UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x                             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

OR

o                                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                        to                        

Commission file number: 001-31262

ASBURY AUTOMOTIVE GROUP, INC.
(Exact name of Registrant as specified in its charter)

 

(212) 885-2500
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer  o                          Accelerated Filer  x                          Non-Accelerated Filer  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: The number of shares of common stock outstanding as of May 4, 2007, was 32,414,542 (net of 2,836,706 treasury shares).

ASBURY AUTOMOTIVE GROUP, INC.
INDEX

PART I — Financial Information
Item 1.		Condensed Consolidated Financial Statements (unaudited)
		Condensed Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006	3
		Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2007 and 2006	4
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006	5
		Notes to Condensed Consolidated Financial Statements	6
		Report of Independent Registered Public Accounting Firm	21
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.		Controls and Procedures	39
PART II — Other Information			41
Item 6.		Exhibits	41
		Signatures	42
		Index to Exhibits	43

 

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)

		March 31, 2007			December 31, 2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	94,497		$	129,170
Contracts-in-transit		115,720			126,012
Accounts receivable (net of allowance of $476 and $648, respectively)		141,312			167,562
Inventories		780,491			775,313
Deferred income taxes		13,961			13,961
Prepaid and other current assets		69,328			55,099
Assets held for sale		22,359			25,947
Total current assets		1,237,668			1,293,064
PROPERTY AND EQUIPMENT, net		204,782			202,584
GOODWILL		447,021			447,996
OTHER LONG-TERM ASSETS		88,741			87,193
Total assets		$	1,978,212		$	2,030,837
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Floor plan notes payable—manufacturer affiliated		$	225,676		$	319,896
Floor plan notes payable—non-manufacturer affiliated		445,762			380,881
Current maturities of long-term debt		24,841			23,144
Accounts payable		67,149			63,951
Accrued liabilities		86,499			89,296
Liabilities associated with assets held for sale		—			3,887
Total current liabilities		849,927			881,055
LONG-TERM DEBT		477,880			454,010
DEFERRED INCOME TAXES		45,702			53,991
OTHER LONG-TERM LIABILITIES		35,345			29,948
COMMITMENTS AND CONTINGENCIES (Note 11)
SHAREHOLDERS’ EQUITY:
Preferred stock, $.01 par value per share, 10,000,000 shares authorized		—			—
Common stock, $.01 par value per share, 90,000,000 shares authorized, 35,181,154 and 35,071,401 shares issued, including shares held in treasury, respectively		352			351
Additional paid-in capital		431,648			431,725
Retained earnings		190,118			196,393
Treasury stock, at cost; 2,836,706 and 1,536,706 shares held, respectively		(50,634		)	(14,559		)
Accumulated other comprehensive loss		(2,126		)	(2,077		)
Total shareholders’ equity		569,358			611,833
Total liabilities and shareholders’ equity		$	1,978,212		$	2,030,837

 

See Notes to Condensed Consolidated Financial Statements.

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ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)

		For the Three Months Ended March 31,
		2007			2006
REVENUES:
New vehicle		$	824,451		$	809,657
Used vehicle		378,147			352,415
Parts, service and collision repair		174,288			168,529
Finance and insurance, net		38,684			35,150
Total revenues		1,415,570			1,365,751
COST OF SALES:
New vehicle		764,914			752,607
Used vehicle		341,978			319,982
Parts, service and collision repair		84,615			84,243
Total cost of sales		1,191,507			1,156,832
GROSS PROFIT		224,063			208,919
OPERATING EXPENSES:
Selling, general and administrative		176,386			163,291
Depreciation and amortization		5,328			4,955
Income from operations		42,349			40,673
OTHER INCOME (EXPENSE):
Floor plan interest expense		(11,216		)	(8,937		)
Other interest expense		(11,786		)	(10,903		)
Interest income		1,965			727
Loss on extinguishment of long-term debt		(17,737		)	—
Other income, net		292			344
Total other expense, net		(38,482		)	(18,769		)
Income before income taxes		3,867			21,904
INCOME TAX EXPENSE		1,458			8,214
INCOME FROM CONTINUING OPERATIONS		2,409			13,690
DISCONTINUED OPERATIONS, net of tax		(1,976		)	(1,137		)
NET INCOME		$	433		$	12,553
EARNINGS PER COMMON SHARE:
Basic—
Continuing operations		$	0.07		$	0.42
Discontinued operations		(0.06		)	(0.04		)
Net income		$	0.01		$	0.38
Diluted—
Continuing operations		$	0.07		$	0.41
Discontinued operations		(0.06		)	(0.04		)
Net income		$	0.01		$	0.37
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		33,333			32,922
Diluted		34,161			33,584

 

See Notes to Condensed Consolidated Financial Statements.

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ASBURY AUTOMOTIVE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

