Cross-Continent Auto Retailers Reports 1st-Qtr. Results
24 April 1998
Cross-Continent Auto Retailers Reports 1st-Qtr. Results
AMARILLO, Texas, April 23 -- Cross-Continent Auto Retailers,
Inc. , the nation's first publicly traded franchise auto dealer
group, today announced results for the first fiscal quarter ended March 31,
1998.
First Quarter Results
Revenues for the first quarter of 1998 increased $60.5 million to
$149.5 million, a 68.0 percent increase from the $89.0 million recorded in the
1997 period. Earnings before an employee severance charge were $1.5 million,
or $0.11 per share, compared with $2.1 million, or $0.16 per share, a year
ago. During the quarter, the company recorded an employee severance charge in
the amount of $815,000 reflecting realignment of management and other
personnel. Net earnings including the employee severance charge were
$948,000, or $0.07 per share on a basic and fully diluted basis.
An increase in new vehicle sales accounted for $34.7 million of the total
increase in revenue, retail used vehicle sales increased $12.7 million,
wholesale used vehicle sales increased $5.2 million, service and parts revenue
increased $5.1 million, finance, insurance and extended warranty sales
increased $1.3 million and all other revenue increased $1.5 million.
The revenue increase for the quarter was positively impacted by
$87.9 million in revenue from acquired dealerships in Las Vegas and Denver.
This increase was partially off-set by the absence of $20.4 million in revenue
from the two under-performing dealerships sold in the second quarter of 1997
but included in the comparable period last year and a net decrease in same-
store sales of $7.0 million.
"Same store Amarillo dealership sales increased 8.2% during the quarter,
primarily due to a 26.2% increase in retail used vehicle unit sales. This
improvement was offset by a decrease in unit sale volume at the company's
Hickey Dodge dealership in Oklahoma City. Jim Holman, the company's most
experienced general manager, is now solely responsible for the dealership's
operations and has fully implemented our policies and procedures. The company
is beginning to see results from those changes," said Bill Gilliland, Cross-
Continent's chairman and chief executive officer.
The company's gross profit increased 67.8%, to $25.5 million for the
quarter. Gross profit margin was 17.0% for the quarter, compared to 17.1% a
year ago.
Selling, general and administrative expenses totaled $20.1 million for the
first quarter of 1998 compared to $10.9 million in the first quarter of 1997.
"Acquisitions added approximately $11.5 million in SG&A expense which was
partially offset by the absence of $2.5 million in SG&A expense from the two
under-performing dealerships sold in the second quarter of 1997 but included
in the comparable period last year. Same store expense increased a modest
$204,000, primarily attributable to improved sales in the Amarillo market and
overall growth of the company. This increase was partially offset by a
$762,000 reduction in expense at Hickey Dodge," Gilliland said.
As a percentage of revenue, SG&A was 13.5% for the quarter, compared to
12.2% last year.
"The decline in sales at the Hickey Dodge dealership increased the SG&A
expense ratio by 70 basis points. Adjusted for Hickey, the company's SG&A
ratio was 12.8% which is more in line with management expectations," Gilliland
said.
"During the quarter we took several steps to further enhance the
performance of our dealerships and streamline operations. These actions are
expected to generate savings of approximately $1.0 million annually.
Accounting, personnel, inventory, advertising and operating procedures have
been standardized in all dealerships," said Bobby Hall, Cross-Continent's
senior vice chairman.
First Quarter Highlights
On January 6, 1998, Cross-Continent announced that it had completed the
acquisition of Chaisson Motor Cars, a multiple franchise dealership group in
Las Vegas, Nevada and Chaisson BMW in Henderson, Nevada. The purchase was
completed for approximately $18.7 million and was accounted for as a purchase.
Chaisson is the sole dealership for new BMW, Volkswagen, Audi, Land Rover and
other luxury vehicles in the Las Vegas market. Bill Gilliland noted the
acquisition was a strategic fit for Cross-Continent since Chaisson's
facilities are located near the company's other operations in the Las Vegas
market.
On January 7, 1998, Cross-Continent announced it had entered into a sale-
leaseback agreement with Capital Automotive L.P. a real estate investment
trust. The agreement provides for the company to sale and leaseback six
dealership properties, for total cash consideration approximating $35 million.
