Crown Group, Inc. Reports Fourth-Quarter and FY2001 Operating Results
DALLAS--August 1, 2001--Crown Group, Inc. :Strong Automotive Sales Increase Revenues to Record $343 Million,
Generating Earnings Per Share of $0.74 for Fiscal Year
Crown Group, Inc. today announced its operating results for the fourth quarter and fiscal year ended April 30, 2001.
For the fiscal year ended April 30, 2001, revenues increased 44% to a record $342.8 million, compared with revenues of $237.6 million in the previous fiscal year. Fiscal 2001 earnings from operations, defined as net income excluding one-time gains, decreased 23% to approximately $6.0 million, or $0.74 per diluted share, compared with approximately $7.8 million, or $0.81 per diluted share, in the previous fiscal year. The decrease in earnings in Fiscal 2001 reflects weaker-than-expected performance at the Company's 70%-owned Smart Choice Automotive subsidiary in Florida. Operating results at both of the Company's other automotive units, America's Car-Mart, based in Rogers, Arkansas, and Paaco Automotive Group, based in Dallas, Texas, significantly exceeded management's expectations.
Revenues during Fiscal 2001 were derived as follows (before intercompany eliminations): Automotive Sales and Finance: $327.6 million; Other: $16.3 million.
Revenues in the fourth quarter of Fiscal 2001 increased 7% to $90.6 million, versus $84.8 million in the prior-year period. Earnings from operations declined 80% to $0.7 million, or $0.09 per diluted share, compared with $3.2 million, or $0.36 per diluted share, during the same period last year. The decrease in fourth-quarter earnings principally relates to a $3.1 million loss at Smart Choice's Florida operation versus a $0.5 million profit in the same period of the prior year. The loss resulted primarily from abnormally high credit losses at the subsidiary. Strong performances at both Car-Mart and Paaco more than offset the loss at Smart Choice, allowing Crown Group to report a profitable fourth quarter.
"We are extremely pleased with the record performances of our Car-Mart and Paaco subsidiaries throughout Fiscal 2001, but are clearly disappointed in the poor performance at Smart Choice," stated Edward R. McMurphy, President and Chief Executive Officer of Crown Group, Inc. "Car-Mart and Paaco continued to outperform their internal operating targets, earning $16.4 million and $7.1 million pretax, respectively, for the year. Car-Mart opened six retail lots over the year and presently operates 51 dealerships with locations in seven states. Paaco opened two new dealerships during the year, one in Houston and one in East Dallas, and consolidated its reconditioning, customer service and corporate headquarters into a new state-of-the-art facility located in Grand Prairie, Texas. Paaco's improved operating and loan portfolio performance indicates that efficiencies and customer relations have benefited from the move into the new facility. We expect Car-Mart and Paaco to continue their strong performance during Fiscal 2002."
"During the past several months, we have made significant changes in the operating and loan origination policies at Smart Choice, including a reduction in operating expenses by approximately 20%, or $335,000 per month," continued McMurphy. "Through the implementation of these new operating policies, we believe that we are now originating higher quality loans and providing more value to our customers. We expect to substantially improve the situation at Smart Choice in the near future. Longer term, we believe that the geographic diversity of our automotive operations provides many advantages, the most significant of which is the ability to hedge against risks specific to certain markets. Further, with operations in the Midwest, Southwest and Southeast, Crown subsidiaries continue to expand their presences nationally, building brand awareness and capitalizing on economies of scale."
"Crown's non-automotive operations generated over $16 million in revenues during Fiscal 2001, with our Precision IBC rental business leading the way with another impressive year of growth. Consistent with our previously stated objective of divesting of the Company's non-core businesses, we sold our El Salvador gaming operations and 50% of Precision IBC during the year, and we may sell our remaining interest in Precision IBC during the current fiscal year. Our 80%-owned residential mortgage lender, Concorde Acceptance Corporation, continued to increase loan originations during the year and has recently recorded consecutive record months in originations. Fiscal 2002 should be Concorde's best year ever."
In furtherance of the Company's goal of reducing shares outstanding, the Company repurchased 1,122,225 shares of its common stock in the open market during Fiscal 2001, bringing the total number of shares repurchased since March 1996 to approximately 5.2 million. As of April 30, 2001, Crown's shareholders' equity totaled $58.9 million, which was equivalent to approximately $8.44 for each of the Company's 6,980,367 shares of common stock outstanding. Since April 30, 2001, the Company has repurchased an additional 245,000 shares, bringing the total number of shares outstanding down to 6,735,367.
"We continue to believe that the repurchase of our shares in the open market is an accretive use of the Company's capital, given current market prices," commented McMurphy. "We feel strongly that with a P/E ratio of approximately five times trailing earnings and a book value more than double the current market price, our shares are deeply undervalued. Accordingly, we intend to continue repurchasing stock in the future."