		For the Three Months Ended March 31,
		2007			2006
CASH FLOW FROM OPERATING ACTIVITIES:
Net income		$	433		$	12,553
Adjustments to reconcile net income to net cash (used in) provided by operating activities-
Depreciation and amortization		5,328			4,955
Depreciation and amortization from discontinued operations		27			84
Stock-based compensation		1,895			1,369
Amortization of deferred financing fees		627			573
Change in allowance for doubtful accounts		(172		)	(216		)
Loss (gain) on sale of discontinued operations, net		2,001			(53		)
Loss on extinguishment of long-term debt		17,737			—
Deferred income taxes		(903		)	—
Other adjustments		3,284			1,361
Changes in operating assets and liabilities, net of acquisitions and divestitures-
Contracts-in-transit		10,292			23,292
Accounts receivable		20,786			9,839
Proceeds from the sale of accounts receivable		5,636			4,649
Inventories		609			(63,645		)
Prepaid and other current assets		(17,397		)	(7,468		)
Floor plan notes payable—manufacturer affiliated		(94,219		)	98,695
Accounts payable and accrued liabilities		498			(15,058		)
Excess tax benefits from share-based payment arrangements		(891		)	(381		)
Other long-term assets and liabilities		69			3,137
Net cash (used in) provided by operating activities		(44,360		)	73,686
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures—internally financed		(10,230		)	(5,534		)
Capital expenditures—externally financed		(2,687		)	(6,410		)
Proceeds from the sale of assets		8,389			9,275
Other investing activities		(1,827		)	(529		)
Net cash used in investing activities		(6,355		)	(3,198		)
CASH FLOW FROM FINANCING ACTIVITIES:
Floor plan borrowings—non-manufacturer affiliated		663,002			677,249
Floor plan repayments—non-manufacturer affiliated		(602,008		)	(747,686		)
Proceeds from borrowings		265,000			902
Repayments of debt		(253,919		)	(1,554		)
Debt issuance costs		(7,250		)	—
Purchase of convertible note hedge		(19,309		)	—
Sale of warrants		8,924			—
Purchase of treasury stock		(36,075		)	—
Payment of dividends		(6,708		)	—
Proceeds from the sale of assets associated with sale-leaseback agreements		3,181			—
Proceeds from the exercise of stock options, net		313			2,900
Excess tax benefits from share-based payment arrangements		891			381
Net cash provided by (used in) financing activities		16,042			(67,808		)
Net (decrease) increase in cash and cash equivalents		(34,673		)	2,680
CASH AND CASH EQUIVALENTS, beginning of period		129,170			57,194
CASH AND CASH EQUIVALENTS, end of period		$	94,497		$	59,874

 

See Note 10 for supplemental cash flow information.

See Notes to Condensed Consolidated Financial Statements.

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ASBURY AUTOMOTIVE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. DESCRIPTION OF BUSINESS

Asbury Automotive Group, Inc. is a national automotive retailer, operating 112 franchises (85 dealership locations) in 21 metropolitan markets within 10 states as of March 31, 2007. We offer an extensive range of automotive products and services, including new and used vehicles, vehicle maintenance, replacement parts, collision repair services, and financing, insurance and service contracts. We offer 33 domestic and foreign brands of new vehicles, including four heavy truck brands. We also operate 23 collision repair centers that serve our markets.

Our retail network is currently organized into four regions and includes nine dealership groups, each marketed under different local brands: (i) Florida (comprising our Coggin dealerships, operating primarily in Jacksonville and Orlando, and our Courtesy dealerships operating in Tampa), (ii) West (comprising our McDavid dealerships operating throughout Texas and our California dealerships operating in Los Angeles, Sacramento and Fresno), (iii) Mid-Atlantic (comprising our Crown dealerships operating in North Carolina, South Carolina and Southern Virginia) and (iv) South (comprising our Nalley dealerships operating in Atlanta, Georgia, and our North Point dealerships operating in Little Rock, Arkansas). Our Plaza dealerships operating in St. Louis, Missouri and our Gray Daniels dealerships operating in Jackson, Mississippi remain standalone operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and reflect the condensed consolidated accounts of Asbury Automotive Group, Inc. and our wholly owned subsidiaries.  All intercompany transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Accordingly, actual results could differ from these estimates. Estimates and assumptions are reviewed quarterly and the effects of revisions are reflected in the condensed consolidated financial statements in the period they are determined to be necessary. Refer to “Critical Accounting Estimates” in Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information on our critical estimates.

In the opinion of management, all adjustments (consisting only of normal, recurring adjustments) considered necessary for a fair presentation of the unaudited interim condensed consolidated financial statements as of March 31, 2007, and for the three months ended March 31, 2007 and 2006 have been included. The results of operations for the three months ended March 31, 2007 are not necessarily indicative of the results that may be expected for the full year. Our interim unaudited condensed consolidated financial statements should be read together with our consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K/A for the year ended December 31, 2006.

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” certain amounts reflected in the accompanying Condensed Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006, have been classified as Assets Held for Sale and Liabilities Associated with Assets Held for Sale. In addition, the accompanying Condensed Consolidated Statement of Income for the three months ended March 31, 2006, has been reclassified to reflect the status of our discontinued operations as of March 31, 2007.

Revenue Recognition

Revenue from the sale of new and used vehicles is recognized upon delivery, passage of title, signing of the sales contract and approval of financing. Revenue from the sale of parts, service and collision repair is recognized upon delivery of parts to the customer or at the time vehicle service or repair work is completed. Manufacturer incentives and rebates, including manufacturer holdbacks, floor plan interest assistance and certain advertising assistance, are recognized as a component of new vehicle cost of sales when earned, generally at the time the related vehicles are sold.

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We receive commissions from third party lending and insurance institutions for arranging customer financing and for the sale of vehicle service contracts, credit life insurance and disability insurance to customers (collectively “F&I”). We may be charged back (“chargebacks”) for F&I commissions in the event a contract is terminated. F&I commissions are recorded at the time the vehicles are sold and a reserve for future chargebacks is established based on historical operating results and the termination provisions of the applicable contracts. F&I commissions, net of estimated chargebacks, are included in Finance and insurance, net in the accompanying Consolidated Statements of Income.

Goodwill and Other Intangible Assets

Goodwill represents the excess cost of the businesses acquired over the fair market value of the identifiable net assets. We have determined that based on how we operate our business, allocate resources, and regularly review our financial data and operating results that we qualify as a single reporting unit for purposes of testing goodwill for impairment. We evaluate our operations and financial results in the aggregate by dealership. The dealership general managers are responsible for customer facing activities, including inventory management and advertising and personnel decisions; and have the flexibility to respond to local market conditions. The corporate management team, with input from the regional management teams, is responsible for infrastructure and general strategy decisions.

The fair market value of our manufacturer franchise rights is determined at the acquisition date through discounting the projected cash flows specific to each franchise. We have determined that manufacturer franchise rights have an indefinite life as there are no legal, contractual, economic or other factors that limit their useful lives and they are expected to generate cash flows indefinitely due to the historically long lives of the manufacturers’ brand names. Due to the fact that manufacturer franchise rights are specific to the location in which we acquire a dealership, we have determined that the dealership is the reporting unit for purposes of testing for impairment.

