Sonic Automotive Announces Record Earnings
CHARLOTTE, N.C., March 4 -- Sonic Automotive, Inc. announced results today for the fourth quarter and full year ended December 31, 2002.
Operating Results Highlights for the year 2002 compared to the year 2001: * Total revenue increased 20.3% * Record net income of $106.6 million, up 34.3% * Earnings per share up 29.3%
Net income for the quarter ended December 31, 2002 was $21.4 million, or $0.51 per diluted share, compared to prior year results of $21.2 million, or $0.51 per diluted share. The results for 2002 reflect the new accounting standard regarding goodwill, which became effective for Sonic on January 1, 2002. On a comparable accounting basis, net income for the quarter ended December 31, 2001 was $25.3 million, or $0.60 per diluted share. Earnings per share from continuing operations were $0.53 per diluted share for the quarter ended December 31, 2002. The results for the quarter ended December 31, 2002 include an after-tax gain of $1.0 million, or $0.02 per diluted share related to the repurchase of debt securities.
For the year ended December 31, 2002, net income increased 34.3% to $106.6 million, or $2.47 per diluted share, from $79.3 million, or $1.91 per diluted share, for the same period in 2001. On a comparable accounting basis, net income for the year ended December 31, 2001 was $93.3 million, or $2.24 per diluted share. Earnings per share from continuing operations were $2.51 for the year ended December 31, 2002. The results for the year ended December 31, 2002 include an after-tax gain of $1.9 million, or $0.04 per diluted share related to the repurchase of debt securities.
O. Bruton Smith, the Company's Chairman and Chief Executive Officer stated, "Our Company has completed yet another year of record earnings, despite a challenging economy and vehicle sales environment. We continue to prove the resiliency of our business model and the ability to generate cash flow and grow earnings in all types of market conditions. On a comparable accounting basis, we have delivered a double digit increase in earnings per share for the fifth consecutive year."
"We remain comfortable with previously announced earnings targets at $2.70 to $2.80 for calendar year 2003. This estimate is based on an expected level of new vehicle industry sales of 16 million units and a 7% decline in retail used unit volumes. We believe we can continue our track record of consistent earnings growth even in a declining vehicle sales market."
Same Store Sales
On a same store basis, total revenues in the three months ended December 31, 2002 decreased 10.8% from the same period last year. Same store new vehicle sales declined 10.9% for the quarter. Same store used retail vehicle sales declined 17.1% for the quarter. Finance and insurance revenues decreased 10.4% on a same store basis for the quarter, however, same store finance and insurance revenue per unit increased 6.7%. Same store revenues in our higher margin service, parts and collision repair business remained constant quarter over quarter, despite declines of 4.8% in low margin wholesale parts sales. Same store gross profit dollars provided by service and parts increased 3.7% for the quarter.
Because of favorable mix changes, same store gross margin percentages for the quarter increased to 15.7% from 15.3% in the same quarter last year. Same store customer paid (non-warranty) service and parts revenue increased 8.0% for the quarter. The Company has continued to grow its core service and parts operations, despite new vehicle industry sales declines.
B. Scott Smith, the Company's Vice Chairman and Chief Strategic Officer stated, "A certain level of same store revenue decline was expected in the fourth quarter due to the unusually strong results from the comparable period last year which was driven by the initial roll out of the zero percent manufacturer incentive programs. Used vehicle sales continue to be the most challenging area due to declines in affordable consumer credit available to used car customers and the strong financing and incentive options available on new vehicles. Despite commonly available zero percent financing on new vehicles, our finance and insurance revenue per unit actually increased. We expect this trend to continue as we implement strategies to further improve our penetration rates on extended service contracts and other value added products for consumers."
Acquisitions and Dispositions
During the fourth quarter of 2002 and the first quarter of 2003 to date, Sonic closed on three acquisitions with annual revenues of approximately $134 million (all of which had been previously announced). All previously announced acquisitions have been completed. Sonic has completed dispositions of two dealerships in the fourth quarter of 2002 and the first quarter of 2003 with annual revenues of approximately $59.3 million. The Company has entered into definitive agreements to dispose of an additional four dealerships.
