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, 2005
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.) |
| 6415 Idlewild Road, Suite 109, 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 29, 2005, there were 29,655,990 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 March 31, |
||||||||
| 2004 |
2005 |
|||||||
| Revenues: |
||||||||
| New vehicles |
$ | 995,123 | $ | 1,079,383 | ||||
| Used vehicles |
285,657 | 305,860 | ||||||
| Wholesale vehicles |
111,096 | 126,282 | ||||||
| Total vehicles |
1,391,876 | 1,511,525 | ||||||
| Parts, service and collision repair |
242,895 | 267,415 | ||||||
| Finance, insurance and other |
43,330 | 46,536 | ||||||
| Total revenues |
1,678,101 | 1,825,476 | ||||||
| Cost of sales |
1,413,037 | 1,538,135 | ||||||
| Gross profit |
265,064 | 287,341 | ||||||
| Selling, general and administrative expenses |
210,529 | 232,125 | ||||||
| Depreciation and amortization |
3,572 | 4,082 | ||||||
| Operating income |
50,963 | 51,134 | ||||||
| Other income / (expense): |
||||||||
| Interest expense, floor plan |
(5,865 | ) | (9,028 | ) | ||||
| Interest expense, other, net |
(9,702 | ) | (11,130 | ) | ||||
| Other income, net |
28 | 17 | ||||||
| Total other expense |
(15,539 | ) | (20,141 | ) | ||||
| Income from continuing operations before income taxes |
35,424 | 30,993 | ||||||
| Provision for income taxes |
13,171 | 11,622 | ||||||
| Income from continuing operations |
22,253 | 19,371 | ||||||
| Discontinued operations: |
||||||||
| Loss from operations and the sale of discontinued franchises |
(248 | ) | (3,615 | ) | ||||
| Income tax benefit |
180 | 1,356 | ||||||
| Loss from discontinued operations |
(68 | ) | (2,259 | ) | ||||
| Net income |
$ | 22,185 | $ | 17,112 | ||||
| Basic earnings (loss) per share: |
||||||||
| Earnings per share from continuing operations |
$ | 0.54 | $ | 0.46 | ||||
| Loss per share from discontinued operations |
— | (0.05 | ) | |||||
| Earnings per share |
$ | 0.54 | $ | 0.41 | ||||
| Weighted average common shares outstanding |
41,193 | 41,748 | ||||||
| Diluted earnings (loss) per share: |
||||||||
| Earnings per share from continuing operations |
$ | 0.51 | $ | 0.45 | ||||
| Loss per share from discontinued operations |
— | (0.05 | ) | |||||
| Earnings per share |
$ | 0.51 | $ | 0.40 | ||||
| Weighted average common shares outstanding |
45,375 | 45,460 | ||||||
| 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 BALANCE SHEETS
(Dollars in thousands)
| December 31, 2004 |
March 31, 2005 |
|||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash |
$ | 9,991 | $ | 5,974 | ||||
| Receivables, net |
357,403 | 330,764 | ||||||
| Inventories |
1,024,342 | 1,061,865 | ||||||
| Assets held for sale |
98,530 | 96,400 | ||||||
| Other current assets |
101,277 | 112,104 | ||||||
| Total current assets |
1,591,543 | 1,607,107 | ||||||
| Property and equipment, net |
134,490 | 139,344 | ||||||
| Goodwill, net |
1,056,924 | 1,065,003 | ||||||
| Other intangible assets, net |
84,777 | 87,206 | ||||||
| Other assets |
33,877 | 35,981 | ||||||
| Total assets |
$ | 2,901,611 | $ | 2,934,641 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: |
||||||||
| Notes payable - floor plan |
$ | 984,549 | $ | 985,019 | ||||
| Trade accounts payable |
88,616 | 87,466 | ||||||
| Accrued interest |
15,421 | 12,067 | ||||||
| Other accrued liabilities |
175,510 | 157,383 | ||||||
| Liabilities held for sale |
66,309 | 65,877 | ||||||
| Current maturities of long-term debt |
2,970 | 3,016 | ||||||
| Total current liabilities |
1,333,375 | 1,310,828 | ||||||
| Long-term debt |
668,826 | 707,556 | ||||||
| Other long-term liabilities |
28,888 | 31,299 | ||||||
| Deferred income taxes |
100,835 | 101,256 | ||||||
| Stockholders’ Equity: |
||||||||
| Class A Common Stock; $.01 par value; 100,000,000 shares authorized; 39,979,567 shares issued and 29,631,703 shares outstanding at December 31, 2004; 40,113,547 shares issued and 29,698,183 shares outstanding at March 31, 2005 |
397 | 398 | ||||||
| Class B Common Stock; $.01 par value; 30,000,000 shares authorized; 12,029,375 shares issued and outstanding at December 31, 2004 and March 31, 2005 |
121 | 121 | ||||||
| Paid-in capital |
441,503 | 443,970 | ||||||
| Retained earnings |
470,663 | 482,736 | ||||||
| Accumulated other comprehensive loss |
(1,228 | ) | (569 | ) | ||||
| Deferred compensation related to restricted stock |
(3,408 | ) | (3,089 | ) | ||||
| Treasury Stock, at cost (10,347,864 Class A shares held at December 31, 2004 and 10,415,364 Class A shares held at March 31, 2005) |
(138,361 | ) | (139,865 | ) | ||||
| Total stockholders’ equity |
769,687 | 783,702 | ||||||
| Total liabilities and stockholders’ equity |
$ | 2,901,611 | $ | 2,934,641 | ||||
See notes to unaudited condensed consolidated financial statements.
4
SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Dollars and shares in thousands)
(Unaudited)
| Deferred Compensation Related to Restricted Stock |
Paid-In Capital |
Retained Earnings |
Treasury Stock |
Accumulated Other Comprehensive Loss |
Total Equity |
||||||||||||||||||||||||||||
| Class A Common Stock |
Class B Common Stock |
||||||||||||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
||||||||||||||||||||||||||||||
| Balance at December 31, 2004 |
39,980 | $ | 397 | 12,029 | $ | 121 | $ | (3,408 | ) | $ | 441,503 | $ | 470,663 | $ | (138,361 | ) | $ | (1,228 | ) | $ | 769,687 | ||||||||||||
| Comprehensive Income: |
|||||||||||||||||||||||||||||||||
| Net income |
17,112 | 17,112 | |||||||||||||||||||||||||||||||
| Change in fair value of interest rate swap, net of tax expense of $421 |
659 | 659 | |||||||||||||||||||||||||||||||
| Total comprehensive income, net of tax |
17,771 | ||||||||||||||||||||||||||||||||
| Shares issued under stock compensation plans |
134 | 1 | 2,313 | 2,314 | |||||||||||||||||||||||||||||
| Restricted stock amortization |
319 | 319 | |||||||||||||||||||||||||||||||
| Income tax benefit associated with stock compensation plans |
154 | 154 | |||||||||||||||||||||||||||||||
| Dividends declared |
(5,039 | ) | (5,039 | ) | |||||||||||||||||||||||||||||
| Purchases of treasury stock |
(1,504 | ) | (1,504 | ) | |||||||||||||||||||||||||||||
| Balance at March 31, 2005 |
40,114 | $ | 398 | 12,029 | $ | 121 | $ | (3,089 | ) | $ | 443,970 | $ | 482,736 | $ | (139,865 | ) | $ | (569 | ) | $ | 783,702 | ||||||||||||