Exhibit 99.1
FOR IMMEDIATE RELEASE
SONIC AUTOMOTIVE, INC. ANNOUNCES SECOND QUARTER
NET INCOME OF $0.68 PER SHARE
CHARLOTTE, NC (July 29, 2003) – Sonic Automotive, Inc. (NYSE: SAH) today announced results for the second quarter of 2003.
Net income for the quarter ended June 30, 2003 was $28.5 million, or $0.68 per diluted share, compared to prior year results of $31.5 million, or $0.71 per diluted share. For the first half of 2003, net income was $40.2 million, or $0.96 per diluted share, compared to net income of $53.6 million, or $1.23 per diluted share, for the same period last year. Net income for the six months ended June 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.
In commenting on the quarter, Mr. O. Bruton Smith, the Company’s Chairman and Chief Executive Officer, stated, “The second quarter of 2003 reflects significant improvement from the first quarter. We saw positive trends in new and used vehicle sales over the course of the second quarter. Inventory of new and used vehicles was 54 days and 38 days supply, respectively. We also began seeing the impact of expense reduction programs as our selling, general and administrative expenses improved to 78.8% of gross profit from the first quarter rate of 82.7%. We are targeting earnings per diluted share of $2.45 to $2.60 (excluding the cumulative effect of change in accounting principle) for calendar year 2003. This estimate is based on an expected level of new vehicle industry sales of 16.0 million units and does not include the effect of any unannounced acquisitions or additional share repurchases.”
Same Store Sales
On a same store basis, total revenues declined 1.0% for the quarter. New vehicle same store sales increased 2.1% for the quarter and used vehicle same store sales were down 4.9%. Same store parts, service and collision repair sales increased 1.6% for the quarter while gross profit increased 2.7%. Finance and insurance same store sales were up 1.0%. The same store parts, service and collision repair gross margin rate increased to 48.3% from 47.8% last year. The overall same store gross margin rate declined to 15.1% from 15.4% last year due primarily to lower gross margin rates on vehicles and a higher mix of new vehicle sales.
Jeffrey C. Rachor, the Company’s Chief Operating Officer, stated, “We experienced two distinct trends during the second quarter. First, import brands significantly out performed the domestic brands and generated positive same store results. Second, operating results improved throughout the quarter. This trend was reflected in same store unit sales gains in both new and used vehicles in June. Additionally, total selling, general and administrative expenses declined to 77.8% of gross profit for the month. Used vehicle same store sales improved from a 13.9% decline in April to a 0.7% increase in June. Our emphasis on certified pre-owned programs resulted in a 62.5% increase in unit sales for the quarter versus last year. Our selling, general and administrative expenses for the quarter reflect a one time casualty loss for hail damage in several Texas stores which reduced EPS per diluted share for the quarter by approximately $0.02.”
Acquisition and Disposition Activity
During the second quarter, Sonic closed on two previously announced dealership acquisitions representing over $60 million in annual revenues. The Company continues to pursue acquisition opportunities and expects to announce agreements to acquire dealerships representing more than $500 million in annual revenues during 2003. At June 30, 2003 the Company had approximately $164 million available under the Company’s revolving credit facility. Through June 30, 2003, the Company had disposed of seven dealerships representing $290 million in annual revenues. These disposals generated $24 million in cash flow.
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. The Company has year to date repurchases of 755,100 shares for $12 million and at June 30, 2003 had approximately $25 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%), Ford (14.3%), Toyota (12.4%), Chevrolet (10.9%), Cadillac (10.2%), BMW (9.5%), Lexus (4.7%), Volvo (3.8%), Chrysler (3.7%) and Nissan (3.0%).
The Company’s top markets for the quarter based on total revenues were San Francisco (10.0%), Los Angeles (9.9%), Houston (9.8%), Dallas (9.6%), Charlotte (6.4%), San Jose (6.1%), Tampa (5.8%), Oklahoma (4.8%), Atlanta (3.4%) and Mid-Atlantic (3.4%).
