Sonic Automotive Reports EPS Increases 57% on Record Q3 Earnings
25 October 1999
Sonic Automotive, Inc. Reports EPS Increases 57% on Record 3rd Quarter Earnings of $.33 per Share
CHARLOTTE, N.C., Oct. 25 -- Sonic Automotive, Inc.
announced today that net income for the third quarter ended
September 30, 1999 increased 132% to $12.6 million, or $.33 per diluted share,
from $5.4 million, or $.21 per diluted share, for the third quarter ended
September 30, 1998. Net income before goodwill charges per diluted share was
$.37 in the third quarter of 1999 versus $.23 in the third quarter of 1998, an
increase of 61%. Net income before goodwill charges has been presented in
accordance with the newly proposed accounting standard on business
combinations.
For the first nine months of 1999, net income increased 140% to $29.4
million, or $.88 per diluted share, from $12.2 million, or $0.50 per diluted
share for the first nine months of 1998. Earnings per share increased 76% in
the first nine months of 1999 when compared to the prior year. Net income per
diluted share before goodwill charges for the first nine months of 1999 was
$.99 versus $0.57 in the first nine months of 1998.
O. Bruton Smith, the Company's Chairman and Chief Executive Officer,
stated, "Sonic has continued its trend of exceeding analysts' consensus
expectations since going public in 1997. More importantly, the third quarter
of 1999 also marks our eighth consecutive quarter of greater than 50% growth
in earnings per share. We're proud of this impressive record of growth
delivered to our shareholders."
Rapidly Growing Revenues and Margins
Total revenues for the third quarter of 1999 rose 73% to $870 million from
$504.1 million in the third quarter of 1998. Total revenues for the first
nine months of 1999 rose 89% to $2.2 billion versus $1.2 billion in the first
nine months of 1998. The Company's revenue mix also improved with new vehicle
revenues declining from 59.8% of sales to 58.3% of sales. Finance and
insurance revenues, Sonic's highest margin revenue stream, increased to 2.4%
of revenues from 2.0% of revenues.
Gross profits increased 82% to $116.7 million in the third quarter of
1999, compared to $64.0 million in the third quarter of 1998, resulting
primarily from acquisitions and improvements in overall gross margins to 13.4%
from 12.7%. Gross profits for the first nine months of 1999 increased 97% to
$289.0 million, compared to $146.4 million for the same period in the prior
year. New vehicle gross profit margins expanded 7.6% in the third quarter of
1999 compared to the prior year. On a same store basis, new vehicle gross
margins expanded 6.6% for the quarter.
"Despite rapidly expanding use of the Internet by consumers to research or
facilitate new vehicle purchases, we have experienced no negative effect on
new vehicle gross margins. Development of Internet marketing channels is an
excellent opportunity for Sonic to take advantage of its scale, geographic
diversity, brand diversity and ability to execute training efforts across the
organization. In November of 1999 we will add to our training programs an
extensive Internet marketing initiative which we believe will show results in
the year 2000," stated B. Scott Smith, the Company's President and Chief
Operating Officer.
Income before taxes for the quarter rose 131% to $20.5 million from
$8.9 million in the same quarter of the prior year. Operating income during
the quarter rose to $31.0 million from $15.6 million in the same quarter of
last year, representing an increase of 98%. Net operating cash flow (net
income plus depreciation and amortization plus tax benefits of goodwill
amortization) was approximately $15.5 million for the quarter ended
September 30, 1999.
B. Scott Smith stated, "Our results reflect the successful integration of
33 dealerships in 1999, representing $1.3 billion in annual revenues.
Management attention to successful integration of acquired dealerships has not
harmed same store performance -- same store profitability improved
dramatically. We have in place the structure and processes to build on our
track record with a successful integration of FirstAmerica Automotive. Our
acquisition pace has slowed to enable greater focus on integration of
FirstAmerica, as well as other recent acquisitions, and operating cash flows
will support execution of our acquisition strategy in the year 2000."
