	)		149.8

⁽¹⁾

These amounts have been adjusted to exclude the impact of certain items to provide additional information regarding the performance of our operations and improve period-to-period comparability. Refer to our Reconciliation of Certain Non-GAAP Financial Measures for a description of the aforementioned adjustments.

Group 1 Automotive, Inc.

Additional Information—Same Store⁽¹⁾

(Unaudited)

(Dollars in thousands, except per unit amounts)


	Three Months Ended June 30,									Six Months Ended June 30,
	2012			2011			% Change			2012			2011			% Change
REVENUES:
New vehicle retail sales	$	979,317		$	806,141			21.5		$	1,820,048		$	1,589,794			14.5

Used vehicle retail sales		417,810			351,653			18.8			803,310			674,697			19.1
Used vehicle wholesale sales		63,212			60,542			4.4			124,427			122,478			1.6

Total used		481,022			412,195			16.7			927,737			797,175			16.4
Parts and service		206,171			203,592			1.3			404,708			397,666			1.8
Finance and insurance		60,563			46,293			30.8			113,775			90,486			25.7

Total	$	1,727,073		$	1,468,221			17.6		$	3,266,268		$	2,875,121			13.6

GROSS MARGIN %:
New vehicle retail sales		5.8			6.7						5.8			6.1
Used vehicle retail sales		8.5			9.8						8.6			9.4
Used vehicle wholesale sales		0.7			2.7						2.3			3.4
Total used		7.5			8.7						7.7			8.4
Parts and service		52.8			52.6						52.7			52.8
Finance and insurance		100.0			100.0						100.0			100.0
Total		15.2			16.6						15.5			16.2

GROSS PROFIT:
New vehicle retail sales	$	57,204		$	54,018			5.9		$	105,967		$	96,699			9.6

Used vehicle retail sales		35,545			34,327			3.5			68,949			63,179			9.1
Used vehicle wholesale sales		411			1,652			(75.1	)		2,898			4,144			(30.1	)

Total used		35,956			35,979			(0.1	)		71,847			67,323			6.7
Parts and service		108,887			106,997			1.8			213,237			210,097			1.5
Finance and insurance		60,563			46,293			30.8			113,775			90,486			25.7

Total	$	262,610		$	243,287			7.9		$	504,826		$	464,605			8.7

UNITS SOLD:
Retail new vehicles sold		29,899			23,977			24.7			55,691			48,637			14.5

Retail used vehicles sold		20,310			17,131			18.6			39,590			33,836			17.0
Wholesale used vehicles sold		9,949			8,484			17.3			19,162			17,535			9.3

Total used		30,259			25,615			18.1			58,752			51,371			14.4

AVERAGE RETAIL SALES PRICE:
New vehicle retail	$	32,754		$	33,621			(2.6	)	$	32,681		$	32,687			(0.0	)
Used vehicle retail	$	20,572		$	20,528			0.2		$	20,291		$	19,940			1.8

GROSS PROFIT PER UNIT SOLD:
New vehicle retail sales	$	1,913		$	2,253			(15.1	)	$	1,903		$	1,988			(4.3	)
Used vehicle retail sales		1,750			2,004			(12.7	)		1,742			1,867			(6.7	)
Used vehicle wholesale sales		41			195			(79.0	)		151			236			(36.0	)
Total used		1,188			1,405			(15.4	)		1,223			1,311			(6.7	)
Finance and insurance (per retail unit)	$	1,206		$	1,126			7.1		$	1,194		$	1,097			8.8

OTHER: ⁽²⁾
SG&A expenses	$	194,490		$	182,674			8.2		$	379,767		$	358,185			6.9
SG&A as % revenues		11.3			12.4						11.6			12.5
SG&A as % gross profit		74.1			75.1						75.2			77.1
Operating margin %		3.5			3.7						3.4			3.2

FLOORPLAN EXPENSE:
Floorplan interest	$	(7,177	)	$	(6,450	)		11.3		$	(14,178	)	$	(13,201	)		7.4
Floorplan assistance		7,827			5,866			33.4			14,473			12,066			19.9

Net floorplan income (expense)	$	650		$	(584	)		211.3		$	295		$	(1,135	)		126.0

⁽¹⁾

Same store amounts include the results for the identical months in each period presented in the comparison, commencing with the first full month we owned the dealership and, in the case of dispositions, ending with the last full month we owned it. Same store results also include the activities of our corporate office.

⁽²⁾

Group 1 Automotive, Inc.

Reconciliation of Certain Non-GAAP Financial Measures

(Unaudited)

(Dollars in thousands, except per share amounts)


	Three Months Ended June 30,							Six Months Ended June 30,
	2012			2011		% Change		2012			2011		% Change
NET INCOME RECONCILIATION:

As reported	$	28,625		$	24,683		16.0	$	51,742		$	40,045		29.2
After-tax Adjustments:
Non-cash asset impairment charges⁽²⁾		115			85				115			225
Net gain on real estate transactions⁽³⁾		(659	)		—				(659	)		—
Insurance deductibles for hail storm damage ⁽⁴⁾		1,658			—				1,658			—

Adjusted net income ⁽¹⁾	$	29,739		$	24,768		20.1	$	52,856		$	40,270		31.3

ADJUSTED NET INCOME ATTRIBUTABLE TO DILUTED COMMON SHARES RECONCILIATION:

Adjusted net income	$	29,739		$	24,768		20.1	$	52,856		$	40,270		31.3
Less: Adjusted earnings allocated to participating securities		1,637			1,424		15.0		2,789			2,310		20.7

