Group 1 Automotive Posts Increase in Revenues for First Quarter 2003; EPS Matches 2002 Record Performance
HOUSTON--May 1, 2003--With Solid First-Quarter Results, EPS Guidance for 2003 Confirmed
Group 1 Automotive, Inc. , a Fortune 500 specialty retailer, today reported more than $1.0 billion in revenues and an 11.8 percent increase in gross profit for the first quarter ended March 31, 2003. In a challenging period for the automobile industry, the Company reported diluted earnings per share of $0.64 for the quarter, equal to the record first quarter of 2002.
"This quarter's performance demonstrates the flexibility of our business model," said B.B. Hollingsworth Jr., Group 1's chairman, president and chief executive officer. "We dealt with the uncertainty of the marketplace and delivered solid financial performance."
Highlights:
| -- | Revenues increase 8.8 percent to more than $1.0 billion |
| -- | Gross margin expands to 16.5 percent vs. 16.0 percent |
| -- | Parts & service and finance & insurance revenues experience double-digit growth |
| -- | Diluted EPS at $0.64 equal to 1Q 2002 |
Summary Results of Operations (Unaudited)
(In millions, except per share amounts)
Three Months Ended
March 31,
2003 2002
---------- ----------
Revenues $1,029.8 $946.1
Gross Profit $169.4 $151.5
Income from Operations $31.4 $31.8
Net Income $14.8 $15.5
Diluted Earnings per Share $0.64 $0.64
Results for the First Quarter
For the first quarter ended March 31, 2003, revenues grew 8.8 percent to $1.0 billion from $946.1 million during the same period last year. As the overall automobile market declined, same store revenues fell 7.8 percent, compared with a 0.4 percent decline in the first quarter of 2002. Revenues contributed by dealerships acquired during 2002 and 2003 offset the decline.
New vehicle retail sales expanded 7.5 percent, on a unit sales increase of 6.8 percent. Used vehicle retail sales rose 3.3 percent, with retail unit sales 0.9 percent higher. Parts and service and finance and insurance revenues grew 21.2 percent and 17.8 percent, respectively.
Gross margin for the quarter increased to 16.5 percent compared with 16.0 percent during the year-ago period, as revenues increased in each category and the Company benefited from rapid growth in its higher-margin businesses -- parts and service and finance and insurance. Income from operations was $31.4 million versus $31.8 million, a 1.4 percent decrease. Operating margin was 3.0 percent compared with 3.4 percent during the year-ago period.
Net income decreased 4.4 percent to $14.8 million from $15.5 million, and diluted average shares outstanding decreased 4.7 percent to 23.0 million. This resulted in diluted earnings per share of $0.64 for the first quarter of 2003 which is consistent with the same period last year.
"This performance, during a less vigorous economic period, keeps us on track to achieve our goal of growing earnings per share for the sixth consecutive year," said Hollingsworth, who noted that from a brand standpoint Toyota/Lexus and Honda were among the strongest performers. "We had an outstanding performance from our Los Angeles platform, acquired in the third quarter last year," he added.
Management's Outlook
"We expect a solid vehicle market in 2003, although volatile at times and less robust than 2002. Based on our financial performance this quarter, we are comfortable 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. During the first quarter of 2003, the Company repurchased 117,000 shares of its common stock at an average price of $21.35. As of March 31, 2003, the Company had remaining board of directors' authorization to repurchase $22.5 million of its common stock.
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 annual revenues of approximately $800 million. Year-to-date, the Company has acquired three franchises with $131.2 million in annual revenues, and disposed of one franchise with $47.4 million in annual revenues in Oklahoma City, Oklahoma. In addition, a previously announced add-point Ford dealership was opened in Pensacola, Florida, with $40.0 million in anticipated annual revenues. Hollingsworth stated, "Group 1's stable cash flow from operations, combined with one of the strongest balance sheets in the industry, allows us to take advantage of opportunities to make investments that enhance shareholder value."