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” we do not amortize goodwill and other intangible assets that are deemed to have indefinite lives. We review goodwill and indefinite lived manufacturer franchise rights for impairment annually on October 1st of each year, or more often if events or circumstances indicate that impairment may have occurred. We are subject to financial statement risk to the extent that intangible assets become impaired due to decreases in the related fair market value of our underlying businesses.

Derivative Instruments and Hedging Activities

We utilize derivative financial instruments to manage our capital structure. The types of risks hedged are those relating to the variability of cash flows and changes in the fair value of our financial instruments caused by movements in interest rates. We document our risk management strategy and assess hedge effectiveness at the inception and during the term of each hedge. Derivatives are reported at fair value on the accompanying Consolidated Balance Sheets.

The changes in fair value of the effective portion of “cash flow” hedges are reported as a component of accumulated other comprehensive income (loss). Amounts in accumulated other comprehensive income (loss) are reclassified to interest expense to the extent the hedge becomes ineffective. The change in fair value of “fair value” hedges are recorded as a component of interest expense. Changes in the fair value of the associated hedged exposures are also recorded as a component of interest expense.

Measurements of hedge effectiveness are based on comparisons between the gains or losses of the actual interest rate swaps and the gains or losses of hypothetical interest rate swaps, which are designed to reflect the critical terms of the defined hedged exposures. Ineffective portions of these interest rate swaps are reported as a component of interest expense in the accompanying Consolidated Statements of Income. We recognized minor ineffectiveness during the three months ended March 31, 2007, and no ineffectiveness during the three months ended March 31, 2006.

Statements of Cash Flows —

Borrowings and repayments of floor plan notes payable to a party unaffiliated with the manufacturer of a particular new vehicle, and all floor plan notes payable relating to pre-owned vehicles, are classified as financing activities on the accompanying Condensed Consolidated Statements of Cash Flows with borrowings reflected separately from repayments. The net change in floor plan notes payable to a party affiliated with the manufacturer of a particular new vehicle is classified as an operating activity on the Condensed Consolidated Statements of Cash Flows.

In November 2006, General Motors sold 51% of their financing subsidiary, General Motors Acceptance Corporation (“GMAC”), to an investment consortium led by Cerberus FIM Investors, LLC. Prior to this transaction, the net change in

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floor plan notes payable to GMAC was classified as an operating activity on the accompanying Consolidated Statements of Cash Flows as borrowings and repayments of floor plan notes payable at our General Motors dealerships were with a manufacturer affiliated lender. Floor plan notes payable related to vehicles financed prior to this change in control will continue to be classified as Floorplan notes payable—manufacturer affiliated on the accompanying Consolidated Balance Sheets, with subsequent repayments classified as an operating activity, since these GMAC borrowings occurred while General Motors had control of GMAC. Following the sale of GMAC, General Motors no longer has a majority ownership of or controls GMAC, and therefore, beginning in December 2006, floor plan notes payable related to vehicles financed after this change in control are classified as Floorplan notes payable—non-manufacturer affiliated on the accompanying Consolidated Balance Sheets, with the related borrowings and repayments presented separately as financing activities on the accompanying Consoldiated Statements of Cash Flows.

Loaner vehicle activity accounts for a significant portion of Prepaid and Other Current Assets on the accompanying Consolidated Statements of Cash Flows. We acquire loaner vehicles through borrowings with manufacturer affiliated lenders, therefore we classify the acquisition of loaner vehicles and the related borrowings as an operating activity in Prepaid and Other Current Assets in the accompanying Consolidated Statements of Cash Flows. When loaner vehicles are taken out of loaner status they are transferred to used vehicle inventory, which is reflected as a non-cash transfer in the accompanying Consolidated Statements of Cash Flows. The cash outflow to repay loaner vehicle loans are reflected in Prepaid and Other Current Assets and the cash inflow upon the sale of a loaner vehicle is reflected in Inventory on the accompanying Consolidated Statements of Cash Flows. Therefore, the net impact of loaner vehicle activity on the accompanying Consolidated Statements of Cash Flows is a cash outflow in Prepaid and Other Current Assets and a cash inflow in Inventory.

Construction reimbursements from third parties in connection with sale-leaseback agreements for the construction of new dealership facilities or leasehold improvements to our dealership facilities are included in investing activities in the accompanying Condensed Consolidated Statements of Cash Flows.

Proceeds from the sale of dealership facilities and the related real estate previously owned and subsequently leased back in connection with sale-leaseback agreements are reflected as financing activities in the accompanying Consolidated Statements of Cash Flows.

Externally financed capital expenditures include all expenditures that we have financed during the reporting period or intend to finance in future reporting periods through sale-leaseback transactions or mortgage financing. Internally financed capital expenditures include all capital expenditures which were paid using available cash and for which we do not intend to seek external financing.

Tax benefits related to share-based awards that are fully vested prior to the adoption of SFAS No. 123R are included as cash inflows from financing activities and cash outflows from operating activities on the accompanying Condensed Consolidated Statements of Cash Flows.  Excess tax benefits related to share-based awards that are partially vested upon or granted after the adoption of SFAS No. 123R are included as cash inflows from financing activities and cash outflows from operating activities within the accompanying Condensed Consolidated Statements of Cash Flows.

Net proceeds from share-based payment arrangements include payments from employees upon the exercise of stock options, net of payments of employee income taxes in connection with net share settlements of share-based awards.  Net share settlements of share-based awards result in (i) the issuance of shares of our common stock with a value equal to the employee’s intrinsic value and (ii) the payment of the income tax on behalf of the employee in lieu of issuing additional shares of common stock.

Recent Accounting Pronouncements

In June 2006, the FASB issued FASB Interpretation (“FIN”) No. 48 “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109”.  FIN 48 establishes a single model to address accounting for uncertain tax positions.  FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized as well as providing guidance on derecognition, measurement classification, interest and penalties and disclosure. 

