Sonic Automotive, Inc. Announces Third Quarter Results

CHARLOTTE, N.C., Oct. 28 /PRNewswire-FirstCall/ -- Sonic Automotive, Inc. (NYSE: SAH), a leader in automotive retailing, today announced a third quarter 2008 loss from continuing operations of $11.4 million, or $0.24 per diluted share, compared to earnings of $30.9 million, or $0.68 per diluted share, in the prior year period. Included in the current quarter's results from continuing operations is an after-tax charge of approximately $21.0 million, or $0.49 per diluted share, related primarily to franchise asset and property impairment costs. The Company also recorded an after-tax charge of approximately $11.5 million, or $0.27 per diluted share, also primarily related to franchise asset and property impairment costs in our loss from discontinued operations in the current quarter.

In addition to these charges, also included in the current quarter's results from continuing operations is an estimated approximately $0.08 per diluted share negative impact related to property damage and business disruption caused by hurricane activity in the greater Houston area.

Mr. David Cosper, the Company's Chief Financial Officer, stated, "In light of the current economic conditions and the expectation of lower profitability at a small number of our domestic dealerships, we have written down the value of the franchise assets assigned to these dealerships. In addition, we have eliminated various planned facility projects and revised our plans for several facilities that we had vacated. As a result, we have written off certain costs that had already been incurred on those projects. We are in compliance with all debt covenants at the end of the quarter and expect to remain in compliance going forward. We have also performed an interim test of the recoverability of our goodwill and have determined that there is no impairment of the goodwill assets recorded on our balance sheet."

Scott Smith, the Company's President and Chief Strategic Officer, stated, "The current softness in consumer demand is to be expected given the turmoil in the credit markets and the amount of economic uncertainty we are currently experiencing. We remain focused on those things we can control and that we believe add value for our shareholders. We continue to aggressively reduce costs and manage capital expenditures as we move forward with our used vehicle and parts and service initiatives. As a result of the current economic uncertainty, we are projecting diluted earnings per share from continuing operations for the fourth quarter of $0.10 to $0.20."

Presentation materials for the Company's earnings conference call at 11:00 A.M. (Eastern) on October 28, 2008 can be accessed on the Company's website at www.sonicautomotive.com by clicking on the "For Investors" tab and choosing "Webcasts & Presentations" on the right side of the screen.

To access the live broadcast of the conference call over the Internet go to: www.sonicautomotive.com.

A live audio of the conference call will be accessible to the public by calling (877) 791-3416. International callers dial (706) 643-0958. Callers should dial in approximately 10 minutes before the call begins.

A conference call replay will be available one hour following the call for seven days and can be accessed by calling: (800) 642-1687 (domestic) or (706) 645-9291 (international), conference call ID #67717439.

About Sonic Automotive

Sonic Automotive, Inc., a Fortune 300 company based in Charlotte, N.C., is one of the largest automotive retailers in the United States operating 169 franchises. Sonic can be reached on the Web at www.sonicautomotive.com.

Included herein are forward-looking statements, including statements with respect to expected diluted earnings per share from continuing operations, debt compliance expectations, profitability at certain dealerships, cost reduction plans and capital expenditure reduction plans. There are many factors that affect management's views about future events and trends of the Company's business. These factors involve risk and uncertainties that could cause actual results or trends to differ materially from management's view, including without limitation, economic conditions, risks associated with acquisitions and the risk factors described in the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2008. The Company does not undertake any obligation to update forward-looking information.



    Sonic Automotive, Inc.
    Results of Operations (Unaudited)
    (in thousands, except per share, unit data and percentage amounts)

                                Three Months Ended       Nine Months Ended
                               9/30/2008   9/30/2007   9/30/2008  9/30/2007
    Revenues
      New retail vehicles       $987,520  $1,204,343  $3,016,719 $3,360,848
      Fleet vehicles              54,863      98,509     282,962    288,344
        Total new vehicles     1,042,383   1,302,852   3,299,681  3,649,192
      Used vehicles              339,498     363,785   1,088,808  1,034,375
      Wholesale vehicles          72,316     100,201     239,118    304,173
        Total vehicles         1,454,197   1,766,838   4,627,607  4,987,740
      Parts, service and
       collision repair          284,132     292,044     871,713    853,650
      Finance, insurance and
       other                      46,512      53,600     150,148    152,729
        Total revenues         1,784,841   2,112,482   5,649,468  5,994,119
    Total gross profit           285,693     323,963     899,205    933,327
    SG&A expenses               (267,961)   (240,243)   (749,651)  (701,621)
    Depreciation                  (8,912)     (5,338)    (25,656)   (19,163)
    Operating income               8,820      78,382     123,898    212,543
    Interest expense, floor
     plan                         (9,744)    (16,660)    (34,467)   (49,002)
    Interest expense, other      (16,661)    (10,898)    (43,439)   (28,446)
    Other (expense) / income         (10)         (5)         87         85
    Income / (loss) from
     continuing operations
     before taxes                (17,595)     50,819      46,079    135,180
    Income taxes                   6,214     (19,903)    (19,256)   (53,159)
    Income / (loss) from
     continuing operations       (11,381)     30,916      26,823     82,021
    Discontinued operations:
      Loss from operations and
       the sale of discontinued
       franchises                (19,954)     (6,870)    (38,790)   (13,651)
      Income tax benefit           5,986       2,061      11,637      4,096
      Loss from discontinued
       operations                (13,968)     (4,809)    (27,153)    (9,555)
    Net income/ (loss)          $(25,349)    $26,107       $(330)   $72,466