The company expects to use the proceeds, after the repayment of existing
mortgages, taxes and related expenses, for the continued acquisition of
additional dealerships. The six properties are located in Amarillo, Texas,
Denver, Colorado and Las Vegas, Nevada. During the first quarter of 1998, the
company completed the sale and leaseback of the Amarillo, Texas and Denver,
Colorado properties and expects to complete the remaining transactions by May
1998.
Looking Forward
"The company is entering the peak selling season, which occurs in the
second and third calendar quarters, and expects to regain some expense
leverage during that period," Gilliland said
Cross-Continent is an acquisition driven, growth minded company. The
company seeks to diversify and strengthen its portfolio of dealerships, and
currently has two acquisitions pending. The company has entered into a
contract to acquire a certain dealership in Nevada, for approximately
$12.5 million, and the company has entered into a contract to acquire a
certain dealership in California, for approximately $5.5 million. The two
dealerships had combined revenue of approximately $115 million in 1997 and
retailed 2,962 new vehicles and 2,843 used vehicles. The transactions are
subject to manufacturer's approval and other routine conditions. The company
intends to fund the cash portion of the purchases with available working
capital and availability under its credit line. The company intends to fund
the balance of the purchases with seller financed notes and common stock.
"The company's goal is to grow and expand its dealership base, building
value for its shareholders, while achieving brand, geographic and economic
diversity. The pending acquisitions represent an opportunity to diversify
brands and build local market share in Nevada, and to achieve further
geographic and economic diversity. Our acquisition strategy is on course, we
are actively pursuing additional acquisition opportunities and we are seeing
acquisition pricing come down," said Gilliland.
Cross-Continent Auto Retailers, Inc. owns and operates a group of
franchised automobile retail dealerships in Texas, Oklahoma, Nevada and
Colorado. Through these dealerships, the company sells new and used cars and
light trucks, arranges related financing and insurance, sells replacement
parts and provides vehicle maintenance and repair services.
Cross-Continent Auto Retailers, Inc. is listed on the New York Stock
Exchange under the symbol XC.
Cross-Continent Auto Retailers, Inc. believes its shareholders benefit
from the views of management about the future of the company's business.
Included herein are forward-looking statements, including statements with
respect to anticipated revenue growth, acquisitions and profitability. There
are many factors which affect management's views about future events and
trends of the company's business. These factors involve risk and
uncertainties that could cause actual results or trends to differ materially
from management's view, including without limitation economic conditions,
risks associated with acquisitions and the risk factors set forth from time to
time in the company's filings with the Securities and Exchange Commission.
CROSS-CONTINENT AUTO RETAILERS, INC.
($ 000 except per share and unit data)
Unaudited
Three months ended
March 31,
1998 1997
New vehicle revenue $ 69,565 $ 34,878
Used vehicle retail revenue 46,423 33,675
Used vehicle wholesale revenue 14,146 9,001
Other operating revenue 19,397 11,468
Total revenue 149,531 89,022
Cost of sales 124,045 73,839
Gross Profit 25,486 15,183
SGA 20,119 10,901
Employee severance 815 ---
Depreciation & amortization 927 381
Operating Income 3,625 3,901
Interest expense (net) 2,112 475
Income before income taxes 1,513 3,426
Income taxes 565 1,280
Net Income $ 948 $ 2,146
Weighted average shares outstanding 13,560 13,800
Basic and diluted EPS $ 0.07 $ 0.16
Unit Sales
New 2,773 1,595
Used - Retail 3,785 2,769
Wholesale 2,203 1,849
Average Selling Price:
New 25,087 21,867
Used - Retail 12,265 12,161
Wholesale 6,421 4,868
CROSS-CONTINENT AUTO RETAILERS, INC.
SELECTED BALANCE SHEET DATA
($ 000 )
Unaudited
March 31, December 31,
1998 1997
Cash and cash equivalents $ 11,398 $ 15,173
Accounts receivable 21,362 16,884
Inventory 75,463 55,807
Total current assets 110,494 89,656
Goodwill, net 84,639 67,988
Total assets 220,712 197,273
Floorplan notes payable 65,154 53,368
Total current liabilities 107,400 86,568
Long term debt 42,005 44,263
Total liabilities 154,502 134,011
Stockholders' equity 66,210 63,262
Total liabilities and stockholders'
equity 220,712 197,273
SOURCE Cross-Continent Auto Retailers, Inc.