Group 1 Gains in Revenues, Operating Income, Net Income for Q1 2000
27 April 2000
Group 1 Posts Double-Digit Gains in Revenues, Operating Income, Net Income for First Quarter 2000
HOUSTON, April 27 Highlights:
-- Revenues up 76%; operating income rises 63%
-- Diluted EPS $0.40 vs. $0.31, a 29% increase
-- Cash flow per share $0.56 vs. $0.41, a 37% increase
Summary Results of Operations (Unaudited)
(In millions, except per share amounts)
Three Months Ended
March 31,
2000 1999
Revenues $859.9 $489.4
Gross Profit $125.4 $76.2
Income from Operations $25.8 $15.8
Net Income $9.0 $6.2
Diluted Earnings per Share $0.40 $0.31
Group 1 Automotive, Inc. (NYSE: GPI), a leading operator in the automotive
retailing industry, today reported gains in revenues, net income and earnings
per share for the first quarter of 2000 compared with the same period last
year. Strong new vehicle sales and greater operating leverage combined with
contributions from acquisitions to produce these results.
Strong New Vehicle Market Drives Revenues, Profits
Revenues accelerated 76 percent to $859.9 million from $489.4 million for
the same period last year. New vehicle revenues grew 89 percent and unit
sales were up 83 percent. Used vehicle revenues expanded 56 percent and unit
sales were up 46 percent. Parts and service and other dealership revenues
each grew 66 percent.
Net income rose 46 percent to $9.0 million from $6.2 million while diluted
earnings per share grew to $0.40 from $0.31 a year ago. Cash flow per share,
defined as net income plus depreciation and amortization, increased to $0.56
from $0.41 last year. The increases in earnings and cash flow per share were
achieved despite being calculated on 22.8 million shares compared with
20.0 million shares last year, a 14 percent higher number of shares
outstanding.
Gross margin contracted to 14.6 percent from 15.6 percent during the
year-ago period primarily due to a change in the company's merchandising mix,
as new vehicle sales, which carry the lowest margins, expanded rapidly, and
the recent addition of two platform operations that have lower margins.
Significant Operating Leverage Continues
Income from operations increased 63 percent to $25.8 million from
$15.8 million as greater operating leverage partly offset the gross-margin
contraction. Included in selling, general and administrative expenses (SG&A)
was a $1.5 million charge, or approximately $0.04 per share, relating to
unfavorable medical claims experience during the quarter. The operating
margin dipped slightly to 3.0 percent from 3.2 percent, primarily because of
the health insurance charge, the merchandising mix and two new platform
operations.
Other income included a one-time gain of $1.0 million, or $0.03 per share,
relating to the sale of a Chrysler franchise. The company works with its
manufacturer/partners in all areas where Group 1 is represented to help them
align, or channel, their franchises. In working with Chrysler to assist them
in channeling the Austin, Texas, market, Group 1's Maxwell Platform sold a
Chrysler franchise to a Jeep dealer resulting in the above-described gain. In
return, Chrysler granted the company a new Dodge franchise at no cost. The
new Dodge franchise operates out of the former Chrysler facility.
Business Strategy Generating Value
"I am pleased to announce another quarter of record results," said B.B.
Hollingsworth Jr., Group 1's chairman, president and chief executive officer.
"New vehicle sales were outstanding in the first quarter. In fact, they were
much stronger than predicted, and we certainly benefited from this. As you
would expect, because new vehicle sales carry the lowest margins,
exceptionally strong new vehicle volume impacted our revenue mix and pushed
our gross margins down. Conversely, a slowdown in new vehicle sales would
dampen the revenue line, but boost our margins.
"The payoff on our strategy to create economies of scale and realize
synergy was evident this quarter," Hollingsworth continued. "Excluding the
one-time charge in SG&A, the operating leverage inherent in our business model
offset the majority of the gross-margin softness and contributed to increased
earnings."
Hollingsworth added, "We have not seen any indication that this strong new
vehicle market is abating. We expect to continue to benefit from this market
and from the synergy delivered by our proven operating strategies."
