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, 2004
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 April 30, 2004, there were 29,285,115 shares of Class A Common Stock and 12,029,375 shares of Class B Common Stock outstanding.
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, |
||||||||
| 2003 |
2004 |
|||||||
| Revenues: |
||||||||
| New vehicles |
$ | 931,330 | $ | 1,008,352 | ||||
| Used vehicles |
276,527 | 290,191 | ||||||
| Wholesale vehicles |
98,631 | 114,458 | ||||||
| Total vehicles |
1,306,488 | 1,413,001 | ||||||
| Parts, service and collision repair |
223,304 | 246,897 | ||||||
| Finance, insurance and other |
46,183 | 43,895 | ||||||
| Total revenues |
1,575,975 | 1,703,793 | ||||||
| Cost of sales |
1,324,578 | 1,436,180 | ||||||
| Gross profit |
251,397 | 267,613 | ||||||
| Selling, general and administrative expenses |
203,938 | 214,079 | ||||||
| Depreciation |
2,274 | 3,720 | ||||||
| Operating income |
45,185 | 49,814 | ||||||
| Other income / (expense): |
||||||||
| Interest expense, floor plan |
(5,522 | ) | (5,955 | ) | ||||
| Interest expense, other |
(9,525 | ) | (8,335 | ) | ||||
| Other income, net |
71 | 27 | ||||||
| Total other expense |
(14,976 | ) | (14,263 | ) | ||||
| Income from continuing operations before taxes and cummulative effect of change in accounting principle |
30,209 | 35,551 | ||||||
| Provision for income taxes |
11,148 | 13,171 | ||||||
| Income from continuing operations before cummulative effect of change in accounting principle |
19,061 | 22,380 | ||||||
| Discontinued operations: |
||||||||
| Loss from operations and the sale of discontinued franchises |
(2,915 | ) | (375 | ) | ||||
| Income tax benefit |
1,158 | 180 | ||||||
| Loss from discontinued operations |
(1,757 | ) | (195 | ) | ||||
| Income before cumulative effect of change in accounting principle |
17,304 | 22,185 | ||||||
| Cumulative effect of change in accounting principle, net of tax benefit of $3,325 |
(5,619 | ) | — | |||||
| Net income |
$ | 11,685 | $ | 22,185 | ||||
| Basic net income (loss) per share: |
||||||||
| Income per share from continuing operations |
$ | 0.47 | $ | 0.54 | ||||
| Loss per share from discontinued operations |
(0.05 | ) | — | |||||
| Income per share before cumulative effect of change in accounting principle |
0.42 | 0.54 | ||||||
| Cumulative effect of change in accounting principle |
(0.14 | ) | — | |||||
| Net income per share |
$ | 0.28 | $ | 0.54 | ||||
| Weighted average common shares outstanding |
40,931 | 41,193 | ||||||
| Diluted net income (loss) per share: |
||||||||
| Income per share from continuing operations |
$ | 0.46 | $ | 0.53 | ||||
| Loss per share from discontinued operations |
(0.04 | ) | (0.01 | ) | ||||
| Income per share before cumulative effect of change in accounting principle |
0.42 | 0.52 | ||||||
| Cumulative effect of change in accounting principle |
(0.14 | ) | — | |||||
| Net income per share |
$ | 0.28 | $ | 0.52 | ||||
| Weighted average common shares outstanding |
41,757 | 42,599 | ||||||
| Dividends declared per common share |
$ | — | $ | 0.10 | ||||
See notes to unaudited consolidated financial statements.