We adopted the provisions of FIN 48 effective January 1, 2007 and recognized no material adjustment in our liability for unrecognized tax benefits.   As of January 1, 2007, we had $3.6 million of total unrecognized tax benefits.  Of that amount $2.4 million, net of the federal effect, if recognized would favorably impact our effective rate in future periods.  We do not expect these amounts to change materially in the next twelve months.

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In connection with the adoption of FIN 48, we analyzed our filing positions in all of the federal and state jurisdictions where we are required to file tax returns, as well as all open years in these jurisdictions.  We have uncertain tax positions in certain of the states in which we do business; however, none of the states individually constitute a “major” tax jurisdiction, as defined.  Years subject to audit range as far back as 2003.  The Internal Revenue Service commenced examinations of our consolidated federal returns for the years 2004 and 2005 in the first quarter of 2007, and certain of our subsidiary returns for 2003, 2004 and 2005 in the fourth quarter 2006.  In addition, we have various state audits for years 2003, 2004 and 2005, being performed as of March 31, 2007.  To date, no material adjustments have been proposed and we do not anticipate that these examinations will result in a material change to our financial position or results of operations.    

We recognize interest and penalties related to income tax matters in income tax expense.  As of March 31, 2007, we had approximately $0.7 million of accrued interest related to uncertain tax positions and no accrual for penalties.  We do not expect the amount of accrued interest to change materially in the next twelve months.

3. INVENTORIES

Inventories consist of the following:

		As of
(In thousands)		March 31, 2007			December 31, 2006
New vehicles		$	606,054		$	616,275
Used vehicles		130,767			115,927
Parts and accessories		43,670			43,111
Total inventories		$	780,491		$	775,313

 

The lower of cost or market reserves reduced total inventory cost by $4.9 million and $4.8 million as of March 31, 2007 and December 31, 2006, respectively. In addition to the inventories shown above, we have $4.8 million of inventory as of December 31, 2006, classified as Assets Held for Sale on the accompanying Condensed Consolidated Balance Sheets as it is associated with franchises held for sale.  There was no inventory classified as Assets Held for Sale as of March 31, 2007.

4. GOODWILL AND MANUFACTURER FRANCHISE RIGHTS

During the three months ended March 31, 2007, we sold two franchises (two dealership locations) resulting in the removal of approximately $1.0 million of Goodwill and approximately $2.3 million of manufacturer franchise rights from our Condensed Consolidated Balance Sheets.  Manufacturer franchise rights totaled $37.2 million and $39.5 million as of March 31, 2007 and December 31, 2006, respectively, and are included in Other Long-term Assets on the accompanying Condensed Consolidated Balance Sheets.

5. ASSETS AND LIABILITIES HELD FOR SALE

Assets and liabilities classified as held for sale include (i) assets and liabilities associated with discontinued operations held for sale at each balance sheet date, and (ii) costs of completed construction projects and related reimbursements during the construction period associated with pending sale-leaseback transactions.

As of December 31, 2006, assets and liabilities associated with discontinued operations included two franchises (two dealership locations) in Arkansas.  During the three months ended March 31, 2007, we sold the two franchises (two dealership locations) that had been held for sale as of December 31, 2006.  There were no assets or liabilities associated with discontinued operations as of March 31, 2007. 

Assets associated with pending sale-leaseback transactions as of March 31, 2007, and December 31, 2006, include three and two completed construction projects, respectively, totaling $11.3 million and $9.7 million, respectively. As of March 31, 2007, we had not received any reimbursements associated with these sale-leaseback transactions. We expect to expect to receive final reimbursement during 2007.

Assets held for sale include real estate not currently used in our operations totaling $11.1 million as of March 31, 2007 and December 31, 2006.

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A summary of assets and liabilities held for sale is as follows:

		As of
(In thousands)		March 31, 2007			December 31, 2006
Assets:
Inventories		$	—		$	4,808
Property and equipment, net		22,359			21,139
Total assets		22,359			25,947
Liabilities:
Floor plan notes payable		—			3,887
Total liabilities		—			3,887
Net assets held for sale		$	22,359		$	22,060

 

Included in Prepaid and Other Current Assets on the accompanying Condensed Consolidated Balance Sheets are costs associated with construction projects, which we intend to sell through sale-leaseback transactions but have not been completed, and therefore are not available for sale. In connection with these construction projects, we have entered into sale-leaseback agreements whereby an unaffiliated third party purchased the land and is reimbursing us for the cost of construction of dealership facilities being constructed on the land. We capitalize the cost of the construction during the construction period and record a corresponding liability equal to the amount of the reimbursed funds. Upon completion of the construction and receipt of the final reimbursement, we remove the cost of construction and the related liability from our Condensed Consolidated Balance Sheets. The book value of assets associated with construction projects that have not been completed as of March 31, 2007 and December 31, 2006, totaled $4.7 million and $4.4 million, respectively. As of March 31, 2007 and December 31, 2006, there were no liabilities associated with these construction projects.

6. LONG-TERM DEBT

Long-term debt consists of the following:

		As of
(In thousands)		March 31, 2007			December 31, 2006
9% Senior Subordinated Notes due 2012		$	11,908		$	250,000
8% Senior Subordinated Notes due 2014 ($179.4 million and $182.4 million face value, respectively, net of hedging activity of $7,455 and $7,848, respectively)		171,975			174,582
7.625% Senior Subordinated Notes due 2017		150,000			—
3% Senior Subordinated Convertible Notes Due 2012		115,000			—
Mortgage notes payable		26,587			26,837
Notes payable collateralized by loaner vehicles		23,000			21,279
Capital lease obligations		3,426			3,552
Other notes payable		825			904
		502,721			477,154
Less—current portion		(24,841		)	(23,144		)
Long-term debt		$	477,880		$	454,010

 

Long-term Debt Refinancing

During the three months ended March 31, 2007, we initiated a refinancing of our long-term debt which included (i) a cash tender offer for all of our $250.0 million 9% Senior Subordinated Notes due 2012 (“9% Notes”), (ii) the issuance of $115.0 million of 3% Senior Subordinated Convertible Notes due 2012 (“3% Notes”), which have an initial conversion price of $33.99 and (iii) the issuance of $150.0 million of 7.625% Senior Subordinated Notes due 2017.  As of March 31, 2007, we had completed the issuance of our 3% Notes and 7.625% Notes and repurchased $238.1 million of our 9% Notes through our tender offer.  We plan to call the remaining $11.9 million of our 9% Notes on the first call date of June 15, 2007.  Upon completion of our long-term debt refinancing, we expect our annual interest expense will decrease by approximately $7.9 million.

