Exhibit 99.1
SONIC AUTOMOTIVE, INC. ANNOUNCES THIRD QUARTER
INCOME FROM CONTINUING OPERATIONS OF $0.53 PER SHARE
CHARLOTTE, NC (October 26, 2004) – Sonic Automotive, Inc. (NYSE: SAH) today announced results for the third quarter of 2004. Sonic reported that revenues increased $95.4 million to $1.983 billion in the third quarter of 2004 as compared to the third quarter of 2003. Income from continuing operations for the quarter increased to $22.3 million, or $0.53 per diluted share, compared to $19.3 million, or $0.45 per diluted share, in 2003. Income from continuing operations for the third quarter of 2004 of $0.53 per diluted share was negatively impacted by approximately $0.09 due to hurricanes in the Southeast Division, hail damage in Colorado and other less significant charges. Income from continuing operations for the third quarter of 2003 of $0.45 per diluted share included charges of $0.23 related to the Company’s senior subordinated notes refinancing. Revenues increased $285.9 million to $5.553 billion for the first nine months of 2004 compared to the same period in 2003. Income from continuing operations for the first nine months of 2004 was $76.1 million, or $1.79 per diluted share, compared to $66.8 million, or $1.58 per diluted share, for the same period in 2003.
Net income for the quarter ended September 30, 2004 was $19.3 million, or $0.46 per diluted share, compared to $17.5 million, or $0.41 per diluted share, in 2003. Net income for the first nine months of 2004 was $71.5 million, or $1.68 per diluted share, compared to $57.7 million, or $1.37 per diluted share, for the same period in 2003. In addition to the $0.23 of refinancing charges in the third quarter of last year discussed above, net income for the nine months ended September 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.
O. Bruton Smith, the Company’s Chairman and Chief Executive Officer stated, “The third quarter was challenging due to the overall retail environment as well as the price competition caused by excess inventory in the industry. In addition, hurricanes in the Southeast created sales shortfalls for our Company. We do not anticipate a significant improvement in the overall environment during the balance of this year. In spite of these conditions, we are confident that our strategy is sound and our Company’s cash flow is strong. We anticipate fourth quarter earnings of $0.41 to $0.44 per diluted share from continuing operations.”
Same Store Data
On a same store basis, total revenues declined 4.3% for the quarter compared to the same quarter last year. The overall same store gross margin rate was relatively flat with last year at 14.8%. New vehicle same store sales declined 4.0% for the quarter and the new vehicle same store gross margin rate was relatively flat with the same quarter of last year at 6.9%. Combined retail and wholesale used vehicle same store sales were down 6.0% for the quarter while the retail gross margin decreased 20 bps to 10.0%. Same store parts, service and collision repair sales decreased 1.8% for the quarter while gross margin increased to 48.4% from 48.0% in the same quarter last year.
Jeffrey C. Rachor, the Company’s President and Chief Operating Officer, stated, “In light of the difficult conditions created by the hurricanes and increasingly competitive industry dynamics, we continue to focus on what we can control. New vehicle inventories were reduced by 11 days during the quarter to a 48 days supply at the end of the quarter. We are committed to balancing sales and gross margin rates while maintaining disciplined control of expenses. The recent management realignment in the Western Division should positively impact execution of our operating initiatives in key under-performing markets. We continue the development of people and processes with a commitment to improved operating performance and consistent results.”
Acquisition and Disposition Activity
With the July closing on the BMW dealerships in Houston, the Company has completed all anticipated acquisitions in 2004. Year to date in 2004, the Company has closed on acquisitions representing approximately $600 million in annual revenues.
The Company disposed of two dealerships during the quarter from the previously announced group of dealerships held for sale. Year to date, Sonic has closed on four of these planned dealership dispositions.
Security Repurchase Plans
During the third quarter, the Company repurchased 279,900 shares for $5.5 million and had approximately $32.8 million of the Board’s previous authorization remaining. Year to date repurchases of Company shares total 951,500 shares for $20.9 million.
Financial Position
At September 30, 2004, the Company had approximately $175 million available under its revolving credit facility. The Company’s debt-to-total-capital ratio was 49.9% at September 30, 2004 primarily as a result of the acquisition of the BMW dealerships completed in July. The Company remains committed to its long-term targeted debt-to-total-capital ratio of 40%. The Company expects the ratio to be between 46% and 48% by year-end.
Brand and Geographic Diversity
The Company’s top ten brands for the quarter based on new vehicle revenues were Honda (12.3%), BMW (12.2%), Chevrolet (12.1%), Cadillac (11.1%), Toyota (10.7%), Ford (9.3%), Lexus (5.6%), Volvo (4.3%), Chrysler (3.0%) and Mercedes (2.7%).
