Sonic Automotive, Inc. Announces Second Quarter Net Income of $0.68 Per Share
CHARLOTTE, N.C., July 29 -- Sonic Automotive, Inc. today announced results for the second quarter of 2003.
Net income for the quarter ended June 30, 2003 was $28.5 million, or $0.68 per diluted share, compared to prior year results of $31.5 million, or $0.71 per diluted share. For the first half of 2003, net income was $40.2 million, or $0.96 per diluted share, compared to net income of $53.6 million, or $1.23 per diluted share, for the same period last year. Net income for the six months ended June 30, 2003 includes a $5.6 million, or $0.14 per diluted share, after tax charge recorded in the first quarter as a cumulative effect of accounting change related to the Emerging Issues Task Force guidance on accounting for incentives and rebates.
In commenting on the quarter, Mr. O. Bruton Smith, the Company's Chairman and Chief Executive Officer, stated, "The second quarter of 2003 reflects significant improvement from the first quarter. We saw positive trends in new and used vehicle sales over the course of the second quarter. Inventory of new and used vehicles was 54 days and 38 days supply, respectively. We also began seeing the impact of expense reduction programs as our selling, general and administrative expenses improved to 78.8% of gross profit from the first quarter rate of 82.7%. We are targeting earnings per diluted share of $2.45 to $2.60 (excluding the cumulative effect of change in accounting principle) for calendar year 2003. This estimate is based on an expected level of new vehicle industry sales of 16.0 million units and does not include the effect of any unannounced acquisitions or additional share repurchases."
Same Store Sales
On a same store basis, total revenues declined 1.0% for the quarter. New vehicle same store sales increased 2.1% for the quarter and used vehicle same store sales were down 4.9%. Same store parts, service and collision repair sales increased 1.6% for the quarter while gross profit increased 2.7%. Finance and insurance same store sales were up 1.0%. The same store parts, service and collision repair gross margin rate increased to 48.3% from 47.8% last year. The overall same store gross margin rate declined to 15.1% from 15.4% last year due primarily to lower gross margin rates on vehicles and a higher mix of new vehicle sales.
Jeffrey C. Rachor, the Company's Chief Operating Officer, stated, "We experienced two distinct trends during the second quarter. First, import brands significantly out performed the domestic brands and generated positive same store results. Second, operating results improved throughout the quarter. This trend was reflected in same store unit sales gains in both new and used vehicles in June. Additionally, total selling, general and administrative expenses declined to 77.8% of gross profit for the month. Used vehicle same store sales improved from a 13.9% decline in April to a 0.7% increase in June. Our emphasis on certified pre-owned programs resulted in a 62.5% increase in unit sales for the quarter versus last year. Our selling, general and administrative expenses for the quarter reflect a one time casualty loss for hail damage in several Texas stores which reduced EPS per diluted share for the quarter by approximately $0.02."
Acquisition and Disposition Activity
During the second quarter, Sonic closed on two previously announced dealership acquisitions representing over $60 million in annual revenues. The Company continues to pursue acquisition opportunities and expects to announce agreements to acquire dealerships representing more than $500 million in annual revenues during 2003. At June 30, 2003 the Company had approximately $164 million available under the Company's revolving credit facility. Through June 30, 2003, the Company had disposed of seven dealerships representing $290 million in annual revenues. These disposals generated $24 million in cash flow.
Security Repurchase Plans
Sonic's Board of Directors has authorized the expenditure of up to $145 million to repurchase outstanding shares of its Class A common stock or redeem securities convertible into its Class A common stock. The Company has year to date repurchases of 755,100 shares for $12 million and at June 30, 2003 had approximately $25 million of the authorization remaining.
Brand and Geographic Diversity
The Company's top ten brands for the quarter based on new vehicle revenues were Honda (14.5%), Ford (14.3%), Toyota (12.4%), Chevrolet (10.9%), Cadillac (10.2%), BMW (9.5%), Lexus (4.7%), Volvo (3.8%), Chrysler (3.7%) and Nissan (3.0%).
The Company's top markets for the quarter based on total revenues were San Francisco (10.0%), Los Angeles (9.9%), Houston (9.8%), Dallas (9.6%), Charlotte (6.4%), San Jose (6.1%), Tampa (5.8%), Oklahoma (4.8%), Atlanta (3.4%) and Mid-Atlantic (3.4%).
MANAGEMENT WILL BE HOLDING A CONFERENCE CALL ON TUESDAY, JULY 29 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.SONICAUTOMOTIVE.COM
About Sonic Automotive, Inc.
Sonic Automotive, Inc., a Fortune 300 Company, is one of the largest automotive retailers in the United States operating 188 franchises and 42 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 and growth in profit, profit margins and earnings per share, 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 March 31, 2003. The Company does not undertake any obligation to update forward-looking information.
Sonic Automotive, Inc.