During the three months ended March 31, 2007, we recognized a $17.7 million loss on the extinguishment of $238.1 million of our 9% Notes and $3.0 million of our 8% Notes.  Included in the $17.7 million loss are (i) a $12.4 million premium on the repurchase of the 9% Notes and 8% Notes, (ii) $5.2 million of costs associated with a pro-rata write-off of

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unamortized debt issuance costs associated with the 9% Notes and 8% Notes, and (iii) $0.1 million of costs associated with a pro-rata write-off of the unamortized value of our terminated fair value swap associated with the 8% Notes.

In connection with the sale of our 3% Notes, we entered into convertible note hedge transactions with respect to our common stock, with Goldman, Sachs & Co. and Deutsche Bank AG, London Branch (collectively, the “counterparties”). The convertible note hedge transactions will cover, subject to customary anti-dilution adjustments, approximately 3.4 million shares of common stock at a strike price of $33.99 per share of common stock, which corresponds to the initial conversion price of the 3% Notes.

We also entered into separate warrant transactions whereby we sold to the counterparties warrants to acquire, subject to customary anti-dilution adjustments, approximately 3.4 million shares of our common stock at a strike price of $45.09 per share. On exercise of the warrants, we have the option to deliver cash or common stock equal to the difference between the then market price and strike price.

The convertible note hedge and warrant transactions are separate contracts and are not part of the terms of the 3% Notes and will not affect the holders’ rights under the 3% Notes.  Holders of the 3% Notes will not have any rights with respect to the convertible note hedge and warrant transactions. The convertible hedge and warrant transactions will generally have the effect of increasing the conversion price of the 3% Notes to $45.09, which is a 62.50% premium over the market price of our common stock at the time of pricing. The convertible note hedge transactions are expected to offset the potential dilution upon conversion of the 3% Notes in the event that the market value per share of our common stock at the time of exercise is greater than the strike price of the convertible note hedge transactions.

The warrant transactions and the underlying shares of common stock issuable upon exercise of the warrants have not been registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

3% Senior Subordinated Convertible Notes due 2012—

On March 16, 2007, we issued $115.0 million in aggregate principal amount of our 3% Notes, receiving net proceeds of $111.4 million.  The sale of the notes was exempt from registration pursuant to Rule 144A under the Securities Act of 1933.  During the second quarter of 2007, we expect to file a shelf registration statement with the Securities and Exchange Commission covering the resale of the notes and the underlying common stock.  The costs related to the issuance of these notes were capitalized and are being amortized to other interest expense over the term of the notes.  We pay interest on these notes on March 15 and September 15 of each year until their maturity on September 15, 2012.  If and when these notes are converted, we will pay cash for the principal amount of each note and, if applicable, shares of our common stock based on a daily conversion value calculated on a proportionate basis for each volume weighted average price (“VWAP”) trading day (as defined in the notes) and the relevant 30 VWAP trading day observation period. The initial conversion rate for the notes will be 29.4172 shares of common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of $33.99 per share.   The conversion rate will be subject to adjustment in some events but will not be adjusted for accrued interest.

Our 3% Notes are guaranteed by all our wholly-owned current subsidiaries and all of our future domestic subsidiaries that have outstanding, incur or guarantee any other indebtedness. The terms of our 3% Notes, in certain circumstances, restrict our ability to, among other things, sell all or substantially all of our assets.

7.625% Senior Subordinated Notes due 2017—

On March 26, 2007, we issued $150.0 million of our 7.625% Notes, receiving net proceeds of $146.3 million.  The sale of the notes was exempt from registration pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended.  During the second quarter of 2007, we expect to file a registration statement with the Securities and Exchange Commission in connection with an exchange offer to exchange the notes for new notes with substantially identical terms that are registered under the Securities Act of 1933 and, therefore, will generally be freely transferable.  The costs related to the issuance of these notes were capitalized and are being amortized to other interest expense over the term of the notes.  We pay interest on these notes on March 15 and September 15 of each year until their maturity on March 15, 2017.  At any time during the term of the 7.625% Notes we may, at our option, choose to redeem all or a portion of these notes at a price equal to 100% of their principal amount plus the applicable premium set forth in the 7.625% Notes indenture.  On or before March 15, 2010, we may, at our option, use the net proceeds of one or more equity offerings to redeem up to 35% of the aggregate principal amount of these notes at a redemption price equal to 107.625% of their principal amount plus accrued and unpaid interest thereon.

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Our 7.625% Notes are guaranteed by all of our wholly-owned current subsidiaries and all of our future domestic subsidiaries that have outstanding, incur or guarantee any other indebtedness. The terms of our 7.625% Notes, in certain circumstances, restrict our ability to, among other things, incur additional indebtedness, pay dividends, repurchase our common stock and merge or sell all or substantially all our assets.

7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITY

In November 2006, we entered into an interest rate swap agreement with a notional principal amount of $150.0 million as a hedge against the changes in interest rates of our variable rate floor plan notes payable for a period of two years beginning in November 2006. The swap agreement was designated and qualifies as a cash flow hedge of future changes in interest rates of our variable rate floor plan notes payable and is not expected to contain any ineffectiveness. As of March 31, 2007, the swap agreement had a fair value of $0.4 million, which was included in Other Long-Term Liabilities on the accompanying Condensed Consolidated Balance Sheet.

