EPS Increase of 70% Reported By Sonic Automotive, Inc.
26 July 2000
Eleventh Consecutive Quarter of Greater Than 50% EPS Growth
CHARLOTTE, N.C. - Sonic Automotive, Inc. announced today that net income for
the second quarter ended June 30, 2000 increased 122% to $22.5 million, or $0.51
per diluted share, from $10.1 million, or $0.30 per diluted share, for the
second quarter ended June 30, 1999. For the first half of 2000, net income
increased 137% to $39.8 million, or $0.89 per diluted share, from $16.8 million,
or $0.54 per diluted share for the first half of 1999. The second quarter of
2000 was Sonic's eleventh consecutive quarter of greater than 50% growth in
earnings per share. The 70% increase in earnings per share for the second
quarter of 2000 was achieved despite a 30% increase in shares outstanding versus
the same quarter in 1999.
Net income before tax effected goodwill amortization expense per diluted
share was $0.58 in the second quarter of 2000 versus $0.33 in the second
quarter of 1999, an increase of 76%. For the first half of 2000, net income
before tax effected goodwill amortization expense per diluted share was $1.03
versus $0.61 in the first half of 1999, an increase of 69%. Net operating
cash flow (net income, plus depreciation and amortization plus tax benefits of
goodwill amortization) was approximately $29.1 million for the quarter ended
June 30, 2000.
O. Bruton Smith, the Company's Chairman and Chief Executive Officer
stated, "Once again, Sonic Automotive has demonstrated the power of the auto
retailing business model and our acquisition growth strategy. Reporting a 70%
increase in EPS, despite rising rates and a cooling new vehicle market, is an
exceptional accomplishment for our people and our management team. With our
outstanding and dedicated team of employees, we believe there is nearly
unlimited opportunity to continue execution of our growth strategy."
Delivering Growth in Revenues and Margins
Total revenues for the second quarter of 2000 increased 114% to
$1.5 billion from $723.5 million in the second quarter of 1999. Total
revenues for the first half of 2000 rose 129% to $3.0 billion versus
$1.3 billion in the first half of 1999. Sonic's top five brands for the
quarter were Honda (15%), Ford (14%), Chrysler (11%), BMW (10%), and Toyota
(9%).
Gross profits increased 133% to $219.3 million in the second quarter of
2000, compared to $94.3 million in the second quarter of 1999, resulting
primarily from acquisitions and improvements in gross margins from 13.0% to
14.2%. Gross profits for the first half of 2000 increased 148% to
$427.3 million, compared to $172.3 million for the same period in the prior
year. 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 12.6% to 13.7% of total sales. Per unit finance and
insurance income for the quarter increased $150 or 25%, demonstrating both
benefits of scale and the effectiveness of ongoing training programs.
"Internet marketing efforts and greater pricing transparency did not
result in declining new vehicle gross margins. Our new vehicle gross margins
for the quarter expanded by 7.4%. We have also continued to improve our
product mix with significant increases in finance and insurance and service
and parts sales. Our overall gross margins, operating and net income margins
increased in the quarter -- continuing our long-term trend," stated B. Scott
Smith, the Company's President and Chief Operating Officer.
Income before taxes for the second quarter of 2000 rose 124% to
$36.3 million from $16.2 million in the same quarter of the prior year, with
pre-tax profits growing 9% more rapidly than sales. Operating income during
the second quarter of 2000 rose to $58.7 million from $24.6 million in the
same quarter of last year, representing an increase of 139%. EBITDA margins
after floorplan interest increased 32 basis points, or 10%, to 3.4%.
Same Store Growth - Better Product Mix
On a same store basis, revenues in the three months ended June 30, 2000
increased 2.7%. Same store new vehicle sales declined 1.2% for the quarter.
For the three months ended June 30, 2000 same store sales for high margin
finance and insurance products increased 14.0%. Same store operating income
increased 4.0% for the second quarter of 2000.
Same store performance reflected aggressive actions taken during the
quarter to reduce unprofitable large fleet sales. Fleet sales declined 29.5%
in the same store base. Without considering fleet sales, same store sales
would have been up 4.3%. Declines in fleet sales are likely to effect
reported same store sales performance for the next three to four quarters.
However, declines in large fleet sales are expected to benefit both margins
and net income.
"Our expanded operations management team demonstrated its value by leading
the company's efforts to expand sales of higher margin and less cyclical
products and services. Same store used vehicle retail sales were up 10.0%.
