Sonic Automotive, Inc. Announces First Quarter
Net Income of $0.33 Per Share
CHARLOTTE, N.C., April 24 Sonic Automotive, Inc.
announced today net income of $13.5 million, or $0.33 per diluted
share, for the first quarter ended March 31, 2001, exceeding consensus
estimates of $0.23 per share. This compares to net income of $17.4 million,
or $0.39 per diluted share for the quarter ended March 31, 2000. Net income
before goodwill amortization expense for the quarter was $0.40 per diluted
share. Under proposed accounting guidance which is expected to be finalized
in the second half of 2001, net income will no longer be reduced by goodwill
amortization expense.
B. Scott Smith, the Company's President and Chief Operating Officer
stated, "Our Company has responded aggressively to the slow down in vehicle
sales and outperformed expectations for the first quarter. Our performance,
as well as performance of other auto retailers during a quarter of cyclical
declines in new vehicle sales, compares favorably to performance by auto
manufacturers and auto parts manufacturers. This performance conclusively
demonstrates the value of our variable cost structure and non-cyclical
consumer service and parts offerings. We expect new vehicle unit volumes to
continue at a rate below the prior year and we have adjusted our operations to
reflect the lower expected demand. Given the current quarter's results, we
are now raising our expectations and targeting earnings per share for the year
ending December 31, 2001 of $1.55 to $1.59 and earnings per share for the
second quarter of 2001 of $0.42 to $0.45."
Operations
Total revenues for the quarter were $1.5 billion, a 5.2% increase from the
first quarter of last year and a 6.6% increase from the fourth quarter of last
year. Parts, service, and collision repair revenues represented 12.3% of
total revenue this quarter compared to 11.3% for the first quarter last year.
Gross margin for those revenue lines was 45.3% in the current quarter compared
to 44.1% for the first quarter last year, an increase of 2.7%. Finance and
insurance revenues increased 7.0% and finance and insurance revenues per unit
increased 7.1%.
Mr. Scott Smith also stated, "Despite a more challenging operating
environment we were able to post solid operating results this quarter. As
expected, we saw slight declines in new vehicle gross margins as we reduced
inventories; however, we were able to increase margins in the higher margin
parts and service segments of our business. We did exactly what we promised
at the end of the fourth quarter -- we reduced our inventory levels and
controlled our variable costs. We believe the inventory correction stage of
this vehicle sales cycle is behind us at Sonic."
"There was a marked differentiation between the performance of domestic
and import brands -- particularly Toyota, Lexus and BMW. Our brand portfolio,
with an emphasis on luxury brands, was a major factor in our ability to
sustain well above industry average profit margins in the quarter. Although
our California markets were not as strong as some other regions, our emphasis
on luxury and import brands in these markets was reflected in our performance.
California market same store sales were down less than 1%," stated Jeffrey C.
Rachor, the Company's Executive Vice President of Retail Operations.
Same Store Sales
On a same store basis, revenues for the quarter decreased 5.0%. Same
store new vehicle sales decreased 6.9% and same store retail used vehicle
sales decreased 7.3%. Despite cyclical declines in vehicle sales -- parts,
service and collision repair revenues increased 5.4% on a same store basis.
Same store gross margins in parts and service also expanded 3.4%.
The continuing growth in our service and parts operations demonstrates the
strength of the automotive retailing business model and the sustained benefit
of strong vehicle sales rates the last several years to our service and parts
operations. Because of changes in revenue mix, overall same store margins
increased from 14.0% to 14.6%.
Acquisitions and Dispositions
Sonic closed on six acquisitions late in the fourth quarter of 2000 and in
the first quarter of 2001. These acquisitions contributed $132.6 million in
revenue and $3.2 million in operating income in the first quarter. Even after
considering associated borrowing costs, these acquisitions contributed $0.03
per share to first quarter earnings, illustrating the highly accretive
valuations of recent acquisitions.
The Company continues to pursue a substantial pipeline of acquisition
opportunities at attractive valuations. Cyclical declines in sales have
negatively effected many operators -- creating greater motivation to sell.
Sonic has both cash generation from operations and $127.0 million in
availability under our existing acquisition credit facility to support
continuation of its disciplined acquisition strategy. Currently, acquisition
opportunities in markets with an established presence and management team are
the Company's primary focus.
