Group 1 Posts Double-Digit Gains in Revenues, Earnings For Record Third Quarter And First Nine Months of 2000
26 October 2000
Group 1 Posts Double-Digit Gains in Revenues, Earnings For Record Third Quarter And First Nine Months of 2000
Nine-Month Revenues Approach $3 Billion
HOUSTON, Oct. 26 Group 1 Automotive, Inc. , a
leading operator in the automotive retailing industry, today reported double-
digit gains in revenues, operating income and diluted earnings per share for
the third quarter and first nine months of 2000. Continued successful
execution of the company's business strategy and strong new vehicle sales
combined to produce the record third quarter results.
Highlights:
-- Revenues up 36% for Q3; operating income rises 24%
-- Q3 diluted EPS $0.54, a 13% increase
-- Nine-month revenues increase 51% to over $2.7 billion; diluted EPS up
21% to $1.47
-- Cash flow per share $0.72 for Q3, $2.00 for nine months
Summary Results of Operations (Unaudited)
(In millions, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenues $955.0 $701.8 $2,745.0 $1,816.5
Gross profit $139.0 $105.1 $400.0 $274.9
Income from operations $31.9 $25.7 $90.3 $64.1
Net income $11.6 $10.5 $32.6 $25.9
Diluted earnings per share $0.54 $0.48 $1.47 $1.21
Strong New Vehicle Market Continues
For the third quarter ended September 30, 2000, revenues grew 36 percent
to $955.0 million from $701.8 million for the same period last year. New
vehicle revenues grew 41 percent and unit sales were up 37 percent. Used
vehicle revenues expanded 27 percent and unit sales were up 25 percent. Parts
and service and other dealership revenues grew 35 percent and 30 percent,
respectively.
Net income increased 10 percent to $11.6 million from $10.5 million, while
diluted earnings per share grew 13 percent to $0.54 from $0.48 a year ago.
Diluted cash flow per share, defined as net income plus depreciation and
amortization, increased 20 percent to $0.72 from $0.60 in the 1999 period.
Gross margin for the quarter was 14.6 percent compared with 15.0 percent
during the year-ago period. This was partly due to a shift in the company's
merchandising mix as new vehicle sales, which carry the lowest margin,
accelerated rapidly, reaching a record at 62 percent of total revenue. In
addition, acquisitions with lower gross margins have been integrated into the
company. Income from operations rose to $31.9 million from $25.7 million, a
24 percent increase. Operating margin was 3.3 percent versus 3.7 percent
primarily due to the shift in merchandising mix and the lower-margin
operations acquired.
"I am pleased to announce a record third-quarter performance," said
B.B. Hollingsworth Jr., Group 1's chairman, president and chief executive
officer. "Our manufacturer partners continue to produce vehicles that are
very popular, which is helping to drive new vehicle sales. Additionally, our
parts and service business is benefiting from our strong vehicle service
contract program and recent service department expansions." Hollingsworth
noted that from a brand standpoint, Toyota, Dodge and Ford were among the
strongest performers.
Record Performance for Nine Months
For the first nine months of 2000, revenues reached $2.7 billion, a
51 percent increase from $1.8 billion for the same period last year. New
vehicle revenues grew 58 percent and unit sales were up 54 percent. Used
vehicle revenues expanded 40 percent and unit sales were up 34 percent. Parts
and service and other dealership revenues grew 48 percent and 45 percent,
respectively. Net income increased 26 percent to $32.6 million, or $1.47 per
diluted share, compared with $25.9 million, or $1.21 per diluted share for the
first nine months of 1999. Diluted cash flow per share increased 28 percent
to $2.00 from $1.56.
Year-to-date gross margin for 2000 was 14.6 percent compared with
15.1 percent in the 1999 period. Income from operations rose 41 percent to
$90.3 million from $64.1 million, and the operating margin was 3.3 percent
compared with 3.5 percent last year. The shift in merchandising mix that
impacted margins in the third quarter had a similar effect on the nine-month
period.
