Sonic Automotive, Inc. Announces Improved Fourth Quarter and Year End 2004 Results
CHARLOTTE, N.C., Feb. 22, 2005 -- Sonic Automotive, Inc. , a leader in automotive retailing, today reported that its 2004 fourth quarter income from continuing operations was $20.5 million, or $0.48 per diluted share, compared to $19.6 million, or $0.46 per diluted share, in the prior year period. Net income for the quarter was $14.6 million, or $0.35 per diluted share, compared to $13.8 million, or $0.33 per diluted share, in the prior year period.
Revenue of $1.89 billion for the quarter increased 11.2% over the year-ago quarter, with all areas reporting significant growth. Parts and service experienced a 12.1% increase; used vehicles a 12.3% increase; new vehicles a 10.6% increase; and finance and insurance an 8.3% increase.
Commenting on fourth quarter performance, Chairman and Chief Executive Officer O. Bruton Smith said, "Sonic Automotive's earnings reflect a stronger than anticipated fourth quarter retail environment and our continued focus on improving operating efficiencies. We were pleased to be recognized at the Automotive News World Congress last month for achieving the industry's best shareholder returns in 2004."
For the year ended December 31, 2004, income from continuing operations was $95.7 million, or $2.22 per diluted share, compared to $87.3 million, or $2.04 per diluted share, in the prior year. Revenue for the full year of 2004 was $7.39 billion, compared to $6.95 billion for 2003. Net income for the year was $86.1 million, or $2.00 per diluted share, compared to net income of $71.6 million, or $1.69 per diluted share, in 2003.
Based on a change required by the FASB's Emerging Issues Task Force (EITF 04-8), the company has included in diluted earnings per share, the effect of its $130.1 million contingently convertible senior subordinated notes, as if these notes had been converted. For the full year 2004, the dilutive impact was $0.04 per diluted share, compared to a dilutive impact of $0.02 per diluted share in 2003, on a continuing operations basis. There was no impact on earnings from continuing operations in the fourth quarters of 2004 or 2003.
On a same store basis, total revenue in the quarter increased 2.4% from the same quarter last year. Same store new vehicle revenue increased 2.5% for the quarter, while same store retail used vehicle revenue increased 2.8% for the quarter. Finance and insurance revenue increased 1.2% on a same store basis for the quarter. Same store revenue in our service, parts and collision repair business increased 1.8% in the quarter.
"We continue to focus on improving operating execution and performance. Our progress during the fourth quarter confirms that our efforts are gaining traction," said President and Chief Operating Officer Jeffrey C. Rachor. "Consistent inventory management improved our new vehicle days supply to 52 days from 56 days. We saw improvement in our selling, general and administrative expense rate in the fourth quarter and are targeting a 100 basis point reduction to 78% in 2005."
Consistent with the company's previously announced slower acquisition strategy, there have been no acquisitions completed since July 2004. In 2005, targeted acquisitions will include luxury and high volume import brands in the company's existing markets. The company will continue to dispose of non- performing stores and non-core brands.
At December 31, 2004, the company had approximately $253.3 million available under its revolving credit facility. "The slower acquisition pace along with continued strong cash flows from operations allowed us to reach a 46.2% debt to total capital ratio, net of cash, consistent with our target. We are making significant progress toward our 40% long term objective," Mr. Smith said.
Looking ahead to 2005, Mr. Smith said, "We anticipate that the industry will continue to be challenging. We estimate overall same store sales growth in the 2% to 3% range in 2005. It is likely that we will add targeted acquisitions in the $400 million to $700 million range in annualized revenue, which will help offset the effect of rising interest rates on our business. Earnings per share from continuing operations are expected to be between $2.35 and $2.45 for the full year 2005, with most of the improvement realized during the second half."
Sonic Automotive, Inc., a Fortune 300 company based in Charlotte, N.C., is one of the largest automotive retailers in the United States operating 192 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, unit data and percentage amounts)
Three Months Ended Year Ended
12/31/2003 12/31/2004 12/31/2003 12/31/2004
Revenues
New vehicles $1,048,630 $1,160,289 $4,240,427 $4,492,251
Used vehicles 265,465 298,185 1,159,226 1,187,753
Wholesale vehicles 107,216 121,754 421,877 496,645
Total vehicles 1,421,311 1,580,228 5,821,530 6,176,649
Parts, service and
collision repair 237,268 265,911 935,366 1,028,136
Finance, insurance and
other 42,946 46,492 192,757 190,152
Total revenues 1,701,525 1,892,631 6,949,653 7,394,937
Total gross profit 259,174 289,651 1,064,649 1,137,180
SG&A expenses 211,703 232,553 843,564 898,215
Depreciation 3,684 4,997 11,313 16,761
Operating income 43,787 52,101 209,772 222,204
Interest expense, floor plan 5,410 7,987 20,876 26,816
Interest expense, other 9,490 11,251 42,029 42,868
Other income (expense) 10 (13) (13,841) 49
Income from continuing
operations before taxes 28,897 32,850 133,026 152,569
Income taxes 9,303 12,345 45,721 56,858
Income from continuing
operations 19,594 20,505 87,305 95,711
Discontinued operations:
Loss from operations and
the sale of discontinued
dealerships (8,518) (6,148) (13,204) (12,756)
Income tax benefit 2,742 256 3,078 3,116
Loss from discontinued
operations (5,776) (5,892) (10,126) (9,640)
Income before cumulative
effect of change in
accounting principle 13,818 14,613 77,179 86,071
Cumulative effect of change
in accounting principle,
net of tax benefit of $3,325 - - (5,619) -
Net income $13,818 $14,613 $71,560 $86,071
Diluted:
Weighted average common
shares outstanding (1) 45,590 45,224 45,197 45,217
Income per share from
continuing operations $0.46 $0.48 $2.04 $2.22
Loss per share from
discontinued operations ($0.13) ($0.13) ($0.23) ($0.22)
Cumulative effect of change
in accounting principle - - ($0.12) -
Net income per share $0.33 $0.35 $1.69 $2.00
(1) Weighted average common shares include an additional 2,776 shares to
reflect the potential impact of our contingently convertible notes on
an "if-converted" basis.