Crown Group, Inc. is primarily engaged in automotive retailing and specialty finance activities. Through its automotive subsidiaries, Crown Group currently owns and operates 73 dealerships in eight states and is the second-largest automotive retailer in the United States focused exclusively on the "Buy Here/Pay Here" used car market segment. The Company's America's Car-Mart subsidiary operates 51 dealerships primarily in small cities and rural locations throughout the Southwestern and Midwestern United States, and is considered one of the largest "Buy Here/Pay Here" franchises in the country. Smart Choice Automotive Group operates 10 dealerships under the First Choice brand name in Florida and 12 dealerships and three collision/repair centers under the Paaco name in Texas, most of which operate in large metropolitan areas. All of the Company's dealerships sell only used cars and light trucks to predominantly non-banked customers. Both Car-Mart and Smart Choice finance approximately 98% of the vehicles they sell and perform all underwriting, financing and servicing duties related to these retail installment contracts. The primary objective of both Car-Mart and Smart Choice is to provide quality vehicles, courteous service, flexible payment arrangements and a friendly atmosphere to their customers.
In addition to its automotive subsidiaries, the Company has historically made equity investments for long-term appreciation in companies spanning various industries through either controlling ownership or minority positions. The Company currently owns (i) 95% of America's Car-Mart, Inc. and 70% of Smart Choice Automotive Group, Inc. (OTCBB: SCHA), vertically integrated used car sales and finance companies; (ii) 80% of Concorde Acceptance Corporation, a residential mortgage lender; (iii) 50% of Precision IBC, Inc., a firm specializing in the sale and rental of intermediate bulk containers; (iv) 8.0% of Mariah Vision3, Inc., a software developer specializing in 3-D graphic design; and (v) 6.7% of Monarch Venture Partners Fund I, a venture capital fund focused on emerging technology companies. Crown Group is headquartered in Dallas, Texas, and its common stock is traded on the Nasdaq National Market under the symbol "CNGR".
This press release includes statements that may constitute "forward-looking" statements, usually containing the words "believe," "estimate," "project," "expect" or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those relating to the development of the Company's businesses, risks associated with acquisitions, availability of lines of credit for the Company's businesses, changes in interest rates, changes in the Company's ability to monitor its underwriting and collection processes, changes in estimates and assumptions in, and ongoing adequacy of, the Company's allowance for credit losses, the inability of the Company to reduce operating expenses, changes in the industries in which the Company operates, competition, adverse economic conditions, dependence on existing management, and other risks which are discussed in the Company's periodic filings with the Securities and Exchange Commission. All forward-looking statements in this release are based upon information available as of the date of this release. Such information may change or become invalid after the date of this release, and by making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.
CROWN GROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(in thousands, except Three Months Ended April 30,
per-share data) 2001 2000
---- ----
Total revenues $ 90,632 $ 84,834
Costs and expenses 90,159 78,115
Equity in earnings (loss) of
unconsolidated subsidiaries 58 (124)
Gain on sale of securities, net - -
-------- --------
Income before taxes and
minority interests 531 6,595
Provision for income taxes 432 2,839
Minority interests (551) 585
-------- --------
Net income $ 650 $ 3,171
======== ========
Earnings per share:
Basic $ 0.09 $ 0.38
======== ========
Diluted $ 0.09 $ 0.36
======== ========
Weighted average number of
shares outstanding:
Basic 7,203,979 8,325,620
Diluted 7,397,547 8,704,301
SELECTED FINANCIAL HIGHLIGHTS
Twelve Months Ended April 30,
(in thousands, except per share data) 2001 2000
---- ----
Total revenues $ 342,762 $ 237,641
Costs and expenses 332,052 223,389
Equity in earnings of
unconsolidated subsidiaries 138 507
Gain on sale of securities, net 5 10,861
-------- --------
Income before taxes and
minority interests 10,853 25,620
Provision for income taxes 4,758 10,106
Minority interests 132 678
-------- --------
Net income $ 5,963 $ 14,836
======== ========
Earnings per share:
Basic $ 0.77 $ 1.61
======== ========
Diluted $ 0.74 $ 1.54
======== ========
Weighted average number of
shares outstanding:
Basic 7,697,239 9,216,184
Diluted 8,015,834 9,621,328
SELECTED FINANCIAL HIGHLIGHTS
Quarter Ended April 30,
Revenue contribution ($000s) 2001 2000
---- ----
Car-Mart $ 29,547 $ 26,028
Paaco 35,224 31,481
Smart Choice 23,275 22,553
Other 2,835 5,224
Eliminations (249) (452)
-------- --------
Consolidated revenues $ 90,632 $ 84,834
======== ========
Income (loss) before taxes &
minority interests ($000s) 2001 2000
---- ----
Car-Mart $ 4,618 $ 4,655
Paaco 1,471 2,406
Smart Choice (4,401) 700
Other (1,157) (1,166)
-------- --------
Income before taxes & minority interests $ 531 $ 6,595
======== ========
Fiscal Year Ended April 30,
Revenue contribution ($000s) 2001 2000
---- ----
Car-Mart $105,706 $ 89,382
Paaco 122,985 94,708
Smart Choice 98,923 35,856
Other 16,315 19,723
Eliminations (1,167) (2,028)
-------- --------
Consolidated revenues $342,762 $237,641
======== ========
Income (loss) before taxes &
minority interests ($000s) 2001 2000
---- ----
Car-Mart $ 16,375 $ 13,562
Paaco 7,093 4,318
Smart Choice (7,591) 831
Other (5,024) 6,909
-------- --------
Income before taxes & minority interests $ 10,853 $ 25,620
======== ========
BALANCE SHEET DATA, April 30, 2001
Cash $ 2,193,342
Total assets $ 302,520,116
Stockholders' equity $ 58,932,253
Shares outstanding 6,980,367
Book value per share $ 8.44