First Quarter EPS Increase of 62% Reported By Sonic Automotive, Inc.,
25 April 2000
First Quarter EPS Increase of 62% Reported By Sonic Automotive, Inc.,
CHARLOTTE, N.C., April 24 Sonic Automotive, Inc.
(NYSE: SAH) announced today that net income for the first quarter ended
March 31, 2000 increased 160% to $17.4 million, or $0.39 per diluted share,
from $6.7 million, or $0.24 per diluted share, for the first quarter ended
March 31, 1999. Net income before tax effected goodwill amortization expense
per diluted share was $0.45 in the first quarter of 2000 versus $0.27 in the
first quarter of 1999, an increase of 67%.
The first quarter of 2000 was Sonic's tenth consecutive quarter of greater
than 50% growth in earnings per share. The 62% increase in earnings per share
for the first quarter of 2000 was achieved despite a 60% increase in shares
outstanding versus the same quarter in 1999.
O. Bruton Smith, the Company's Chairman and Chief Executive Officer,
stated, "Integration of our acquisition of FirstAmerica Automotive, Inc. has
gone better than expected, contributing to our strong earnings performance for
the quarter. Expected cost reductions at FirstAmerica are largely complete as
of the end of the first quarter of 2000 and the full impact of this
acquisition will be felt beginning in the second quarter."
Rapidly Growing Revenues and Margin Expansion
Total revenues for the first quarter of 2000 increased 147% to
$1.5 billion from $593.5 million in the first quarter of 1999. Revenues for
the first quarter include operating results of Sonic's acquisition of
FirstAmerica Automotive, Inc. for the full quarter. Sonic's first quarter
results also include operations of Sonic's recently announced acquisitions of
the Blount Strange and Riverside groups for a portion of the first quarter.
"The strength of Sonic's brand portfolio, geographic diversity and
continued strength in vehicle sales drove first quarter results. Our BMW,
Lexus and Mercedes dealerships posted exceptional earnings for the quarter.
Sonic's expanded geographic diversity prevented weather-related weakness in
January performance in many East Coast markets from affecting overall
performance," stated B. Scott Smith, the Company's President and Chief
Operating Officer.
Sonic's top five brands for the quarter were Ford (15%), Honda (14%),
Chrysler (13%), BMW (10%), and Toyota (8%).
Gross profits increased 166% to $208.0 million in the first quarter of
2000, compared to $78.1 million in the first quarter of 1999, resulting
primarily from acquisitions and improvements in gross margins from 13.2% to
14.2%. Revenue mix for the quarter improved with the percentage of total
revenues from high margin service, parts, collision repair and finance and
insurance increasing from 12.2% to 13.9% of total sales. Per unit finance and
insurance income increased $186 or 35%, demonstrating both benefits of scale
and the effectiveness of ongoing training programs.
Income before taxes for the first quarter of 2000 rose 162% to
$28.4 million from $10.8 million in the same quarter of the prior year, with
pre-tax profits growing 10% more rapidly than sales. Operating income during
the first quarter of 2000 rose to $49.0 million from $19.0 million in the same
quarter of last year, representing an increase of 159%. EBITDA margins after
floorplan interest increased 26 basis points, or 9%, to 3.0%.
Floorplan interest as a percentage of revenues decreased 5% although
floorplan interest rates increased 69 basis points (10.4%) over the same
quarter of the prior year. The impact of floor plan rate increases is largely
offset by increased manufacturers floor plan assistance. Net operating cash
flow (net income, plus depreciation and amortization plus tax benefits of
goodwill amortization) was approximately $23.6 million for the quarter ended
March 31, 2000.
Continued Same Store Sales Growth
On a same store basis, revenues in the three months ended March 31, 2000
increased 9%. For the three months ended March 31, 2000 same store sales for
high margin finance and insurance products increased 35%. Same store income
before taxes increased 6% for the first quarter of 2000.
"Same store sales of high margin service and parts increased 9%.
Continued strength in new vehicle sales is driving long-term, sustainable
increases in sales and profits in our fixed operations. Improvements in
finance, insurance, service, and parts sales are also proving the
effectiveness of Sonic's training and development programs," stated Jeffrey C.
Rachor, the Company's Executive Vice President of Retail Operations.
Stock Buyback Program
As of April 24, 2000, Sonic has expended $29 million of a $50,000,000
authorized stock buyback program. This buyback represents over 6% of Sonic's
total common stock equivalents outstanding. If all treasury shares were
reflected as repurchased at the beginning of 2000, diluted EPS for the first
quarter would have been $0.40 per share. The stock buybacks completed through
the end of the first quarter resulted in a $0.02 increase in EPS for the
quarter. The full impact of Sonic's purchases to date will be reflected
beginning in the third quarter of 2000.