Gross Margin Data:
New vehicles retail 7.4% 7.4% 7.2% 7.3%
Used vehicles retail 9.9% 9.8% 10.5% 10.4%
Total vehicles retail 7.9% 7.9% 7.9% 7.9%
Parts, service and
collision repair 48.6% 48.3% 48.2% 48.6%
Finance and insurance 100.0% 100.0% 100.0% 100.0%
Overall gross margin 15.2% 15.3% 15.3% 15.4%
SG&A Expenses:
Personnel 122,606 133,629 505,954 521,887
Advertising 18,153 14,900 69,072 61,477
Facility rent 18,415 21,619 68,339 81,440
Other 52,529 62,405 200,199 233,411
Unit Data:
New units 35,263 37,375 149,578 151,479
Used units 15,652 16,492 69,651 68,039
Total units retailed 50,915 53,867 219,229 219,518
Wholesale units 13,695 14,533 56,626 59,755
Average price per unit:
New vehicles 29,737 31,045 28,349 29,656
Used vehicles 16,960 18,081 16,643 17,457
Wholesale vehicles 7,829 8,378 7,450 8,311
Other Data:
Net cash provided by
operating activities $52,400 $89,975 $138,568 $209,750
Floorplan assistance
(continuing operations) $9,112 $9,486 $35,977 $38,066
Same store revenue
percentage changes:
New 2.5% -1.7%
Used 2.8% -5.4%
Parts, service and
collision repair 1.8% 0.4%
Finance, insurance and other 1.2% -8.3%
Total 2.4% -1.7%
Comparable Basis Items:
Three Months Ended
12/31/2003 12/31/2004
Diluted Diluted
Per Share Per Share
Net income as reported $13,818 $0.33 $14,613 $0.35
Cumulative effect of change in
accounting principle - - - -
Loss from discontinued operations 5,776 0.13 5,892 0.13
Income from continuing operations -
as reported 19,594 0.46 20,505 0.48
Other items
Debt repurchase/call premium - - - -
Self-insurance adjustment 1,772 0.04 - -
Hurricane / hail losses - - - -
Legal accruals - - 624 0.01
Wholesale parts impairment - - 787 0.02
Comparable Basis Items:
Year Ended
12/31/2003 12/31/2004
Diluted Diluted
Per Share Per Share
Net income as reported $71,560 $1.69 $86,071 $2.00
Cumulative effect of change in
accounting principle 5,619 0.12 - -
Loss from discontinued operations 10,126 0.23 9,640 0.22
Income from continuing operations -
as reported 87,305 2.04 95,711 2.22
Other items
Debt repurchase/call premium 9,141 0.20 - -
Self-insurance adjustment 1,772 0.04 - -
Hurricane / hail losses - - 2,546 0.06
Legal accruals - - 1,693 0.04
Wholesale parts impairment - - 785 0.02
Balance Sheets:
12/31/2003 12/31/2004
ASSETS
Current Assets:
Cash $82,082 $9,991
Receivables, net 306,498 357,403
Inventories 1,046,909 1,095,057
Assets held for sale 88,990 105,100
Other current assets 29,718 23,992
Total current assets 1,554,197 1,591,543
Property and Equipment, Net 125,356 134,490
Goodwill, Net 909,091 1,056,924
Other Intangibles, Net 75,230 84,777
Other Assets 22,355 33,877
TOTAL ASSETS $2,686,229 $2,901,611
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - floor plan $996,370 $1,050,858
Trade accounts payable 63,577 88,616
Accrued interest 13,851 15,421
Other accrued liabilities 121,744 175,510
Current maturities of long-term debt 1,387 2,970
Total current liabilities 1,196,929 1,333,375
LONG-TERM DEBT 694,898 668,826
OTHER LONG-TERM LIABILITIES 19,136 28,888
DEFERRED INCOME TAXES 76,933 100,835
STOCKHOLDERS' EQUITY
Class A common stock 384 397
Class B common stock 121 121
Paid-in capital 416,892 441,503
Retained earnings 402,799 470,663
Accumulated other comprehensive loss (4,419) (1,228)
Deferred compensation related to
restricted stock - (3,408)
Treasury stock, at cost (117,444) (138,361)
Total stockholders' equity 698,333 769,687
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $2,686,229 $2,901,611
Balance Sheet Data:
Current Ratio 1.30 1.19
Debt to Total Capital, Net of Cash 46.8% 46.2%
LTM Return on Stockholders' Equity 10.7% 11.7%