Sonic Automotive, Inc. Reports 21% Vehicle Revenue Growth; Adjusted Continuing Ops Profit Up 41% Over Prior Year Quarter
CHARLOTTE, N.C., July 29 /PRNewswire-FirstCall/ -- Sonic Automotive, Inc. (NYSE: SAH), the nation's third-largest automotive retailer, today reported that 2010 second quarter adjusted earnings from continuing operations were $15.6 million, up 41% from adjusted earnings from continuing operations in the same prior year period. On a per share basis, the Company earned an adjusted $0.27 per diluted share from continuing operations, compared to an adjusted $0.23 per diluted share from continuing operations in the same prior year quarter. The adjustments, which are related primarily to debt refinancing activities and mark-to-market adjustments on interest rate swaps, are detailed further in the attached tables. During the second quarter, the Company completed the retirement of $200 million of our 8.625% senior subordinated notes using proceeds from a debt offering that was completed in March 2010.
Business Overview – Revenue Growth In Every Business Line Over Q2 of Last Year
Commenting on the quarter, B. Scott Smith, the Company's President, said, "We are pleased with the growth in both revenues and profits over the second quarter of last year. Our new vehicle business is up both sequentially and over the same period last year as we continue to see economic stabilization in certain segments of our geographic footprint. The growth in our used vehicle business continues to drive incremental revenue in our fixed operations and F&I departments. Our strategy for some time has been focused on standardizing our operating procedures through the rollout of our operational playbooks. Results this quarter demonstrate one of the primary benefits of our operational playbooks – they create growth opportunities not just in their specific area of the business but across all of our business lines."
New and Used Vehicles – Revenue Increases 19% and 23%, Respectively
New vehicle retail revenue increased 19% and used vehicle retail revenue increased 23% for the second quarter of 2010 compared to the same quarter last year. Jeff Dyke, the Company's EVP of Operations, stated, "We are pleased with our new vehicle growth, particularly given that our volume declines in 2009 were not as severe as what the overall industry experienced due to our favorable brand and geographic mix. Our dealerships continue to take market share and outperform the competition in their local markets. We are excited to announce that our New Car Playbook will be introduced to our stores later this year. We expect it to provide us many of the same successes that we have already received from our proven Used Vehicle Playbook. We also continue to be very pleased with our used vehicle volume growth especially when we consider the 20% growth comes on top of 12% growth in 2009. We continue to show that the used car business has tremendous upside potential as the second quarter was our largest used vehicle volume and gross profit quarter in our Company's history."
Service, Parts & Body Shop – Revenue and Gross Profit Both Increase
Sonic's Service, Parts & Body Shop revenue for the second quarter was up approximately 5% compared to the prior year quarter, while gross profit dollars were up over 3%. Mr. Dyke stated, "Our operational strategies in parts and service are specifically designed to increase the non-warranty pieces of our business to respond to improved vehicle quality, fewer units in operation and changing warranty programs. We have seen consistent growth in both our customer pay business and in the revenues we earn for reconditioning work done on pre-owned vehicles."
Presentation materials for the Company's July 29, 2010 earnings conference call at 11:00 A.M. (Eastern) 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 monitor.
To access the live broadcast of the call over the Internet go to: www.ccbn.com or www.sonicautomotive.com
A live audio of the 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, International callers dial (706) 645-9291 Conference ID: 86991682
About Sonic Automotive
Sonic Automotive, Inc., a Fortune 500 company based in Charlotte, N.C., is the nation's third-largest automotive retailer, operating 140 franchises. Sonic can be reached on the web at www.sonicautomotive.com.