The Company’s top markets for the quarter based on total revenues were Houston (15.3%), Los Angeles (9.7%), Dallas (8.7%), San Francisco (7.7%), San Jose (7.5%), Charlotte (4.7%), Oklahoma (4.6%), Tampa (4.5%), Atlanta (4.0%) and Michigan (3.6%).
MANAGEMENT WILL BE HOLDING A CONFERENCE CALL ON TUESDAY, OCTOBER 26 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, earnings per share, expense levels and debt-to-capital levels, as well as anticipated industry vehicle sales conditions and expected improvement in execution of operating initiatives. 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 June 30, 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 |
Nine Months Ended |
|||||||||||||||
| 9/30/2003 |
9/30/2004 |
9/30/2003 |
9/30/2004 |
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| Revenues |
||||||||||||||||
| New vehicles |
$ | 1,157,648 | $ | 1,209,668 | $ | 3,202,143 | $ | 3,359,251 | ||||||||
| Used vehicles |
315,700 | 311,972 | 895,571 | 895,356 | ||||||||||||
| Wholesale vehicles |
115,780 | 139,480 | 314,791 | 380,735 | ||||||||||||
| Total vehicles |
1,589,128 | 1,661,120 | 4,412,505 | 4,635,342 | ||||||||||||
| Parts, service and collision repair |
245,099 | 269,549 | 704,147 | 773,123 | ||||||||||||
| Finance, insurance and other |
53,380 | 52,303 | 150,483 | 144,547 | ||||||||||||
| Total revenues |
1,887,607 | 1,982,972 | 5,267,135 | 5,553,012 | ||||||||||||
| Total gross profit |
283,340 | 296,121 | 808,452 | 852,440 | ||||||||||||
| SG&A expenses |
221,342 | 240,119 | 636,729 | 673,978 | ||||||||||||
| Depreciation |
2,975 | 4,209 | 7,797 | 12,207 | ||||||||||||
| Operating income |
59,023 | 51,793 | 163,926 | 166,255 | ||||||||||||
| Interest expense, floor plan |
4,626 | 6,516 | 15,495 | 18,972 | ||||||||||||
| Interest expense, other |
10,273 | 9,628 | 29,455 | 26,713 | ||||||||||||
| Other income (expense) |
(13,937 | ) | 66 | (13,849 | ) | 61 | ||||||||||
| Income from continuing operations before taxes |
30,187 | 35,715 | 105,127 | 120,631 | ||||||||||||
| Income taxes |
10,932 | 13,409 | 38,278 | 44,513 | ||||||||||||
| Income from continuing operations |
19,255 | 22,306 | 66,849 | 76,118 | ||||||||||||
| Discontinued operations: |
||||||||||||||||
| Loss from operations and the sale of discontinued dealerships |
(2,830 | ) | (4,836 | ) | (5,682 | ) | (7,520 | ) | ||||||||
| Income tax benefit (expense) |
1,116 | 1,811 | 2,195 | 2,860 | ||||||||||||
| Loss from discontinued operations |
(1,714 | ) | (3,025 | ) | (3,487 | ) | (4,660 | ) | ||||||||
| Income before cumulative effect of change in accounting principle |
17,541 | 19,281 | 63,362 | 71,458 | ||||||||||||
| Cumulative effect of change in accounting principle, net of tax benefit of $3,325 |
— | — | (5,619 | ) | — | |||||||||||
| Net income |
$ | 17,541 | $ | 19,281 | $ | 57,743 | $ | 71,458 | ||||||||
| Diluted: |
||||||||||||||||
| Weighted average common shares outstanding |
43,022 | 42,164 | 42,288 | 42,439 | ||||||||||||
| Income per share from continuing operations |
$ | 0.45 | $ | 0.53 | $ | 1.58 | $ | 1.79 | ||||||||
| Loss per share from discontinued operations |
$ | (0.04 | ) | $ | (0.07 | ) | $ | (0.08 | ) | $ | (0.11 | ) | ||||
| Cumulative effect of change in accounting principle |
— | — | $ | (0.13 | ) | — | ||||||||||
| Net income per share |
$ | 0.41 | $ | 0.46 | $ | 1.37 | $ | 1.68 | ||||||||
| Gross Margin Data: |
||||||||||||||||
| New vehicles retail |
7.0 | % | 7.0 | % | 7.1 | % | 7.2 | % | ||||||||
