Group 1 Posts Q2 Revenues and Earnings
22 July 1998
Group 1 Posts Double-Digit Gains in Revenues, Earnings for Second Quarter, First Six Months of 1998
All Previously Announced Acquisitions Closed
Highlights:
-- Q2 net income jumps 78% on 84% revenue growth
-- Diluted EPS for Q2 $0.31 vs. $0.21, a 48% increase on 20% more
shares
-- Q2 operating income nearly doubles; operating margin expands to
3.2% vs. 3.0%
-- Six-month revenues grow 52%; operating margin improvement drives
net income up 59%
-- Diluted EPS for six months $0.52 vs. $0.36 on higher share base
Summary Results of Operations (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997* 1998 1997*
Revenues $431,531 $234,961 $685,466 $450,343
Gross profit $60,353 $32,857 $96,374 $63,901
Income from operations $13,793 $7,066 $21,259 $12,637
Net income $5,621 $3,156 $8,735 $5,493
Diluted earnings per share $0.31 $0.21 $0.52 $0.36
*These amounts represent pro forma results as the founding companies were
merged simultaneously with the company's initial public offering on
October 29, 1997.
HOUSTON, July 22 -- Group 1 Automotive, Inc. , a
leading operator and consolidator in the automotive retailing industry, today
reported double-digit gains in revenues, operating profit, net income and
earnings per share for the second quarter and first six months of 1998.
Revenue growth, including contributions from recent acquisitions, and
operating margin expansion drove the company's strong performance.
Second Quarter Validates Consolidation Strategy
For the second quarter ending June 30, 1998, revenues increased 84 percent
to $431.5 million from $235.0 million for the same period last year. Revenues
from new vehicles, used vehicles and parts and service increased substantially
while other dealership revenue more than doubled. Net income accelerated 78
percent, reaching $5.6 million, or $0.31 per share on a diluted basis,
compared with $3.2 million, or $0.21 per share on a diluted basis, for the
same period last year. The increase in earnings per share was achieved
despite being calculated on 18.1 million shares compared with 15.1 million
shares in the 1997 second quarter.
Gross margin for the quarter was stable at 14.0%. However, income from
operations surged 95 percent, resulting in the operating margin expanding to
3.2 percent from 3.0 percent in the year-ago period. According to the
company, Group 1 has achieved sequential quarterly improvements in operating
margin since going public.
"I am pleased to announce another exceptionally strong quarter," said B.B.
Hollingsworth Jr., Group 1's chairman, president and chief executive officer.
"Our performance demonstrates the benefits being realized as we execute our
consolidation strategy."
Hollingsworth noted revenue gains were achieved by growth in core
dealerships, augmented by acquisitions completed during the first half of
1998. Added Hollingsworth, "We are especially excited by the growth in other
dealership revenue. Because of our size, we are able to negotiate favorable
pricing on finance products, which lowers our costs and gives us a
competitive advantage." According to the company, several new programs were
effective during the second quarter.
Group 1 recently increased its $125 million syndicated credit facility to
$345 million. The credit facility will provide funds for floorplan financing,
acquisitions and general corporate purposes. "Our size, execution of strategy
and strong financial performance facilitated the increase," Hollingsworth
noted.
Six-Month Results Demonstrate Operating Leverage from Synergy
For the first six months of 1998, revenues increased 52 percent to $685.5
million from $450.3 million for the same period last year. Net income jumped
59 percent to $8.7 million, or $0.52 per share on a diluted basis, compared
with $5.5 million, or $0.36 per share on a diluted basis, for the same period
last year. Earnings per share for the 1998 period were calculated on 16.9
million shares compared with 15.1 million shares last year.
Income from operations was $21.3 million, compared with $12.6 million for
the first six months of 1997. The operating margin expanded sharply to 3.1
percent from 2.8 percent in the year-ago period.
