Sonic Automotive, Inc. Reports First Quarter Results - Record Revenue and Gross Profit

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CHARLOTTE, N.C., April 26, 2018 /PRNewswire/ -- Sonic Automotive, Inc. (NYSE: SAH), one of the nation's largest automotive retailers, today reported financial results for the first quarter of 2018.

  • Record first quarter revenue and gross profit of $2.4 billion and $352.5 million, respectively
  • All-time record quarterly pre-owned retail unit sales of 33,739 units
  • All-time record quarterly F&I gross profit per retail unit of $1,490
  • Record first quarter F&I gross of $93.7 million
  • Record first quarter fixed operations gross profit of $169.6 million
  • Pre-owned segment retailed over 5,500 units during the quarter

First Quarter 2018 Results

GAAP Basis

Net loss from continuing operations for the first quarter of 2018 was $2.0 million, or $0.05 per diluted share. Comparatively, net loss from continuing operations for the first quarter of 2017 was $0.0 million, or $0.0 per diluted share.

Adjusted Basis

Adjusted net income from continuing operations and related earnings per diluted share are non-GAAP financial measures.  The schedules included in this press release reconcile these non-GAAP financial measures to the most directly comparable GAAP financial measures.

Adjusted net income from continuing operations for the first quarter of 2018 was $11.0 million, or $0.26 per diluted share. The adjustments in the 2018 quarterly period relate to a gain on the disposal of franchises offset by fixed asset impairments, compensation related charges, lease exit accruals and certain legal matters. Adjusted net income from continuing operations for the first quarter of 2017 was $10.3 million, or $0.23 per diluted share. The adjustments in the 2017 quarterly period relate to the redemption of Sonic's 7.0% Senior Subordinated Notes due 2022 (the "7.0% Notes"), weather-related physical damage costs and fixed asset impairments, offset by net settlement gains related to legal matters.

Commentary

Heath Byrd, the Company's Chief Financial Officer, noted, "The first quarter met our internal earnings expectations and we remain confident with our full year earnings guidance.  We shifted our strategy during the quarter related to the number of used vehicle inventory we are carrying.  The decline in used gross per unit and the increase in wholesale loss resulted from us aggressively disposing of units to reduce our overall days' supply of used vehicles.  Additionally, we believe we found a good compromise between volume and gross for new vehicles and we were able to grow both fixed operations and F&I gross profit compared to the first quarter of 2017."

"We remain committed to growing our franchise store operations and our EchoPark brand.  In addition to our dividend of $0.06 per share distributed during the first quarter, we continue to honor our commitment to return capital to shareholders as we repurchased approximately 1.2 million shares of our common stock for approximately $23.4 million."

Dividend

Sonic's Board of Directors approved a quarterly dividend of $0.06 per share payable in cash for our stockholders of record on June 15, 2018.  The dividend will be payable on July 13, 2018.

First Quarter Earnings Conference Call

Senior management will host a conference call today at 11:00 A.M. (Eastern) to discuss the quarter's results.  To access the live broadcast of the call over the Internet go to: www.sonicautomotive.com, then click on "Our Company," then "Investor Relations," then "Earnings Conference Calls."

Presentation materials for the conference call can be accessed on the Company's website at www.sonicautomotive.com by clicking on the "Investor Relations" tab under "Our Company" and choosing "Webcasts & Presentations."

The conference call will also be available live by dialing in 10 minutes prior to the start of the call at:

Domestic: (877) 450-3867
International: (706) 643-0958
Conference ID: 9399998

A conference call replay will be available one hour following the call for seven days and can be accessed by calling:

Domestic: (855) 859-2056
International: (404) 537-3406
Conference ID: 9399998

About Sonic Automotive

Sonic Automotive, Inc., a Fortune 500 company based in Charlotte, N.C., is one of the nation's largest automotive retailers.  Sonic can be reached on the web at www.sonicautomotive.com. More information about EchoPark Automotive can be found at www.echopark.com.

