Group 1 Automotive Posts Record Net Income in 2002; Fourth-Quarter 2002 Earnings Exceed Revised Expectations
HOUSTON--Feb. 19, 2003--Group 1 Automotive, Inc. , a Fortune 500 specialty retailer, today reported more than $1 billion in revenues and $0.53 diluted earnings per share compared to $0.68 in fourth quarter 2001, which was one of the best periods in the history of the automobile industry.
"Although our operating results are down from fourth quarter last year, as we compare against the exceptional financial results realized a year ago, we continue to generate significant earnings and cash flow. We are benefiting from our diverse revenue streams despite the challenge of operating in a soft U.S. economy and a challenging used car environment," said B.B. Hollingsworth Jr., Group 1's chairman, president and chief executive officer. This marks the Company's fifth consecutive year of earnings per share growth.
Highlights:
| -- | Q4 revenues top $1.0 billion |
| -- | Q4 gross margin expands to 15.4 percent vs. 14.7 percent |
| -- | Full-year net income increased 21.0 percent to $67.1 million |
| -- | Full-year diluted EPS up 8.1 percent to $2.80 |
Summary Results of Operations (Unaudited)
(In millions, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- -------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Revenues $1,032.6 $1,039.9 $4,214.4 $3,996.4
Gross Profit $159.5 $153.0 $652.3 $607.3
Income from Operations $28.6 $33.8 $137.6 $131.3
Net Income $12.3 $16.2 $67.1 $55.4
Diluted Earnings per Share $0.53 $0.68 $2.80 $2.59
Results for the Fourth Quarter
For the fourth quarter ended Dec. 31, 2002, revenues were $1.0 billion, consistent with the same period last year. After a 21.4 percent increase in same store revenues in the fourth quarter of 2001, the Company experienced a 14.1 percent decline in same store revenues in the fourth quarter of 2002. This decline was offset by revenues contributed by dealerships acquired during the year. New vehicle retail sales fell 1.9 percent, on a unit sales decrease of 3.8 percent. Used vehicle retail sales fell 9.3 percent, with retail unit sales 11.8 percent lower. Parts and service and finance and insurance revenues grew 16.6 percent and 3.9 percent, respectively.
Net income decreased 23.9 percent to $12.3 million from $16.2 million, resulting in diluted earnings per share of $0.53 from $0.68 a year ago, a 22.1 percent reduction. Average shares outstanding decreased 1.8 percent to 23.2 million as the Company repurchased common stock.
Gross margin for the quarter increased to 15.4 percent compared with 14.7 percent during the year-ago period, as vehicle sales slowed and other higher margin revenues increased. Income from operations was $28.6 million versus $33.8 million, a 15.6 percent decrease. Operating margin was 2.8 percent compared with 3.3 percent during the year-ago period.
Hollingsworth stated, "We have focused this quarter on the very successful integration of our new Los Angeles platform, on cost control and on our underperforming operations in Atlanta, South Florida and Dallas." Hollingsworth further noted that from a brand standpoint Honda and Toyota were among the strongest performers. "Our record of 20 consecutive quarters of double-digit year-over-year earnings per share growth ended, but we are proud of that achievement and look forward to the opportunities of a new year," he added.
Record Performance for Full Year
For the year, revenues reached $4.2 billion, a 5.5 percent increase from $4.0 billion for 2001. New vehicle retail sales grew 6.5 percent on a 4.8 percent increase in unit sales. Used vehicle retail sales decreased 2.9 percent on a retail unit sales decline of 3.3 percent. Parts and service and finance and insurance revenues grew 11.7 percent and 14.8 percent, respectively.
Gross margin for 2002 increased to 15.5 percent compared with 15.2 percent in 2001. Income from operations rose 4.8 percent to $137.6 million from $131.3 million, and operating margin remained stable at 3.3 percent. Diluted earnings per share increased 8.1 percent to $2.80 on net income of $67.1 million, compared with $2.59 per diluted share on net income of $55.4 million, for the previous year.
Acquisition Program
During the fourth quarter, Group 1 acquired a new Toyota franchise in the Boston market area, expanding the Ira platform to 14 automobile franchises. The Company also purchased new Lincoln and Mercury franchises in Amarillo, Texas bringing the Gene Messer platform to 17 automobile franchises. The new Ira Toyota and the Gene Messer Lincoln-Mercury franchises began operations in December 2002 with expected annual revenues of $41 million. For the year, the Company completed 21 franchise acquisitions with annual aggregate revenues of $827 million, while it disposed of five dealerships with $51 million of annualized revenues, as part of its previously stated acquisition strategy for 2002.
