The Boyd Group: Understanding the Cash Flow Statement

Last week we discussed the Boyd Group Income Fund (“Boyd”), specifically the Fiscal Year 2014 Income Statement, and how it is both similar and different to the income statements of other operators in the industry. In 2014 Boyd generated an impressive $844 million in sales but reported a net loss of over $15 million. Many in the industry mistakenly assume that because the company operates at a net loss it is only able to remain in business through the benevolence of Wall Street banks. The reality is that Boyd, while operating at a net loss, generates substantial cash for shareholders. And when adjusting for certain accounting idiosyncrasies unique to the legal structure and location of the firm, the company generates a respectable profit. To understand how this is possible is to understand the difference between cash and accrual accounting*, and more generally, how to use corporate finance to drive systemic growth.

*See the footnote at the end of this article for a further explanation of cash vs. accrual accounting.

While Boyd generated a significant net loss on an annual basis, it also generated substantial cash from collision and glass operations. […]

How Private Equity Makes Millions in the Collision Industry

We’ve talked a bit about the state of the industry and the Big 4, or the Big Boys as I sometimes call them (Boyd/Gerber, Caliber, Service King, ABRA). While they may be in the same business of fixing cars, the way they do things is systematically different.

(Editor’s Note: Keep an eye out for our upcoming article on the role of franchise based MSO’s and their impact on the industry.)

Perhaps the least understood difference is at the core of their business – how they actually make money for their shareholders.

Some people believe they give heavy discounts and make it up in volume. Others believe they don’t actually make money, and are barely holding on.

The reality is that these businesses are making millions upon millions of dollars. But not the way you may realize. […]