Three of our interest rate swap agreements terminated in March 2006, which resulted in a cash payment of $13.7 million, which equaled the fair market value of the swap agreements. Included in Accumulated Other Comprehensive Loss on our Condensed Consolidated Balance Sheet as of March 31, 2007, was $3.1 million ($2.0 million, net of tax) of unrecognized amortization related to our two terminated cash flow swaps, which are being amortized through March 2014 as a component of Floor Plan Interest Expense on the accompanying Condensed Consolidated Statements of Income. Amortization of these terminated cash flow swaps will total $0.9 million for the year ended December 31, 2007. In addition, included as a reduction to our 8% Notes as of March 31, 2007, was $7.5 million of unrecognized amortization related to our terminated fair value swap, which is being amortized through March 2014 as a component of Other Interest Expense on the accompanying Condensed Consolidated Statements of Income. Amortization of this terminated fair value swap will total $1.1 million for the year ended December 31, 2007.

We have an interest rate swap with a current notional principal amount of $14.0 million. The swap was designed to provide a hedge against changes in interest rates of our variable rate mortgage notes payable through maturity in June 2011. This interest rate swap qualifies for cash flow hedge accounting treatment and will contain minor ineffectiveness. Under the terms of the swap agreement, we make payments based on a fixed rate of 6.08% and receive a variable rate cash flows based on one-month LIBOR.  As of March 31, 2007 and December 31, 2006, the swap agreement had a fair value of $0.3 million, which was included in Other Long-Term Assets on the accompanying Condensed Consolidated Balance Sheets.

8. COMPREHENSIVE INCOME

The following table provides a reconciliation of net income to comprehensive income:

		For the Three Months Ended March 31,
(In thousands)		2007			2006
Net income		$	433		$	12,553
Other comprehensive income:
Change in fair value of cash flow swaps		(351		)	2,019
Amortization of expired cash flow swaps		224			80
Income tax benefit (expense) associated with cash flow swaps		78			(787		)
Comprehensive income		$	384		$	13,865

 

9. DISCONTINUED OPERATIONS

During the three months ended March 31, 2007, we sold two franchises (two dealership locations).  There were no franchises pending disposition as of March 31, 2007.  The accompanying Condensed Consolidated Statements of Income for the three months ended March 31, 2006, have been reclassified to reflect the status of our discontinued operations as of March 31, 2007.

The following table provides further information regarding our discontinued operations as of March 31, 2007, and includes the results of businesses sold prior to March 31, 2007:

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		For the Three Months Ended March 31,
(Dollars in thousands)		2007			2006
Franchises:
Mid-line Domestic		—			6
Mid-line Import		—			2
Value		2			3
Luxury		—			1
Total		2			12
Ancillary Businesses		—			1
Revenues		$	1,396		$	51,439
Cost of sales		1,478			43,269
Gross profit		(82		)	8,170
Operating expenses		964			9,435
Loss from operations		(1,046		)	(1,265		)
Other expense, net		(20		)	(607		)
Gain (loss) on disposition of discontinued operations, net		(2,001		)	53
Loss before income taxes		(3,067		)	(1,819		)
Income tax benefit		1,091			682
Discontinued operations, net of tax		$	(1,976	)	$	(1,137	)

 

10. SUPPLEMENTAL CASH FLOW INFORMATION

During the three months ended March 31, 2007 and 2006, we made interest payments, net of amounts capitalized, totaling $26.6 million and $18.3 million, respectively.  During the three months ended March 31, 2006, we received $0.5 million of proceeds associated with our interest rate swap agreement that was entered into in December 2003 in connection with the issuance of our 8% Senior Subordinated Notes due 2014.

During the three months ended March 31, 2007 and 2006, we made income tax payments totaling $5.2 million and $5.5 million, respectively.

11. COMMITMENTS AND CONTINGENCIES

A significant portion of our vehicle business involves the sale of vehicles, parts or vehicles composed of parts that are manufactured outside the United States of America. As a result, our operations are subject to customary risks of importing merchandise, including fluctuations in the relative values of currencies, import duties, exchange controls, trade restrictions, work stoppages and general political and socio-economic conditions in foreign countries. The United States of America or the countries from which our products are imported may, from time to time, impose new quotas, duties, tariffs or other restrictions, or adjust presently prevailing quotas, duties or tariffs, which may affect our operations and our ability to purchase imported vehicles and/or parts at reasonable prices.

Manufacturers may direct us to implement costly capital improvements to dealerships as a condition upon entering into franchise agreements with them. Manufacturers also typically require that their franchises meet specific standards of appearance. These factors, either alone or in combination, could cause us to divert our financial resources to capital projects from uses that management believes may be of higher long-term value, such as acquisitions.

Substantially all of our facilities are subject to federal, state and local provisions regarding the discharge of materials into the environment. Compliance with these provisions has not had, nor do we expect such compliance to have, any material effect upon our capital expenditures, net earnings, financial condition, liquidity or competitive position. We believe that our current practices and procedures for the control and disposition of such materials comply with applicable federal, state and local requirements.

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From time to time, we and our dealerships are named in claims involving the manufacture and sale or lease of motor vehicles, including but not limited to the charging of administrative fees, the operation of dealerships, contractual disputes and other matters arising in the ordinary course of our business. With respect to certain of these claims, the sellers of our acquired dealerships have indemnified us. We do not expect that any potential liability from these claims will materially affect our financial condition, liquidity, results of operations or financial statement disclosures.

Our dealerships hold dealer agreements with a number of vehicle manufacturers. In accordance with the individual dealer agreements, each dealership is subject to certain rights and restrictions typical of the industry. The ability of the manufacturers to influence the operations of the dealerships or the loss of a dealer agreement could have a negative impact on our operating results.

