Asbury Automotive Group, Inc., one of the largest automotive retail and service companies in the U.S., reported net income for the fourth quarter 2018 of $40.4 million ($2.06 per diluted share) compared to $42.5 million  ($2.03 per diluted share) in the prior year quarter. It also reported adjusted net income (a non-GAAP measure) for the fourth quarter 2018 of $43.2 million ($2.20 per diluted share) compared to $37.8 million ($1.81 per diluted share) in the prior year quarter, a 22% increase in adjusted earnings per share.

Net income for the fourth quarter 2018 was adjusted for a $3.7 million pre-tax charge for franchise rights impairments ($0.14 per diluted share). Net income for the fourth quarter 2017 was adjusted for a $5.1 million pre-tax charge for franchise rights impairments ($0.15 per diluted share) and a $7.9 million benefit ($0.37 per diluted share) related to adjustments to deferred tax balances as a result of changes to the tax law.

On January 1, 2018, the company adopted ASC 606 for revenue recognition which impacted F&I and parts and service revenue and gross profit. The net impact of adopting ASC 606 in the fourth quarter was to increase net income by $1.2 million or $0.06 per diluted share.

"We closed out 2018 with a strong performance delivering 22% adjusted EPS growth in the quarter," said David Hult, Asbury's President and Chief Executive Officer. "During 2018, we acquired three dealerships, repurchased approximately $105 million of our shares, and further developed our omni-channel capabilities.  In a relatively flat SAAR environment we maintained our industry leading operating margins and grew adjusted EPS 31%. This performance is a direct result of our team's hard work, dedication, and commitment to continuous improvement.  Going forward, we will continue to execute our two-part strategy: drive operational excellence and deploy capital to its highest returns."

Fourth Quarter 2018 Operational Summary

All stores:

Revenue increased 7%; gross profit increased 5%

New vehicle revenue increased 6%; gross profit decreased 6%

Used vehicle retail revenue increased 10%; gross profit increased 10%

Finance and insurance revenue and gross profit increased 6%

Parts and service revenue increased 7%; gross profit increased 7%

SG&A as a percentage of gross profit increased 90 basis points to 68.2%

Adjusted income from operations as a percentage of revenue was 4.5%

Adjusted EPS from continuing operations increased 22%

Same store:

Revenue increased 4%; gross profit increased 2%

New vehicle revenue increased 3%; gross profit decreased 7%

Used vehicle retail revenue increased 7%; gross profit increased 7%

Finance and insurance revenue and gross profit increased 3%

Parts and service revenue increased 5%; gross profit increased 5%

Strategic Highlights:

In Q4 2018, we repurchased $48 million of common stock

Signed an agreement to acquire four stores in the Indianapolis market that we expect to close in Q1 2019, subject to customary closing conditions. We expect these dealerships will generate approximately $250 million in annualized revenue.

Omni-channel initiatives helped drive results, reduce costs, and improve efficiencies

For the full year 2018, the Company reported net income of $168.0 million ($8.28 per diluted share) compared to $139.1 million ($6.62 per diluted share) in the prior year period. Adjusted net income (a non-GAAP measure) for 2018 was $170.8 million ($8.41 per diluted share) compared to $135.1 million ($6.43 per diluted share) in the prior year period, a 31% increase in adjusted EPS.