Sonic Automotive, Inc. Reports Q2 Earnings
6 August 1998
Sonic Automotive, Inc. Reports 2nd Quarter Earnings of $0.39 Per Share, Net Income Increases 367%
CHARLOTTE, N.C., Aug. 5 -- Sonic Automotive, Inc.
reported an increase in net income for the quarter ended June 30, 1998 of
367.1% to $4.7 million, or $0.39 per diluted share, from $1.0 million, or
$0.16 per diluted share for the second quarter of 1997. Cash income per
diluted share (net income plus goodwill amortization) was $0.45 in the second
quarter versus $0.16 in the second quarter of the prior year, an increase of
181.3%. For the first half of 1998, net income increased 341.8% to $6.8
million, or $0.58 per diluted share, from $1.5 million, or $0.25 per diluted
share for the first half of 1997.
Total revenues for the second quarter of 1998 rose 237.8% to $385.5
million from $114.1 million in the second quarter of 1997. Total revenues
for the first half of 1998 rose 204.8% to $648.8 million versus $212.9 million
in the first half of 1997. During the first half of 1998, Sonic sold 16,601
new vehicles and 9,719 retail used vehicles, representing a 153.3% increase in
new vehicles sold from 6,553 and a 268.4% increase in retail used vehicles
sold from 2,638.
Operating income during the quarter rose to $13.2 million from $3.4
million in the same quarter of the prior year, representing an increase of
286.0%. As a percentage of total revenues, operating income increased for the
second quarter of 1998 to 3.4% from 3.0% for the second quarter of 1997,
despite an increase of $0.6 million in goodwill amortization. As a percentage
of total revenue for the first half of 1998, operating income increased to
3.2% from 2.7%.
B. Scott Smith, the Company's President and Chief Operating Officer, said
"Sonic had another outstanding quarter, exceeding earnings expectations. We
are particularly pleased with the continued revenue and profitability
improvement at recently acquired dealerships. Our model for acquiring and
integrating dealerships is operating effectively.
We continued to improve margins in all segments of our business over the
prior year. Our disciplined approach to inventory management resulted in
reduction of floorplan interest expense to 1.1% of sales, down from 1.5% in
the second quarter of 1997."
On a same store basis, revenues in the second quarter of 1998 rose 2.8% to
$115.5 million from $112.3 million in the second quarter of 1997. Revenues
from all dealerships owned by Sonic prior to January 1998 for the quarter
increased 139.9% compared to the prior year. On a same store basis, revenues
in the first half of 1998 rose 3.0% to $217.4 million from $211.2 million in
the first half of 1997.
Gross profits increased 273.5% to $49.4 million in the second quarter of
1998, compared to $13.2 million in the second quarter of 1997, resulting
primarily from additional acquisitions and improvements in gross margins to
12.8% from 11.6%. Gross profits for the first half of 1998 increased 246.0%
to $84.6 million, compared to $24.5 million for the same period in the prior
year. Gross margins improved to 13.0% in the first half of 1998 compared to
11.5% in the first half of the prior year.
Completion of Debt Offering and Acquisitions
The Company completed its private placement of $125 million Senior
Subordinated Notes due 2008 on July 24, 1998. The proceeds of the offering
will be used to repay Sonic's existing line of credit and to fund previously
announced acquisitions. The company has closed its previously announced
acquisitions of Capitol Chevrolet and Imports, Casa Ford, Century BMW and
Heritage Lincoln-Mercury.
Sonic Automotive, Inc. is one of the leading automotive retailers in the
United States, with operations in Alabama, Florida, Georgia, North Carolina,
Ohio, South Carolina, Tennessee and Texas.
Included herein are forward-looking statements, including statements with
respect to anticipated revenue growth. There are many factors which 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 set forth from time to time in the Company's filings with the
Securities and Exchange Commission.
Results of Operations (Unaudited)
(in thousands, except per share and unit data amounts)
Three Months Ended June 30, Six Months Ended June 30,
1997 1998 1997 1998
New Units 3,533 9,984 6,553 16,601
Used Units 1,369 5,386 2,638 9,719
Total Units
Retailed 4,902 15,370 9,191 26,320
Wholesale Units 1,227 5,267 2,750 9,011
Revenues:
New Vehicles $ 74,323 $ 233,732 $ 137,208 $ 387,466
Used Vehicles 17,101 76,008 32,666 132,508
Wholesale Vehicles 8,187 28,966 15,342 47,305
Total Vehicles 99,611 338,706 185,216 567,279
Parts, Service, and
Collision Repair 11,928 39,028 22,907 68,020
Finance & Insurance 2,562 7,718 4,763 13,541
Total Revenues 114,101 385,452 212,886 648,840
Total Gross Profit 13,236 49,433 24,464 84,645
SG&A Expenses 9,641 35,206 18,364 61,819
Depreciation &
Amortization 178 1,036 396 1,851
Operating Income 3,417 13,191 5,704 20,975
Interest Expense 1,841 5,768 3,336 10,086
Other Income 1 7 135 15
Income Before Taxes 1,577 7,430 2,503 10,904
Income Taxes 577 2,762 916 4,100
Income Before
Minority Interest 1,000 4,668 1,587 6,804
Minority Interest 1 - 47 -
Net Income $ 999 $ 4,668 $ 1,540 $ 6,804
Diluted income per
share $ 0.16 $ 0.39 $ 0.25 $ 0.58
Weighted average
shares outstanding 6,250 11,859 6,250 11,637