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, 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 October 29, 2004, there were 29,344,693 shares of Class A Common Stock and 12,029,375 shares of Class B Common Stock outstanding.
2
PART I - FINANCIAL INFORMATION
Item 1: Condensed Consolidated Financial Statements.
SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars and shares in thousands except per share amounts)
(Unaudited)
| Three-Month Periods Ended September 30, |
||||||||
| 2003 |
2004 |
|||||||
| Revenues: |
||||||||
| New vehicles |
$ | 1,157,648 | $ | 1,209,668 | ||||
| Used vehicles |
315,700 | 311,972 | ||||||
| Wholesale vehicles |
115,780 | 139,480 | ||||||
| Total vehicles |
1,589,128 | 1,661,120 | ||||||
| Parts, service and collision repair |
245,099 | 269,549 | ||||||
| Finance, insurance and other |
53,380 | 52,303 | ||||||
| Total revenues |
1,887,607 | 1,982,972 | ||||||
| Cost of sales |
1,604,267 | 1,686,851 | ||||||
| Gross profit |
283,340 | 296,121 | ||||||
| Selling, general and administrative expenses |
221,342 | 240,118 | ||||||
| Depreciation and amortization |
2,975 | 4,209 | ||||||
| Operating income |
59,023 | 51,794 | ||||||
| Other income / (expense): |
||||||||
| Interest expense, floor plan |
(4,626 | ) | (6,516 | ) | ||||
| Interest expense, other, net |
(10,273 | ) | (9,628 | ) | ||||
| Other income / (expense), net |
(13,937 | ) | 65 | |||||
| Total other expense |
(28,836 | ) | (16,079 | ) | ||||
| Income from continuing operations before income taxes |
30,187 | 35,715 | ||||||
| Provision for income taxes |
10,932 | 13,409 | ||||||
| Income from continuing operations |
19,255 | 22,306 | ||||||
| Discontinued operations: |
||||||||
| Loss from operations and the sale of discontinued franchises |
(2,830 | ) | (4,836 | ) | ||||
| Income tax benefit |
1,116 | 1,811 | ||||||
| Loss from discontinued operations |
(1,714 | ) | (3,025 | ) | ||||
| Net income |
$ | 17,541 | $ | 19,281 | ||||
| Basic net income (loss) per share: |
||||||||
| Income per share from continuing operations |
$ | 0.47 | $ | 0.54 | ||||
| Loss per share from discontinued operations |
(0.04 | ) | (0.07 | ) | ||||
| Net income per share |
$ | 0.43 | $ | 0.47 | ||||
| Weighted average common shares outstanding |
40,926 | 41,349 | ||||||
| Diluted net income (loss) per share: |
||||||||
| Income per share from continuing operations |
$ | 0.45 | $ | 0.53 | ||||
| Loss per share from discontinued operations |
(0.04 | ) | (0.07 | ) | ||||
| Net income per share |
$ | 0.41 | $ | 0.46 | ||||
| Weighted average common shares outstanding |
43,022 | 42,164 | ||||||
| Dividends declared per common share |
$ | 0.10 | $ | 0.12 | ||||
See notes to unaudited condensed consolidated financial statements.
3
SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars and shares in thousands except per share amounts)
(Unaudited)
| Nine-Month Periods Ended September 30, |
||||||||
| 2003 |
2004 |
|||||||
| Revenues: |
||||||||
| New vehicles |
$ | 3,202,143 | $ | 3,359,251 | ||||
| Used vehicles |
895,571 | 895,356 | ||||||
| Wholesale vehicles |
314,791 | 380,735 | ||||||
| Total vehicles |
4,412,505 | 4,635,342 | ||||||
| Parts, service and collision repair |
704,147 | 773,123 | ||||||
| Finance, insurance and other |
150,483 | 144,547 | ||||||
| Total revenues |
5,267,135 | 5,553,012 | ||||||
| Cost of sales |
4,458,683 | 4,700,572 | ||||||
| Gross profit |
808,452 | 852,440 | ||||||
| Selling, general and administrative expenses |
636,729 | 673,978 | ||||||
| Depreciation and amortization |
7,797 | 12,207 | ||||||
| Operating income |
163,926 | 166,255 | ||||||
| Other income / (expense): |
||||||||
| Interest expense, floor plan |
(15,495 | ) | (18,972 | ) | ||||
| Interest expense, other, net |
(29,455 | ) | (26,713 | ) | ||||
| Other income / (expense), net |
(13,849 | ) | 61 | |||||
| Total other expense |
(58,799 | ) | (45,624 | ) | ||||
| Income from continuing operations before taxes and cummulative effect of change in accounting principle |
105,127 | 120,631 | ||||||
| Provision for income taxes |
38,278 | 44,513 | ||||||
| Income from continuing operations before cummulative effect of change in accounting principle |
66,849 | 76,118 | ||||||
| Discontinued operations: |
||||||||
| Loss from operations and the sale of discontinued franchises |
(5,682 | ) | (7,520 | ) | ||||
| Income tax benefit |
2,195 | 2,860 | ||||||
| Loss from discontinued operations |
(3,487 | ) | (4,660 | ) | ||||
| Income before cumulative effect of change in accounting principle |
63,362 | 71,458 | ||||||
| Cumulative effect of change in accounting principle, net of tax benefit of $3,325 |
(5,619 | ) | — | |||||
| Net income |
$ | 57,743 | $ | 71,458 | ||||
| Basic net income (loss) per share: |
||||||||
| Income per share from continuing operations |
$ | 1.64 | $ | 1.84 | ||||
| Loss per share from discontinued operations |
(0.09 | ) | (0.11 | ) | ||||
| Income per share before cumulative effect of change in accounting principle |
1.55 | 1.73 | ||||||
| Cumulative effect of change in accounting principle |
(0.14 | ) | — | |||||
| Net income per share |
$ | 1.41 | $ | 1.73 | ||||
| Weighted average common shares outstanding |
40,858 | 41,328 | ||||||
| Diluted net income (loss) per share: |
||||||||
| Income per share from continuing operations |
$ | 1.58 | $ | 1.79 | ||||
| Loss per share from discontinued operations |
(0.08 | ) | (0.11 | ) | ||||
| Income per share before cumulative effect of change in accounting principle |
1.50 | 1.68 | ||||||
| Cumulative effect of change in accounting principle |
(0.13 | ) | — | |||||
| Net income per share |
$ | 1.37 | $ | 1.68 | ||||
| Weighted average common shares outstanding |
42,288 | 42,439 | ||||||
| Dividends declared per common share |
$ | 0.10 | $ | 0.32 | ||||
See notes to unaudited condensed consolidated financial statements.
4
SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| December 31, 2003 |
September 30, 2004 (Unaudited) |
|||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash |
$ | 82,082 | $ | — | ||||
| 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 intangible assets, 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 | ||||||