Exhibit 99.1
SONIC AUTOMOTIVE, INC. ANNOUNCES FIRST QUARTER
INCOME FROM CONTINUING OPERATIONS OF $0.53 PER SHARE
CHARLOTTE, NC (April 27, 2004)—Sonic Automotive, Inc. (NYSE: SAH) today announced results for the first quarter of 2004. Sonic reported first quarter income from continuing operations of $22.4 million, or $0.53 per diluted share, compared to $19.1 million, or $0.46 per diluted share, in 2003.
Net income for the quarter ended March 31, 2004 was $22.2 million, or $0.52 per diluted share, compared to the prior year of $11.7 million, or $0.28 per diluted share. Net income for the quarter ended March 31, 2003 included a $5.6 million, or $0.14 per diluted share, after tax charge as a cumulative effect of accounting change related to the Emerging Issues Task Force guidance on accounting for incentives and rebates.
In commenting on the quarter, Mr. O. Bruton Smith, the Company’s Chairman and Chief Executive Officer stated, “The results reflect initial benefits from the execution of previously announced operating initiatives in our dealerships. We have completed the majority of planned actions to strengthen field management which should create value as the year progresses. The shift to centralized control over advertising expense has been completed and has generated immediate benefits. The implementation of standard field compensation plans has begun and will continue throughout the year. We are pleased with our first quarter results but fully realize that continued improvement is dependent on consistent execution of our primary strategies of reducing SG&A expenses, maintaining gross margins and completion of pending acquisitions. Because of this, we remain comfortable with our previously announced earnings target of $2.65 to $2.80 per diluted share from continuing operations for calendar year 2004.”
Same Store Sales
On a same store basis, total revenues increased 2.4% for the quarter. New vehicle same store sales were up 2.4% with gross margins of 7.4%, consistent with the prior year. Total retail and wholesale used vehicle same store sales increased 2.6% for the quarter while the gross margin rate declined 20 bps. Same store parts, service and collision sales increased 4.8% with the gross margin rate increasing 30 bps to 48.3%. Same store finance and insurance revenues declined 10.5% for the quarter.
Jeffrey C. Rachor, the Company’s Chief Operating Officer, stated, “The expense reduction efforts previously announced produced benefits in the first quarter. We saw advertising expense on a same store basis decline $2.1 million, or 90 bps as a percent of gross profit, compared to the prior year. Sales compensation, our largest operating expense category, declined $3.2 million, or 150 bps as a percent of gross profit. Most importantly, we achieved our SG&A expense target for the quarter of 80% of gross profit.”
Mr. Rachor continued, “Our previously announced SG&A expense targets for 2004 remain unchanged at 77% of gross profit in the second and third quarters and 78% in the fourth quarter. We also believe that our reduced acquisition pace will continue to help our corporate and regional management focus on the execution of our operating initiatives.”
Acquisition and Disposition Activity
During the first quarter, Sonic closed on the previously announced acquisition of Crown Lexus. On April 16, the Company completed the acquisition of eight franchises in Houston, Texas including Porsche, Audi, Volvo, Jaguar, Volkswagen and Land Rover brands. It is anticipated that the balance of the previously announced Houston acquisition will be completed in July. Mr. Smith reiterated, “We expect our 2004 acquisition program to be complete upon the closing of these pending acquisitions and continue to target long-term acquisition growth of a maximum of 10% of annual revenues.”
The Company sold two dealerships included in discontinued operations during the quarter and signed contracts to sell three other dealerships.
Financial Position
At March 31, 2004, the Company had approximately $235 million available under its revolving credit facility and cash of $39.5 million. The Company’s debt-to-total-capital ratio was 48.0%, net of cash, at March 31, 2004. The Company remains committed to its previously announced targeted debt-to-total-capital ratio of 45% by the end of 2004 and 40% over the longer term.
Brand and Geographic Diversity
The Company’s top brands for the quarter based on new vehicle revenues were Honda (13.1%), Cadillac (12.9%), Toyota (12.1%), BMW (10.3%), Chevrolet (10.3%), Ford (10.2%), Lexus (6.1%), Volvo (3.9%), Mercedes (3.4%) and Chrysler (3.2%).