Adjusted net income available to diluted common shares	$	28,102		$	23,344		20.4	$	50,067		$	37,960		31.9

DILUTED INCOME PER COMMON SHARE RECONCILIATION:

As reported	$	1.20		$	1.03		16.5	$	2.18		$	1.66		31.3
After-tax Adjustments:
Non-cash asset impairment charges		0.01			—				0.01			0.01
Net gain on real estate transactions		(0.03	)		—				(0.03	)		—
Insurance deductibles for hail storm damage		0.07			—				0.07			—

Adjusted diluted income per share ⁽¹⁾	$	1.25		$	1.03		21.4	$	2.23		$	1.67		33.5

SG&A RECONCILIATION:

As reported	$	214,327		$	183,051		17.1	$	413,439		$	358,935		15.2
Pre-tax Adjustments:
Net gain on real estate transactions		1,071			—				1,071			—
Insurance deductibles for hail storm damage		(2,650	)		—				(2,650	)		—

Adjusted SG&A ⁽¹⁾	$	212,748		$	183,051		16.2	$	411,860		$	358,935		14.7

SG&A AS % REVENUES:

Unadjusted		11.3			12.4				11.6			12.4
Adjusted ⁽¹⁾		11.2			12.4				11.6			12.4

SG&A AS % OF GROSS PROFIT:

Unadjusted		75.1			75.0				75.8			77.0
Adjusted ⁽¹⁾		74.6			75.0				75.5			77.0

OPERATING MARGIN %:

Unadjusted		3.3			3.7				3.3			3.2
Adjusted ^{(1), (5)}		3.4			3.7				3.3			3.3

PRETAX MARGIN %:

Unadjusted		2.4			2.7				2.3			2.2
Adjusted ^{(1), (5)}		2.5			2.7				2.4			2.2

SAME STORE SG&A RECONCILIATION:

As reported
Pre-tax adjustments:	$	197,644		$	182,674		8.2	$	382,921		$	358,185		6.9
Loss on real estate transaction		(504	)		—				(504	)		—
Insurance deductibles for hail storm damage		(2,650	)		—				(2,650	)		—

Adjusted Same Store SG&A ⁽¹⁾	$	194,490		$	182,674		6.5	$	379,767		$	358,185		6.0

SAME STORE SG&A AS % REVENUES:

Unadjusted		11.4			12.4				11.7			12.5
Adjusted ⁽¹⁾		11.3			12.4				11.6			12.5

SAME STORE SG&A AS % OF GROSS PROFIT:

Unadjusted		75.3			75.1				75.9			77.1
Adjusted ⁽¹⁾		74.1			75.1				75.2			77.1

SAME STORE OPERATING MARGIN %:

Unadjusted		3.3			3.7				3.3			3.2
Adjusted ^{(1), (6)}		3.5			3.7				3.4			3.2


	Three Months Ended June 30,									Six Months Ended June 30,
	2012			2011			% Change			2012			2011			% Change
CASH FLOWS FROM OPERATING ACTIVITIES RECONCILIATION:
Net cash provided by (used in) operating activities	$	(36,271	)	$	145,919			(124.9	)	$	(45,721	)	$	200,374			(122.8	)
Change in floorplan notes payable-credit facility, excluding floorplan offset account and net acquisition and disposition related activity		79,218			(69,722	)					151,581			(73,286	)
Change in floorplan notes payable-manufacturer affiliates associated with net acquisition and disposition related activity		—			(22,419	)					—			(26,578	)

Adjusted net cash provided by operating activities⁽¹⁾	$	42,947		$	53,778			(20.1	)	$	105,860		$	100,510			5.3

⁽¹⁾

We believe that these adjusted financial measures are relevant and useful to investors because they provide additional information regarding the performance of our operations and improve period-to-period comparability. These measures are not measures of financial performance under GAAP. Accordingly, they should not be considered as substitutes for their unadjusted counterparts, which are prepared in accordance with GAAP. Although we find these non-GAAP results useful in evaluating the performance of our business, our reliance on these measures is limited because the adjustments often have a material impact on our financial statements calculated in accordance with GAAP. Therefore, we typically use these adjusted numbers in conjunction with our GAAP results to address these limitations.

⁽²⁾	Adjustment is net of tax benefit of $72 for the three and six months ended June 30, 2012, and $57 and $139 for the three and six months ended June 30, 2011, respectively, calculated utilizing the applicable federal and state tax rates for the adjustment.

⁽³⁾	Adjustment is net of tax provision of $412 for the three and six months ended June 30, 2012, calculated utilizing the applicable federal and state tax rates for the adjustment.

⁽⁴⁾	Adjustment is net of tax benefit of $992 for the three and six months ended June 30, 2012, calculated utilizing the applicable federal and state tax rates for the adjustment.

⁽⁵⁾	Excludes the impact of non-cash asset impairment charges for all periods, as well as a net gain on real estate transactions and insurance deductibles for hail storm damage in 2012.

⁽⁶⁾

Excludes the impact of Same Store non-cash asset impairment charges of $187 for the three and six months ended June 30, 2012, and $142 and $319 for the three and six months ended June 30, 2011, respectively. In addition, this excludes the impact of Same Store loss on real estate transaction of $504 and insurance deductibles of $2,650 for both the three and six months ended June 30, 2012. Adjusted Same Store operating income was $60,786, $54,024, $110,718, and $93,410 for the periods presented respectively.

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