"To date, 2000 has been another record-setting year for new vehicle sales,
and we continue to benefit from this. Currently, the industry is operating at
a record run rate, and this positively impacted our revenues and should
positively impact our future parts and service business," Hollingsworth said.
"We are very pleased with our overall operations, which have resulted in
increased profitability and cash flow generation. Our capital position
continues to be strong and our operating cash flow, supplemented as needed by
our revolving credit line, can support future investments."
Fourth-Quarter and 2001 Outlook
"Currently, we have three definitive agreements to acquire North Atlanta
dealerships that have approximately $165 million in aggregate annual revenue.
These acquisitions, which are subject to customary closing conditions, will
augment our Atlanta operation by adding four new franchises: Toyota, Ford,
Lincoln and Mercury. These new franchises combined with our two existing
Atlanta Ford franchises provide critical mass in the fast-growing North
Atlanta market. We expect to close these transactions during the fourth
quarter, however, their revenue contributions this year will be minimal,"
Hollingsworth said.
"Exclusive of any acquisitions and assuming the vehicle market remains at
current levels, we expect our 2001 revenues to remain stable," he added. "Our
goal for 2001 is to selectively invest the company's net cash flow in
strategic tuck-in acquisitions and the company's common stock." Hollingsworth
said the tuck-in acquisitions "will augment current operations and expand our
e-commerce offerings, while we see the stock repurchases as an exceptional
investment opportunity. We have, in fact, repurchased 1.2 million shares in
private transactions during the first nine months of the year." Operating
margins for the fourth quarter and for 2001 are expected to remain consistent
with prior quarters, adjusted for seasonality. According to Hollingsworth,
Group 1's goals are to achieve double-digit growth in diluted earnings per
share for the fourth quarter of 2000 and for 2001.
Third-Quarter Conference Call
Group 1 will hold a conference call to discuss third-quarter results and
management's outlook for the fourth quarter and 2001 at 10:00 a.m. EDT on
Thursday, October 26, 2000. The call can be accessed live and will be
available for replay over the Internet via http://www.vcall.com . A replay will also
be available on Group 1's website, http://www.group1auto.com .
Group 1 is a leading operator in the automotive retailing industry. The
company has an annualized revenue run rate of over $3.5 billion, and, upon
completion of the announced acquisitions, will own 102 dealership franchises
comprised of 30 different brands, and 21 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 "forward-looking statements" within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934.
These statements include statements regarding our plans, goals, beliefs or
current expectations, including those plans, goals, beliefs and expectations
of our officers and directors with respect to, among other things:
-- the completion of pending and future acquisitions
-- future new and used vehicle sales
-- future parts and service sales
-- revenue growth for 2001
-- future stock repurchases
-- future e-commerce activities
-- capital expenditures for the fourth quarter 2000 and for 2001
-- operating margins for the fourth quarter 2000 and for 2001
-- earnings per share growth for the fourth quarter 2000 and for 2001
Any such forward-looking statements are not assurances of future
performance and involve risks and uncertainties. Actual results may differ
materially from anticipated results in the forward-looking statements for a
number of reasons, including:
-- the future economic environment, including consumer confidence, may
affect the demand for new and used vehicles and parts and service sales
-- regulatory environment, adverse legislation, or unexpected litigation
-- our principal automobile manufacturers, especially Ford and Toyota, may
not continue to enjoy high customer satisfaction with their products
and they may not continue to support and make high-demand vehicles
available to us
-- requirements imposed on us by automobile manufacturers may affect our
acquisitions and capital expenditures related to our dealership
facilities
-- our dealership operations may not perform at expected levels or achieve
expected improvements
-- we may not achieve expected future cost savings and our future costs
could be higher than we expected
-- available capital resources and various debt agreements may limit our
ability to repurchase shares. Any repurchases of our stock may be
made, from time to time, in accordance with applicable securities laws,
in the open market or in privately negotiated transactions at such time
and in such amounts, as we consider appropriate
This information and additional factors that could affect our operating
results and performance are described in Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations --Cautionary
Statement About Forward-Looking Statements; --Dependence on Acquisitions for
Growth; --Contingent Acquisition Payments; --Dependence on the Success of Our
Manufacturers; --Cyclicality; --Seasonality and --Additional Factors to
Consider in our Form 10-K for the year ended December 31, 1999.