Sonic completed dispositions of seven franchises in the first quarter of
2001. Agreements are in place for divestiture of an additional
two dealerships in the second quarter of 2001. We expect our disposition
program to be largely completed in the third quarter of 2001 without
significant gain or loss. Completion of these dispositions will have a
positive impact on earnings per share in second quarter of 2001 and subsequent
periods.
Stock Buyback Activity
As of April 24, 2001, Sonic has expended $64.1 million to repurchase
5,857,465 shares of its Class A common stock and 13,801 shares of its
convertible preferred stock. Sonic's Board of Directors has authorized a
$75 million stock buyback program. Sonic intends to continue to use the
authorized stock buyback as market conditions warrant.
About Sonic Automotive, Inc.
Sonic Automotive, Inc., a Fortune 300 Company, is the second largest
automotive retailer in the United States operating 165 franchises and
30 collision repair centers. Sonic can be reached on the Web at
http://www.sonicautomotive.com .
Included herein are forward-looking statements, including statements with
respect to anticipated profit and earnings per share growth. There are many
factors that 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 described in Exhibit 99.1 to the Company's
Annual Report on Form 10-K for the year ending December 31, 2000. The Company
does not undertake any obligation to update forward-looking information.
MANAGEMENT WILL BE HOLDING A CONFERENCE CALL ON TUESDAY, APRIL 24, 2001 AT
11:00 A.M. EASTERN TIME. TO PARTICIPATE, PLEASE DIAL 888-318-6429, SECURITY
CODE: SONIC -- OR YOU CAN ACCESS THE CALL AT http://WWW.STREETFUSION.COM OR
http://WWW.SONICAUTOMOTIVE.COM .
SONIC AUTOMOTIVE, INC.
Results of Operations (unaudited)
(in thousands, except per share and unit data amounts)
Three Months Ended
03/31/2000 03/31/2001
New units 33,390 33,241
Used units 20,132 20,248
Total units retailed 53,522 53,489
Wholesale units 15,701 16,518
Average price per unit:
New vehicles 25,578 26,431
Used vehicles 15,171 15,525
Wholesale vehicles 6,433 7,074
Revenues
New vehicles $854,035 $878,608
Used vehicles 305,431 314,347
Wholesale vehicles 101,012 116,853
Total vehicles 1,260,478 1,309,808
Parts, service, and collision repair 165,587 189,361
Finance & insurance and other 38,337 41,036
Total Revenues 1,464,402 1,540,205
Total Gross Profit 208,034 221,939
SG&A expenses 153,466 171,467
Depreciation 1,517 1,725
Goodwill amortization 4,050 4,451
Operating Income 49,001 44,296
Interest expense, floor plan 10,357 12,242
Interest expense, other 10,266 10,005
Other income 38 59
Income Before Taxes 28,416 22,108
Income taxes 11,045 8,625
Net Income $ 17,371 $ 13,483
Diluted:
Weighted average common shares outstanding 44,877 41,473
Earnings per share $0.39 $0.33
Gross Margin Data:
New vehicles retail 8.1% 7.8%
Used vehicles retail 11.2% 10.9%
Total vehicles retail 8.9% 8.6%
Parts, service and collision repair 44.1% 45.3%
Finance and insurance 83.7% 84.6%
Overall gross margin 14.2% 14.4%
SG&A Expenses:
Personnel $ 94,659 $102,728
Advertising 13,862 14,263
Facility rent 13,037 16,137
Other 31,908 38,339
Balance Sheet Data:
Cash and equivalents $ 82,395 $103,699
Working capital $192,150 $206,852
New vehicle inventory $515,224 $551,130
Used vehicle inventory $122,215 $127,554
Parts inventory $ 48,048 $ 47,847
Floorplan debt $576,540 $648,783
Long term debt (including current portion) $473,123 $512,411
Other Data:
Net operating cash flow $ 22,976 $ 19,603
Interest (non-floorplan) coverage ratio 4.3x 3.8x
EBITDA $ 44,249 $ 38,289
Average debt to EBITDA ratio 2.2x 2.7x