MANAGEMENT WILL BE HOLDING A CONFERENCE CALL ON TUESDAY, JULY 29 AT 11:00 A.M. EASTERN TIME. TO PARTICIPATE, PLEASE DIAL 877-791-3416 – OR YOU CAN ACCESS THE CALL ATWWW.COMPANYBOARDROOM.COM ORWWW.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 188 franchises and 42 collision repair centers. Sonic can be reached on the Web atwww.sonicautomotive.com.
Included herein are forward-looking statements, including statements with respect to anticipated acquisition activity and growth in profit, profit margins and earnings per share, as well as industry vehicle sales 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, 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 | Six Months Ended | |||||||||||||||
| 06/30/2002 | 06/30/2003 | 06/30/2002 | 06/30/2003 | |||||||||||||
Revenues | ||||||||||||||||
New vehicles | $ | 1,104,943 | $ | 1,208,471 | $ | 2,000,548 | $ | 2,220,304 | ||||||||
Used vehicles | 314,994 | 316,902 | 568,183 | 599,741 | ||||||||||||
Wholesale vehicles | 134,129 | 109,697 | 232,902 | 213,679 | ||||||||||||
Total vehicles | 1,554,066 | 1,635,070 | 2,801,633 | 3,033,724 | ||||||||||||
Parts, service, and collision repair | 232,373 | 251,601 | 428,935 | 489,918 | ||||||||||||
Finance & insurance and other | 50,596 | 54,920 | 94,938 | 104,153 | ||||||||||||
Total revenues | 1,837,035 | 1,941,591 | 3,325,506 | 3,627,795 | ||||||||||||
Total gross profit | 283,238 | 292,702 | 519,037 | 560,291 | ||||||||||||
SG&A expenses | 215,263 | 230,584 | 398,486 | 451,771 | ||||||||||||
Depreciation | 2,132 | 2,753 | 4,024 | 5,215 | ||||||||||||
Operating income | 65,843 | 59,365 | 116,527 | 103,305 | ||||||||||||
Interest expense, floor plan | 6,195 | 5,925 | 11,252 | 11,985 | ||||||||||||
Interest expense, other | 9,496 | 9,896 | 17,621 | 19,649 | ||||||||||||
Other income | 151 | 10 | 236 | 80 | ||||||||||||
Income from continuing operations before taxes | 50,303 | 43,554 | 87,890 | 71,751 | ||||||||||||
Income taxes | 19,141 | 15,740 | 33,484 | 26,139 | ||||||||||||
Net income from continuing operations | 31,162 | 27,814 | 54,406 | 45,612 | ||||||||||||
Discontinued operations: | ||||||||||||||||
Income (loss) on operations from discontinued dealerships | 495 | 1,239 | (1,482 | ) | 336 | |||||||||||
Income tax benefit | (169 | ) | (537 | ) | 644 | (127 | ) | |||||||||
Net Income (loss) from discontinued operations | 326 | 702 | (838 | ) | 209 | |||||||||||
Income before cumulative effect of change in accounting principle | 31,488 | 28,516 | 53,568 | 45,821 | ||||||||||||
Cumulative effect of change in accounting principle, net of tax benefit of $3,325 | — | — | — | (5,619 | ) | |||||||||||
Net income | $ | 31,488 | $ | 28,516 | $ | 53,568 | $ | 40,202 | ||||||||
Diluted: | ||||||||||||||||
Weighted average common shares outstanding | 44,537 | 42,071 | 43,555 | 41,915 | ||||||||||||
Net Income per share from continuing operations | $ | 0.70 | $ | 0.66 | $ | 1.25 | $ | 1.09 | ||||||||
Loss per share from discontinued operations | $ | 0.01 | $ | 0.02 | ($ | 0.02 | ) | $ | 0.01 | |||||||
Cumulative effect of change in accounting principle | $ | 0.00 | $ | 0.00 | $ | 0.00 | ($ | 0.14 | ) | |||||||
Net Income per share | $ | 0.71 | $ | 0.68 | $ | 1.23 | $ | 0.96 | ||||||||
Gross Margin Data: | ||||||||||||||||
New vehicles retail | 7.8 | % | 6.9 | % | 7.8 | % | 7.0 | % | ||||||||
