Sonic Automotive Reports EPS Increases 50% on Record Q2 Earnings
26 July 1999
Sonic Automotive, Inc. Reports EPS Increases 50% on Record 2nd Quarter Earnings of $0.30 Per Share
CHARLOTTE, N.C., July 26 -- Sonic Automotive, Inc.
announced today that net income for the second quarter ended
June 30, 1999 increased 116% to $10.1 million, or $.30 per diluted share, from
$4.7 million, or $.20 per diluted share, for the second quarter ended June 30,
1998. Sonic achieved a 50% increase in earnings per share after reflecting a
44% increase in diluted average shares outstanding. Cash income per diluted
share (net income plus goodwill amortization) was $.34 in the second quarter
of 1999 versus $.22 in the second quarter of 1998, an increase of 55%.
For the first half of 1999, net income increased 147% to $16.8 million, or
$0.54 per diluted share, from $6.8 million, or $0.29 per diluted share for the
first half of 1998. Earnings per share increased 86% in the first half of
1999 when compared to the prior year. Cash income per diluted share for the
first half of 1999 was $0.64 versus $0.34 in the first half of 1998.
O. Bruton Smith, the Company's Chairman and Chief Executive Officer,
stated, "We're proud to announce another terrific quarter of rapidly growing
revenues, profits and earnings per share. Again this quarter, net income grew
more rapidly than revenues. The automobile retailing industry is one of the
last great frontiers in American enterprise. As the fastest-growing auto
retailer, we believe Sonic is leading the way in exploring this frontier."
Continued Growth in Revenues and Margins
Total revenues for the second quarter of 1999 rose 87% to $723.5 million
from $386.1 million in the second quarter of 1998. Total revenues for the
first half of 1999 rose 103% to $1.3 billion versus $650 million in the first
half of 1998. The Company's revenue mix also improved with new vehicle
revenues declining from 59% of sales to 58% of sales. After completion of all
pending acquisitions, Sonic's annual revenue run rate exceeds $3.5 billion.
Gross profits increased 96% to $94.3 million in the second quarter of
1999, compared to $48.3 million in the second quarter of 1998, resulting
primarily from acquisitions and improvements in gross margins to 13.0% from
12.5%. Gross profits for the first half of 1999 increased 109% to
$172.3 million, compared to $82.4 million for the same period in the prior
year.
Jeffrey C. Rachor, the Company's Vice President of Retail Operations,
stated, "The benefits of our new finance and insurance development team are
demonstrated in the 26% increase in finance and insurance income per vehicle
over the same quarter of the prior year. Our used car development program was
a significant factor in the 16% increase in same store used vehicle sales and
9% increase in retail used vehicle margins per unit for the quarter. Our
operations improvement processes are just beginning to be implemented and we
see great opportunities for further improvement in all components of our
business."
Income before taxes for the quarter rose 118% to $16.2 million from
$7.4 million in the same quarter of the prior year. Operating income during
the quarter rose to $24.6 million from $12.8 million in the same quarter of
last year, representing an increase of 92%. Net operating cash flow (net
income plus depreciation and amortization plus tax benefits of goodwill
amortization) was approximately $13 million for the quarter ended
June 30, 1999.
"Sonic improved in all margins -- gross profits, EBITDA, operating income
and net income. Net income grew 29% more rapidly than revenues for the
quarter. Our management team's constant focus on inventory management led to
floorplan interest expense reductions as a percentage of revenue from 1.0% to
.7%. These consistent, positive trends demonstrate value Sonic is creating
through successful execution of its strategy," stated B. Scott Smith, the
Company's President and Chief Operating Officer.
Same Store Sales
On a same store basis, revenues in the three months and six months ended
June 30, 1999 rose 12% and 17%, respectively. For the three months ended
June 30, 1999 same store sales in higher margin used cars and finance and
insurance increased 18% and 43%, respectively. Same store operating income,
after floorplan interest, increased 23% for the second quarter. O. Bruton
Smith stated, "Sonic's growth in revenues and profits has been from more than
acquisitions. We're operators and our management team is working to improve
profitability in every part of our business."