12.  STOCK-BASED COMPENSATION

A summary of options outstanding and exercisable under the Plans as of March 31, 2007, and changes during the three months then ended is presented below:

		Stock Options		Weighted Average Exercise Price			Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value*
Options outstanding - December 31, 2006		1,528,179		$	14.57
Granted		—		$	—
Exercised		(239,427	)	$	16.34
Expired / Forfeited		(11,669	)	$	14.01
Options outstanding - March 31, 2007		1,277,083		$	14.26		6.3		$	17,866,391
Options exercisable - March 31, 2007		1,037,949		$	14.23		6.1		$	14,552,045

 

* Based on the closing price of our common stock on March 30, 2007, which was $28.25 per share.

Net cash received from option exercises for the three months ended March 31, 2007 was $0.3 million. The actual intrinsic value of options exercised during the three months ended March 31, 2007 was $2.6 million. The actual tax benefit realized for the tax deductions from option exercises totaled $1.0 million for the three months ended March 31, 2007.

A summary of performance share units and restricted share units as of March 31, 2007, and changes during the three months ended is presented below:

		Shares		Weighted Average Grant Date Fair Value
Performance Share Units - December 31, 2006		468,125		$	20.15
Granted		199,000		$	26.98
Performance estimate		—		$	—
Vested		—		$	—
Forfeited (including 2,188 of performance estimates)		(10,938	)	$	20.09
Performance Share Units - March 31, 2007*		656,187		$	22.22

 

*    Includes an estimate of 91,437 out of a maximum of 292,600 issuable upon attaining certain performance metrics

		Shares		Weighted Average Grant Date Fair Value
Restricted Share Units - December 31, 2006		29,728		$	21.65
Granted		21,409		$	26.98
Vested		—		$	—
Forfeited		(2,500	)	$	22.98
Restricted Share Units - March 31, 2007		48,637		$	23.93

 

Each performance share unit provides an opportunity for the employee to receive a number of shares of our common stock based on our performance during a three year period as measured against objective performance goals as determined by the compensation committee of our board of directors. The actual number of shares earned may range from 0% to 180% of the target number of shares depending upon achievement of the performance goals.

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13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

Our Committed Credit Facility is guaranteed by all of our current subsidiaries, other than our current Toyota and Lexus dealership subsidiaries, and all of our future domestic restricted subsidiaries, other than our future Toyota and Lexus dealership facilities. The following tables set forth, on a condensed consolidating basis, our balance sheets, statements of income and statements of cash flows, of our guarantor and non-guarantor subsidiaries for all financial statement periods presented in our interim condensed consolidated financial statements.

Condensed Consolidating Balance Sheet
As of March 31, 2007
(In thousands)

		Parent Company			Guarantor Subsidiaries			Non- guarantor Subsidiaries			Eliminations			Condensed Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	—		$	94,497		$	—		$	—		$	94,497
Inventories		—			724,200			56,291			—			780,491
Other current assets		—			291,556			48,765			—			340,321
Assets held for sale		—			22,359			—			—			22,359
Total current assets		—			1,132,612			105,056			—			1,237,668
Property and equipment, net		—			198,292			6,490			—			204,782
Goodwill		—			393,819			53,202			—			447,021
Other long-term assets		—			88,467			274			—			88,741
Investment in subsidiaries		569,358			93,667			—			(663,025		)	—
Total assets		$	569,358		$	1,906,857		$	165,022		$	(663,025	)	$	1,978,212
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Floor plan notes payable—manufacturer affiliated		$	—		$	225,676		$	—		$	—		$	225,676
Floor plan notes payable—non-manufacturer affiliated		—			399,960			45,802			—			445,762
Other current liabilities		—			152,976			25,513			—			178,489
Total current liabilities		—			778,612			71,315			—			849,927
Long-term debt		—			477,841			39			—			477,880
Other long-term liabilities		—			81,046			1			—			81,047
Shareholders’ equity		569,358			569,358			93,667			(663,025		)	569,358
Total liabilities and shareholders’ equity		$	569,358		$	1,906,857		$	165,022		$	(663,025	)	$	1,978,212

 

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Condensed Consolidating Balance Sheet
As of December 31, 2006
(In thousands)

		Parent Company			Guarantor Subsidiaries			Non- guarantor Subsidiaries			Eliminations			Condensed Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	—		$	129,170		$	—		$	—		$	129,170
Inventories		—			719,350			55,963			—			775,313
Other current assets		—			311,134			51,500			—			362,634
Assets held for sale		—			25,947			—			—			25,947
Total current assets		—			1,185,601			107,463			—			1,293,064
Property and equipment, net		—			196,017			6,567			—			202,584
Goodwill		—			394,794			53,202			—			447,996
Other assets		—			86,919			274			—			87,193
Investment in subsidiaries		611,833			83,198			—			(695,031		)	—
Total assets		$	611,833		$	1,946,529		$	167,506		$	(695,031	)	$	2,030,837
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Floor plan notes payable—manufacturer affiliated		$	—		$	319,896		$	—		$	—		$	319,896
Floor plan notes payable—non-manufacturer affiliated		—			330,026			50,855			—			380,881
Other current liabilities		—			142,983			33,408			—			176,391
Liabilities associated with assets held for sale		—			3,887			—			—			3,887
Total current liabilities		—			796,792			84,263			—			881,055
Long-term debt		—			453,966			44			—			454,010
Other liabilities		—			83,938			1			—			83,939
Shareholders’ equity		611,833			611,833			83,198			(695,031		)	611,833
Total liabilities and shareholders’ equity		$	611,833		$	1,946,529		$	167,506		$	(695,031	)	$	2,030,837

 

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Condensed Consolidating Statement of Income
For the Three Months Ended March 31, 2007
(In thousands)

