Exhibit 99.1
SONIC AUTOMOTIVE, INC. ANNOUNCES SECOND QUARTER
INCOME FROM CONTINUING OPERATIONS OF $0.73 PER SHARE
Continues Earnings Growth and Achieves Expense Targets
CHARLOTTE, NC (July 27, 2004) – Sonic Automotive, Inc. (NYSE: SAH) today announced results for the second quarter of 2004. Sonic reported that revenues increased $53.9 million to $1.877 billion in the second quarter of 2004 as compared to the second quarter of 2003. Income from continuing operations for the quarter increased to $30.9 million, or $0.73 per diluted share, compared to $28.6 million, or $0.68 per diluted share, in 2003. Revenues increased $181.8 million to $3.581 billion for the first half of 2004 compared to the first half of 2003. Income from continuing operations for the first half of 2004 was $53.3 million, or $1.25 per diluted share, compared to $47.7 million, or $1.14 per diluted share, for the same period last year.
Net income for the quarter ended June 30, 2004 was $30.0 million, or $0.70 per diluted share, compared to the prior year of $28.5 million, or $0.68 per diluted share. For the first half of 2004, net income was $52.2 million, or $1.23 per diluted share, compared to net income of $40.2 million, or $0.96 per diluted share, for the same period last year. Net income for the six months ended June 30, 2003 included 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.
In commenting on the quarter, Mr. O. Bruton Smith, the Company’s Chairman and Chief Executive Officer, stated, “The second quarter results reinforce the appropriateness of our current strategy to reduce the acquisition pace and focus on expense control. The results reflect the benefits of continued execution of this strategy and dampened the impact of the challenging sales environment for both new and used vehicles. We remain comfortable with our previously announced target of $2.65 to $2.80 per diluted share of income from continuing operations for calendar year 2004.”
Same Store Data
On a same store basis, total revenues declined 5.1% for the quarter but the overall same store gross margin rate increased to 15.4% from 15.1% for the same quarter last year. New vehicle same store sales declined 5.4% for the quarter but the new vehicle same store gross margin rate increased to 7.4% in the quarter compared to 7.1% last year. Combined retail and wholesale used vehicle same store sales were down 6.1% for the quarter while the retail gross margin increased 10 bps. Same store parts, service and collision repair sales were relatively flat for the quarter while the gross margin rate increased to 48.8% from 48.3% last year.
Jeffrey C. Rachor, the Company’s President and Chief Operating Officer, stated, “We continued to execute on our previously announced expense reduction efforts. Our overall SG&A expense was 76.5% of gross profit compared to our previously announced target of 77.0% for the second quarter. We remain focused on meeting the previously announced SG&A expense targets of 77.0% in the third quarter and 78.0% in the fourth quarter of 2004. Although these are aggressive targets compared to the prior year results, we expect that the progress achieved to date will continue to benefit us throughout the second half of the year. We are also pleased with the improvement in new vehicle and overall gross margin rates during the recently completed quarter.”
Acquisition and Disposition Activity
On July 1, Sonic closed on two previously announced BMW dealerships in the Houston area. Year to date in 2004, the Company has closed on acquisitions representing approximately $700 million in annual revenues and does not expect to complete any additional acquisitions for the remainder of 2004.
The Company disposed of one dealership during the quarter and one dealership in July from our previously announced group of dealerships held for sale. Year to date, Sonic has closed on three of its planned dealership dispositions.
Security Repurchase Plans
The Company’s Board of Directors has increased the authorization to repurchase outstanding shares of the Company’s Class A common stock or redeem securities convertible into the Company’s Class A common stock by $20.0 million. During the second quarter, the Company repurchased 474,800 shares for $10.9 million and, including the additional authorization, had approximately $33.0 million of the authorization remaining at July 27, 2004.
Financial Position
At June 30, 2004, the Company had approximately $196 million available under its revolving credit facility. The Company’s debt-to-total-capital ratio was 49.3% at June 30, 2004 primarily as a result of the recently completed acquisitions. The Company remains committed to its long-term debt-to-total capital target of 40%. The Company expects the ratio to be between 45% and 49% by year end.
Brand and Geographic Diversity
The Company’s top ten brands for the quarter based on new vehicle revenues were Honda (12.7%), BMW (11.3%), Toyota (11.3%), Cadillac (11.1%), Chevrolet (10.8%), Ford (9.9%), Lexus (5.9%), Volvo (4.0%), Chrysler (3.3%), and Mercedes (3.0%).