Incremental Revenue Through Technology Initiatives
Group 1 recently announced the rollout of its second-generation Internet
marketing program featuring one-stop Internet shopping. An Internet user can
log onto the Group 1 home page and link to all of its regional dealership
platforms, which are comprised of multiple automobile brands. Each regional
platform then links to the individual dealerships in that platform.
By using a combination of brick-and-mortar and web-based retailing,
Group 1 seeks to generate incremental sales by driving potential buyers
through the Internet to one of its regional dealership's websites and, in some
cases, into the local dealership to make the purchase in person.
Group 1 is a leading operator in the automotive retailing industry. The
company has an annualized revenue run rate of over $3.4 billion, and owns
98 dealership franchises comprised of 29 different brands, and 19 collision
service centers located in Texas, Oklahoma, Florida, New Mexico, Colorado,
Georgia, Louisiana and Massachusetts. Through its dealerships and Internet
sites, the company sells new and used cars and light trucks, provides
maintenance and repair services, sells replacement parts and arranges related
financing, vehicle service and insurance 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 are subject to known and unknown risks, uncertainties or other factors
not under Group 1's control that may cause the actual results, performance or
achievements of Group 1 to be materially different from the results,
performance or other expectations implied by these forward-looking statements.
Some of these risks, uncertainties and other factors include those disclosed
in Group 1's filings with the Securities and Exchange Commission.
For additional information regarding Group 1 Automotive free of charge via
fax, dial 800-PRO-INFO and use the company's stock symbol, "GPI."
Group 1 Automotive, Inc. can be reached on the Internet at
http://www.group1auto.com
Group 1 Automotive, Inc.
Statements of Operations
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended
March 31,
2000 1999
REVENUES:
New vehicles $511,417 $270,118
Used vehicles 249,697 159,779
Parts & service 72,844 43,774
Other dealership revenues, net 25,953 15,680
Total revenues 859,911 489,351
COST OF SALES:
New vehicles 471,807 247,373
Used vehicles 229,625 146,148
Parts & service 33,129 19,636
Total cost of sales 734,561 413,157
Gross profit 125,350 76,194
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 95,820 58,278
DEPRECIATION EXPENSE 1,750 1,033
AMORTIZATION EXPENSE 2,011 1,058
INCOME FROM OPERATIONS 25,769 15,825
OTHER INCOME (EXPENSE):
Floorplan interest expense (8,373) (3,847)
Other interest expense, net (3,883) (1,786)
Other income, net 1,024 36
Income before income taxes 14,537 10,228
PROVISION FOR INCOME TAXES 5,524 4,071
NET INCOME $9,013 $6,157
Basic earnings per share $0.40 $0.33
Diluted earnings per share $0.40 $0.31
Diluted cash flow per share $0.56 $0.41
Weighted average shares outstanding:
Basic 22,384,332 18,921,723
Diluted 22,781,689 19,989,005
OTHER DATA:
Gross margin 14.6% 15.6%
Operating margin 3.0% 3.2%
Pretax income margin 1.7% 2.1%
Retail new vehicles sold 20,779 11,324
Retail used vehicles sold 14,651 10,021
Total retail sales 35,430 21,345
Group 1 Automotive, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
March 31, December 31,
2000 1999
(unaudited) (audited)
ASSETS:
Current assets:
Cash and cash equivalents $121,263 $118,824
Inventories, net 452,863 386,255
Other assets, net 50,804 48,344
Total current assets 624,930 553,423
Property, plant and equipment, net 60,106 46,711
Goodwill, net 262,346 235,312
Other assets 7,059 7,464
Total assets $954,441 $842,910
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Floorplan notes payable $428,769 $363,489
Other interest-bearing liabilities 1,929 1,076
Accounts payable and accrued expenses 107,875 108,730
Total current liabilities 538,573 473,295
Debt 143,053 113,174
Other liabilities 25,473 24,412
Total stockholders' equity 247,342 232,029
Total liabilities and stockholders' equity $954,441 $842,910
OTHER DATA:
Working capital $86,357 $80,128
Current ratio 1.16 1.17
Long-term debt to capitalization 37% 33%