		Parent Company			Guarantor Subsidiaries			Non- guarantor Subsidiaries			Eliminations			Condensed Consolidated
Revenues		$	—		$	1,246,436		$	173,084		$	(3,950	)	$	1,415,570
Cost of sales		—			1,050,645			144,812			(3,950		)	1,191,507
Gross profit		—			195,791			28,272			—			224,063
Operating expenses:
Selling, general and administrative		—			156,724			19,662			—			176,386
Depreciation and amortization		—			4,880			448			—			5,328
Income from operations		—			34,187			8,162			—			42,349
Other income (expense):
Floor plan interest expense		—			(10,470		)	(746		)	—			(11,216		)
Other interest expense		—			(9,886		)	(1,900		)	—			(11,786		)
Other income (expense), net		—			(15,727		)	247			—			(15,480		)
Equity in earnings of subsidiaries		433			3,590			—			(4,023		)	—
Total other expense, net		433			(32,493		)	(2,399		)	(4,023		)	(38,482		)
Income before income taxes		433			1,694			5,763			(4,023		)	3,867
Income tax (benefit) expense		—			(715		)	2,173			—			1,458
Income from continuing operations		433			2,409			3,590			(4,023		)	2,409
Discontinued operations, net of tax		—			(1,976		)	—			—			(1,976		)
Net income		$	433		$	433		$	3,590		$	(4,023	)	$	433

 

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Condensed Consolidating Statement of Income
For the Three Months Ended March 31, 2006
(In thousands)

		Parent Company			Guarantor Subsidiaries			Non- guarantor Subsidiaries			Eliminations			Condensed Consolidated
Revenues		$	—		$	1,207,724		$	159,840		$	(1,813	)	$	1,365,751
Cost of sales		—			1,022,814			135,831			(1,813		)	1,156,832
Gross profit		—			184,910			24,009			—			208,919
Operating expenses:
Selling, general and administrative		—			145,623			17,668			—			163,291
Depreciation and amortization		—			4,513			442			—			4,955
Income from operations		—			34,774			5,899			—			40,673
Other income (expense):
Floor plan interest expense		—			(8,282		)	(655		)	—			(8,937		)
Other interest expense		—			(9,429		)	(1,474		)	—			(10,903		)
Other income, net		—			986			85			—			1,071
Equity in earnings of subsidiaries		12,553			2,409			—			(14,962		)	—
Total other expense, net		12,553			(14,316		)	(2,044		)	(14,962		)	(18,769		)
Income before income taxes		12,553			20,458			3,855			(14,962		)	21,904
Income tax expense		—			6,768			1,446			—			8,214
Income from continuing operations		12,553			13,690			2,409			(14,962		)	13,690
Discontinued operations, net of tax		—			(1,137		)	—			—			(1,137		)
Net income		$	12,553		$	12,553		$	2,409		$	(14,962	)	$	12,553

 

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Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2007
(In thousands)

		Parent Company			Guarantor Subsidiaries			Non- guarantor Subsidiaries			Eliminations			Condensed Consolidated
Net cash (used in) provided by operating activities		$	—		$	(76,477	)	$	32,117		$	—		$	(44,360	)
Cash flow from investing activities:
Capital expenditures		—			(12,537		)	(380		)	—			(12,917		)
Other investing activities		—			6,551			11			—			6,562
Net cash used in investing activities		—			(5,986		)	(369		)	—			(6,355		)
Cash flow from financing activities:
Floor Plan Borrowings — non-manufacturer affiliated		—			553,361			109,641			—			663,002
Floor Plan Repayments — non-manufacturer affiliated		—			(487,313		)	(114,695		)	—			(602,008		)
Payment of dividends		—			(6,708		)	—			—			(6,708		)
Proceeds from borrowings		—			265,000			—			—			265,000
Payments of debt issuance costs		—			(7,250		)	—			—			(7,250		)
Sale-leaseback agreements		—			3,181			—			—			3,181
Repayments of debt		—			(253,914		)	(5		)	—			(253,919		)
Intercompany financing, net		—			26,689			(26,689		)	—			—
Other financing activities		—			(45,256		)	—			—			(45,256		)
Net cash provided by (used in) financing activities		—			47,790			(31,748		)	—			16,042
Net decrease in cash and cash equivalents		—			(34,673		)	—			—			(34,673		)
Cash and cash equivalents, beginning of period		—			129,170			—			—			129,170
Cash and cash equivalents, end of period		$	—		$	94,497		$	—		$	—		$	94,497

 

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Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2006
(In thousands)

		Parent Company			Guarantor Subsidiaries			Non- guarantor Subsidiaries			Eliminations			Condensed Consolidated
Net cash provided by operating activities		$	—		$	71,459		$	2,227		$	—		$	73,686
Cash flow from investing activities:
Capital expenditures		—			(11,285		)	(659		)	—			(11,944		)
Other investing activities		—			8,746			—			—			8,746
Net cash used in investing activities		—			(2,539		)	(659		)	—			(3,198		)
Cash flow from financing activities:
Floor Plan Borrowings — non-manufacturer Affiliated		—			575,672			101,577			—			677,249
Floor Plan Repayments — non-manufacturer affiliated		—			(643,929		)	(103,757		)	—			(747,686		)
Proceeds from borrowings		—			902			—			—			902
Repayments of debt		—			(1,547		)	(7		)	—			(1,554		)
Intercompany financing		—			(619		)	619			—			—
Other financing activities		—			3,281			—			—			3,281
Net cash used in financing activities		—			(66,240		)	(1,568		)	—			(67,808		)
Net increase in cash and cash equivalents		—			2,680			—			—			2,680
Cash and cash equivalents, beginning of period		—			57,194			—			—			57,194
Cash and cash equivalents, end of period		$	—		$	59,874		$	—		$	—		$	59,874

 

14. SUBSEQUENT EVENTS

During the second quarter of 2007, we completed the acquisition of three franchises (three dealership locations) representing annual revenues of approximately $144.0 million for approximately $29.0 million (including $10.7 million borrowed from our floor plan facility for the purchase of inventory).

On May 4, 2007, our board of directors declared a $0.20 per share cash dividend. This was the fourth consecutive quarter that a $0.20 per share dividend was paid.

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