3
SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| December 31, 2003 |
March 31, (Unaudited) |
|||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash |
$ | 82,082 | $ | 39,475 | ||||
| Receivables, net |
306,498 | 310,613 | ||||||
| Inventories |
1,046,909 | 1,096,550 | ||||||
| Assets held for sale |
88,990 | 83,941 | ||||||
| Other current assets |
29,718 | 35,949 | ||||||
| Total current assets |
1,554,197 | 1,566,528 | ||||||
| Property and equipment, net |
125,356 | 133,003 | ||||||
| Goodwill, net |
909,091 | 932,801 | ||||||
| Other intangible assets, net |
75,230 | 77,087 | ||||||
| Other assets |
22,355 | 31,227 | ||||||
| Total assets |
$ | 2,686,229 | $ | 2,740,646 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: |
||||||||
| Notes payable - floor plan |
$ | 996,370 | $ | 1,021,752 | ||||
| Trade accounts payable |
63,577 | 64,635 | ||||||
| Accrued interest |
13,851 | 9,569 | ||||||
| Other accrued liabilities |
121,744 | 133,072 | ||||||
| Current maturities of long-term debt |
1,387 | 1,123 | ||||||
| Total current liabilities |
1,196,929 | 1,230,151 | ||||||
| Long-term debt |
694,898 | 698,656 | ||||||
| Other long-term liabilities |
19,136 | 20,025 | ||||||
| Deferred income taxes |
76,933 | 76,882 | ||||||
| Stockholders’ Equity: |
||||||||
| Class A Common Stock; $.01 par value; 100,000,000 shares authorized; 38,588,913 shares issued and 29,192,549 shares outstanding at December 31, 2003; 38,785,782 shares issued and 29,192,618 shares outstanding at March 31, 2004 |
384 | 386 | ||||||
| Class B Common Stock; $.01 par value; 30,000,000 shares authorized; 12,029,375 shares issued and outstanding at December 31, 2003 and March 31, 2004 |
121 | 121 | ||||||
| Paid-in capital |
416,892 | 419,975 | ||||||
| Retained earnings |
402,799 | 420,864 | ||||||
| Accumulated other comprehensive loss |
(4,419 | ) | (4,499 | ) | ||||
| Treasury Stock, at cost (9,396,364 shares held at December 31, 2003 and 9,593,164 shares held at March 31, 2004) |
(117,444 | ) | (121,915 | ) | ||||
| Total stockholders’ equity |
698,333 | 714,932 | ||||||
| Total liabilities and stockholders’ equity |
$ | 2,686,229 | $ | 2,740,646 | ||||
See notes to unaudited consolidated financial statements.
4
SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Dollars and shares in thousands)
(Unaudited)
| Class A Common Stock |
Class B Common Stock |
Paid-In Capital |
Retained Earnings |
Treasury Stock |
Accumulated Other Comprehensive Loss |
Total Stockholders’ Equity |
|||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
||||||||||||||||||||||||||
| Balance at December 31, 2003 |
38,589 | $ | 384 | 12,029 | $ | 121 | $ | 416,892 | $ | 402,799 | $ | (117,444 | ) | $ | (4,419 | ) | $ | 698,333 | |||||||||||
| Comprehensive Income: |
|||||||||||||||||||||||||||||
| Net Income |
22,185 | 22,185 | |||||||||||||||||||||||||||
| Change in fair value of interest rate swap, net of tax benefit of $51 |
(80 | ) | (80 | ) | |||||||||||||||||||||||||
| Total comprehensive income, net of tax |
22,105 | ||||||||||||||||||||||||||||
| Shares issued under stock compensation plans |
197 | 2 | 2,405 | 2,407 | |||||||||||||||||||||||||
| Income tax benefit associated with stock compensation plans |
678 | 678 | |||||||||||||||||||||||||||
| Dividends declared ($0.10 per share) |
(4,120 | ) | (4,120 | ) | |||||||||||||||||||||||||
| Purchase of treasury stock |
(4,471 | ) | (4,471 | ) | |||||||||||||||||||||||||
| Balance at March 31, 2004 |
38,786 | $ | 386 | 12,029 | $ | 121 | $ | 419,975 | $ | 420,864 | $ | (121,915 | ) | $ | (4,499 | ) | $ | 714,932 | |||||||||||