Double Digit Same Store Sales Growth
On a same store basis, revenues in the three months and nine months ended
September 30, 1999 rose 13.6% and 15.4%, respectively. For the three months
ended September 30, 1999, same store sales in high margin finance and
insurance increased 29.7%, respectively. Same store income before taxes
increased 20.4% for the third quarter.
Jeffrey C. Rachor, Executive Vice President of Retail Operations, stated,
"The top 10 dealerships in our portfolio have operating income margins of
greater than 4.7% compared to our overall operating income margins of 3.6%.
Opportunities to improve performance through training, economies of scale and
application of professional management processes are almost unlimited. The
benefits of training are clearly demonstrated by our improvement in finance
and insurance revenues and same store profitability."
Acquisition Closings
During the third quarter and fourth quarter to date, Sonic Automotive
closed its previously announced acquisitions of Lute Riley Honda in Dallas,
Texas; Classic Dodge in Mobile, Alabama; the Manhattan Dealership Group in
Washington, D.C.; Ben Reading Pontiac-Buick-GMC and Toyota in Houston, Texas;
Joe Camp Ford in Houston, Texas; Charleston Lincoln-Mercury in Charleston,
S.C.; Shottenkirk Honda in Pensacola, Florida; Integrity Dodge in Las Vegas,
Nevada; and Altman Dodge in Charleston, S.C.
In 1999, the Company has closed 33 dealership acquisitions totaling
approximately $1.3 billion in 1998 revenues. Including the dealerships listed
above and transactions that have yet to close, Sonic has announced definitive
agreements to acquire 69 dealerships totaling approximately $3.0 billion in
estimated 1999 revenues.
Sonic Automotive, Inc. is the second largest automotive retailer 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 159 franchises and
30 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 Nine Months Ended
September 30, September 30,
1998 1999 1998 1999
New Units 12,661 20,778 29,262 52,509
Used Units 7,492 12,098 17,211 32,392
Total Units Retailed 20,153 32,876 46,473 84,901
Wholesale Units 6,684 11,027 15,695 27,295
Revenues:
New Vehicles $304,279 $508,066 $690,525 $1,275,882
Used Vehicles 100,932 173,592 235,621 458,797
Wholesale Vehicles 37,832 69,523 86,007 169,923
Total Vehicles 443,043 751,181 1,012,153 1,904,602
Parts, Service, and
Collision Repair 50,803 96,223 119,114 230,249
Finance & Insurance 10,264 22,560 22,954 52,095
Total Revenues 504,110 869,964 1,154,221 2,186,946
Total Gross Profit 63,974 116,654 146,396 288,990
SG&A Expenses 46,793 82,650 107,185 207,293
Depreciation &
Amortization 1,535 2,992 3,360 7,143
Operating Income 15,646 31,012 35,851 74,554
Interest Expense 6,779 10,507 16,095 27,295
Other Income 9 38 24 362
Income Before Taxes 8,876 20,543 19,780 47,621
Income Taxes 3,450 7,960 7,550 18,250
Net Income $5,426 $12,583 $12,230 $29,371
Diluted income per
share $ 0.21 $ 0.33 $ 0.50 $ 0.88
Weighted average shares
outstanding 26,125 38,268 24,280 33,489
Other Data:
Gross margin 12.7% 13.4% 12.7% 13.2%
Operating margin 3.1% 3.6% 3.1% 3.4%
Pretax income margin 1.8% 2.4% 1.7% 2.2%
MANAGEMENT WILL BE HOLDING A CONFERENCE CALL TUESDAY, OCTOBER 26, 1999 AT
10:00 AM EASTERN TIME. TO PARTICIPATE, PLEASE DIAL: 888-318-6429, SECURITY
CODE: SONIC
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.
Val Holley-Dennis, Media Relations of Sonic Automotive, Inc.
(704) 660-3424.
Internet Address: http://www.sonicautomotive.com