Forward-Looking Statements

Included herein are forward-looking statements, including statements with respect to our 2018 earnings expectations, our projected annual effective income tax rate, 2018 new vehicle industry volume, projected results for our EchoPark brand, the anticipated expansion of both our franchised and pre-owned businesses in 2018 and our long-term strategy.  There are many factors that affect management's views about future events and trends of the Company's business.  These factors involve risks and uncertainties that could cause actual results or trends to differ materially from management's views, including without limitation, economic conditions in the markets in which we operate, new and used vehicle industry sales volume, the success of our operational strategies, the rate and timing of overall economic recovery or decline, and the risk factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 2017. The Company does not undertake any obligation to update forward-looking information, except as required under federal securities laws and the rules and regulations of the Securities and Exchange Commission (the "SEC").

Non-GAAP Financial Measures

This press release and the attached financial tables contain certain non-GAAP financial measures as defined under SEC rules, such as adjusted net income from continuing operations and related earnings per diluted share, which exclude certain items disclosed in the attached financial tables.  As required by SEC rules, the Company provides reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures.  The Company believes that these non-GAAP financial measures improve the transparency of the Company's disclosure, provide a meaningful presentation of the Company's results from its core business operations excluding the impact of items not related to the Company's ongoing core business operations, and improve the period-to-period comparability of the Company's results from its core business operations.

 

 

Sonic Automotive, Inc.

Results of Operations (Unaudited)

 


Results of Operations

Three Months Ended
March 31,

2018

2017

(In thousands, except per share and unit data)

Revenues:


New vehicles

$

1,180,846

$

1,171,932

Used vehicles

709,046

634,474

Wholesale vehicles

65,398

46,310

Total vehicles

1,955,290

1,852,716

Parts, service and collision repair

351,758

352,043

Finance, insurance and other, net

93,725

83,063

Total revenues

2,400,773

2,287,822

Gross profit

352,499

350,346

Selling, general and administrative expenses

(304,925)

(292,234)

Impairment charges

(3,643)

(510)

Depreciation and amortization

(23,743)

(21,153)

Operating income (loss)

20,188

36,449

Other income (expense):


Interest expense, floor plan

(10,677)

(8,387)

Interest expense, other, net

(13,456)

(13,409)

Other income (expense), net

89

(14,501)

Total other income (expense)

(24,044)

(36,297)

Income (loss) from continuing operations before taxes

(3,856)

152

Provision for income taxes for continuing operations - benefit (expense)

1,842

(172)

Income (loss) from continuing operations

(2,014)

(20)

Income (loss) from discontinued operations

(180)

(521)

Net income (loss)

$

(2,194)

$

(541)




Diluted earnings (loss) per common share:


Earnings (loss) per share from continuing operations

$

(0.05)

$

—

Earnings (loss) per share from discontinued operations

—

(0.01)

Earnings (loss) per common share

$

(0.05)

$

(0.01)

Weighted average common shares outstanding

42,789

44,791

Gross Margin Data (Continuing Operations):


New vehicles

4.8

%

5.0

%

Used vehicles

5.2

%

6.4

%

Wholesale vehicles

(6.8)%

(2.5)%

Parts, service and collision repair

48.2

%

48.1

%

Finance, insurance and other

100.0

%

100.0

%

Overall gross margin

14.7

%

15.3

%




SG&A Expenses (Continuing Operations):


Compensation

185,037

176,547

Advertising

16,016

15,257

Rent

21,868

18,487

Other

82,004

81,943




Total SG&A expenses

304,925

292,234

SG&A expenses as % of gross profit

86.5

%

83.4

%




Operating Margin %

0.8

%

1.6

%




Unit Data (Continuing Operations):


New units

29,500

30,495

Used units

33,739

30,372

Wholesale units

9,680

8,307

 

 

Sonic Automotive, Inc.