The Company’s top markets for the quarter based on total revenues were Houston (13.3%), Los Angeles (9.3%), Dallas (8.9%), San Francisco (7.9%), San Jose (7.4%), Tampa (5.5%), Charlotte (4.8%), Atlanta (4.2%), Oklahoma (4.1%), and Michigan (3.8%).
MANAGEMENT WILL BE HOLDING A CONFERENCE CALL ON TUESDAY, JULY 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 www.ccbn.com OR 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 195 franchises and 40 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, disposition activity, earnings per share and expense levels and debt-to-capital levels. 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2004. 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 |
Six Months Ended |
|||||||||||||||
| 6/30/2003 |
6/30/2004 |
6/30/2003 |
6/30/2004 |
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| Revenues |
||||||||||||||||
| New vehicles |
$ | 1,118,757 | $ | 1,144,243 | $ | 2,049,932 | $ | 2,152,506 | ||||||||
| Used vehicles |
313,454 | 297,970 | 589,981 | 588,161 | ||||||||||||
| Wholesale vehicles |
102,707 | 128,527 | 201,338 | 242,986 | ||||||||||||
| Total vehicles |
1,534,918 | 1,570,740 | 2,841,251 | 2,983,653 | ||||||||||||
| Parts, service and collision repair |
236,671 | 257,653 | 459,933 | 504,518 | ||||||||||||
| Finance, insurance and other |
51,705 | 48,822 | 97,883 | 92,714 | ||||||||||||
| Total revenues |
1,823,294 | 1,877,215 | 3,399,067 | 3,580,885 | ||||||||||||
| Total gross profit |
276,272 | 290,267 | 527,645 | 557,863 | ||||||||||||
| SG&A expenses |
213,783 | 222,014 | 417,721 | 436,092 | ||||||||||||
| Depreciation |
2,555 | 4,300 | 4,829 | 8,020 | ||||||||||||
| Operating income |
59,934 | 63,953 | 105,095 | 113,751 | ||||||||||||
| Interest expense, floor plan |
5,384 | 6,561 | 10,906 | 12,516 | ||||||||||||
| Interest expense, other |
9,696 | 8,802 | 19,221 | 17,137 | ||||||||||||
| Other income (expense) |
16 | (33 | ) | 88 | (6 | ) | ||||||||||
| Income from continuing operations before taxes |
44,870 | 48,557 | 75,056 | 84,092 | ||||||||||||
| Income taxes |
16,239 | 17,624 | 27,387 | 30,795 | ||||||||||||
| Income from continuing operations |
28,631 | 30,933 | 47,669 | 53,297 | ||||||||||||
| Discontinued operations: |
||||||||||||||||
| Loss from operations and the sale of discontinued dealerships |
(78 | ) | (1,501 | ) | (2,969 | ) | (1,859 | ) | ||||||||
| Income tax benefit (expense) |
(37 | ) | 560 | 1,121 | 740 | |||||||||||
| Loss from discontinued operations |
(115 | ) | (941 | ) | (1,848 | ) | (1,119 | ) | ||||||||
| Income before cumulative effect of change in accounting principle |
28,516 | 29,992 | 45,821 | 52,178 | ||||||||||||
| Cumulative effect of change in accounting principle, net of tax benefit of $3,325 |
— | — | (5,619 | ) | — | |||||||||||
| Net income |
$ | 28,516 | $ | 29,992 | $ | 40,202 | $ | 52,178 | ||||||||
| Diluted: |
||||||||||||||||
| Weighted average common shares outstanding |
42,071 | 42,557 | 41,915 | 42,578 | ||||||||||||
| Income per share from continuing operations |
$ | 0.68 | $ | 0.73 | $ | 1.14 | $ | 1.25 | ||||||||
| Loss per share from discontinued operations |
$ | 0.00 | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.02 | ) | |||||
| Cumulative effect of change in accounting principle |
$ | 0.00 | $ | 0.00 | $ | (0.14 | ) | $ | 0.00 | |||||||
| Net income per share |
$ | 0.68 | $ | 0.70 | $ | 0.96 | $ | 1.23 | ||||||||
| Gross Margin Data: |
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| New vehicles retail |
