Sonic Automotive, Inc. Announces Second Quarter Income From Continuing Operations of $0.73 Per Share
Continues Earnings Growth and Achieves Expense Targets
CHARLOTTE, N.C., July 27 -- Sonic Automotive, Inc. today announced results for the second quarter of 2004. Sonic reported that revenues increased $53.9 million to $1.877 billion in the second quarter of 2004 as compared to the second quarter of 2003. Income from continuing operations for the quarter increased to $30.9 million, or $0.73 per diluted share, compared to $28.6 million, or $0.68 per diluted share, in 2003. Revenues increased $181.8 million to $3.581 billion for the first half of 2004 compared to the first half of 2003. Income from continuing operations for the first half of 2004 was $53.3 million, or $1.25 per diluted share, compared to $47.7 million, or $1.14 per diluted share, for the same period last year.
Net income for the quarter ended June 30, 2004 was $30.0 million, or $0.70 per diluted share, compared to the prior year of $28.5 million, or $0.68 per diluted share. For the first half of 2004, net income was $52.2 million, or $1.23 per diluted share, compared to net income of $40.2 million, or $0.96 per diluted share, for the same period last year. Net income for the six months ended June 30, 2003 included 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 results reinforce the appropriateness of our current strategy to reduce the acquisition pace and focus on expense control. The results reflect the benefits of continued execution of this strategy and dampened the impact of the challenging sales environment for both new and used vehicles. We remain comfortable with our previously announced target of $2.65 to $2.80 per diluted share of income from continuing operations for calendar year 2004."
Same Store Data
On a same store basis, total revenues declined 5.1% for the quarter but the overall same store gross margin rate increased to 15.4% from 15.1% for the same quarter last year. New vehicle same store sales declined 5.4% for the quarter but the new vehicle same store gross margin rate increased to 7.4% in the quarter compared to 7.1% last year. Combined retail and wholesale used vehicle same store sales were down 6.1% for the quarter while the retail gross margin increased 10 bps. Same store parts, service and collision repair sales were relatively flat for the quarter while the gross margin rate increased to 48.8% from 48.3% last year.
Jeffrey C. Rachor, the Company's President and Chief Operating Officer, stated, "We continued to execute on our previously announced expense reduction efforts. Our overall SG&A expense was 76.5% of gross profit compared to our previously announced target of 77.0% for the second quarter. We remain focused on meeting the previously announced SG&A expense targets of 77.0% in the third quarter and 78.0% in the fourth quarter of 2004. Although these are aggressive targets compared to the prior year results, we expect that the progress achieved to date will continue to benefit us throughout the second half of the year. We are also pleased with the improvement in new vehicle and overall gross margin rates during the recently completed quarter."
Acquisition and Disposition Activity
On July 1, Sonic closed on two previously announced BMW dealerships in the Houston area. Year to date in 2004, the Company has closed on acquisitions representing approximately $700 million in annual revenues and does not expect to complete any additional acquisitions for the remainder of 2004.
The Company disposed of one dealership during the quarter and one dealership in July from our previously announced group of dealerships held for sale. Year to date, Sonic has closed on three of its planned dealership dispositions.
Security Repurchase Plans
The Company's Board of Directors has increased the authorization to repurchase outstanding shares of the Company's Class A common stock or redeem securities convertible into the Company's Class A common stock by $20.0 million. During the second quarter, the Company repurchased 474,800 shares for $10.9 million and, including the additional authorization, had approximately $33.0 million of the authorization remaining at July 27, 2004.
Financial Position
At June 30, 2004, the Company had approximately $196 million available under its revolving credit facility. The Company's debt-to-total-capital ratio was 49.3% at June 30, 2004 primarily as a result of the recently completed acquisitions. The Company remains committed to its long-term debt- to-total capital target of 40%. The Company expects the ratio to be between 45% and 49% by year end.
Brand and Geographic Diversity
The Company's top ten brands for the quarter based on new vehicle revenues were Honda (12.7%), BMW (11.3%), Toyota (11.3%), Cadillac (11.1%), Chevrolet (10.8%), Ford (9.9%), Lexus (5.9%), Volvo (4.0%), Chrysler (3.3%), and Mercedes (3.0%).
The Company's top markets for the quarter based on total revenues were Houston (13.3%), Los Angeles (9.3%), Dallas (8.9%), San Francisco (7.9%), San Jose (7.4%), Tampa (5.5%), Charlotte (4.8%), Atlanta (4.2%), Oklahoma (4.1%), and Michigan (3.8%).
MANAGEMENT WILL BE HOLDING A CONFERENCE CALL ON TUESDAY, JULY 27 AT 11:00 A.M. EASTERN TIME. TO PARTICIPATE, PLEASE DIAL 877-791-3416. INTERNATIONAL CALLERS DIAL 706-643-0958 - OR YOU CAN ACCESS THE CALL AT http://www.ccbn.com/ OR http://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 195 franchises and 40 collision repair centers. Sonic can be reached on the Web at http://www.sonicautomotive.com/ .
Sonic Automotive, Inc.