All forward-looking statements attributable to us are qualified in their
entirety by this cautionary statement.
For additional information regarding Group 1 Automotive free of charge via
fax, dial 1-800-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)
(In thousands of dollars, except share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
REVENUES:
New vehicles $588,328 $418,244 $1,659,564 $1,050,771
Used vehicles 258,861 203,059 774,939 554,398
Parts & service 78,714 58,188 226,781 153,460
Other dealership
revenues, net 29,054 22,299 83,721 57,911
Total revenues 954,957 701,790 2,745,005 1,816,540
COST OF SALES:
New vehicles 542,491 382,941 1,530,399 963,229
Used vehicles 237,416 187,070 711,732 508,855
Parts & service 36,065 26,684 102,842 69,511
Total cost of sales 815,972 596,695 2,344,973 1,541,595
Gross Profit 138,985 105,095 400,032 274,945
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES 102,960 76,558 297,808 203,457
DEPRECIATION EXPENSE 2,001 1,220 5,671 3,397
AMORTIZATION EXPENSE 2,084 1,605 6,222 4,028
Income from operations 31,940 25,712 90,331 64,063
OTHER INCOME (EXPENSE):
Floorplan interest
expense (9,302) (5,438) (27,257) (13,623)
Other interest
expense, net (3,909) (2,904) (11,591) (7,705)
Other income, net 4 104 1,027 209
INCOME BEFORE INCOME
TAXES 18,733 17,474 52,510 42,944
PROVISION FOR INCOME
TAXES 7,119 6,955 19,954 17,092
NET INCOME $11,614 $10,519 $32,556 $25,852
Basic earnings
per share $0.54 $0.49 $1.49 $1.27
Diluted earnings
per share $0.54 $0.48 $1.47 $1.21
Diluted cash flow
per share $0.72 $0.60 $2.00 $1.56
Weighted average
shares outstanding:
Basic 21,369,802 21,253,799 21,865,182 20,383,000
Diluted 21,662,055 22,106,027 22,222,798 21,359,645
Other Data:
Gross margin 14.6% 15.0% 14.6% 15.1%
Operating margin 3.3% 3.7% 3.3% 3.5%
Pretax income margin 2.0% 2.5% 1.9% 2.4%
EBITDA $36,029 $28,641 $103,251 $71,697
Retail new
vehicles sold 23,728 17,259 67,194 43,629
Retail used
vehicles sold 15,536 12,454 45,817 34,126
Total retail sales 39,264 29,713 113,011 77,755
Group 1 Automotive, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
September 30, 2000 December 31, 1999
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $119,556 $118,824
Inventories, net 417,787 386,255
Other assets, net 59,430 48,344
Total current assets 596,773 553,423
Property and equipment, net 63,664 46,711
Goodwill, net 259,570 235,312
Other assets 7,048 7,464
Total assets $927,055 $842,910
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Floorplan notes payable $390,934 $363,489
Other interest-bearing liabilities 1,377 1,076
Accounts payable and accrued expenses 112,775 108,730
Total current liabilities 505,086 473,295
Debt 140,991 113,174
Other liabilities 25,266 24,412
Stockholders' equity:
Common stock 213 218
Additional paid-in capital 171,733 181,398
Retained earnings 84,261 51,705
Treasury stock (495) (1,292)
Total stockholders' equity 255,712 232,029
Total liabilities and
stockholders' equity $927,055 $842,910
OTHER DATA:
Working capital $91,687 $80,128
Current ratio 1.18 1.17
Long-term debt to capitalization 36% 33%