7.1 | % | 7.5 | % | 7.2 | % | 7.4 | % | ||||||||
| Used vehicles retail |
10.3 | % | 10.3 | % | 10.5 | % | 10.5 | % | ||||||||
| Total vehicles retail |
7.8 | % | 8.1 | % | 8.0 | % | 8.1 | % | ||||||||
| Parts, service and collision repair |
48.3 | % | 48.8 | % | 48.2 | % | 48.7 | % | ||||||||
| Finance and insurance |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
| Overall gross margin |
15.2 | % | 15.5 | % | 15.5 | % | 15.6 | % | ||||||||
| SG&A Expenses: |
||||||||||||||||
| Personnel |
130,706 | 129,335 | 254,043 | 257,542 | ||||||||||||
| Advertising |
16,852 | 16,583 | 32,183 | 30,162 | ||||||||||||
| Facility rent |
16,750 | 20,115 | 33,372 | 39,896 | ||||||||||||
| Other |
49,475 | 55,981 | 98,123 | 108,492 | ||||||||||||
| Unit Data: |
||||||||||||||||
| New units, excluding fleet |
37,016 | 35,655 | 67,637 | 67,114 | ||||||||||||
| Fleet units |
2,989 | 3,783 | 6,006 | 7,102 | ||||||||||||
| Total new units |
40,005 | 39,438 | 73,643 | 74,216 | ||||||||||||
| Used units |
18,768 | 17,125 | 35,706 | 34,503 | ||||||||||||
| Total units retailed |
58,773 | 56,563 | 109,349 | 108,719 | ||||||||||||
| Wholesale units |
14,462 | 16,226 | 27,300 | 29,659 | ||||||||||||
| Average price per unit: |
||||||||||||||||
| New vehicles |
27,965 | 29,014 | 27,836 | 29,003 | ||||||||||||
| Used vehicles |
16,702 | 17,400 | 16,523 | 17,047 | ||||||||||||
| Wholesale vehicles |
7,102 | 7,921 | 7,375 | 8,193 | ||||||||||||
| Other Data: |
||||||||||||||||
| Net cash provided by operating activities |
$ | 52,937 | $ | 27,500 | $ | 79,440 | $ | 25,266 | ||||||||
| Floorplan assistance (continuing operations) |
$ | 9,628 | $ | 10,091 | $ | 17,205 | $ | 19,075 | ||||||||
Balance Sheets:
| 12/31/2003 |
6/30/2004 |
|||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 82,082 | $ | 0 | ||||
| Receivables, net |
306,498 | 350,922 | ||||||
| Inventories |
1,046,909 | 1,160,487 | ||||||
| Assets held for sale |
88,990 | 84,784 | ||||||
| Other current assets |
29,718 | 50,034 | ||||||
| Total current assets |
1,554,197 | 1,646,227 | ||||||
| Property and Equipment, Net |
125,356 | 147,770 | ||||||
| Goodwill, Net |
909,091 | 970,394 | ||||||
| Other Intangibles, Net |
75,230 | 87,817 | ||||||
| Other Assets |
22,355 | 29,567 | ||||||
| TOTAL ASSETS |
$ | 2,686,229 | $ | 2,881,775 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Notes payable - floor plan |
$ | 996,370 | $ | 1,077,296 | ||||
| Trade accounts payable |
63,577 | 65,851 | ||||||
| Accrued interest |
13,851 | 14,322 | ||||||
| Other accrued liabilities |
121,744 | 151,524 | ||||||
| Current maturities of long-term debt |
1,387 | 3,547 | ||||||
| Total current liabilities |
1,196,929 | 1,312,540 | ||||||
| LONG-TERM DEBT |
694,898 | 721,737 | ||||||
| OTHER LONG-TERM LIABILITIES |
19,136 | 24,502 | ||||||
| DEFERRED INCOME TAXES |
76,933 | 78,229 | ||||||
| STOCKHOLDERS’ EQUITY |
||||||||
| Class A common stock |
384 | 393 | ||||||
| Class B common stock |
121 | 121 | ||||||
| Paid-in capital |
416,892 | 432,736 | ||||||
| Retained earnings |
402,799 | 446,709 | ||||||
| Accumulated other comprehensive loss |
(4,419 | ) | (2,392 | ) | ||||
| Treasury stock, at cost |
(117,444 | ) | (132,800 | ) | ||||
| Total stockholders’ equity |
698,333 | 744,767 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 2,686,229 | $ | 2,881,775 | ||||
| Balance Sheet Data: |
||||||||
| Current Ratio |
1.30 | 1.25 | ||||||
| Debt to Total Capital |
49.9 | % | 49.3 | % | ||||
| LTM Return on Stockholders’ Equity |
10.7 | % | 11.9 | % | ||||