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 March 31, 2003 |
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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
As of May 12, 2003, there were 28,669,980 shares of Class A Common Stock and 12,029,375 shares of Class B Common Stock outstanding.
| PAGE | ||||
| PART I—FINANCIAL INFORMATION |
||||
| ITEM 1. |
Consolidated Financial Statements (Unaudited) |
|||
| Consolidated Statements of Income—Three-month periods ended March 31, 2002 and March 31, 2003 |
3 | |||
| Consolidated Balance Sheets—December 31, 2002 and March 31, 2003 |
4 | |||
| Consolidated Statement of Stockholders’ Equity—Three-month period ended March 31, 2003 |
5 | |||
| 6 | ||||
| 7 | ||||
| ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 | ||
| ITEM 3. |
19 | |||
| ITEM 4. |
19 | |||
| PART II—OTHER INFORMATION |
||||
| ITEM 6. |
21 | |||
| 23 | ||||
| Certifications Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 |
24 | |||
2
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 March 31, |
||||||||
| 2002 |
2003 |
|||||||
| Revenues: |
||||||||
| New vehicles |
$ |
883,192 |
|
$ |
1,004,153 |
| ||
| Used vehicles |
|
248,447 |
|
|
281,196 |
| ||
| Wholesale vehicles |
|
96,886 |
|
|
103,244 |
| ||
| Total vehicles |
|
1,228,525 |
|
|
1,388,593 |
| ||
| Parts, service and collision repair |
|
193,845 |
|
|
236,066 |
| ||
| Finance & insurance and other |
|
43,552 |
|
|
48,571 |
| ||
| Total revenues |
|
1,465,922 |
|
|
1,673,230 |
| ||
| Cost of sales |
|
1,233,793 |
|
|
1,407,986 |
| ||
| Gross profit |
|
232,129 |
|
|
265,244 |
| ||
| Selling, general and administrative expenses |
|
179,829 |
|
|
218,990 |
| ||
| Depreciation |
|
1,872 |
|
|
2,435 |
| ||
| Operating income |
|
50,428 |
|
|
43,819 |
| ||
| Other income / (expense): |
||||||||
| Interest expense, floor plan |
|
(4,977 |
) |
|
(6,010 |
) | ||
| Interest expense, other |
|
(8,016 |
) |
|
(9,692 |
) | ||
| Other income |
|
85 |
|
|
85 |
| ||
| Total other expense |
|
(12,908 |
) |
|
(15,617 |
) | ||
| Income from continuing operations before taxes and cummulative effect of change in accounting principle |
|
37,520 |
|
|
28,202 |
| ||
| Provision for income taxes |
|
(14,307 |
) |
|
(10,405 |
) | ||
| Income from continuing operations before cummulative effect of change in accounting principle |
|
23,213 |
|
|
17,797 |
| ||
| Discontinued operations: |
||||||||
| Loss from operations of discontinued dealerships, net |
|
(1,911 |
) |
|
(908 |
) | ||
| Income tax benefit |
|
777 |
|
|
415 |
| ||
| Loss from discontinued operations |
|
(1,134 |
) |
|
(493 |
) | ||
| Income before cumulative effect of change in accounting principle |
|
22,079 |
|
|
17,304 |
| ||
| Cumulative effect of change in accounting principle, net of tax benefit of $3,325 |
|
— |
|
|
(5,619 |
) | ||
| Net income |
$ |
22,079 |
|
$ |
11,685 |
| ||
| Basic net income (loss) per share: |
||||||||
| Income per share from continuing operations |
$ |
0.57 |
|
$ |
0.43 |
| ||
| Loss per share from discontinued operations |
|
(0.03 |
) |
|
(0.01 |
) | ||
| Income per share before cumulative effect of change in accounting principle |
|
0.54 |
|
|
0.42 |
| ||
| Cumulative effect of change in accounting principle |
|
— |
|
|
(0.14 |
) | ||
| Net income per share |
$ |
0.54 |
|
$ |
0.28 |
| ||
| Weighted average common shares outstanding |
|
40,627 |
|
|
40,931 |
| ||
| Diluted net income (loss) per share: |
||||||||
| Income per share from continuing operations |
$ |
0.55 |
|
$ |
0.43 |
| ||
| Loss per share from discontinued operations |
|
(0.03 |
) |
|
(0.01 |
) | ||
| Income per share before cumulative effect of change in accounting principle |
|
0.52 |
|
|
0.42 |
| ||
| Cumulative effect of change in accounting principle |
|
— |
|
|
(0.14 |
) | ||
| Net income per share |
$ |
0.52 |
|
$ |
0.28 |
| ||
| Weighted average common shares outstanding |
|
42,563 |
|
|
41,757 |
| ||
See notes to unaudited consolidated financial statements.
3
SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
(Dollars in thousands)
| December 31, 2002 |
March 31, 2003 (Unaudited) |
|||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash |
$ |
10,576 |
|
$ |
16,568 |
| ||
| Receivables, net |
|
297,859 |
|
|
268,426 |
| ||
| Inventories |
|
929,450 |
|
|
918,207 |
| ||
| Other current assets |
|
63,742 |
|
|
100,586 |
| ||
| Total current assets |
|
1,301,627 |
|
|
1,303,787 |
| ||
| Property and equipment, net |
|
121,936 |
|
|
113,156 |
| ||
| Goodwill, net |
|
875,894 |
|
|
883,501 |
| ||
| Other intangible assets, net |
|
61,800 |
|
|
65,400 |
| ||
| Other assets |
|
14,051 |
|
|
16,030 |
| ||
| Total assets |
$ |
2,375,308 |
|
$ |
2,381,874 |
| ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Notes payable – floor plan |
$ |
850,162 |
|
$ |
837,510 |
| ||
| Trade accounts payable |
|
58,560 |
|
|
51,908 |
| ||
| Accrued interest |
|
13,306 |
|
|
10,310 |
| ||
| Other accrued liabilities |
|
113,592 |
|
|
119,376 |
| ||
| Current maturities of long-term debt |
|
2,764 |
|
|
2,764 |
| ||
| Total current liabilities |
|
1,038,384 |
|
|
1,021,868 |
| ||
| Long-term debt |
|
637,545 |
|
|
654,791 |
| ||
| Other long-term liabilities |
|
16,085 |
|
|
17,497 |
| ||
| Payable to the Company’s Chairman |
|
5,500 |
|
|
5,500 |
| ||
| Deferred income taxes |
|
40,616 |
|
|
40,566 |
| ||
| Stockholders’ Equity: |
||||||||
| Class A Common Stock; $.01 par value; 100,000,000 shares authorized; 37,245,706 shares issued and 29,111,542 shares outstanding at December 31, 2002; 37,347,382 shares issued and 28,689,218 shares outstanding at March 31, 2003 |
|
371 |
|
|
372 |
| ||
| Class B Common Stock; $.01 par value; 30,000,000 shares authorized; 12,029,375 shares issued and outstanding at December 31, 2002 and March 31, 2003. |
|
121 |
|
|
121 |
| ||
| Paid-in capital |
|
396,813 |
|
|
397,622 |
| ||
| Retained earnings |
|
339,457 |
|
|
351,142 |
| ||
| Accumulated other comprehensive loss |
|
(6,447 |
) |
|
(6,525 |
) | ||
| Treasury Stock, at cost (8,134,164 shares held at December 31, 2002 and 8,658,164 shares held at March 31, 2003) |
|
(93,137 |
) |
|
(101,080 |
) | ||