Cross-Continent Reports Q2 Results
28 July 1998
Cross-Continent Reports 25% Increase in Second Quarter Net
AMARILLO, Texas, July 28 -- Cross-Continent Auto Retailers,
Inc. , the nation's first publicly traded franchise auto dealer
group, today announced results for the second fiscal quarter ended
June 30, 1998.
Second Quarter Results
Revenue for the second quarter of 1998 increased 23.5 percent to
$167.2 million from $135.4 million recorded in the 1997 period. Earnings for
the second quarter of 1998 were $2.7 million, or $0.20 per share on a basic
and fully diluted basis, as compared to earnings in the corresponding 1997
period of $2.2 million, or $0.16 per share, before a charge recorded on the
sale of two under performing dealerships. Including the charge on the sale of
the dealerships, earnings in the 1997 period were $1.9 million, or $0.13 per
share.
New vehicle revenue increased 30.5 percent, retail used vehicle revenue
increased 14.4 percent, wholesale used vehicle revenue increased 9.5 percent
and all other revenue increased 31.5 percent.
The revenue increase for the quarter was positively impacted by
$44.8 million in revenue from acquired dealerships in the Las Vegas, Nevada
market and a $4.0 million increase in same store revenue. This increase was
partially off-set by the absence of $17.0 million in revenue from the two
under-performing dealerships sold in the second quarter of 1997 and included
in the comparable period last year.
"Same store sales increased 3.4 percent during the quarter. The increase
was primarily attributable to a 12.0 percent increase in same store revenue at
the company's two Toyota dealerships and a 1.8 percent increase in same store
revenue in the Amarillo, Texas market," said Bill Gilliland, Cross-Continent's
chairman and chief executive officer.
Gross profit increased 26.9 percent, to $29.9 million for the quarter.
Gross profit margin in the second quarter was 17.9 percent compared to
17.4 percent a year ago.
Selling, general and administrative expenses totaled $22.3 million for the
second quarter of 1998, compared to $17.7 million in the second quarter of
1997. The increase is primarily attributable to the company's acquisition
activity, which added $5.8 million in selling, general and administrative
expenses. As a percentage of revenue, SG&A was 13.3 percent for the quarter,
compared to 13.1 percent last year.
First Half Results
Revenue for the first six months of 1998 increased 41.1 percent to
$316.8 million, compared to $224.4 million in the comparable period last year,
primarily as a result of the company's acquisition activity.
Earnings for the six month period of 1998 were $3.7 million, or $0.27 per
share, compared to $4.0 million, or $0.29 per share, last year. Adjusted for
an employee severance charge recorded in the first quarter of 1998 and a
charge related to the sale of two under performing dealerships in 1997,
earnings were $0.31 per share in 1998 compared to $0.31 last year.
"We are pleased with the progress made to date on our initiative to
improve the performance of our dealerships, and we remain committed to our
strategy of continuing to build our automobile dealership base. We have taken
several steps to further enhance the performance of our dealerships and
streamline operations. The results of these efforts are reflected in this
second quarter," said Gilliland.
General Motors Strike
On June 5, 1998, the United Auto Workers initiated a strike at a General
Motors' parts plant, which has caused General Motors to cease the production
of most of its new vehicles. The company relies on General Motors as the
primary source of new vehicle inventory for its three Chevrolet dealerships in
the Amarillo, Texas market. A continuation of this strike, or any other
disruption in the availability of new vehicle inventory from the
manufacturers, could have an adverse affect on new vehicle sales at the
company's dealerships. As of the date of this announcement, General Motors
has not announced a resolution to the labor dispute.
"Although the success of our acquisition strategy has mitigated the affect
of this strike, its continuation will somewhat offset the positive year that
is developing for us until the labor issues are resolved and inventory
availability has been replenished. During the first six months of 1998, new
Chevrolet sales accounted for 28 percent of the company's new vehicle revenue,
compared to 42 percent in the first six months of 1997. We have purchased
over 200 new Chevrolet units from other Chevy dealers since the initiation of
the strike and we continue to supplement our available inventory with these
purchases and we are emphasizing used vehicles as well as parts and repair
services," said Gilliland.