Same store service, parts, and collision repair sales were up 6.6% and finance
and insurance sales were up 14.0%. Same store profitability also continued
its growth," stated Jeffrey C. Rachor, the Company's Executive Vice President
of Retail Operations.
Acquisition Strategy Developments and Recent Closings
Sonic's cash generation from operations, approximately $29.1 million in
the second quarter, combined with availability under existing lines enable
Sonic to continue pursuing acquisitions. After the close of the second
quarter, Sonic completed its previously announced acquisition of Larry Miller
Chevrolet in Tulsa, Oklahoma which had 1999 revenues of over $100 million.
"With successful integration of over 75 dealerships acquired in 1999 and
the first quarter of 2000, Sonic Automotive is poised to again aggressively
pursue acquisition opportunities. We have developed acquisition processes and
a management team with a demonstrated capability to integrate large numbers of
dealership acquisitions," stated Tom Price, the Company's Vice Chairman.
Minor Impact of Rising Interest Rates
Increases in interest rates on acquisition credit facilities over the
prior year impacted earnings for the second quarter by $.01 per share or 3%.
Increasing rates do not significantly affect Sonic's operating results unless
consumer demand moderates because of rate increases. Although rates generally
have increased sharply, vehicles continue to be affordable for consumers on a
monthly payment basis. Manufacturers incentives, interest rate subvention,
and rising incomes have offset much of the potential impact of higher rates on
consumers.
Other Developments
It was announced during the quarter that the Company was added to this
year's Fortune 500 listing of America's biggest companies as measured by total
revenues. The ranking marks Sonic Automotive's first appearance on the list
as the 460th largest company in America. In addition, Sonic was recently
added to the Russell 2000 Index.
About Sonic Automotive, Inc.
Sonic Automotive, Inc. is the second largest automotive retailer in the
United States operating 168 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 eleven
consecutive quarters of greater than 50% growth in earnings per share.
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, JULY 25, 2000 AT
11:00 A.M. EASTERN TIME.
Result of Operations (Unaudited)
(in thousands, except per share data and unit data amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1999 2000 1999 2000
New units 17,449 35,332 31,731 68,722
Used units 10,886 20,557 20,294 40,689
Total units
retailed 28,335 55,889 52,025 109,411
Wholesale units 8,697 16,498 16,268 32,199
Average price per unit:
New vehicles 24,117 25,603 24,198 25,591
Used vehicles 14,270 15,631 14,054 15,404
Wholesale vehicles 6,437 6,665 6,172 6,552
Revenues:
New vehicles $ 420,823 $ 904,622 $ 767,816 $ 1,758,656
Used vehicles 155,346 321,323 285,205 626,754
Wholesale vehicles 55,984 109,963 100,400 210,975
Total vehicles 632,153 1,335,908 1,153,421 2,596,385
Parts, service, and
collision repair 74,402 170,545 134,026 336,132
Finance & insurance
and other 16,975 41,886 29,535 80,223
Total Revenues 723,530 1,548,339 1,316,982 3,012,740
Total Gross Profit 94,261 219,298 172,336 427,332
SG&A expenses 67,429 154,819 124,643 308,285
Depreciation 655 1,644 1,181 3,161
Goodwill amortization 1,589 4,180 2,970 8,230
Operating Income 24,588 58,655 43,542 107,656
Interest expense,
floor plan 4,926 12,048 9,397 22,405
Interest expense,
other 3,748 10,296 7,391 20,562
Other income 316 36 324 74
Income Before Taxes 16,230 36,347 27,078 64,763
Income taxes 6,129 13,895 10,290 24,940
Net Income $ 10,101 $ 22,452 $ 16,788 $ 39,823
Diluted income
per share $ 0.30 $ 0.51 $ 0.54 $ 0.89
Diluted weighted
average shares
outstanding 34,088 44,331 31,044 44,604
Other Data:
Gross margin 13.0% 14.2% 13.1% 14.2%
Operating margin 3.4% 3.8% 3.3% 3.6%
Pretax income margin 2.2% 2.3% 2.1% 2.1%
Interest (non-floorplan)
coverage ratio 5.9x 5.1x 5.2x 4.7x
Cash and equivalents $ 60,526 $ 85,615
Working capital $ 127,636 $ 181,245
Total inventory $ 368,197 $ 713,768
Floorplan debt $ 303,965 $ 605,367
Long term debt (incl. current portion) $ 133,513 $ 473,980