The Company has entered into a definitive agreement to acquire Larry Miller Toyota in Denver, Colorado. The Company was also awarded a Mitsubishi franchise for an existing facility in the Denver, Colorado market area. Larry Miller Toyota and the newly awarded Massey Mitsubishi dealership are expected to add approximately $100 million in annual revenues and complement existing operations. The acquisition of Larry Miller Toyota is expected to close by early in the second quarter of 2003, pending the completion of normal closing procedures, including manufacturers' approval. The Company continues to pursue acquisition opportunities and expects to announce agreements to acquire dealerships representing at least $500 million in annual revenues during 2003.
Brand and Geographic Diversity
The Company's top ten brands for the fourth quarter of 2002, based on new vehicle revenues, were Ford (15.8%), Honda (13.8%), Cadillac (11.8%), Chevrolet (10.9%), BMW (10.5%), Toyota (9.8%), Chrysler (5.2%), Lexus (4.1%), Mercedes (3.4%), Nissan (2.8%) and Volvo (2.5%).
The Company's top markets for the quarter, based on total revenues, were San Francisco (10.9%), Los Angeles (10.2%), Houston (9.8%), Dallas (9.7%), Charlotte (7.5%), Tampa (6.1%), San Jose (4.9%), Oklahoma (4.7%), Atlanta (3.6%), Michigan (3.2%), Washington, DC (2.8%), and Columbus (2.3%).
Security Repurchase Plans
In February 2003 Sonic's Board of Directors increased our share repurchase authorization from $125 million to $145 million. The Company repurchased 1,803,900 shares of Class A common stock in 2002. As of February 28, 2003 the Company had approximately $31 million of this increased authorization remaining.
The Company has also repurchased a portion of its 11% Senior Subordinated Notes and 5.25% Convertible Senior Subordinated Notes. During the fourth quarter, Sonic repurchased $16.6 million in aggregate principal amount of the senior subordinated notes and $12.9 million in aggregate principal amount of the convertible notes. These repurchases resulted in a pre-tax gain of $1.7 million.
About Sonic Automotive, Inc.
Sonic Automotive, Inc. is one of the largest automotive retailers in the United States operating 187 franchises and 45 collision repair centers. Sonic can be reached on the Web at www.sonicautomotive.com.
Included herein are forward-looking statements, including statements with respect to anticipated acquisition activity, revenue, profit, earnings per share and growth in revenue, earnings per share and finance and insurance revenue per unit, as well as industry vehicle sales levels. 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 the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002. The Company does not undertake any obligation to update forward-looking information.
Management will be holding a conference call on Tuesday, March 4, 2003 at 11:00 a.m. Eastern Time. To participate, please dial 877-791-3416 -- or you can access the call at www.companyboardroom.com or www.vcall.com.
Sonic Automotive, Inc.