In January of this year, the Company completed the acquisition of Bob Howard Ford-Lincoln-Mercury, and the divestiture of the Bob Howard Mercedes-Benz dealership in Oklahoma City, Okla. In total, these transactions are expected to add net revenues of $84 million in 2003.
Management's Outlook
"We expect another strong new vehicle market in 2003, although perhaps lower than 2002. With our ability to adjust our cost structure, combined with successful integration of recent acquisitions, and expected increases in parts and service revenues, we have confidence in confirming the range of our diluted earnings per share guidance for 2003 of $3.10 to $3.30. Earnings growth is expected to emanate from a combination of acquisitions and improved dealership performance, as well as common stock repurchases, as warranted," commented Hollingsworth. In 2002, the Company repurchased 983,000 shares of its common stock at an average price of $24.20.
Group 1 continues to seek strategic tuck-in acquisitions to augment its current markets, as well as platform acquisitions to enter new markets, targeting to add dealerships with aggregate revenues of approximately $800 million. "We have one of the strongest balance sheets in the industry which allows us to implement our growth plan without reliance on the equity market," commented Hollingsworth.
Fourth-Quarter Conference Call
Group 1 will hold a conference call to discuss fourth-quarter and full-year results at 10 a.m. ET on Wednesday, Feb. 19, 2003. The call can be accessed live and will be available for replay over the Internet via www.vcall.com, or through Group 1's website, www.group1auto.com, for 30 days.
About Group 1 Automotive, Inc.
Group 1 owns 73 automotive dealerships comprised of 114 franchises, 29 different brands, and 25 collision service centers located in California, Colorado, Florida, Georgia, Louisiana, Massachusetts, New Mexico, Oklahoma and Texas. Through its dealerships and Internet sites, the Company sells new and used cars and light trucks; arranges related financing, vehicle service and insurance contracts; provides maintenance and repair services; and sells replacement 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 Securities Act of 1933 and the Securities Exchange Act of 1934. These statements include statements regarding our plans, goals, beliefs or current expectations, including those plans, goals, beliefs and expectations of our officers and directors with respect to, among other things:
| -- | earnings per share for the year ending 2003 |
| -- | the completion of future acquisitions |
| -- | operating cash flows and availability of capital |
| -- | future stock repurchases |
| -- | capital expenditures |
| -- | changes in sales volumes in the new and used vehicle and parts and service markets |
| -- | business trends, including incentives, new vehicle sales, product cycles and interest rates |
| -- | ability to adjust cost structure |
Any such forward-looking statements are not assurances of future performance and involve risks and uncertainties. Actual results may differ materially from anticipated results in the forward-looking statements for a number of reasons, including:
-- the future economic environment, including consumer
confidence, interest rates, the level of manufacturer
incentives and the availability of consumer credit may affect
the demand for new and used vehicles and parts and service
sales
-- regulatory environment, adverse legislation, or unexpected
litigation
-- our principal automobile manufacturers, especially Ford,
Toyota/Lexus, GM and DaimlerChrysler may not continue to
produce or make available to us vehicles that are in high
demand by our customers
-- requirements imposed on us by our manufacturers may affect our
acquisitions and capital expenditures related to our
dealership facilities
-- our dealership operations may not perform at expected levels
or achieve expected improvements
-- we may not achieve expected future cost savings and our future
costs could be higher than we expected
-- available capital resources and various debt agreements may
limit our ability to repurchase shares
-- available capital resources may limit our ability to complete
acquisitions
-- available capital resources may limit our ability to complete
construction of new or expanded facilities
-- our cost of financing could increase significantly
-- new accounting standards could materially impact our reported
earnings per share
-- we may not reach agreement with additional acquisition
candidates
-- we may not be able to adjust our cost structure
-- we may lose key personnel
-- competition in our industry may impact our operations or our
ability to complete acquisitions
-- we may not achieve expected sales volumes from the franchises
granted to us
This information and additional factors that could affect our operating results and performance will be described in our Form 10-K, set forth under the headings "Business-Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." We urge you to carefully consider those factors.