Results of Operations (Unaudited)

Per Share Data



Three Months Ended March 31, 2018



Income (Loss)

Income (Loss)






From Continuing

Operations

From Discontinued

Operations

Net

Income (Loss)

Weighted

Average

Shares

Amount

Per

Share

Amount

Amount

Per

Share

Amount

Amount

Per

Share

Amount

(In thousands, except per share amounts)

Reported:












Earnings (loss) and shares

42,789

$

(2,014)


$

(180)


$

(2,194)

Effect of participating securities:












Non-vested restricted stock

—


—


—

Basic earnings (loss) and shares

42,789

$

(2,014)

$

(0.05)

$

(180)

$

—

$

(2,194)

$

(0.05)

Effect of dilutive securities:












Stock compensation plans

—











Diluted earnings (loss) and shares

42,789

$

(2,014)

$

(0.05)

$

(180)

$

—

$

(2,194)

$

(0.05)














Adjustments:












Impairment charges

$

3,643


$

—


$

3,643

Legal and other

1,500


—


1,500

Compensation-related charges

9,189


—


9,189

Lease exit adjustments

4,814


—


4,814

Gain on disposal

(1,190)


—


(1,190)

Total adjustments before taxes

17,956


—


17,956

Income tax effect of adjustments

(4,894)






$

(4,894)

Effect of adjustments, net of income taxes

$

13,062

$

0.31

$

—

$

(0.01)

$

13,062

$

0.30














Adjusted:












Earnings (loss) and diluted earnings (loss) per share (1)

$

11,048

$

0.26

$

(180)

$

(0.01)

$

10,868

$

0.25







(1)     Net loss attributable to Pre-Owned Stores operations was $0.10 per fully diluted share in the three months ended March 31, 2018.

 

 

Three Months Ended March 31, 2017



Income (Loss)

Income (Loss)






From Continuing

Operations

From Discontinued

Operations

Net

Income (Loss)

Weighted

Average

Shares

Amount

Per

Share

Amount

Amount

Per

Share

Amount

Amount

Per

Share

Amount

(In thousands, except per share amounts)

Reported:












Earnings (loss) and shares

44,791

$

(20)


$

(521)


$

(541)

Effect of participating securities:












Non-vested restricted stock

—


—


—

Basic earnings (loss) and shares

44,791

$

(20)

$

—

$

(521)

$

(0.01)

$

(541)

$

(0.01)

Effect of dilutive securities:








Stock compensation plans

—











Diluted earnings (loss) and shares (2)

44,791

$

(20)

$

—

$

(521)

$

(0.01)

$

(541)

$

(0.01)














Adjustments:












Impairment charges

$

510


$

—


$

510

Legal and other

(1,149)


—


(1,149)

Storm damage

2,382


—


2,382

Loss on debt extinguishment

15,268


—


15,268

Total adjustments before taxes

17,011


—


17,011

Income tax effect of adjustments

(6,677)


—


$

(6,677)

Effect of adjustments, net of income taxes

$

10,334

$

0.23

$

—

$

—

$

10,334

$

0.23














Adjusted:












Earnings (loss) and diluted earnings (loss) per share (2)

$

10,314

$

0.23

$

(521)

$

(0.01)

$

9,793

$

0.22



(2)     Net loss attributable to Pre-Owned Stores operations was $0.07 per fully diluted share in the three months ended March 31, 2017.

 

 

Sonic Automotive, Inc.

Results of Operations (Unaudited)




New Vehicles





Three Months Ended March 31,

Better / (Worse)

2018

2017

Change

% Change

(In thousands, except unit and per unit data)

Reported new vehicle:






Revenue

$

1,180,846

$

1,171,932

$

8,914

0.8%

Gross profit

$

56,800

$

58,278

$

(1,478)

(2.5)%

Unit sales

29,500

30,495

(995)

(3.3)%

Revenue per unit

$

40,029

$

38,430

$

1,599

4.2%

Gross profit per unit

$

1,925

$

1,911

$

14

0.7%

Gross profit as a % of revenue

4.8%

5.0%

(20)

bps










Three Months Ended March 31,

Better / (Worse)

2018

2017

Change

% Change

(In thousands, except unit and per unit data)

Same store new vehicle:






Revenue

$

1,176,510

$

1,151,850

$

24,660

2.1%

Gross profit

$

56,757

$

57,717

$

(960)

(1.7)%

Unit sales

29,416

29,865

(449)

(1.5)%

Revenue per unit

$

39,996

$

38,569

$

1,427

3.7%

Gross profit per unit

$

1,929

$

1,933

$

(4)

(0.2)%

Gross profit as a % of revenue

4.8%

5.0%

(20)

bps









 

 

Sonic Automotive, Inc.

