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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
(Mark One)
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2002
 
OR
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission file number 1-13395
 
SONIC AUTOMOTIVE, INC.
(Exact name of registrant as specified in its charter)
 
 
DELAWARE
  
56-2010790
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
5401 E. Independence Blvd.,
Charlotte, North Carolina
  
28212
(Address of principal executive offices)
  
(Zip Code)
 
(704) 566-2400
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    x     No    ¨
 
As of November 11, 2002, there were 29,484,117 shares of Class A Common Stock and 12,029,375 shares of Class B Common Stock outstanding.

Table of Contents
INDEX TO FORM 10-Q
 
         
Page
PART I—FINANCIAL INFORMATION
     
ITEM 1.
        
       
3
       
4
       
5
       
6
       
7
ITEM 2.
      
15
ITEM 3.
      
28
ITEM 4.
      
28
PART II—OTHER INFORMATION
     
ITEM 6.
      
30
  
31
  
32
 

2

Table of Contents
PART I—FINANCIAL INFORMATION
Item 1.    Consolidated Financial Statements.
 
SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars and shares in thousands except per share amounts)
(Unaudited)
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2001
     
2002
     
2001
     
2002
  
Revenues:
                                    
New vehicles
   
$
865,028
 
   
$
1,219,861
 
   
$
2,605,409
 
   
$
3,266,936
 
Used vehicles
   
 
263,814
 
   
 
333,828
 
   
 
814,250
 
   
 
934,384
 
Wholesale vehicles
   
 
92,624
 
   
 
131,973
 
   
 
296,214
 
   
 
374,093
 
    
  
  
  
Total vehicles
   
 
1,221,466
 
   
 
1,685,662
 
   
 
3,715,873
 
   
 
4,575,413
 
Parts, service and collision repair
   
 
184,334
 
   
 
246,922
 
   
 
543,536
 
   
 
685,450
 
Finance & insurance and other
   
 
46,055
 
   
 
58,306
 
   
 
132,809
 
   
 
156,787
 
    
  
  
  
Total revenues
   
 
1,451,855
 
   
 
1,990,890
 
   
 
4,392,218
 
   
 
5,417,650
 
Cost of sales
   
 
1,223,113
 
   
 
1,689,634
 
   
 
3,714,209
 
   
 
4,584,365
 
    
  
  
  
Gross profit
   
 
228,742
 
   
 
301,256
 
   
 
678,009
 
   
 
833,285
 
Selling, general and administrative expenses
   
 
170,797
 
   
 
230,718
 
   
 
509,127
 
   
 
641,873
 
Depreciation
   
 
1,741
 
   
 
2,494
 
   
 
5,271
 
   
 
6,604
 
Goodwill amortization
   
 
4,421
 
   
 
—  
 
   
 
13,370
 
   
 
—  
 
    
  
  
  
Operating income
   
 
51,783
 
   
 
68,044
 
   
 
150,241
 
   
 
184,808
 
Other income / (expense):
                                    
Interest expense, floor plan
   
 
(6,970
)
   
 
(6,034
)
   
 
(27,996
)
   
 
(17,755
)
Interest expense, other
   
 
(8,267
)
   
 
(10,611
)
   
 
(26,282
)
   
 
(28,486
)
Other income
   
 
39
 
   
 
1,289
 
   
 
115
 
   
 
1,547
 
    
  
  
  
Total other expense
   
 
(15,198
)
   
 
(15,356
)
   
 
(54,163
)
   
 
(44,694
)
    
  
  
  
Income from continuing operations before taxes
   
 
36,585
 
   
 
52,688
 
   
 
96,078
 
   
 
140,114
 
Provision for income taxes
   
 
(14,272
)
   
 
(20,455
)
   
 
(37,425
)
   
 
(53,725
)
    
  
  
  
Net income from continuing operations
   
 
22,313
 
   
 
32,233
 
   
 
58,653
 
   
 
86,389
 
Discontinued operations:
                                    
Loss from operations of discontinued dealerships
   
 
(306
)
   
 
(1,003
)
   
 
(856
)
   
 
(2,021
)
Income tax benefit
   
 
112
 
   
 
360
 
   
 
290
 
   
 
790
 
    
  
  
  
Net loss from discontinued operations
   
 
(194
)
   
 
(643
)
   
 
(566
)
   
 
(1,231
)
    
  
  
  
Net income
   
$
22,119
 
   
$
31,590
 
   
$
58,087
 
   
$
85,158
 
    
  
  
  
Basic net income per share:
                                    
Net income per share from continuing operations
   
$
0.55
 
   
$
0.76
 
   
$
1.44
 
   
$
2.07
 
Net loss per share from discontinued operations
   
$
(0.00
)
   
$
(0.01
)
   
$
(0.01
)
   
$
(0.03
)
    
  
  
  
Net income per share
   
$
0.55
 
   
$
0.75
 
   
$
1.43
 
   
$
2.04
 
    
  
  
  
Weighted average common shares outstanding
   
 
40,449
 
   
 
42,163
 
   
 
40,591
 
   
 
41,819
 
    
  
  
  
Diluted net income per share:
                                    
Net income per share from continuing operations
   
$
0.53
 
   
$
0.74
 
   
$
1.41
 
   
$
1.99
 
Net loss per share from discontinued operations
   
$
(0.00
)
   
$
(0.01
)
   
$
(0.01
)
   
$
(0.03
)
    
  
  
  
Net income per share
   
$
0.53
 
   
$
0.73
 
   
$
1.40
 
   
$
1.96
 
    
  
  
  
Weighted average common shares outstanding
   
 
41,994
 
   
 
43,334
 
   
 
41,511
 
   
 
43,479
 
    
  
  
  
 
See notes to unaudited consolidated financial statements.

3

Table of Contents
 
SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 
    
December 31, 2001
     
September 30, 2002
(Unaudited)
  
ASSETS
                  
Current Assets:
                  
Cash and cash equivalents
   
$
—  
 
   
$
4,150
 
Receivables, net
   
 
262,911
 
   
 
252,064
 
Inventories
   
 
664,258
 
   
 
811,288
 
Other current assets
   
 
29,127
 
   
 
104,110
 
    
  
Total current assets
   
 
956,296
 
   
 
1,171,612
 
Property and Equipment, net
   
 
98,972
 
   
 
100,499
 
Goodwill and Other Intangible Assets, net
   
 
738,103
 
   
 
933,187
 
Other Assets
   
 
12,555
 
   
 
14,711
 
    
  
Total Assets
   
$
1,805,926
 
   
$
2,220,009
 
    
  
LIABILITIES AND STOCKHOLDERS' EQUITY
                  
Current Liabilities:
                  
Notes payable—floor plan
   
$
587,914
 
   
$
699,046
 
Trade accounts payable
   
 
44,802
 
   
 
43,054
 
Accrued interest
   
 
9,676
 
   
 
9,600
 
Other accrued liabilities
   
 
92,275
 
   
 
159,921
 
Current maturities of long-term debt
   
 
2,586
 
   
 
2,374
 
    
  
Total current liabilities
   
 
737,253
 
   
 
913,995
 
Long-Term Debt
   
 
511,877
 
   
 
632,038
 
Other Long-Term Liabilities
   
 
5,836