Sonic Automotive, Inc. Announces Third Quarter Income From Continuing Operations of $0.53 Per Share
CHARLOTTE, N.C., Oct. 26, 2004 -- Sonic Automotive, Inc. today announced results for the third quarter of 2004. Sonic reported that revenues increased $95.4 million to $1.983 billion in the third quarter of 2004 as compared to the third quarter of 2003. Income from continuing operations for the quarter increased to $22.3 million, or $0.53 per diluted share, compared to $19.3 million, or $0.45 per diluted share, in 2003. Income from continuing operations for the third quarter of 2004 of $0.53 per diluted share was negatively impacted by approximately $0.09 due to hurricanes in the Southeast Division, hail damage in Colorado and other less significant charges. Income from continuing operations for the third quarter of 2003 of $0.45 per diluted share included charges of $0.23 related to the Company's senior subordinated notes refinancing. Revenues increased $285.9 million to $5.553 billion for the first nine months of 2004 compared to the same period in 2003. Income from continuing operations for the first nine months of 2004 was $76.1 million, or $1.79 per diluted share, compared to $66.8 million, or $1.58 per diluted share, for the same period in 2003.
Net income for the quarter ended September 30, 2004 was $19.3 million, or $0.46 per diluted share, compared to $17.5 million, or $0.41 per diluted share, in 2003. Net income for the first nine months of 2004 was $71.5 million, or $1.68 per diluted share, compared to $57.7 million, or $1.37 per diluted share, for the same period in 2003. In addition to the $0.23 of refinancing charges in the third quarter of last year discussed above, net income for the nine months ended September 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.
O. Bruton Smith, the Company's Chairman and Chief Executive Officer stated, "The third quarter was challenging due to the overall retail environment as well as the price competition caused by excess inventory in the industry. In addition, hurricanes in the Southeast created sales shortfalls for our Company. We do not anticipate a significant improvement in the overall environment during the balance of this year. In spite of these conditions, we are confident that our strategy is sound and our Company's cash flow is strong. We anticipate fourth quarter earnings of $0.41 to $0.44 per diluted share from continuing operations."
Same Store Data
On a same store basis, total revenues declined 4.3% for the quarter compared to the same quarter last year. The overall same store gross margin rate was relatively flat with last year at 14.8%. New vehicle same store sales declined 4.0% for the quarter and the new vehicle same store gross margin rate was relatively flat with the same quarter of last year at 6.9%. Combined retail and wholesale used vehicle same store sales were down 6.0% for the quarter while the retail gross margin decreased 20 bps to 10.0%. Same store parts, service and collision repair sales decreased 1.8% for the quarter while gross margin increased to 48.4% from 48.0% in the same quarter last year.
Jeffrey C. Rachor, the Company's President and Chief Operating Officer, stated, "In light of the difficult conditions created by the hurricanes and increasingly competitive industry dynamics, we continue to focus on what we can control. New vehicle inventories were reduced by 11 days during the quarter to a 48 days supply at the end of the quarter. We are committed to balancing sales and gross margin rates while maintaining disciplined control of expenses. The recent management realignment in the Western Division should positively impact execution of our operating initiatives in key under-performing markets. We continue the development of people and processes with a commitment to improved operating performance and consistent results."
Acquisition and Disposition Activity
With the July closing on the BMW dealerships in Houston, the Company has completed all anticipated acquisitions in 2004. Year to date in 2004, the Company has closed on acquisitions representing approximately $600 million in annual revenues.
The Company disposed of two dealerships during the quarter from the previously announced group of dealerships held for sale. Year to date, Sonic has closed on four of these planned dealership dispositions.
Security Repurchase Plans
During the third quarter, the Company repurchased 279,900 shares for $5.5 million and had approximately $32.8 million of the Board's previous authorization remaining. Year to date repurchases of Company shares total 951,500 shares for $20.9 million.
Financial Position
At September 30, 2004, the Company had approximately $175 million available under its revolving credit facility. The Company's debt-to-total- capital ratio was 49.9% at September 30, 2004 primarily as a result of the acquisition of the BMW dealerships completed in July. The Company remains committed to its long-term targeted debt-to-total-capital ratio of 40%. The Company expects the ratio to be between 46% and 48% by year-end.
Brand and Geographic Diversity
The Company's top ten brands for the quarter based on new vehicle revenues were Honda (12.3%), BMW (12.2%), Chevrolet (12.1%), Cadillac (11.1%), Toyota (10.7%), Ford (9.3%), Lexus (5.6%), Volvo (4.3%), Chrysler (3.0%) and Mercedes (2.7 %).
The Company's top markets for the quarter based on total revenues were Houston (15.3%), Los Angeles (9.7%), Dallas (8.7%), San Francisco (7.7%), San Jose (7.5%), Charlotte (4.7%), Oklahoma (4.6%), Tampa (4.5%), Atlanta (4.0%) and Michigan (3.6%).