The Company’s top markets for the quarter based on total revenues were Los Angeles (10.2%), Houston (9.8%), Dallas (9.3%), San Francisco (8.5%), San Jose (7.4%), Tampa (5.9%), Charlotte (4.8%), Michigan (4.1%), Atlanta (4.1%) and Oklahoma (4.0%).
MANAGEMENT WILL BE HOLDING A CONFERENCE CALL ON TUESDAY, APRIL 27 AT 11:00 A.M. EASTERN TIME. TO PARTICIPATE, PLEASE DIAL 877-791-3416. INTERNATIONAL CALLERS DIAL 706-643-0958—OR YOU CAN ACCESS THE CALL AT: http://www.ccbn.com/ or http://www.sonicautomotive.com/
About Sonic Automotive, Inc.
Sonic Automotive, Inc., a Fortune 300 Company, is one of the largest automotive retailers in the United States operating 194 franchises and 39 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 acquisition growth pace, disposition activity, earnings per share, expense levels and capital structure. 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 Annual Report on Form 10-K for the year ended December 31, 2003. The Company does not undertake any obligation to update forward-looking information.
Sonic Automotive, Inc.
Results of Operations (unaudited)
(in thousands, except per share and unit data amounts)
| Three Months Ended |
||||||||
| 03/31/2003 |
D03/31/2004 |
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| Income Statements: |
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| Revenues |
||||||||
| New vehicles |
$ | 931,330 | $ | 1,008,352 | ||||
| Used vehicles |
276,527 | 290,191 | ||||||
| Wholesale vehicles |
98,631 | 114,458 | ||||||
| Total vehicles |
1,306,488 | 1,413,001 | ||||||
| Parts, service and collision repair |
223,304 | 246,897 | ||||||
| Finance & insurance and other |
46,183 | 43,895 | ||||||
| Total revenues |
1,575,975 | 1,703,793 | ||||||
| Total gross profit |
251,397 | 267,613 | ||||||
| SG&A expenses |
203,938 | 214,079 | ||||||
| Depreciation |
2,274 | 3,720 | ||||||
| Operating income |
45,185 | 49,814 | ||||||
| Interest expense, floor plan |
5,522 | 5,955 | ||||||
| Interest expense, other |
9,525 | 8,335 | ||||||
| Other income |
72 | 27 | ||||||
| Income from continuing operations before taxes |
30,210 | 35,551 | ||||||
| Income taxes |
11,148 | 13,171 | ||||||
| Income from continuing operations |
19,062 | 22,380 | ||||||
| Discontinued operations: |
||||||||
| Loss from operations and the sale of discontinued dealerships |
(2,915 | ) | (375 | ) | ||||
| Income tax benefit |
1,158 | 180 | ||||||
| Loss from discontinued operations |
(1,757 | ) | (195 | ) | ||||
| Income before cumulative effect of change in accounting principle |
17,305 | 22,185 | ||||||
| Cumulative effect of change in accounting principle, net of tax benefit of $3,325 |
(5,620 | ) | — | |||||
| Net income |
$ | 11,685 | $ | 22,185 | ||||
| Diluted: |
||||||||
| Weighted average common shares outstanding |
41,757 | 42,599 | ||||||
| Income per share from continuing operations |
$ | 0.46 | $ | 0.53 | ||||
| Loss per share from discontinued operations |
(0.04 | ) | (0.01 | ) | ||||
| Cumulative effect of change in accounting principle |
(0.14 | ) | — | |||||
| Net Income per share |
$ | 0.28 | $ | 0.52 | ||||
| Gross Margin Data: |
||||||||
| New vehicles retail |
7.4 | % | 7.3 | % | ||||