First-Quarter Conference Call
Group 1 will hold a conference call to discuss the first-quarter results at 10 a.m. ET on Thursday, May 1, 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 |
| -- | 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 |
| -- | dealership operating performance |
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
-- the effect of adverse international developments such as war,
terrorism, political conflicts or other hostilities
-- 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 complete acquisitions, complete
construction of new or expanded facilities or repurchase
shares
-- our cost of financing could increase significantly
-- new accounting standards could materially impact our reported
earnings per share
-- we may not complete additional acquisitions or the pace of
acquisitions may change
-- 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
-- insurance costs could increase significantly
-- we may not obtain inventory of new and used vehicles and
parts, including imported inventory, at the cost or in the
volume we expect
This information and additional factors that could affect our operating results and performance are 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
March 31,
-----------------------
2003 2002
----------- -----------
REVENUES:
New vehicle retail sales $593,754 $552,523
Used vehicle retail sales 225,198 217,933
Used vehicle wholesale sales 61,004 51,068
Parts & service sales 111,113 91,691
Finance & insurance revenues, net 38,722 32,859
----------- -----------
Total revenues 1,029,791 946,074
COST OF SALES:
New vehicle retail sales 551,029 509,951
Used vehicle retail sales 197,058 191,471
Used vehicle wholesale sales 62,799 52,363
Parts & service sales 49,457 40,780
----------- -----------
Total cost of sales 860,343 794,565
Gross Profit 169,448 151,509
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 134,838 116,877
DEPRECIATION AND AMORTIZATION EXPENSE 3,250 2,836
----------- -----------
Income from operations 31,360 31,796
OTHER INCOME (EXPENSE):
Floorplan interest expense (5,447) (4,390)
Other interest expense, net (2,369) (2,739)
Other expense, net (26) (75)
----------- -----------
INCOME BEFORE INCOME TAXES 23,518 24,592
PROVISION FOR INCOME TAXES 8,702 9,099
----------- -----------
NET INCOME $14,816 $15,493
=========== ===========
Basic earnings per share $0.66 $0.68
Diluted earnings per share $0.64 $0.64
Weighted average shares outstanding:
Basic 22,363,602 22,909,209
Diluted 23,010,648 24,140,222
OTHER DATA:
Gross margin 16.5% 16.0%
Operating margin 3.0% 3.4%
Pretax income margin 2.3% 2.6%
Same store revenues -7.8% -0.4%
Manufacturer floorplan assistance $5,850 $5,673
Retail new vehicles sold 22,177 20,769
Retail used vehicles sold 16,312 16,159
----------- -----------
Total retail unit sales 38,489 36,928
Group 1 Automotive, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
March 31, December 31,
2003 2002
------------- -------------
(unaudited) (audited)
ASSETS:
Current assets:
Cash $20,224 $24,333
Contracts in transit and vehicle
receivables 130,862 178,623
Inventories 703,120 622,205
Other assets 74,154 77,877
------------- -------------
Total current assets 928,360 903,038
------------- -------------
Property and equipment 120,742 116,270
Intangible assets 366,068 368,786
Investments and deferred costs from
insurance and vehicle
service contract sales 31,883 32,637
Other assets 3,347 3,034
------------- -------------
Total assets $1,450,400 $1,423,765
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Floorplan notes payable $675,499 $652,538
Other interest-bearing liabilities 895 997
Accounts payable and accrued expenses 147,200 155,748
------------- -------------
Total current liabilities 823,594 809,283
------------- -------------
Debt 82,980 83,222
Other liabilities 39,217 38,656
------------- -------------
Total liabilities before deferred
revenues 945,791 931,161
------------- -------------
Deferred revenues 46,772 49,187
Stockholders' equity 457,837 443,417
------------- -------------
Total liabilities and stockholders'
equity $1,450,400 $1,423,765
============= =============
OTHER DATA:
Working capital $104,766 $93,755
Current ratio 1.13 1.12
Long-term debt to capitalization 15% 16%
Last 12 months return on average equity 15% 16%