Results of Operations (Unaudited)




Used Vehicles






Three Months Ended March 31,

Better / (Worse)

2018

2017

Change

% Change

(In thousands, except unit and per unit data)

Reported used vehicle:






Revenue

$

709,046

$

634,474

$

74,572

11.8%

Gross profit

$

36,771

$

40,833

$

(4,062)

(9.9)%

Unit sales

33,739

30,372

3,367

11.1%

Revenue per unit

$

21,016

$

20,890

$

126

0.6%

Gross profit per unit

$

1,090

$

1,344

$

(254)

(18.9)%

Gross profit as a % of revenue

5.2%

6.4%

(120)

bps










Three Months Ended March 31,

Better / (Worse)

2018

2017

Change

% Change

(In thousands, except unit and per unit data)

Same store used vehicle:






Revenue

$

629,510

$

613,348

$

16,162

2.6%

Gross profit

$

34,306

$

37,970

$

(3,664)

(9.6)%

Unit sales

29,690

29,162

528

1.8%

Revenue per unit

$

21,203

$

21,032

$

171

0.8%

Gross profit per unit

$

1,155

$

1,302

$

(147)

(11.3)%

Gross profit as a % of revenue

5.4%

6.2%

(80)

bps









 

 

Sonic Automotive, Inc.

Results of Operations (Unaudited)




Wholesale Vehicles





Three Months Ended March 31,

Better / (Worse)

2018

2017

Change

% Change

(In thousands, except unit and per unit data)

Reported used vehicle:






Revenue

$

65,398

$

46,310

$

19,088

41.2%

Gross profit

$

(4,425)

$

(1,172)

$

(3,253)

(277.6)%

Unit sales

9,680

8,307

1,373

16.5%

Revenue per unit

$

6,756

$

5,575

$

1,181

21.2%

Gross profit per unit

$

(457)

$

(141)

$

(316)

(224.1)%

Gross profit as a % of revenue

(6.8)%

(2.5)%

(430)

bps










Three Months Ended March 31,

Better / (Worse)

2018

2017

Change

% Change

(In thousands, except unit and per unit data)

Same store used vehicle:






Revenue

$

62,719

$

45,154

$

17,565

38.9%

Gross profit

$

(4,669)

$

(1,080)

$

(3,589)

(332.3)%

Unit sales

9,215

7,991

1,224

15.3%

Revenue per unit

$

6,806

$

5,651

$

1,155

20.4%

Gross profit per unit

$

(507)

$

(135)

$

(372)

(275.6)%

Gross profit as a % of revenue

(7.4)%

(2.4)%

(500)

bps









 

 

Sonic Automotive, Inc

Results of Operations (Unaudited)




Parts, Service and Collision Repair ("Fixed Operations")





Three Months Ended March 31,

Better / (Worse)

2018

2017

Change

% Change

(In thousands, except unit and per unit data)

Reported:






Revenue






Customer pay

$

142,354

$

138,582

$

3,772

2.7%

Warranty

67,601

69,471

(1,870)

(2.7)%

Wholesale parts

42,501

43,281

(780)

(1.8)%

Internal, sublet and other

99,302

100,709

(1,407)

(1.4)%

Total

$

351,758

$

352,043

$

(285)

(0.1)%







Gross profit






Customer pay

$

76,350

$

73,764

$

2,586

3.5%

Warranty

37,901

38,347

(446)

(1.2)%

Wholesale parts

7,265

7,550

(285)

(3.8)%

Internal, sublet and other

48,112

49,683

(1,571)

(3.2)%

Total

$

169,628

$

169,344

$

284

0.2%








Gross profit as a % of revenue






Customer pay

53.6%

53.2%

40

bps

Warranty

56.1%

55.2%

90

bps

Wholesale parts

17.1%

17.4%

(30)

bps

Internal, sublet and other

48.5%

49.3%

(80)

bps

Total

48.2%

48.1%

10

bps









 

 

Sonic Automotive, Inc.