Results of Operations (unaudited)
(in thousands, except per share and unit data amounts)
Three Months Ended Six Months Ended
06/30/2002 06/30/2003 06/30/2002 06/30/2003
Revenues
New vehicles $1,104,943 $1,208,471 $2,000,548 $2,220,304
Used vehicles 314,994 316,902 568,183 599,741
Wholesale vehicles 134,129 109,697 232,902 213,679
Total vehicles 1,554,066 1,635,070 2,801,633 3,033,724
Parts, service,
and collision repair 232,373 251,601 428,935 489,918
Finance & insurance
and other 50,596 54,920 94,938 104,153
Total revenues 1,837,035 1,941,591 3,325,506 3,627,795
Total gross profit 283,238 292,702 519,037 560,291
SG&A expenses 215,263 230,584 398,486 451,771
Depreciation 2,132 2,753 4,024 5,215
Operating income 65,843 59,365 116,527 103,305
Interest expense,
floor plan 6,195 5,925 11,252 11,985
Interest expense, other 9,496 9,896 17,621 19,649
Other income 151 10 236 80
Income from continuing
operations before
taxes 50,303 43,554 87,890 71,751
Income taxes 19,141 15,740 33,484 26,139
Net income from
continuing operations 31,162 27,814 54,406 45,612
Discontinued operations:
Income (loss) on
operations from
discontinued dealerships 495 1,239 (1,482) 336
Income tax benefit (169) (537) 644 (127)
Net Income (loss) from
discontinued operations 326 702 (838) 209
Income before cumulative
effect of change in
accounting principle 31,488 28,516 53,568 45,821
Cumulative effect of
change in accounting
principle, net of tax
benefit of $3,325 -- -- -- (5,619)
Net income $31,488 $28,516 $53,568 $40,202
Diluted:
Weighted average
common shares
outstanding 44,537 42,071 43,555 41,915
Net Income per share
from continuing
operations $0.70 $0.66 $1.25 $1.09
Loss per share from
discontinued
operations $0.01 $0.02 ($0.02) $0.01
Cumulative effect of
change in accounting
principle $0.00 $0.00 $0.00 ($0.14)
Net Income per share $0.71 $0.68 $1.23 $0.96
Gross Margin Data:
New vehicles retail 7.8% 6.9% 7.8% 7.0%
Used vehicles retail 11.6% 10.9% 11.7% 11.2%
Total vehicles retail 8.7% 7.7% 8.7% 7.9%
Parts, service and
collision repair 47.9% 48.4% 47.4% 48.2%
Finance and insurance 100.0% 100.0% 100.0% 100.0%
Overall gross margin 15.4% 15.1% 15.6% 15.4%
SG&A Expenses:
Personnel 133,661 140,427 249,109 273,705
Advertising 17,721 17,466 31,243 33,329
Facility rent 17,208 18,834 31,815 37,555
Other 46,673 53,857 86,319 107,182
Unit Data:
New units 39,916 42,429 72,787 78,411
Used units 19,930 20,194 36,943 38,678
Total units retailed 59,846 62,623 109,730 117,089
Wholesale units 16,959 15,597 31,606 29,452
Average price per unit:
New vehicles 27,682 28,482 27,485 28,316
Used vehicles 15,805 15,693 15,380 15,506
Wholesale vehicles 7,909 7,033 7,369 7,255
Other Data:
Net cash provided by
operating activities $16,083 $52,937 $56,081 $79,440
Floorplan assistance
(continuing
operations) $9,762 $10,186 $16,942 $18,369
Balance Sheets:
As Of
12/31/2002 06/30/2003
ASSETS
Current Assets:
Cash and cash equivalents $10,576 $32,071
Receivables, net 297,859 295,890
Inventories 929,450 939,826
Other current assets 63,742 87,175
Total current assets 1,301,627 1,354,962
Property and Equipment, Net 121,936 119,150
Goodwill, Net 875,894 892,055
Other Intangibles, Net 61,800 69,100
Other Assets 14,051 18,156
TOTAL ASSETS $2,375,308 $2,453,423
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable -- floor plan $850,162 $873,226
Trade accounts payable 58,560 64,193
Accrued interest 13,306 13,205
Other accrued liabilities 113,592 144,972
Current maturities of long-term debt 2,764 2,764
Total current liabilities 1,038,384 1,098,360
LONG-TERM DEBT 637,545 621,929
OTHER LONG-TERM LIABILITIES 16,085 18,233
PAYABLE TO COMPANY'S CHAIRMAN 5,500 5,500
DEFERRED INCOME TAXES 40,616 40,329
STOCKHOLDERS' EQUITY
Class A convertible preferred stock -- --
Class A common stock 371 375
Class B common stock 121 121
Paid-in capital 396,813 400,994
Accumulated other comprehensive loss (6,447) (6,896)
Retained earnings 339,457 379,659
Treasury stock, at cost (93,137) (105,181)
Total stockholders' equity 637,178 669,072
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,375,308 $2,453,423
Balance Sheet Data:
Current Ratio 1.25 1.23
Debt to Total Capital 50.3% 48.5%
LTM Return on Stockholders' Equity 17.9% 14.6%
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