    Diluted:
      Weighted average common
       shares outstanding         42,900      46,978      43,387     47,631

      Earnings / (loss) per
       share from continuing
       operations                 ($0.24)      $0.68       $0.68      $1.79
      Loss per share from
       discontinued operations    ($0.33)     ($0.10)     ($0.63)    ($0.20)
      Earnings / (loss) per
       share                      ($0.57)      $0.58       $0.05      $1.59

    Gross Margin Data
     (Continuing Operations):

      Retail new vehicles            7.0%        7.5%        7.3%       7.4%
      Fleet vehicles                 4.5%        1.5%        2.2%       2.1%
        Total new vehicles           6.9%        7.0%        6.8%       7.0%
      Used vehicles retail           8.0%        8.8%        8.5%       9.2%
        Total vehicles retail        7.2%        7.4%        7.3%       7.5%
      Wholesale vehicles            (1.9%)      (1.5%)      (1.8%)     (0.9%)
      Parts, service and
       collision repair             49.9%       50.7%       49.9%      50.6%
      Finance, insurance and
       other                       100.0%      100.0%      100.0%     100.0%
        Overall gross margin        16.0%       15.3%       15.9%      15.6%

    SG&A Expenses (Continuing
     Operations):

      Personnel                 $128,167    $133,930    $400,115   $398,201
      Advertising                 14,489      17,294      48,018     48,416
      Facility rent               28,655      24,890      75,073     74,730
      Other                       96,650      64,129     226,445    180,274
        Total                   $267,961    $240,243    $749,651   $701,621

    SG&A Expenses as % of
     Gross Profit

      Personnel                     44.9%       41.3%       44.5%      42.7%
      Advertising                    5.1%        5.3%        5.3%       5.2%
      Facility rent                 10.0%        7.7%        8.3%       8.0%
      Other                         33.8%       19.9%       25.3%      19.3%
        Total                       93.8%       74.2%       83.4%      75.2%

    Operating Margin %               0.5%        3.7%        2.2%       3.5%



    Unit Data (Continuing        Three Months Ended      Nine Months Ended
     Operations):              9/30/2008   9/30/2007   9/30/2008  9/30/2007

      New retail units            29,076      35,686      90,104     99,707
      Fleet units                  2,816       4,272      11,729     12,685
      Used units                  16,994      18,056      54,260     51,758
      Wholesale units              9,563      11,230      30,377     33,869
      Average price per unit:
        New retail vehicles      $33,963     $33,748     $33,480    $33,707
        Fleet vehicles            19,483      23,059      24,125     22,731
        Used vehicles             19,978      20,148      20,066     19,985
        Wholesale vehicles         7,562       8,923       7,872      8,981

    Other Data:

      Same store revenue
       percentage changes:
        New retail                 (18.9%)                 (14.2%)
        Fleet                      (44.3%)                 (10.3%)
          Total New Vehicles       (20.8%)                 (13.9%)
        Used                        (7.7%)                    1.6%
        Parts, service and
         collision repair           (3.8%)                  (1.3%)
        Finance, insurance
         and other                 (13.6%)                  (3.9%)
          Total                    (16.4%)                  (9.7%)

    Balance Sheet Data:
                               9/30/2008  12/31/2007
    ASSETS
    Current Assets:
      Cash and cash
       equivalents                $7,340     $16,514
      Receivables, net           214,625     347,309
      Inventories              1,030,704   1,093,017
      Assets held for sale       110,815      87,342
      Other current assets        34,836      35,879
        Total current assets   1,398,320   1,580,061
    Property and Equipment,
     Net                         381,950     286,591
    Goodwill, Net              1,254,403   1,276,074
    Other Intangibles, Net        95,974     111,342
    Other Assets                  21,705      28,676
    TOTAL ASSETS              $3,152,352  $3,282,744

    LIABILITIES AND
     STOCKHOLDERS' EQUITY
    Current Liabilities:
      Floor plan notes payable  $991,571  $1,125,670
      Other current
       liabilities               223,288     247,658
      Liabilities associated
       with assets held for
       sale                       42,928      48,592
      Current maturities of
       long-term debt            131,705       4,197
        Total current
         liabilities           1,389,492   1,426,117
    LONG-TERM DEBT               638,970     697,800
    OTHER LONG-TERM
     LIABILITIES                 222,154     227,999
    STOCKHOLDERS' EQUITY         901,736     930,828
    TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY     $3,152,352  $3,282,744


    Balance Sheet Ratios:
      Current Ratio                 1.01        1.11
      Debt to Total Capital,
       Net of Cash                  45.8%       42.4%

SOURCE Sonic Automotive, Inc.