Exhibit 99.1
FOR IMMEDIATE RELEASE
SONIC AUTOMOTIVE, INC. ANNOUNCES THIRD QUARTER RESULTS
CHARLOTTE, NC (October 28, 2003) – Sonic Automotive, Inc. (NYSE: SAH) today announced results for the third quarter of 2003.
Net income for the quarter ended September 30, 2003 was $17.5 million, or $0.41 per diluted share, compared to prior year results of $31.6 million, or $0.73 per diluted share. For the nine months ended September 30, 2003, net income was $57.7 million, or $1.37 per diluted share, compared to net income of $85.2 million, or $1.96 per diluted share, for the same period last year. Net income for the nine months ended September 30, 2003 includes a $5.6 million, or $0.14 per diluted share, after tax charge recorded in the first quarter as a cumulative effect of accounting change related to the Emerging Issues Task Force guidance on accounting for incentives and rebates.
During the third quarter of 2003, the Company issued $200 million of 8 5/8% senior subordinated notes due 2013. The proceeds of the offering were used to retire all outstanding 11% senior subordinated notes due in 2008. These transactions required a charge for the call premium, write-off of debt issuance cost and discount, and incremental interest costs for the 30-day call period on the 11% notes. The following schedule presents the effect of these items in both periods (dollars, except per share amounts, in millions):
| Third Quarter 2003 |
Third Quarter 2002 | |||||||||||||
| Net Income |
EPS |
Net Income |
EPS | |||||||||||
| (Loss) gain on early retirement of debt |
$ | (8.9 | ) | $ | (0.21 | ) | $ | 0.9 | $ | 0.02 | ||||
| Interest cost during 30-day call period on early retirement of debt |
$ | (0.7 | ) | $ | (0.02 | ) | ||||||||
In commenting on the quarter, Mr. O. Bruton Smith, the Company’s Chairman and Chief Executive Officer, stated, “The third quarter did not continue our trend of improvement in profitability over the course of this year. The same store performance in our import and luxury branded dealerships outpaced the industry. However, our domestic branded dealerships, particularly Ford and Chrysler/Jeep/Dodge, sharply under performed resulting in lower overall results. We have developed action plans to address these dealerships and are moving aggressively to improve performance. Our forecasted earnings per diluted share is $2.20 to $2.25 (excluding the effects of the cumulative effect of change in accounting principle and the retirement of debt discussed above) for calendar year 2003. Additionally, we are forecasting earnings per diluted share of $2.65 to $2.85 for calendar year 2004. Our 2004 estimate does not include the effect of any unannounced acquisitions or additional share repurchases.”
Same Store Sales
On a same store basis, total revenues were up 1.2% for the quarter. New vehicle same store sales increased 2.9% for the quarter and used vehicle same store sales were down 3.0%. Same store parts, service and collision repair sales increased 3.6% for the quarter. Finance and insurance same store sales were down 3.7%. The same store parts, service and collision repair gross margin rate increased to 48.1% from 47.5% last year and contributed to a 4.8% growth in fixed operations gross profit. The overall same store gross margin rate declined to 14.8% from 15.3% last year due primarily to lower gross margin rates on new vehicles and a higher mix of new vehicle sales.
Jeffrey C. Rachor, the Company’s Chief Operating Officer, stated, “Our import and luxury branded dealerships continued to perform well as reflected by an 11% overall same store sales increase in the quarter. Our company-wide parts, service and collision repair business grew in both same store sales and gross margin rate. Our used
vehicle product line was stable with decreased wholesale losses offsetting lower retail same store sales to generate flat combined gross profit on a same store basis. In addition our emphasis on certified pre-owned programs resulted in a 67% increase in CPO unit sales for the quarter versus last year. However, our incremental investment in advertising and sales compensation failed to grow market share and improve performance in our domestic dealerships during the quarter. The combination of the increased investment and weak operating performance in the domestic dealerships caused our selling, general and administrative expenses as a percentage of gross profit to increase to 79.6% for the quarter. We have implemented targeted programs for these under-performing dealerships to address overall management, inventory mix, advertising strategy and sales compensation. We are confident that this targeted approach will improve performance.”
Acquisition and Disposition Activity
During the third quarter, Sonic announced agreements to purchase 18 dealerships. During the quarter, we closed on seven of those acquisitions representing over $161 million in annual revenues. We expect one more of those acquisitions to close during the balance of this year.
Security Repurchase Plans
Sonic’s Board of Directors has authorized the expenditure of up to $145 million to repurchase outstanding shares of its Class A common stock or redeem securities convertible into its Class A common stock. During the third quarter, the Company repurchased 221,600 shares for $5.8 million and at September 30, 2003 had approximately $20 million of the authorization remaining.
Brand and Geographic Diversity
The Company’s top ten brands for the quarter based on new vehicle revenues were Honda (14.5%), Toyota (13.3%), Ford (13.2%), Chevrolet (10.8%), Cadillac (10.3%), BMW (8.3%), Lexus (4.4%), Chrysler (4.3%), Volvo (4.0%) and Nissan (3.3%).
