Group 1 Third-Quarter Revenues Nearly Double
21 October 1998
Group 1 Third-Quarter Revenues Nearly Double; Nine-Month Revenues Exceed $1 Billion
Highlights:
-- Q3 net income jumps 81% on 98% revenue growth
-- Diluted Q3 EPS $0.35 vs. $0.24, a 46% increase
-- Gross and operating margins expand sharply
-- Nine-month revenues up 68%; net income also rises 68%
-- Diluted EPS for nine months $0.87 vs. $0.60, a 45% increase
Summary Results of Operations (Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997* 1998 1997*
Revenues $472,050 $238,707 $1,157,516 $689,050
Gross profit $70,963 $33,699 $167,337 $97,600
Income from operations $16,421 $7,427 $37,680 $20,064
Net income $6,515 $3,609 $15,250 $9,102
Diluted earnings per share $0.35 $0.24 $0.87 $0.60
*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, Oct. 21 -- Group 1 Automotive, Inc. , a
leading operator and consolidator in the automotive retailing industry, today
reported that revenues nearly doubled for the third quarter of 1998, while
gross profit and income from operations more than doubled for the period. The
company also experienced double-digit increases in revenues, gross profit,
income from operations and net income for the first nine months of 1998.
Strong Growth Internally and from Acquisitions
For the third quarter ending September 30, 1998, revenues increased 98
percent to $472.1 million from $238.7 million for the same period last year.
Revenues from new and used vehicles increased substantially while parts and
service sales and other dealership revenue more than doubled. Net income
accelerated 81 percent, reaching $6.5 million, or $0.35 per diluted share,
compared with $3.6 million, or $0.24 per diluted share, for the same period
last year. The increase in earnings per share was achieved despite being
calculated on 18.9 million shares compared with 15.1 million shares in the
1997 third quarter.
Gross margin jumped to 15.0 percent from 14.1 percent during the year-ago
period due to improved used vehicle margins and a change in the merchandising
mix as parts and service and other dealership revenue increased more rapidly
than lower-margin revenues. Income from operations more than doubled, rising
to $16.4 million from $7.4 million last year, resulting in the operating
margin expanding to 3.5 percent from 3.1 percent in the year-ago period.
Group 1 has achieved sequential quarterly improvements in operating margin
since going public.
B.B. Hollingsworth Jr., Group 1's chairman, president and chief executive
officer, noted that the revenue gains were achieved by growth in the founding
dealerships as well as contributions from acquisitions. Sales were especially
strong for Lexus, Honda and Toyota. "We achieved an exceptional quarter
despite low levels of General Motors inventory due to the strike and the
impact from our South Florida operations being shut down for a week because of
Hurricane Georges. These results affirm our strategy of diversifying by
manufacturer and geographic location," Hollingsworth said. "We are especially
pleased to see increased revenues from our high-margin products since this is
a key element of our long-term growth strategy."
Successful Acquisition Integration Driving Nine-Month Results
For the first nine months of 1998, revenues accelerated 68 percent to $1.2
billion from $689.1 million for the same period last year. Net income jumped
68 percent to $15.3 million, or $0.87 per diluted share, compared with $9.1
million, or $0.60 per diluted share, for the year-ago period. Earnings per
share for the 1998 period were calculated on 17.5 million shares compared with
15.1 million shares last year.
Gross margin for the 1998 period was 14.5 percent compared with 14.2
percent a year ago. Income from operations was $37.7 million, an 88 percent
increase from last year. The operating margin expanded sharply to 3.3 percent
from 2.9 percent in the first nine months of 1997.
"Our operating leverage has been significant and demonstrates that we have
been successful in integrating both our platform and tuck-in acquisitions,"
Hollingsworth commented. "Select acquisitions executed under a disciplined
strategy can produce earnings growth and enhance shareholder value.
"Since becoming a public company in November 1997, we have completed the
acquisition of 32 franchises in five states," Hollingsworth continued. "We
have almost doubled our 1997 revenues, which were just in excess of $900
million." During the third quarter, Group 1 acquired two additional
dealerships in Texas, increasing its annual revenue run rate to over $1.8
billion.
Because the company's acquisition strategy has been successful, Group 1
recently announced that John S. Bishop, a 25-year automobile industry veteran,
would fill the position of senior vice president -- operations. Bishop has
significant experience with Toyota, Ford and Chrysler -- three of Group 1's
largest brands. He will oversee the company's operations and coordinate
activities with the dealerships.
Momentum for the Fourth Quarter
According to Hollingsworth, Group 1's momentum has carried into the fourth
quarter. "We are seeing good customer traffic in our dealerships, and our GM
inventory is approaching more normal levels."
Hollingsworth confirmed that the company will continue to seek
acquisitions that enhance brand and geographic diversity, as well as provide
synergy. Improving the merchandising mix by increasing higher-margin products
will remain a priority.
Group 1 was founded to become a leading operator and consolidator in the
highly fragmented automotive retailing industry. Group 1 owns 57 dealership
franchises comprised of 22 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 filings with the Securities and Exchange
Commission.
Group 1 Automotive, Inc.
Statements of Operations
(Unaudited)
(In thousands of dollars, except share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
REVENUES:
New vehicle sales $273,282 $140,098 $662,323 $391,928
Used vehicle sales 142,351 72,168 363,096 220,735
Parts & service sales 41,542 19,988 97,264 58,389
Other dealership revenue, net 14,875 6,453 34,833 17,998
Total revenues 472,050 238,707 1,157,516 689,050
COST OF SALES 401,087 205,008 990,179 591,450
Gross Profit 70,963 33,699 167,337 97,600
GOODWILL AMORTIZATION 678 200 1,490 599
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 53,864 26,072 128,167 76,937
Income from operations 16,421 7,427 37,680 20,064
OTHER INCOME (EXPENSE):
Floorplan interest expense (3,690) (1,104) (8,994) (3,928)
Other interest expense, net (1,767) (230) (2,705) (684)
Other income (expense), net 40 2 (8) (17)
INCOME BEFORE INCOME TAXES 11,004 6,095 25,973 15,435
PROVISION FOR INCOME TAXES 4,489 2,486 10,723 6,333
NET INCOME 6,515 3,609 15,250 9,102
Basic earnings per share 0.36 0.25 0.90 0.62
Diluted earnings per share 0.35 0.24 0.87 0.60
Weighted average shares outstanding
Basic earnings per share
Basic 18,199,646 14,673,05116,957,327 14,673,051
Diluted 18,855,004 15,101,51017,538,446 15,101,510
Other Data:
Gross margin 15.0% 14.1% 14.5% 14.2%
Operating margin 3.5% 3.1% 3.3% 2.9%
Pretax income margin 2.3% 2.6% 2.2% 2.2%
Retail new vehicles sold 11,901 6,298 28,640 17,923
Retail used vehicles sold 9,086 4,720 22,431 13,923
Total retail sales 20,987 11,018 51,071 31,846