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 Nine Months Ended
9/30/2003 9/30/2004 9/30/2003 9/30/2004
Revenues
New vehicles $1,157,648 $1,209,668 $3,202,143 $3,359,251
Used vehicles 315,700 311,972 895,571 895,356
Wholesale vehicles 115,780 139,480 314,791 380,735
Total vehicles 1,589,128 1,661,120 4,412,505 4,635,342
Parts, service and
collision repair 245,099 269,549 704,147 773,123
Finance, insurance and
other 53,380 52,303 150,483 144,547
Total revenues 1,887,607 1,982,972 5,267,135 5,553,012
Total gross profit 283,340 296,121 808,452 852,440
SG&A expenses 221,342 240,119 636,729 673,978
Depreciation 2,975 4,209 7,797 12,207
Operating income 59,023 51,793 163,926 166,255
Interest expense, floor
plan 4,626 6,516 15,495 18,972
Interest expense, other 10,273 9,628 29,455 26,713
Other income (expense) (13,937) 66 (13,849) 61
Income from continuing
operations before taxes 30,187 35,715 105,127 120,631
Income taxes 10,932 13,409 38,278 44,513
Income from continuing
operations 19,255 22,306 66,849 76,118
Discontinued operations:
Loss from operations and
the sale of
discontinued
dealerships (2,830) (4,836) (5,682) (7,520)
Income tax benefit
(expense) 1,116 1,811 2,195 2,860
Loss from discontinued
operations (1,714) (3,025) (3,487) (4,660)
Income before cumulative
effect of change in
accounting principle 17,541 19,281 63,362 71,458
Cumulative effect of
change in accounting
principle, net of tax
benefit of $3,325 -- -- (5,619) --
Net income $17,541 $19,281 $57,743 $71,458
Diluted:
Weighted average common
shares outstanding 43,022 42,164 42,288 42,439
Income per share from
continuing operations $0.45 $0.53 $1.58 $1.79
Loss per share from
discontinued operations ($0.04) ($0.07) ($0.08) ($0.11)
Cumulative effect of
change in accounting
principle -- -- ($0.13) --
Net income per share $0.41 $0.46 $1.37 $1.68
Gross Margin Data:
New vehicles retail 7.0% 7.0% 7.1% 7.2%
Used vehicles retail 10.4% 9.8% 10.5% 10.2%
Total vehicles retail 7.7% 7.5% 7.9% 7.9%
Parts, service and
collision repair 48.1% 48.6% 48.1% 48.6%
Finance and insurance 100.0% 100.0% 100.0% 100.0%
Overall gross margin 15.0% 14.9% 15.3% 15.4%
SG&A Expenses:
Personnel 132,707 135,594 385,567 392,062
Advertising 18,760 16,753 50,580 46,708
Facility rent 17,556 21,047 50,687 60,694
Other 52,319 66,725 149,895 174,514
Unit Data:
New units, excluding
fleet 39,625 37,804 106,935 104,702
Fleet units 1,808 3,354 7,814 10,456
Total new units 41,433 41,158 114,749 115,158
Used units 19,140 17,851 54,160 51,983
Total units retailed 60,573 59,009 168,909 167,141
Wholesale units 16,181 16,410 42,974 45,808
Average price per unit:
New vehicles 27,940 29,391 27,906 29,171
Used vehicles 16,494 17,476 16,536 17,224
Wholesale vehicles 7,155 8,500 7,325 8,312
Other Data:
Net cash provided by
operating activities $6,728 $94,509 $86,168 $119,775
Floorplan assistance
(continuing operations) $9,762 $9,801 $26,846 $28,773
Balance Sheets:
12/31/2003 9/30/2004
ASSETS
Current Assets:
Cash and cash
equivalents $82,082 $0
Receivables, net 306,498 330,512
Inventories 1,046,909 1,015,026
Assets held for sale 88,990 83,930
Other current assets 29,718 19,540
Total current assets 1,554,197 1,449,008
Property and Equipment,
Net 125,356 160,781
Goodwill, Net 909,091 1,051,782
Other Intangibles, Net 75,230 90,847
Other Assets 22,355 32,025
TOTAL ASSETS $2,686,229 $2,784,443
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - floor
plan $996,370 $925,356
Trade accounts payable 63,577 64,322
Accrued interest 13,851 10,315
Other accrued
liabilities 121,744 175,325
Current maturities of
long-term debt 1,387 3,984
Total current
liabilities 1,196,929 1,179,302
LONG-TERM DEBT 694,898 747,808
OTHER LONG-TERM
LIABILITIES 19,136 22,859
DEFERRED INCOME TAXES 76,933 78,441
STOCKHOLDERS' EQUITY
Class A common stock 384 394
Class B common stock 121 121
Paid-in capital 416,892 434,927
Retained earnings 402,799 461,013
Accumulated other
comprehensive loss (4,419) (2,061)
Treasury stock, at cost (117,444) (138,361)
Total stockholders'
equity 698,333 756,033
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,686,229 $2,784,443
Balance Sheet Data:
Current Ratio 1.30 1.23
Debt to Total Capital 49.9% 49.9%
LTM Return on
Stockholders' Equity 10.7% 11.9%