The Company’s top markets for the quarter based on total revenues were Los Angeles (10.9%), San Francisco (10.6%), Houston (9.8%), Dallas (9.3%), Charlotte (6.4%), San Jose (6.0%), Tampa (5.2%), Oklahoma (4.6%), Denver (3.5%) and Columbus (3.2%).
MANAGEMENT WILL BE HOLDING A CONFERENCE CALL ON TUESDAY, OCTOBER 28 AT 11:00 A.M. EASTERN TIME. TO PARTICIPATE, PLEASE DIAL 877-791-3416 – OR YOU CAN ACCESS THE CALL AT WWW.COMPANYBOARDROOM.COM OR WWW.VCALL.COM.
About Sonic Automotive, Inc.
Sonic Automotive, Inc., a Fortune 300 Company, is one of the largest automotive retailers in the United States operating 192 franchises and 42 collision repair centers. Sonic can be reached on the Web at www.sonicautomotive.com.
Included herein are forward-looking statements, including statements with respect to anticipated acquisition activity and earnings per share. 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 described in the Company’s Current Report on Form 8-K dated October 2, 2003. The Company does not undertake any obligation to update forward-looking information.
| Contact: |
E. Lee Wyatt, Chief Financial Officer of Sonic Automotive, Inc. (704) 566-2415. | |
| J. Todd Atenhan, Investor Relations of Sonic Automotive, Inc. (888) 766-4218. | ||
| Bill Steers, Media Relations of Sonic Automotive, Inc. (888) 766-4219. |
Sonic Automotive, Inc.
Results of Operations (unaudited)
(in thousands, except per share and unit data amounts)
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| 09/30/2002 |
09/30/2003 |
09/30/2002 |
09/30/2003 |
|||||||||||||
| Revenues |
||||||||||||||||
| New vehicles |
$ | 1,194,168 | $ | 1,275,077 | $ | 3,194,716 | $ | 3,495,399 | ||||||||
| Used vehicles |
316,285 | 320,365 | 884,467 | 920,488 | ||||||||||||
| Wholesale vehicles |
126,592 | 125,389 | 359,494 | 339,371 | ||||||||||||
| Total vehicles |
1,637,045 | 1,720,831 | 4,438,677 | 4,755,258 | ||||||||||||
| Parts, service, and collision repair |
242,012 | 260,478 | 670,947 | 750,423 | ||||||||||||
| Finance & insurance and other |
56,595 | 56,778 | 151,533 | 160,952 | ||||||||||||
| Total revenues |
1,935,652 | 2,038,087 | 5,261,157 | 5,666,633 | ||||||||||||
| Total gross profit |
294,857 | 302,355 | 815,700 | 864,720 | ||||||||||||
| SG&A expenses |
225,162 | 240,654 | 625,453 | 694,798 | ||||||||||||
| Depreciation |
2,454 | 3,209 | 6,478 | 8,439 | ||||||||||||
| Operating income |
67,241 | 58,492 | 183,769 | 161,483 | ||||||||||||
| Interest expense, floor plan |
5,798 | 5,103 | 17,050 | 17,100 | ||||||||||||
| Interest expense, other |
10,524 | 10,455 | 28,136 | 30,066 | ||||||||||||
| Other income (expense) |
1,302 | (13,936 | ) | 1,537 | (13,857 | ) | ||||||||||
| Income from continuing operations before taxes |
52,221 | 28,998 | 140,120 | 100,460 | ||||||||||||
| Income taxes |
20,290 | 10,466 | 53,778 | 36,490 | ||||||||||||
| Net income from continuing operations |
31,931 | 18,532 | 86,342 | 63,970 | ||||||||||||
| Discontinued operations: |
||||||||||||||||
| Loss on operations from discontinued dealerships |
(536 | ) | (1,641 | ) | (2,027 | ) | (1,016 | ) | ||||||||
| Income tax benefit |
195 | 650 | 843 | 408 | ||||||||||||
| Loss from discontinued operations |
(341 | ) | (991 | ) | (1,184 | ) | (608 | ) | ||||||||
| Income before cumulative effect of change in accounting principle |
31,590 | 17,541 | 85,158 | 63,362 | ||||||||||||
| Cumulative effect of change in accounting principle, net of tax benefit of $3,325 |
— | — | — | (5,619 | ) | |||||||||||
| Net income |
$ | 31,590 | $ | 17,541 | $ | 85,158 | $ | 57,743 | ||||||||
| Diluted: |
||||||||||||||||
| Weighted average common shares outstanding |
43,334 | 43,022 | 43,479 | 42,288 | ||||||||||||
| Net Income per share from continuing operations |
$ | 0.74 | $ | 0.43 | $ | 1.99 | $ | 1.51 | ||||||||
| Loss per share from discontinued operations |