All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement.
FINANCIAL TABLES TO FOLLOW
Group 1 Automotive, Inc.
Statements of Operations
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------- -----------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
REVENUES:
New vehicle retail
sales $619,599 $631,886 $2,526,847 $2,373,299
Used vehicle retail
sales 217,490 239,879 921,359 949,086
Used vehicle wholesale
sales 56,856 45,906 222,529 190,565
Parts & service 106,672 91,472 402,169 360,201
Finance & insurance,
net 31,981 30,766 141,460 123,223
----------- ----------- ----------- -----------
Total revenues 1,032,598 1,039,909 4,214,364 3,996,374
COST OF SALES:
New vehicle retail
sales 572,954 582,195 2,337,223 2,185,939
Used vehicle retail
sales 193,748 215,535 817,385 845,581
Used vehicle wholesale
sales 59,806 48,660 230,424 197,272
Parts & service 46,575 40,488 177,037 160,330
----------- ----------- ----------- -----------
Total cost of sales 873,083 886,878 3,562,069 3,389,122
Gross Profit 159,515 153,031 652,295 607,252
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES 127,945 114,667 502,732 458,546
DEPRECIATION AND
AMORTIZATION EXPENSE 3,020 4,550 11,940 17,358
----------- ----------- ----------- -----------
Income from operations 28,550 33,814 137,623 131,348
OTHER EXPENSE:
Floorplan interest
expense (5,557) (4,770) (19,371) (27,935)
Other interest
expense, net (2,310) (2,809) (9,925) (13,863)
Other expense, net (855) (176) (1,045) (128)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME
TAXES 19,828 26,059 107,282 89,422
PROVISION FOR INCOME
TAXES 7,534 9,902 40,217 33,980
----------- ----------- ----------- -----------
NET INCOME $12,294 $16,157 $67,065 $55,442
=========== =========== =========== ===========
Basic earnings per
share $0.55 $0.74 $2.93 $2.75
Diluted earnings per
share $0.53 $0.68 $2.80 $2.59
Weighted average
shares outstanding:
Basic 22,463,715 21,840,113 22,874,918 20,137,661
Diluted 23,212,442 23,636,958 23,968,072 21,415,154
OTHER DATA:
Gross margin 15.4% 14.7% 15.5% 15.2%
Operating margin 2.8% 3.3% 3.3% 3.3%
Pretax income margin 1.9% 2.5% 2.5% 2.2%
Same store revenues -14.1% 21.4% -2.8% 7.8%
Manufacturer floorplan
assistance $6,292 $7,386 $26,674 $29,061
Retail new vehicles
sold 22,756 23,652 95,005 90,615
Retail used vehicles
sold 15,124 17,143 65,698 67,927
----------- ----------- ----------- -----------
Total retail sales 37,880 40,795 160,703 158,542
Group 1 Automotive, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
December 31, December 31,
2002 2001
-------------- ---------------
(unaudited) (audited)
ASSETS:
Current assets:
Cash $24,333 $16,861
Contracts-in-transit and vehicle
receivables 178,623 130,351
Inventories 622,205 454,961
Other assets 77,877 59,759
-------------- ---------------
Total current assets 903,038 661,932
-------------- ---------------
Property, plant and equipment 116,270 83,011
Intangible assets 368,786 282,527
Investments and deferred costs from
insurance and vehicle service
contract sales 32,637 21,187
Other assets 3,034 5,768
-------------- ---------------
Total assets $1,423,765 $1,054,425
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Floorplan notes payable $652,538 $364,954
Other interest-bearing liabilities 997 1,687
Accounts payable and accrued expenses 155,748 140,578
-------------- ---------------
Total current liabilities 809,283 507,219
-------------- ---------------
Debt 83,222 95,499
Other liabilities 38,656 30,758
-------------- ---------------
Total liabilities before deferred
revenues 931,161 633,476
-------------- ---------------
Deferred revenues 49,187 28,706
Stockholders' equity 443,417 392,243
-------------- ---------------
Total liabilities and stockholders'
equity $1,423,765 $1,054,425
============== ===============
OTHER DATA:
Working capital $93,755 $154,713
Current ratio 1.12 1.31
Long-term debt to capitalization 16% 20%
Last 12 months return on average equity 16% 19%