Results of Operations (unaudited)
(in thousands, except per share and unit data amounts)
Three Months Ended Six Months Ended
06/30/2003 06/30/2004 06/30/2003 06/30/2004
Revenues
New vehicles $1,118,757 $1,144,243 $2,049,932 $2,152,506
Used vehicles 313,454 297,970 589,981 588,161
Wholesale vehicles 102,707 128,527 201,338 242,986
Total vehicles 1,534,918 1,570,740 2,841,251 2,983,653
Parts, service and
collision repair 236,671 257,653 459,933 504,518
Finance, insurance and
other 51,705 48,822 97,883 92,714
Total revenues 1,823,294 1,877,215 3,399,067 3,580,885
Total gross profit 276,272 290,267 527,645 557,863
SG&A expenses 213,783 222,014 417,721 436,092
Depreciation 2,555 4,300 4,829 8,020
Operating income 59,934 63,953 105,095 113,751
Interest expense, floor plan 5,384 6,561 10,906 12,516
Interest expense, other 9,696 8,802 19,221 17,137
Other income (expense) 16 (33) 88 (6)
Income from continuing
operations before taxes 44,870 48,557 75,056 84,092
Income taxes 16,239 17,624 27,387 30,795
Income from continuing
operations 28,631 30,933 47,669 53,297
Discontinued operations:
Loss from operations and
the sale of discontinued
dealerships (78) (1,501) (2,969) (1,859)
Income tax benefit
(expense) (37) 560 1,121 740
Loss from discontinued
operations (115) (941) (1,848) (1,119)
Income before cumulative
effect of change in
accounting principle 28,516 29,992 45,821 52,178
Cumulative effect of
change in accounting
principle, net of tax
benefit of $3,325 - - (5,619) -
Net income $28,516 $29,992 $40,202 $52,178
Diluted:
Weighted average common
shares outstanding 42,071 42,557 41,915 42,578
Income per share from
continuing operations $0.68 $0.73 $1.14 $1.25
Loss per share from
discontinued operations $0.00 ($0.03) ($0.04) ($0.02)
Cumulative effect of
change in accounting
principle $0.00 $0.00 ($0.14) $0.00
Net income per share $0.68 $0.70 $0.96 $1.23
Gross Margin Data:
New vehicles retail 7.1% 7.5% 7.2% 7.4%
Used vehicles retail 10.3% 10.3% 10.5% 10.5%
Total vehicles retail 7.8% 8.1% 8.0% 8.1%
Parts, service and
collision repair 48.3% 48.8% 48.2% 48.7%
Finance and insurance 100.0% 100.0% 100.0% 100.0%
Overall gross margin 15.2% 15.5% 15.5% 15.6%
SG&A Expenses:
Personnel 130,706 129,335 254,043 257,542
Advertising 16,852 16,583 32,183 30,162
Facility rent 16,750 20,115 33,372 39,896
Other 49,475 55,981 98,123 108,492
Unit Data:
New units, excluding fleet 37,016 35,655 67,637 67,114
Fleet units 2,989 3,783 6,006 7,102
Total new units 40,005 39,438 73,643 74,216
Used units 18,768 17,125 35,706 34,503
Total units retailed 58,773 56,563 109,349 108,719
Wholesale units 14,462 16,226 27,300 29,659
Average price per unit:
New vehicles 27,965 29,014 27,836 29,003
Used vehicles 16,702 17,400 16,523 17,047
Wholesale vehicles 7,102 7,921 7,375 8,193
Other Data:
Net cash provided by
operating activities $52,937 $27,500 $79,440 $25,266
Floorplan assistance
(continuing operations) $9,628 $10,091 $17,205 $19,075
Balance Sheets:
12/31/2003 06/30/2004
ASSETS
Current Assets:
Cash and cash equivalents $82,082 $0
Receivables, net 306,498 350,922
Inventories 1,046,909 1,160,487
Assets held for sale 88,990 84,784
Other current assets 29,718 50,034
Total current assets 1,554,197 1,646,227
Property and Equipment,
Net 125,356 147,770
Goodwill, Net 909,091 970,394
Other Intangibles, Net 75,230 87,817
Other Assets 22,355 29,567
TOTAL ASSETS $2,686,229 $2,881,775
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - floor
plan $996,370 $1,077,296
Trade accounts payable 63,577 65,851
Accrued interest 13,851 14,322
Other accrued liabilities 121,744 151,524
Current maturities of
long-term debt 1,387 3,547
Total current
liabilities 1,196,929 1,312,540
LONG-TERM DEBT 694,898 721,737
OTHER LONG-TERM LIABILITIES 19,136 24,502
DEFERRED INCOME TAXES 76,933 78,229
STOCKHOLDERS' EQUITY
Class A common stock 384 393
Class B common stock 121 121
Paid-in capital 416,892 432,736
Retained earnings 402,799 446,709
Accumulated other
comprehensive loss (4,419) (2,392)
Treasury stock, at cost (117,444) (132,800)
Total stockholders'
equity 698,333 744,767
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,686,229 $2,881,775
Balance Sheet Data:
Current Ratio 1.30 1.25
Debt to Total Capital 49.9% 49.3%
LTM Return on
Stockholders' Equity 10.7% 11.9%