Used vehicles retail | 11.6 | % | 10.9 | % | 11.7 | % | 11.2 | % | ||||||||
Total vehicles retail | 8.7 | % | 7.7 | % | 8.7 | % | 7.9 | % | ||||||||
Parts, service and collision repair | 47.9 | % | 48.4 | % | 47.4 | % | 48.2 | % | ||||||||
Finance and insurance | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Overall gross margin | 15.4 | % | 15.1 | % | 15.6 | % | 15.4 | % | ||||||||
SG&A Expenses: | ||||||||||||||||
Personnel | 133,661 | 140,427 | 249,109 | 273,705 | ||||||||||||
Advertising | 17,721 | 17,466 | 31,243 | 33,329 | ||||||||||||
Facility rent | 17,208 | 18,834 | 31,815 | 37,555 | ||||||||||||
Other | 46,673 | 53,857 | 86,319 | 107,182 | ||||||||||||
Unit Data: | ||||||||||||||||
New units | 39,916 | 42,429 | 72,787 | 78,411 | ||||||||||||
Used units | 19,930 | 20,194 | 36,943 | 38,678 | ||||||||||||
Total units retailed | 59,846 | 62,623 | 109,730 | 117,089 | ||||||||||||
Wholesale units | 16,959 | 15,597 | 31,606 | 29,452 | ||||||||||||
Average price per unit: | ||||||||||||||||
New vehicles | 27,682 | 28,482 | 27,485 | 28,316 | ||||||||||||
Used vehicles | 15,805 | 15,693 | 15,380 | 15,506 | ||||||||||||
Wholesale vehicles | 7,909 | 7,033 | 7,369 | 7,255 | ||||||||||||
Other Data: | ||||||||||||||||
Net cash provided by operating activities | $ | 16,083 | $ | 52,937 | $ | 56,081 | $ | 79,440 | ||||||||
Floorplan assistance (continuing operations) | $ | 9,762 | $ | 10,186 | $ | 16,942 | $ | 18,369 | ||||||||
Balance Sheets:
| As Of | ||||||||
| 12/31/2002 | 06/30/2003 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 10,576 | $ | 32,071 | ||||
Receivables, net | 297,859 | 295,890 | ||||||
Inventories | 929,450 | 939,826 | ||||||
Other current assets | 63,742 | 87,175 | ||||||
Total current assets | 1,301,627 | 1,354,962 | ||||||
Property and Equipment, Net | 121,936 | 119,150 | ||||||
Goodwill, Net | 875,894 | 892,055 | ||||||
Other Intangibles, Net | 61,800 | 69,100 | ||||||
Other Assets | 14,051 | 18,156 | ||||||
TOTAL ASSETS | $ | 2,375,308 | $ | 2,453,423 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Notes payable – floor plan | $ | 850,162 | $ | 873,226 | ||||
Trade accounts payable | 58,560 | 64,193 | ||||||
Accrued interest | 13,306 | 13,205 | ||||||
Other accrued liabilities | 113,592 | 144,972 | ||||||
Current maturities of long-term debt | 2,764 | 2,764 | ||||||
Total current liabilities | 1,038,384 | 1,098,360 | ||||||
LONG-TERM DEBT | 637,545 | 621,929 | ||||||
OTHER LONG-TERM LIABILITIES | 16,085 | 18,233 | ||||||
PAYABLE TO COMPANY’S CHAIRMAN | 5,500 | 5,500 | ||||||
DEFERRED INCOME TAXES | 40,616 | 40,329 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Class A convertible preferred stock | — | — | ||||||
Class A common stock | 371 | 375 | ||||||
Class B common stock | 121 | 121 | ||||||
Paid-in capital | 396,813 | 400,994 | ||||||
Accumulated other comprehensive loss | (6,447 | ) | (6,896 | ) | ||||
Retained earnings | 339,457 | 379,659 | ||||||
Treasury stock, at cost | (93,137 | ) | (105,181 | ) | ||||
Total stockholders’ equity | 637,178 | 669,072 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,375,308 | $ | 2,453,423 | ||||
Balance Sheet Data:
Current Ratio | 1.25 | 1.23 | ||||
Debt to Total Capital | 50.3 | % | 48.5 | % | ||
LTM Return on Stockholders’ Equity | 17.9 | % | 14.6 | % |