Results of Operations (Unaudited)

Parts, Service and Collision Repair ("Fixed Operations")





Three Months Ended March 31,

Better / (Worse)

2018

2017

Change

% Change

(In thousands, except unit and per unit data)

Same Store:






Revenue






Customer pay

$

140,928

$

136,081

$

4,847

3.6 %

Warranty

67,982

67,856

126

0.2%

Wholesale parts

42,437

42,703

(266)

(0.6)%

Internal, sublet and other

96,597

98,435

(1,838)

(1.9)%

Total

$

347,944

$

345,075

$

2,869

0.8%








Gross profit






Customer pay

$

75,680

$

72,387

$

3,293

4.5%

Warranty

38,072

37,424

648

1.7%

Wholesale parts

7,249

7,435

(186)

(2.5)%

Internal, sublet and other

47,058

48,022

(964)

(2.0)%

Total

$

168,059

$

165,268

$

2,791

1.7%








Gross profit as a % of revenue






Customer pay

53.7%

53.2%

50

bps

Warranty

56.0%

55.2%

80

bps

Wholesale parts

17.1%

17.4%

(30)

bps

Internal, sublet and other

48.7%

48.8%

(10)

bps

Total

48.3%

47.9%

40

bps









 

 

Sonic Automotive, Inc.

Results of Operations (Unaudited)




Finance, Insurance and Other, Net ("F&I")





Three Months Ended March 31,

Better / (Worse)

2018

2017

Change

% Change

(In thousands, except per unit data)

Reported:






Revenue

$

93,725

$

83,063

$

10,662

12.8%

Gross profit per retail unit (excludes fleet)

$

1,490

$

1,379

$

111

8.0%









Three Months Ended March 31,

Better / (Worse)

2018

2017

Change


(In thousands, except per unit data)

Same Store:






Revenue

$

84,074

$

80,139

$

3,935

4.9%

Gross profit per retail unit (excludes fleet)

$

1,430

$

1,372

$

58

4.2%








 

 

Sonic Automotive, Inc.

Results of Operations (Unaudited)




Selling, General and Administrative ("SG&A") Expenses





Three Months Ended March 31,

Better / (Worse)

2018

2017

Change

% Change

(In thousands)

Reported:






Compensation

$

185,037

$

176,547

$

(8,490)

(4.8)%

Advertising

16,016

15,257

(759)

(5.0)%

Rent

21,868

18,487

(3,381)

(18.3)%

Other

82,004

81,943

(61)

(0.1)%

Total SG&A expenses

$

304,925

$

292,234

$

(12,691)

(4.3)%

Adjustments:






Legal and other

$

(1,500)

$

1,149



Compensation-related charges

(9,189)

—



Lease exit adjustments

(4,814)

—



Storm damage

—

(2,382)



Gain on disposal

1,190

—



Total SG&A adjustments

$

(14,313)

$

(1,233)



Adjusted:






Total adjusted SG&A expenses

$

290,612

$

291,001

$

389

0.1%

Reported:






SG&A expenses as a % of gross profit:






Compensation

52.5%

50.4%

(210) bps

Advertising

4.5%

4.4%

(10) bps

Rent

6.2%

5.3%

(90) bps

Other

23.3%

23.3%

— bps

Total SG&A expenses as a % of gross profit

86.5%

83.4%

(310) bps

Adjustments:






Legal and other

(0.4)%

0.3%



Compensation-related charges

(2.6)%

—%



Lease exit adjustments

(1.4)%

—%



Storm damage

—%

(0.6)%



Gain on disposal

0.3%

—%



Total effect of adjustments

(4.1)%

(0.3)%



Adjusted:






Total adjusted SG&A expenses as a % of gross profit

82.4%

83.1%

70 bps

 

 

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SOURCE Sonic Automotive, Inc.

Released April 26, 2018