| Used vehicles retail |
10.8 | % | 10.7 | % | ||||
| Total vehicles retail |
8.2 | % | 8.0 | % | ||||
| Parts, service and collision repair |
48.0 | % | 48.6 | % | ||||
| Finance and insurance |
100.0 | % | 100.0 | % | ||||
| Overall gross margin |
16.0 | % | 15.7 | % | ||||
| SG&A Expenses: |
||||||||
| Personnel |
123,338 | 128,208 | ||||||
| Advertising |
15,331 | 13,580 | ||||||
| Facility rent |
16,623 | 19,781 | ||||||
| Other |
48,646 | 52,510 | ||||||
| Unit Data: |
||||||||
| New units |
33,644 | 34,782 | ||||||
| Used units |
16,938 | 17,378 | ||||||
| Total units retailed |
50,582 | 52,160 | ||||||
| Wholesale units |
12,838 | 13,433 | ||||||
| Average price per unit: |
||||||||
| New vehicles |
27,682 | 28,991 | ||||||
| Used vehicles |
16,326 | 16,699 | ||||||
| Wholesale vehicles |
7,683 | 8,521 | ||||||
| Other Data: |
||||||||
| Net cash provided by (used in) operating activities |
$ | 26,503 | $ | (2,234 | ) | |||
| Floorplan assistance realized (continuing operations) |
$ | 7,577 | $ | 8,984 | ||||
| Balance Sheets: |
||||||||||||
| As Of |
||||||||||||
| 12/31/2003 |
03/31/2004 |
|||||||||||
| ASSETS |
||||||||||||
| Current Assets: |
||||||||||||
| Cash and cash equivalents |
$ | 82,082 | $ | 39,475 | ||||||||
| Receivables, net |
306,498 | 310,613 | ||||||||||
| Inventories |
1,046,909 | 1,096,550 | ||||||||||
| Assets held for sale |
88,990 | 83,941 | ||||||||||
| Other current assets |
29,718 | 35,949 | ||||||||||
| Total current assets |
1,554,197 | 1,566,528 | ||||||||||
| Property and Equipment, Net |
125,356 | 133,003 | ||||||||||
| Goodwill, Net |
909,091 | 932,801 | ||||||||||
| Other Intangibles, Net |
75,230 | 77,087 | ||||||||||
| Other Assets |
22,355 | 31,227 | ||||||||||
| TOTAL ASSETS |
$ | 2,686,229 | $ | 2,740,646 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||||
| Current Liabilities: |
||||||||||||
| Notes payable—floor plan |
$ | 996,370 | $ | 1,021,752 | ||||||||
| Trade accounts payable |
63,577 | 64,635 | ||||||||||
| Accrued interest |
13,851 | 9,569 | ||||||||||
| Other accrued liabilities |
121,744 | 133,072 | ||||||||||
| Current maturities of long-term debt |
1,387 | 1,123 | ||||||||||
| Total current liabilities |
1,196,929 | 1,230,151 | ||||||||||
| LONG-TERM DEBT |
694,898 | 698,656 | ||||||||||
| OTHER LONG-TERM LIABILITIES |
19,136 | 20,025 | ||||||||||
| DEFERRED INCOME TAXES |
76,933 | 76,882 | ||||||||||
| STOCKHOLDERS’ EQUITY |
||||||||||||
| Class A convertible preferred stock |
— | — | ||||||||||
| Class A common stock |
384 | 386 | ||||||||||
| Class B common stock |
121 | 121 | ||||||||||
| Paid-in capital |
416,892 | 419,975 | ||||||||||
| Accumulated other comprehensive loss |
(4,419 | ) | (4,499 | ) | ||||||||
| Retained earnings |
402,799 | 420,864 | ||||||||||
| Treasury stock, at cost |
(117,444 | ) | (121,915 | ) | ||||||||
| Total stockholders’ equity |
698,333 | 714,932 | ||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 2,686,229 | $ | 2,740,646 | ||||||||
| Balance Sheet Data: |
||||||||||||
| Current Ratio |
1.30 | 1.27 | ||||||||||
| Debt to Total Capital |
49.9 | % | 49.5 | % | ||||||||
| LTM Return on Stockholders’ Equity |
10.7 | % | 12.0 | % | ||||||||