Acquisition Status
B. Scott Smith stated, "The Company continues to find attractive
acquisition opportunities in its existing markets and in rapidly growing
southeastern and southwestern markets with attractive demographics. Capital
is available to continue our acquisition strategy. Over $50 million will be
available under Sonic's existing acquisition line of credit after completion
of all announced acquisitions. The cash generated from operations is expected
to increase and these operating cash flows are available as equity financing
for acquisitions."
During the second quarter and third quarter to date, Sonic Automotive
closed its previously announced acquisitions of Lute Riley Honda in Dallas,
Texas; the Newsome Dealerships in Columbia, South Carolina and Florence, South
Carolina; the Lloyd Dealerships in Panama City, Florida; Superior Oldsmobile-
Cadillac-GMC in Chattanooga, Tennessee; Freedom Chevrolet (formerly Fitzgerald
Chevrolet) in Charlotte, North Carolina; Lone Star Nissan and Lone Star
Oldsmobile (formerly Sam White Motor City) in Houston, Texas; Classic Dodge in
Mobile, Alabama and Bondesen Chevrolet-Cadillac-Oldsmobile in Deland, Florida.
In 1999, the Company has closed 21 dealership acquisitions totaling
approximately $925 million in 1998 revenues. Including the dealerships listed
above and transactions that have yet to close, it has announced definitive
agreements to acquire 19 dealerships totaling approximately $505 million in
1998 revenues.
Sonic Automotive, Inc. is one of the leading automotive retailers in the
United States, with operations in Alabama, Florida, Georgia, Maryland, Nevada,
North Carolina, Ohio, South Carolina, Tennessee, Texas, and Virginia. Upon
completion of announced acquisitions, Sonic will operate 121 franchises and
28 collision repair centers.
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 recent 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,
1998 1999 1998 1999
New Units 9,984 17,242 16,601 31,731
Used Units 5,386 10,745 9,719 20,294
Total Units
Retailed 15,370 27,987 26,320 52,025
Wholesale Units 5,267 8,607 9,011 16,268
Revenues:
New Vehicles $ 233,139 $ 420,823 $ 386,246 $ 767,816
Used Vehicles 76,923 155,346 134,689 285,205
Wholesale Vehicles 29,469 55,984 48,174 100,400
Total Vehicles 339,531 632,153 569,109 1,153,421
Parts, Service, and
Collision Repair 39,175 74,402 68,312 134,026
Finance & Insurance 7,427 16,975 12,690 29,535
Total Revenues 386,133 723,530 650,111 1,316,982
Total Gross Profit 48,264 94,261 82,421 172,336
SG&A Expenses 34,474 67,429 60,391 124,643
Depreciation &
Amortization 1,010 2,244 1,825 4,151
Operating Income 12,780 24,588 20,205 43,542
Interest Expense 5,357 8,674 9,316 16,788
Other Income 7 316 15 324
Income Before Taxes 7,430 16,230 10,904 27,078
Income Taxes 2,762 6,129 4,100 10,290
Net Income $ 4,668 $ 10,101 $ 6,804 $ 16,788
Diluted income per
share $ 0.20 $ 0.30 $ 0.29 $ 0.54
Weighted average
shares outstanding 23,717 34,088 23,274 31,044
Other Data:
Gross margin 12.5 % 13.0 % 12.7 % 13.1 %
Operating margin 3.3 % 3.4 % 3.1 % 3.3 %
Pretax income margin 1.9 % 2.2 % 1.7 % 2.1 %
Contact: Theodore M. Wright, Chief Financial Officer of Sonic Automotive,
Inc., (704) 532-3347.
J. Todd Atenhan, Investor Relations of Sonic Automotive, Inc.
(888) 766-4218.
Internet Address: http://www.sonicautomotive.com