Included herein are forward-looking statements, including statements with respect to economic stabilization and business improvement, future success and impacts from the implementation of our various operational playbooks, future cash flow generation, growth opportunities and future debt retirement. 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 in the markets in which we operate, new and used vehicle sales volume, the success of our operational strategies, the rate and timing of overall economic recovery or further decline and the risk factors described in the Company's annual report on Form 10-K for the year ending December 31, 2009 and the quarterly report on Form 10-Q for the quarter ending March 31, 2010. 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 Three Months Ended
As As As As
Reported Adjusted Reported Adjusted
6/30/2010 Adjustments 6/30/2010 6/30/2009 Adjustments 6/30/2009
Revenues
New retail
vehicles $ 848,610 $ - $ 848,610 $ 711,083 $ - $ 711,083
Fleet vehicles 53,843 - 53,843 61,213 - 61,213
Total new
vehicles 902,453 - 902,453 772,296 - 772,296
Used vehicles 470,365 - 470,365 382,091 - 382,091
Wholesale
vehicles 30,111 - 30,111 33,903 - 33,903
Total
vehicles 1,402,929 - 1,402,929 1,188,290 - 1,188,290
Parts, service
and collision
repair 287,095 - 287,095 274,032 - 274,032
Finance,
insurance and
other 45,985 - 45,985 38,847 - 38,847
Total
revenues 1,736,009 - 1,736,009 1,501,169 - 1,501,169
Total gross
profit 285,019 - 285,019 259,699 - 259,699
SG&A expenses (228,372) 647 (227,725) (205,767) - (205,767)
Impairment
charges (1) (1) (5,030) 5,030 -
Depreciation (8,675) - (8,675) (8,183) - (8,183)
Operating
income 47,971 647 48,618 40,719 5,030 45,749
Interest
expense, floor
plan (5,507) - (5,507) (5,492) - (5,492)
Interest
expense, other,
net (15,683) 519 (15,164) (23,216) 6,712 (16,504)
Interest
expense,
non-cash,
convertible
debt (1,730) - (1,730) (3,643) - (3,643)
Interest
expense,
non-cash, cash
flow swaps (2,235) 2,235 - (1,908) 1,908 -
Other (expense)
/ income, net (7,235) 7,259 24 20 - 20
Income / (loss)
from continuing
operations
before taxes 15,581 10,660 26,241 6,480 13,650 20,130
Income tax
(expense) /
benefit (6,300) (4,310) (10,610) (2,916) (6,143) (9,059)
Income / (loss)
from continuing
operations 9,281 6,350 15,631 3,564 7,507 11,071
Income / (Loss)
from
discontinued
operations (845) - (845) (3,538) 1,313 (2,225)
Net income $ 8,436 $ 6,350 $ 14,786 $ 26 $ 8,820 $ 8,846
Diluted:
Weighted
average common
shares
outstanding 65,807 - 65,807 41,604 - 53,810
Earnings /
(loss) per
share from
continuing
operations $0.17 $0.10 $0.27 $0.08 $ 0.15 $0.23
Earnings /
(loss) per
share from
discontinued
operations (0.01) (0.01) (0.02) (0.08) 0.04 (0.04)
Cumulative
effect of
change in
accounting
principle
Earnings /
(loss) per
share $0.16 $0.09 $0.25 $0.00 $0.19 $0.19
Gross Margin
Data
(Continuing
Operations):
Retail new
vehicles 7.1% 7.1% 7.0% 7.0%
Fleet vehicles 1.9% 1.9% 3.6% 3.6%
Total new
vehicles 6.8% 6.8% 6.8% 6.8%
Used vehicles
retail 7.7% 7.7% 8.1% 8.1%
Total
vehicles
retail 7.1% 7.1% 7.5% 7.5%
Wholesale
vehicles (6.1%) (6.1%) (3.7%) (3.7%)
Parts, service
and collision
repair 49.9% 49.9% 50.6% 50.6%
Finance,
insurance and
other 100.0% 100.0% 100.0% 100.0%
Overall gross
margin 16.4% 16.4% 17.3% 17.3%
SG&A Expenses
(Continuing
Operations):
Personnel $ 135,845 $ - $ 135,845 $ 117,740 $ - $ 117,740
Advertising 12,964 - 12,964 11,220 - 11,220
Facility rent 32,717 - 32,717 32,132 - 32,132
Other 46,846 (647) 46,199 44,675 - 44,675
Total $ 228,372 $ (647) $ 227,725 $ 205,767 $ - $ 205,767
SG&A Expenses
as % of Gross
Profit 80.1% 79.9% 79.2% 79.2%
Operating
Margin % 2.8% 2.8% 2.7% 3.0%
Unit Data
(Continuing
Operations):
New retail
units 24,854 21,574
Fleet units 2,272 2,572
New units 27,126 24,146
Used units 24,624 20,568
Total units
retailed 51,750 44,714
Wholesale
units 5,266 5,313
Other Data:
Same store
revenue
percentage
changes:
New retail 19.3% (31.8%)
Fleet (12.0%) (47.7%)
Total New
Vehicles 16.9% (33.4%)
Used 23.1% 3.5%
Parts,
service and
collision
repair 4.8% (3.8%)
Finance,
insurance and
other 18.4% (25.7%)
Total 15.6% (22.9%)
Description of
Adjustments: 2010 2009
Continuing
Operations:
Hail damage $ 647 $ -
Debt
restructuring 7,259 6,712
Cash flow
swaps 2,235 1,908
Impairment
charges - 5,030
Double-carry
interest 519 -
Total pretax $ 10,660 $ 13,650
Tax effect (4,310) (6,143)
Total $ 6,350 $ 7,507
Discontinued
Operations:
Impairment
charges $ - $ 1,880
Tax effect - (567)
Total $ - $ 1,313
Sonic
Automotive,
Inc.
