| Sonic Automotive, Inc. | |||
| Proposed Ticker: | DLR | 5401 East Independence Boulevard, P.O. Box 18747 | |
| Exchange: | NASDAQ-National Market | Charlotte, NC 28218 | |
| Industry: | Retail (SIC Code 5511) | (704) 532-3301 | |
| # of Employees: | 1574 | ||
| Type of Shares: | Class A Common Shares | Filing Date: | 8/8/97 | |
| U.S. Shares Filed: | 0 | Filing Price: | - | |
| Non-U.S. Shares Filed: | 0 | Offering Amount: | $104,000,000 | |
| Primary Shares: | 0 | Expenses: | - | |
| Secondary Shares: | 0 | Shares Out After: |
| Manager | Tier | Phone |
| Merrill Lynch & Co. | Lead Manager | (212) 449-4600 |
| Montgomery Securities | Co-manager | (415) 627-2100 |
| Wheat First Butcher & Singer Capital Markets | Co-manager | (804) 782-3278 |
| Issuer's Law Firm: | Parker, Poe, Adams & Bernstine |
| Bank's Law Firm: | Fried, Frank, Harris, Shriver & Jacobson |
| Registrar/Transfer Agent: | First Union National Bank North Carolina |
Dollar amounts in U.S. millions except for per share data | |||||
| 6 Month Ending Financials | |||||
| Full Year Audited Income | Latest Unaudited Income | Prior Unaudited Income | Balance Sheet | ||
| 12/31/96 | 6/30/97 | 6/30/96 | 6/30/97 | ||
| Revenue: | $376.60 | $212.75 | $189.62 | Assets: | $106.86 |
| Net Income: | $2.15 | $1.57 | $1.72 | Curr Assets: | $83.86 |
| EPS: | Liabilities: | $86.50 | |||
| Prior EPS: | $3.98 | $3.78 | Curr Liabilities: | $79.58 | |
| Cash Flow/Oper: | $2.09 | -$0.18 | $0.53 | Equity: | $20.36 |
| Cash Flow/Fin: | $7.09 | -$1.24 | -$4.47 | Cash: | $9.24 |
| Cash Flow/Inv: | -$11.49 | -$1.24 | Working Cap: | $4.29 | |
| Business Description |
| The company is one of the leading automotive retailers in the United States, operating 20 dealerships, four standalone used vehicle facilities and eight collision repair centers in the southeastern and southwestern United States. The company sells new and used cars and light trucks, sells replacement parts, provides vehicle maintenance, warranty, paint and repair services and arranges related financing and insurance ("F&I;") for its automotive customers. The Company's business is geographically diverse, with dealership operations in the Charlotte, Chattanooga, Nashville, Tampa-Clearwater, Houston and Atlanta markets, each of which the Company believes are experiencing favorable demographic trends. Sonic sells 17 domestic and foreign brands, which consist of BMW, Cadillac, Chrysler, Dodge, Eagle, Ford, Honda, Infiniti, Jaguar, Jeep, KIA, Oldsmobile, Plymouth, Saturn, Toyota, Volkswagen and Volvo. In several of its markets, the Company has a significant market share for new cars and light trucks, including 13.7% in Charlotte and 12.6% in Chattanooga in 1996. Pro forma for the Acquisitions, the Company had revenues of $916.1 million and retail unit sales of 24,114 new and 13,453 used vehicles in 1996. The Company believes that in 1996, based on pro forma retail unit sales it would have been one of the ten largest dealer groups out of a total of more than 15,000 dealer groups in the United States and, based on pro forma revenues, it would have had three of the top 100 single-point dealerships in the United States. |
| Competition |
| Automobile retailing is a highly competitive business with over 22,000 franchised automobile dealerships in the United States at the beginning of 1996. The Company's competition includes franchised automobile dealerships selling the same or similar makes of new and used vehicles offered by the Company in the same markets as the Company and sometimes at lower prices than those of the Company. These dealer competitors may be larger and have greater financial and marketing resources than the Company. Other competitors include other franchised dealers, private market buyers and sellers of used vehicles, used vehicle dealers, service center chains and independent service and repair shops. Gross profit margins on sales of new vehicles have been declining since 1986. The Company has also had margin pressure on its used vehicle sales over the last 18 months. The used car market faces increasing competition from non-traditional outlets such as used-car "superstores," which use sales techniques such as one price shopping and the Internet. Several groups have begun to establish nationwide networks of used vehicle superstores. In Charlotte and Atlanta, where the Company has significant operations, CarMax Superstores operate in competition with the Company. In addition, car superstores operate in many of the Company's other markets. "No negotiation" sales methods are also being tried for new cars by at least one of these superstores and by dealers for Saturn and other dealerships. Some recent market entrants may be capable of operating on smaller gross margins compared to the Company. In addition, certain manufacturers have publicly announced that they may directly enter the retail market in the future which could have a material adverse effect on the Company. The increased popularity of short-term vehicle leasing also has resulted, as these leases expire, in a large increase in the number of late model vehicles available in the market, which puts added pressure on margins. As the Company seeks to acquire dealerships in new markets, it may face increasingly significant competition (including from other large dealer groups and dealer groups that have publicly-traded equity) as it strives to gain market share through acquisitions or otherwise. The Company's franchise agreements (other than with Saturn) do not give the Company the exclusive right to sell a Manufacturer's product within a given geographic area. The Company could be materially adversely affected if any of its manufacturers award franchises to others in the same markets where the Company is operating. A similar adverse affect could occur if existing competing franchised dealers increase their market share in the Company's markets. The Company's gross margins may decline over time as it expands into markets where it does not have a leading position. These and other competitive pressures could materially adversely affect the Company's results of operations. |
| Business Plan |
| The company's operating objectives are to focus on customer satisfaction throughout the organization in order to build long-term customer relationships and to capitalize on operating efficiencies which will enhance its financial performance. The company seeks to achieve these objectives by implementing the following operating strategies: (I) Operate Multiple Dealerships in Geographically Diverse Markets, (ii) Achieve High Levels of Customer Satisfaction, (iii) Train and Develop Qualified Management, (iv) Offer a Diverse Range of Automotive Products and Services, (iv) Capitalize on Efficiencies in Operations and (v) Utilize Professional Management Practices and Incentive Based Compensation Programs. |
| Use of Proceeds |
| The proceeds from the proposed offering will be used to fund the acquisitions, including repaying indebtedness incurred by the company in connection with the acquisitions. |
| Name of Shareholder | % Owned Before | % Owned After |
| O. Bruton Smith | 87.62% | |
| Sonic Financial Corporation | 71.05% | |
| Bryan Scott Smith | 7.65% |
| Officer Name | Title | Age |
| O. Bruton Smith | Chairman, Chief Executive Officer and Director | 70 |
| Theodore M. Wright | Chief Financial Officer, Vice President-Finance, Secretary and Director | 35 |
| Nelson E. Bowers, II | Executive Vice President and Director Nominee | 53 |
| Bryan Scott Smith | President, Chief Operating Officer and Director | 29 |
| O. Ken Marks, Jr. | Regional Vice President-Florida | 35 |
| Jeffrey C. Rachor | Regional Vice President-Mid South Region | 35 |
| William M. Sullivan | Regional Vice President-North and South Carolina | 65 |
| Ivan A. Tufty | Regional Vice President-Texas | 57 |