Results of Operations (unaudited)
(in thousands, except per share and unit data amounts)
Three Months Ended Twelve Months Ended
12/31/2001 12/31/2002 12/31/2001 12/31/2002
New units 35,362 36,635 132,737 152,994
Used units 18,781 18,459 73,466 77,903
Total units retailed 54,143 55,094 206,203 230,897
Wholesale units 15,530 14,820 59,900 66,005
Average price per unit:
New vehicles 27,259 28,867 26,570 27,935
Used vehicles 14,685 15,984 14,603 15,588
Wholesale vehicles 5,877 6,925 6,395 7,154
Revenues
New vehicles $963,934 $1,057,530 $3,526,840 $4,273,896
Used vehicles 275,793 295,054 1,072,857 1,214,334
Wholesale vehicles 91,269 102,626 383,054 472,171
Total vehicles 1,330,996 1,455,210 4,982,751 5,960,401
Parts, service, and
collision repair 187,909 234,781 721,235 908,762
Finance & insurance and
other 46,356 47,699 175,923 201,852
Total Revenues 1,565,261 1,737,690 5,879,909 7,071,015
Total Gross Profit 239,445 270,320 904,660 1,090,930
SG&A expenses 182,416 217,079 680,076 847,195
Depreciation 1,592 2,019 6,779 8,528
Goodwill amortization 4,358 -- 17,567 --
Operating Income 51,079 51,222 200,238 235,207
Interest expense, floor
plan 4,925 7,011 32,500 24,524
Interest expense, other 8,694 10,443 34,712 38,734
Other income 22 1,849 137 3,381
Income from Continuing
Operations Before Taxes 37,482 35,617 133,163 175,330
Income taxes 13,828 13,267 50,961 66,821
Net Income from Continuing
Operations 23,654 22,350 82,202 108,509
Discontinued Operations:
Loss on Operations from
Discontinued
Dealerships (2,661) (1,791) (3,119) (3,411)
Income Tax Benefit 248 847 246 1,466
Loss from Discontinued
Operations (2,413) (944) (2,873) (1,945)
Net Income $21,241 $21,406 $79,329 $106,564
Diluted:
Weighted average common
shares outstanding 41,898 42,199 41,609 43,158
Net Income per share
from continuing
operations $0.56 $0.53 $1.98 $2.51
Loss per share from
discontinued operations ($0.05) ($0.02) ($0.07) ($0.04)
Net Income per share $0.51 $0.51 $1.91 $2.47
Gross Margin Data:
New vehicles retail 8.0% 7.6% 7.9% 7.7%
Used vehicles retail 11.4% 11.0% 11.6% 11.5%
Total vehicles retail 8.8% 8.4% 8.8% 8.5%
Parts, service and
collision repair 46.5% 48.0% 46.0% 47.5%
Finance and insurance 100.0% 100.0% 100.0% 100.0%
Overall gross margin 15.3% 15.6% 15.4% 15.4%
SG&A Expenses:
Personnel $110,900 $129,877 $417,621 $517,561
Advertising 12,431 14,176 47,136 61,949
Facility rent 14,767 18,486 56,974 68,668
Other 44,318 54,540 158,345 199,017
Other Data:
Net operating cash flow $28,427 $26,764 $105,144 $126,975
Interest (non-floorplan)
coverage ratio 6.0x 4.6x 5.5x 5.7x
EBITDA (continuing
operations) 52,126 48,079 192,221 222,592
LTM Average debt to
EBITDA ratio N/A N/A 2.6x 2.8x
Floorplan Assistance $8,082 $10,751 $30,755 $38,726
Balance Sheets:
As Of
12/31/2001 12/31/2002
ASSETS
Current Assets:
Cash and cash equivalents $ -- $10,576
Receivables, net 270,306 297,859
Inventories 661,305 888,970
Other current assets 29,127 104,222
Total current assets 960,738 1,301,627
Property and Equipment, Net 98,972 121,936
Goodwill and Other Intangible
Assets, Net 738,103 937,694
Other Assets 12,555 14,051
TOTAL ASSETS $1,810,368 $2,375,308
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - floor plan $587,914 $812,366
Trade accounts payable 52,197 58,560
Accrued interest 9,676 13,306
Other accrued liabilities 89,322 151,388
Current maturities of long-term
debt 2,586 2,764
Total current liabilities 741,695 1,038,384
LONG-TERM DEBT 511,877 637,545
OTHER LONG-TERM LIABILITIES 5,836 16,085
PAYABLE TO COMPANY'S CHAIRMAN 5,500 5,500
DEFERRED INCOME TAXES 28,199 40,616
STOCKHOLDERS' EQUITY
Class A convertible preferred
stock -- --
Class A common stock 348 371
Class B common stock 121 121
Paid-in capital 343,256 396,813
Accumulated Other Comprehensive
Income -- (6,447)
Retained Earnings 232,893 339,457
Treasury stock, at cost (59,357) (93,137)
Total stockholders' equity 517,261 637,178
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,810,368 $2,375,308
Balance Sheet Data:
Current Ratio 1.30 1.25
Debt to total capital 50.1% 50.3%
LTM Return on Equity 16.6% 17.9%
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