"We are very proud of our achievements in expanding operating income and
margins as a result of operating leverage and synergy from consolidation,"
Hollingsworth said. "The combination of strong revenue growth, improved
budgeting and benchmarking resulted in selling, general and administrative
expenses declining to 10.8 percent of sales for the six months, compared with
11.3 percent a year ago."
Brand Diversity Through Acquisitions a Key
Group 1 also announced that it closed the previously announced acquisition
of Luby Chevrolet, one of the largest dealerships in Colorado, on July 7,
1998. Luby will establish a new platform operation for Group 1 in Denver.
The company has now completed all acquisitions announced since becoming a
public company, adding 30 dealership franchises with annual revenues of $700
million, and expanding into four new states.
Hollingsworth emphasized that the importance of brand diversity has been
brought to the forefront through the General Motors Corp. strike. "Unlike an
individual dealership, our diverse brands have insulated us somewhat from the
impact of the strike. GM new vehicle sales account for less than 10 percent
of our revenues. Our diversity combined with the positive impact of the strike
on our non-GM operations will provide protection if the strike continues.
"We will continue to seek acquisitions that enhance brand and geographic
diversity, as well as provide synergy. Our performance to date is evidence
that successful execution of this strategy will enhance shareholder value,"
Hollingsworth concluded.
Group 1 was founded to become a leading operator and consolidator in the
highly fragmented automotive retailing industry. Group 1 owns 60 dealership
franchises comprised of 24 different brands, and 12 collision service centers
located in Texas, Oklahoma, New Mexico, Colorado, Florida and Georgia.
Through its dealerships the company sells new and used cars and light trucks,
provides maintenance and repair services, sells replacement parts and arranges
related financing, insurance and vehicle service contracts.
This press release contains certain forward-looking statements within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934,
which involve known and unknown risks, uncertainties or other factors not
under the company's control which may cause the actual results, performance or
achievements of the company to be materially different from the results,
performance or other expectations implied by these forward-looking statements.
Some of these risks and factors include, but are not limited to those
disclosed in the company's Form 10-K filed with the Securities and Exchange
Commission.
Group 1 Automotive, Inc. can be reached on the Internet at
http://www.group1auto.com.
Group 1 Automotive, Inc.
Statements of Operations
(Unaudited)
(In thousands of dollars, except share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
REVENUES:
New vehicle sales $251,019 $134,411 $389,041 $251,830
Used vehicle sales 133,625 75,351 220,745 148,567
Parts & service sales 34,154 19,371 55,722 38,400
Other dealership
revenue, net 12,733 5,828 19,958 11,546
Total revenues 431,531 234,961 685,466 450,343
COST OF SALES 371,178 202,104 589,092 386,442
Gross Profit 60,353 32,857 96,374 63,901
GOODWILL AMORTIZATION 569 200 812 399
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 45,991 25,591 74,303 50,865
Income from operations 13,793 7,066 21,259 12,637
OTHER INCOME (EXPENSE):
Floorplan interest expense (3,479) (1,483) (5,304) (2,824)
Other interest expense, net (627) (239) (938) (454)
Other income (expense), net (24) 3 (48) (19)
INCOME BEFORE INCOME TAXES 9,663 5,347 14,969 9,340
PROVISION FOR INCOME TAXES 4,042 2,191 6,234 3,847
NET INCOME $5,621 $3,156 $8,735 $5,493
Basic earnings per share $0.32 $0.22 $0.54 $0.37
Diluted earnings per share $0.31 $0.21 $0.52 $0.36
Weighted average shares
outstanding
Basic 17,441,678 14,673,051 16,325,873 14,673,051
Diluted 18,128,366 15,101,510 16,869,256 15,101,510
Other Data:
Gross margin 14.0% 14.0% 14.1% 14.2%
Operating margin 3.2% 3.0% 3.1% 2.8%
Pretax income margin 2.2% 2.3% 2.2% 2.1%
Retail new vehicles sold 10,767 6,174 16,739 11,625
Retail used vehicles sold 7,991 4,724 13,345 9,203
Total retail sales 18,758 10,898 30,084 20,828