Second Quarter Highlights
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 provided for the company to sell and leaseback six
dealership properties, for total cash consideration of $35.9 million. The
company retired mortgages and related debt and expects to use the remaining
proceeds for the continued acquisition of additional dealerships. During the
second quarter of 1998, the company completed the sale and leaseback
transaction.
The company has completed the relocation of its Denver, Colorado and Las
Vegas, Nevada Toyota dealerships to newly constructed facilities. The larger
facilities are located on major thoroughfares which provide for improved
traffic flow, enhanced vehicle merchandizing and increased capacity for the
parts and service operations at the dealerships. The company continues to
lease the two former locations, utilizing the Denver, Colorado facility as a
retail location specializing in used vehicles and the company is renovating
the Las Vegas, Nevada facility for its Volkswagen/Audi dealership.
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 Honda dealership in Las Vegas, Nevada, for approximately
$12.5 million, and the company has entered into a contract to acquire a Toyota
dealership in San Diego, California, for approximately $6.0 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.
"Cross-Continent's three to five year growth goal is to have forty
dealerships, located in 5-7 markets and have $2.5 billion in annual revenue.
We expect a $3.0 million pre-tax profit average contribution per dealership
due to our high margin operating model. We are on track with this focused
strategy," Gilliland said.
Cross-Continent Auto Retailers, Inc. owns and operates a group of
franchised automobile retail dealerships in Texas, Oklahoma, Nevada, Colorado
and California. Through these dealerships, the company sells new and used
cars and light trucks, arranges related financing and insurance, sells
replacement parts and provides vehicle maintenance and repair services.
Cross-Continent Auto Retailers, Inc. is listed on the New York Stock
Exchange under the symbol XC.
Cross-Continent Auto Retailers, Inc. believes its shareholders benefit
from the views of management about the future of the company's business.
Included herein are forward-looking statements, including statements with
respect to anticipated revenue growth, acquisitions and profitability. There
are many factors which affect management's views about future events and
trends of the company's business. These factors involve risk and
uncertainties that could cause actual results or trends to differ materially
from management's view, including without limitation, economic conditions,
risks associated with acquisitions and the risk factors set forth from time to
time in the company's filings with the Securities and Exchange Commission.
CROSS-CONTINENT AUTO RETAILERS, INC.
($ 000 except per share and unit data)
Unaudited
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
New vehicle revenue $82,726 $63,412 $152,291 $98,290
Used vehicle retail
revenue 51,201 44,770 97,624 78,445
Used vehicle W/S revenue12,293 11,229 26,439 20,230
Other operating revenue 21,002 15,976 40,399 27,444
Total revenue 167,222 135,387 316,753 224,409
Cost of sales 137,357 111,856 261,402 185,695
Gross Profit 29,865 23,531 55,351 38,714
SGA 22,262 17,742 42,381 28,643
Depreciation & amortization912 617 1,839 998
Employee severance charge 0 0 815 0
Loss on sale of
dealerships, net 0 347 0 347
Operating Income 6,691 4,825 10,316 8,726
Interest expense (net) 2,364 1,639 4,476 2,114
Income before income taxes4,327 3,186 5,840 6,612
Income taxes 1,617 1,320 2,182 2,600
Net Income $2,710 $1,866 $3,658 $4,012
Basic and fully diluted
shares 13,574 14,049 13,567 13,925
EPS 0.20 0.13 0.27 0.29
Unit Sales
New 3,454 2,907 6,227 4,502
Used - Retail 4,070 3,807 7,855 6,576
Wholesale 2,312 2,515 4,515 4,364
Average Selling Price:
New 23,951 21,814 24,457 21,833
Used - Retail 12,580 11,760 12,428 11,929
Wholesale 5,317 4,465 5,856 4,636
CROSS-CONTINENT AUTO RETAILERS, INC.
($000)
Unaudited
June 30, December 31,
1998 1997
Cash and cash equivalents $7,624 $15,173
Accounts receivable 27,698 16,884
Inventory 76,172 55,807
Total current assets 113,052 89,656
Goodwill, net 84,006 67,988
Total assets 212,474 197,273
Floorplan notes payable 69,930 53,368
Total current liabilities 97,313 86,568
Long term debt 41,752 44,263
Total liabilities 143,555 134,011
Stockholders' equity 68,919 63,262
Total liabilities and
stockholders' equity 212,474 197,273