Internet Developments
"Recently announced alliances with Greenlight.com, Chase Manhattan Bank,
CMSI and BBCN represent elements of Sonic's developing comprehensive Internet
strategy. The Internet will ultimately positively impact all of Sonic's
business, not just vehicle sales. We believe there are opportunities for
Sonic to use the Internet to create value in purchasing, finance and insurance
sales, and service and parts sales. Most importantly we will be able to use
the Internet to create better vehicle purchase and service experiences for our
customers. Sonic's scale, brand and geographic diversity ideally position
Sonic to capture competitive advantage as the Internet impacts auto
retailing," stated Tom Price, the Company's Vice Chairman.
Changing Rate Environment
Increases in interest rates on acquisition credit facilities over the
prior year impacted earnings for the first quarter by $0.01 per share or 3%.
Increasing rates do not dramatically effect Sonic's operating results unless
consumer demand moderates because of rate increases. Although rates have
increased sharply, vehicles continue to be affordable for consumers on a
monthly payment basis. Manufacturers incentives and rising incomes have
offset much of the potential impact of higher rates on consumers.
Acquisition Closings and Acquisition Pipeline
Sonic's cash generation from operations, $23.6 million in the first
quarter, combined with availability under existing lines enable Sonic to
continue selectively pursuing acquisitions. Acquisition efforts are currently
focused on opportunities in markets where Sonic has existing operations.
During the first quarter, Sonic Automotive closed its acquisitions of the
Riverside Dealership Group in Tulsa, Oklahoma, and the Blount Strange
Automotive Group in Montgomery, Alabama totaling approximately $425 million in
annual revenues.
About Sonic Automotive, Inc.
Sonic Automotive, Inc. is the second largest automotive retailer in the
United States operating 172 franchises and 30 collision repair centers in
Alabama, California, Florida, Georgia, Maryland, Nevada, North Carolina, Ohio,
Oklahoma, South Carolina, Tennessee, Texas, and Virginia. Sonic had revenues
of $3.4 billion in 1999, an increase of 109% over 1998. The revenue run rate
is estimated at over $6 billion for 2000. Sonic has experienced ten
consecutive quarters of greater than 50% growth in earnings per share. Sonic
Automotive can be reached on the Web at http://www.sonicautomotive.com.
Included herein are forward-looking statements, including statements with
respect to anticipated revenue and profit growth. There are many factors that
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.
MANAGEMENT WILL BE HOLDING A CONFERENCE CALL ON TUESDAY, APRIL 25, 2000 AT
11:00 A.M. EASTERN TIME. TO PARTICIPATE, PLEASE DIAL 888-318-6429, SECURITY
CODE: SONIC - OR YOU CAN ACCESS THE CALL AT http://WWW.STREETFUSION.COM OR
http://WWW.VCALL.COM.
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
Results of Operations (Unaudited)
(in thousands, except per share and unit data amounts)
Three Months Ended
March 31,
1999 2000
New units 14,282 33,390
Used units 9,408 20,132
Total units retailed 23,690 53,522
Wholesale units 7,571 15,701
Average price per unit:
New vehicles 24,296 25,578
Used vehicles 13,803 15,171
Wholesale vehicles 5,867 6,433
Revenues:
New vehicles $ 346,992 $ 854,034
Used vehicles 129,859 305,431
Wholesale vehicles 44,416 101,012
Total vehicles 521,267 1,260,477
Parts, service, and collision repair 59,625 165,587
Finance & insurance and other 12,560 38,337
Total Revenues 593,452 1,464,401
Total Gross Profit 78,075 208,034
SG&A expenses 57,214 153,466
Depreciation 526 1,517
Goodwill amortization 1,381 4,050
Operating Income 18,954 49,001
Interest expense, floor plan 4,471 10,357
Interest expense, other 3,643 10,266
Other income 8 38
Income Before Taxes 10,848 28,416
Income taxes 4,161 11,045
Net Income $ 6,687 $ 17,371
Diluted income per share $ 0.24 $ 0.39
Weighted average shares outstanding 27,998 44,877
Other Data:
Gross margin 13.2% 14.2%
Operating margin 3.2% 3.3%
Pretax income margin 1.8% 1.9%
Interest (nonfloorplan) coverage ratio 4.5x 4.3x
Cash and equivalents $ 59,738 $ 82,395
Working capital $ 112,978 $ 189,635
Total inventory $ 319,916 $ 707,960
Floorplan debt $ 264,779 $ 582,031
Long term debt (incl. current
portion) $ 190,661 $ 473,135