($ | 0.01 | ) | ($ | 0.02 | ) | ($ | 0.03 | ) | ($ | 0.01 | ) | ||||
| Cumulative effect of change in accounting principle |
$ | 0.00 | $ | 0.00 | $ | 0.00 | ($ | 0.13 | ) | |||||||
| Net Income per share |
$ | 0.73 | $ | 0.41 | $ | 1.96 | $ | 1.37 | ||||||||
| Gross Margin Data: |
||||||||||||||||
| New vehicles retail |
7.6 | % | 6.8 | % | 7.8 | % | 7.0 | % | ||||||||
| Used vehicles retail |
11.3 | % | 11.1 | % | 11.6 | % | 11.2 | % | ||||||||
| Total vehicles retail |
8.4 | % | 7.6 | % | 8.6 | % | 7.9 | % | ||||||||
| Parts, service and collision repair |
47.5 | % | 48.1 | % | 47.4 | % | 48.2 | % | ||||||||
| Finance and insurance |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
| Overall gross margin |
15.2 | % | 14.8 | % | 15.5 | % | 15.3 | % | ||||||||
| SG&A Expenses: |
||||||||||||||||
| Personnel |
137,382 | 143,139 | 386,491 | 417,042 | ||||||||||||
| Advertising |
17,823 | 20,771 | 50,872 | 56,141 | ||||||||||||
| Facility rent |
17,200 | 19,551 | 48,780 | 56,601 | ||||||||||||
| Other |
52,757 | 57,193 | 139,310 | 165,014 | ||||||||||||
| Unit Data: |
||||||||||||||||
| New units |
42,838 | 45,070 | 115,625 | 123,481 | ||||||||||||
| Used units |
19,981 | 20,734 | 56,924 | 59,452 | ||||||||||||
| Total units retailed |
62,819 | 65,804 | 172,549 | 182,933 | ||||||||||||
| Wholesale units |
17,028 | 17,785 | 48,634 | 47,297 | ||||||||||||
| Average price per unit: |
||||||||||||||||
| New vehicles |
27,876 | 28,291 | 27,630 | 28,307 | ||||||||||||
| Used vehicles |
15,829 | 15,451 | 15,538 | 15,483 | ||||||||||||
| Wholesale vehicles |
7,434 | 7,050 | 7,392 | 7,175 | ||||||||||||
| Other Data: |
||||||||||||||||
| Net cash provided by operating activities |
$ | 60,579 | $ | 6,728 | $ | 116,660 | $ | 86,168 | ||||||||
| Floorplan assistance (continuing operations) |
$ | 10,289 | $ | 10,530 | $ | 27,231 | $ | 29,131 | ||||||||
| Balance Sheets: |
||||||||
| As Of | ||||||||
| 12/31/2002 |
09/30/2003 |
|||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 10,576 | $ | 34,951 | ||||
| Receivables, net |
297,859 | 306,655 | ||||||
| Inventories |
929,450 | 872,366 | ||||||
| Other current assets |
63,742 | 53,250 | ||||||
| Total current assets |
1,301,627 | 1,267,222 | ||||||
| Property and Equipment, Net |
121,936 | 155,302 | ||||||
| Goodwill, Net |
875,894 | 906,777 | ||||||
| Other Intangibles, Net |
61,800 | 77,040 | ||||||
| Other Assets |
14,051 | 18,861 | ||||||
| TOTAL ASSETS |
$ | 2,375,308 | $ | 2,425,202 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Notes payable—floor plan |
$ | 850,162 | $ | 787,095 | ||||
| Trade accounts payable |
58,560 | 62,358 | ||||||
| Accrued interest |
13,306 | 8,440 | ||||||
| Other accrued liabilities |
113,592 | 156,545 | ||||||
| Current maturities of long-term debt |
2,764 | 2,764 | ||||||
| Total current liabilities |
1,038,384 | 1,017,202 | ||||||
| LONG-TERM DEBT |
637,545 | 662,620 | ||||||
| OTHER LONG-TERM LIABILITIES |
16,085 | 15,973 | ||||||
| PAYABLE TO COMPANY'S CHAIRMAN |
5,500 | 4,500 | ||||||
| DEFERRED INCOME TAXES |
40,616 | 41,077 | ||||||
| STOCKHOLDERS' EQUITY |
||||||||
| Class A convertible preferred stock |
— | — | ||||||
| Class A common stock |
371 | 379 | ||||||
| Class B common stock |
121 | 121 | ||||||
| Paid-in capital |
396,813 | 406,907 | ||||||
| Accumulated other comprehensive loss |
(6,447 | ) | (5,727 | ) | ||||
| Retained earnings |
339,457 | 393,101 | ||||||
| Treasury stock, at cost |
(93,137 | ) | (110,951 | ) | ||||
| Total stockholders' equity |
637,178 | 683,830 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ | 2,375,308 | $ | 2,425,202 | ||||
| Balance Sheet Data: |
||||||||
| Current Ratio |
1.25 | 1.25 | ||||||
| Debt to Total Capital |
50.3 | % | 49.5 | % | ||||
| LTM Return on Stockholders' Equity |
17.9 | % | 12.1 | % | ||||