Results of
Operations
(Unaudited)
(in thousands,
except per
share, unit
data and
percentage
amounts)
Six Months Ended Six Months Ended
As As As As
Reported Adjusted Reported Adjusted
6/30/2010 Adjustments 6/30/2010 6/30/2009 Adjustments 6/30/2009
Revenues
New retail $ $ $ $
vehicles 1,589,555 $ - 1,589,555 1,362,443 $ - 1,362,443
Fleet
vehicles 97,495 - 97,495 115,376 - 115,376
Total new
vehicles 1,687,050 - 1,687,050 1,477,819 - 1,477,819
Used
vehicles 892,656 - 892,656 710,381 - 710,381
Wholesale
vehicles 61,389 - 61,389 71,359 - 71,359
Total
vehicles 2,641,095 - 2,641,095 2,259,559 - 2,259,559
Parts,
service and
collision
repair 565,682 - 565,682 544,701 - 544,701
Finance,
insurance
and other 86,959 - 86,959 74,000 - 74,000
Total
revenues 3,293,736 - 3,293,736 2,878,260 - 2,878,260
Total gross
profit 553,343 - 553,343 506,672 - 506,672
SG&A expenses (451,865) 647 (451,218) (411,231) - (411,231)
Impairment
charges (45) (45) (5,087) 5,087 -
Depreciation (17,000) - (17,000) (15,776) - (15,776)
Operating
income 84,433 647 85,080 74,578 5,087 79,665
Interest
expense,
floor plan (10,413) - (10,413) (10,660) - (10,660)
Interest
expense,
other, net (32,873) 1,464 (31,409) (39,950) 8,760 (31,190)
Interest
expense,
non-cash,
convertible
debt (3,406) - (3,406) (6,262) - (6,262)
Interest
expense,
non-cash, cash
flow swaps (3,918) 3,918 - (3,179) 3,179 -
Other
(expense) /
income, net (7,171) 7,259 88 70 - 70
Income /
(loss) from
continuing
operations
before taxes 26,652 13,288 39,940 14,597 17,026 31,623
Income tax
(expense) /
benefit (11,061) (5,514) (16,575) (6,569) (7,662) (14,231)
Income /
(loss) from
continuing
operations 15,591 7,774 23,365 8,028 9,364 17,392
Income /
(Loss) from
discontinued
operations (3,001) - (3,001) (6,324) 2,392 (3,932)
Net income $ 12,590 $ 7,774 $ 20,364 $ 1,704 $ 11,756 $ 13,460
Diluted:
Weighted
average
common
shares
outstanding 52,749 - 65,639 40,974 - 47,111
Earnings /
(loss) per
share from
continuing
operations $0.29 $0.13 $0.42 $0.19 $ 0.20 $0.39
Earnings /
(loss) per
share from
discontinued
operations (0.05) - (0.05) (0.15) 0.07 (0.08)
Cumulative
effect of
change in
accounting
principle
Earnings /
(loss) per
share $0.24 $0.13 $0.37 $0.04 $0.27 $0.31
Gross Margin
Data
(Continuing
Operations):
Retail new
vehicles 7.1% 7.1% 6.9% 6.9%
Fleet
vehicles 2.7% 2.7% 3.9% 3.9%
Total new
vehicles 6.9% 6.9% 6.7% 6.7%
Used
vehicles
retail 7.8% 7.8% 8.7% 8.7%
Total
vehicles
retail 7.2% 7.2% 7.4% 7.4%
Wholesale
vehicles (4.1%) (4.1%) (1.8%) (1.8%)
Parts,
service and
collision
repair 50.1% 50.1% 50.1% 50.1%
Finance,
insurance
and other 100.0% 100.0% 100.0% 100.0%
Overall
gross
margin 16.8% 16.8% 17.6% 17.6%
SG&A Expenses
(Continuing
Operations):
Personnel $ 266,821 $ - $ 266,821 $ 232,858 $ - $ 232,858
Advertising 24,294 - 24,294 22,115 - 22,115
Facility
rent 66,328 - 66,328 65,111 - 65,111
Other 94,422 (647) 93,775 91,147 - 91,147
Total $ 451,865 $ (647) $ 451,218 $ 411,231 $ - $ 411,231
SG&A Expenses
as % of Gross
Profit 81.7% 81.5% 81.2% 81.2%
Operating
Margin % 2.6% 2.6% 2.6% 2.8%
Unit Data
(Continuing
Operations):
New retail
units 46,440 41,168
Fleet units 4,022 4,827
New units 50,462 45,995
Used units 46,326 37,924
Total units
retailed 96,788 83,919
Wholesale
units 10,459 11,826
Other Data:
Same store
revenue
percentage
changes:
New retail 16.7% (32.5%)
Fleet (15.5%) (47.9%)
Total New
Vehicles 14.2% (34.0%)
Used 25.7% (2.2%)
Parts,
service and
collision
repair 3.9% (4.2%)
Finance,
insurance
and other 17.5% (27.6%)
Total 14.4% (24.3%)
Description of
Adjustments: 2010 2009
Continuing
Operations:
Hail damage $ 647 $ -
Debt
restructuring 7,259 8,760
Cash flow
swaps 3,918 3,179
Impairment
charges - 5,087
Double-carry
interest 1,464 -
Total pretax $ 13,288 $ 17,026
Tax effect (5,514) (7,662)
Total $ 7,774 $ 9,364
Discontinued
Operations:
Impairment
charges $ - $ 3,408
Tax effect - (1,016)
Total $ - $ 2,392
SOURCE Sonic Automotive, Inc.
Released July 29, 2010