| Used vehicles retail |
10.4 | % | 9.8 | % | 10.5 | % | 10.2 | % | ||||||||
| Total vehicles retail |
7.7 | % | 7.5 | % | 7.9 | % | 7.9 | % | ||||||||
| Parts, service and collision repair |
48.1 | % | 48.6 | % | 48.1 | % | 48.6 | % | ||||||||
| Finance and insurance |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
| Overall gross margin |
15.0 | % | 14.9 | % | 15.3 | % | 15.4 | % | ||||||||
| SG&A Expenses: |
||||||||||||||||
| Personnel |
132,707 | 135,594 | 385,567 | 392,062 | ||||||||||||
| Advertising |
18,760 | 16,753 | 50,580 | 46,708 | ||||||||||||
| Facility rent |
17,556 | 21,047 | 50,687 | 60,694 | ||||||||||||
| Other |
52,319 | 66,725 | 149,895 | 174,514 | ||||||||||||
| Unit Data: |
||||||||||||||||
| New units, excluding fleet |
39,625 | 37,804 | 106,935 | 104,702 | ||||||||||||
| Fleet units |
1,808 | 3,354 | 7,814 | 10,456 | ||||||||||||
| Total new units |
41,433 | 41,158 | 114,749 | 115,158 | ||||||||||||
| Used units |
19,140 | 17,851 | 54,160 | 51,983 | ||||||||||||
| Total units retailed |
60,573 | 59,009 | 168,909 | 167,141 | ||||||||||||
| Wholesale units |
16,181 | 16,410 | 42,974 | 45,808 | ||||||||||||
| Average price per unit: |
||||||||||||||||
| New vehicles |
27,940 | 29,391 | 27,906 | 29,171 | ||||||||||||
| Used vehicles |
16,494 | 17,476 | 16,536 | 17,224 | ||||||||||||
| Wholesale vehicles |
7,155 | 8,500 | 7,325 | 8,312 | ||||||||||||
| Other Data: |
||||||||||||||||
| Net cash provided by operating activities |
$ | 6,728 | $ | 94,509 | $ | 86,168 | $ | 119,775 | ||||||||
| Floorplan assistance (continuing operations) |
$ | 9,762 | $ | 9,801 | $ | 26,846 | $ | 28,773 | ||||||||
Balance Sheets:
| 12/31/2003 |
9/30/2004 |
|||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 82,082 | $ | 0 | ||||
| Receivables, net |
306,498 | 330,512 | ||||||
| Inventories |
1,046,909 | 1,015,026 | ||||||
| Assets held for sale |
88,990 | 83,930 | ||||||
| Other current assets |
29,718 | 19,540 | ||||||
| Total current assets |
1,554,197 | 1,449,008 | ||||||
| Property and Equipment, Net |
125,356 | 160,781 | ||||||
| Goodwill, Net |
909,091 | 1,051,782 | ||||||
| Other Intangibles, Net |
75,230 | 90,847 | ||||||
| Other Assets |
22,355 | 32,025 | ||||||
| TOTAL ASSETS |
$ | 2,686,229 | $ | 2,784,443 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Notes payable - floor plan |
$ | 996,370 | $ | 925,356 | ||||
| Trade accounts payable |
63,577 | 64,322 | ||||||
| Accrued interest |
13,851 | 10,315 | ||||||
| Other accrued liabilities |
121,744 | 175,325 | ||||||
| Current maturities of long-term debt |
1,387 | 3,984 | ||||||
| Total current liabilities |
1,196,929 | 1,179,302 | ||||||
| LONG-TERM DEBT |
694,898 | 747,808 | ||||||
| OTHER LONG-TERM LIABILITIES |
19,136 | 22,859 | ||||||
| DEFERRED INCOME TAXES |
76,933 | 78,441 | ||||||
| STOCKHOLDERS’ EQUITY |
||||||||
| Class A common stock |
384 | 394 | ||||||
| Class B common stock |
121 | 121 | ||||||
| Paid-in capital |
416,892 | 434,927 | ||||||
| Retained earnings |
402,799 | 461,013 | ||||||
| Accumulated other comprehensive loss |
(4,419 | ) | (2,061 | ) | ||||
| Treasury stock, at cost |
(117,444 | ) | (138,361 | ) | ||||
| Total stockholders’ equity |
698,333 | 756,033 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 2,686,229 | $ | 2,784,443 | ||||
| Balance Sheet Data: |
||||||||
| Current Ratio |
1.30 | 1.23 | ||||||
| Debt to Total Capital |
49.9 | % | 49.9 | % | ||||
| LTM Return on Stockholders’ Equity |
10.7 | % | 11.9 | % | ||||