Sonic Automotive, Inc. Reports 13% Overall Revenue Growth Used Vehicle Revenue up 28% First Quarter Profits Up Over Prior Year
CHARLOTTE, N.C., April 27 /PRNewswire-FirstCall/ -- Sonic Automotive, Inc. (NYSE: SAH), the nation's third-largest automotive retailer, today reported that 2010 first quarter adjusted earnings from continuing operations were $0.14 per diluted share, up 40% from adjusted earnings from continuing operations of $0.10 per diluted share in the 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 quarter, the Company further strengthened its balance sheet by issuing $200 million of senior subordinated notes to refinance a portion of its existing senior subordinated notes. This refinancing resulted in the Company incurring interest expense on both notes for a period of time prior to the existing notes being retired in early April.
Business Overview – Operating Initiatives Continue to Drive Revenue Growth
Commenting on the quarter B. Scott Smith, the Company's President, said, "We are very pleased with the way our operating initiatives continued to take hold this quarter. Our focus on associate satisfaction has led to all time low associate turnover which is resulting in better execution of our Playbook process. Commenting further, "We saw strong revenue growth in all departments which continues to demonstrate that our strategy is delivering sound performance as the automotive market continues to improve."
New and Used Vehicles – Revenue and Gross Profit Levels Up Dramatically
Overall new vehicle retail volume was up 10% and used vehicle retail volume was up 25% for the first quarter of 2010 compared to the same quarter last year. Jeff Dyke, the Company's EVP of Operations, stated, "The retail gross profit generated by our used vehicle department alone was up over 8% in the first quarter of 2010 compared to the same period last year. Our used vehicle business continues to exceed our expectations as our stores realize the power of our operational playbooks. Consistent with the expectation we communicated last quarter, our used vehicle margins have contracted somewhat compared to the first quarter of last year as a result of the significant volume growth. Sequentially, our used vehicle margins are in line with the last several quarters. It's important to remember as we continue to expand our penetration of the used vehicle market that our volume growth generates incremental gross profit dollars in used, F&I, and parts and service."
Parts and Service – Steady Growth in a Key Department; Gross margin up 70 basis points
Sonic's parts and service revenue for the first quarter was up approximately 3% compared to the prior year quarter, while gross margin was up 70 basis points at 50.3%. Mr. Dyke stated, "Our parts and service business benefited from the improvement in the general economic environment, the work associated with the various manufacturer recalls during the period, and our continued rollout of our playbook for this area. We are still in the early stages of our operational plan for our fixed operations departments and expect to see continued revenue and margin growth over the course of the year."
Business Outlook
Scott Smith concluded his comments by noting, "The quarter got off to a slow start as our stores came out of a very strong December and as we continued investing in our associates, but profitability improved dramatically as we progressed through the quarter. I have said from the beginning that this is a people business and we will continue to invest appropriately in the one asset that will drive our future growth. We are on track to meet our profit targets for the year."
Presentation materials for the Company's April 27, 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.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: 68235076
About Sonic Automotive
Sonic Automotive, Inc., a Fortune 500 company based in Charlotte, N.C., is the nation's third-largest automotive retailer, operating 145 franchises. Sonic can be reached on the web at www.sonicautomotive.com.
Included herein are forward-looking statements, including statements with respect to fixed operations revenue and gross profit growth, future profitability levels and general operating performance. 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 annual report on Form 10-K for the year ending December 31, 2009. 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
3/31/2010 Adjustments 3/31/2010 3/31/2009 Adjustments 3/31/2009
Revenues
New retail vehicles $ 740,590 $ - $ 740,590 $ 650,554 $ - $ 650,554
Fleet vehicles 43,652 - 43,652 54,163 - 54,163
Total new vehicles 784,242 - 784,242 704,717 - 704,717
Used vehicles 423,610 - 423,610 329,209 - 329,209
Wholesale vehicles 31,384 - 31,384 37,796 - 37,796
Total
vehicles 1,239,236 - 1,239,236 1,071,722 - 1,071,722
Parts, service and
collision repair 279,370 - 279,370 271,641 - 271,641
Finance, insurance and
other 40,959 - 40,959 35,135 - 35,135
Total
revenues 1,559,565 - 1,559,565 1,378,498 - 1,378,498
Total gross profit 268,691 - 268,691 247,467 - 247,467
SG&A expenses (224,310) - (224,310) (205,920) (382) (206,302)
Impairment charges (44) 44 - (57) 57 -
Depreciation (8,501) - (8,501) (7,625) - (7,625)
Operating income 35,836 44 35,880 33,865 (325) 33,540
Interest expense, floor
plan (4,942) - (4,942) (5,198) - (5,198)
Interest expense, other (17,189) 1,004 (16,185) (18,252) - (18,252)
Interest expense,
non-cash, convertible
debt (1,677) - (1,677) (2,619) - (2,619)
Interest expense,
non-cash, cash flow
swaps (1,683) 1,683 - - - -
Other (expense) /
income 62 - 62 50 - 50
Income / (loss) from
continuing operations
before taxes 10,407 2,731 13,138 7,846 (325) 7,521
Income tax (expense) /
benefit (4,475) (1,174) (5,649) (3,531) 146 (3,385)
Income / (loss) from
continuing operations 5,932 1,557 7,489 4,315 (179) 4,136
Income / (Loss) from
discontinued operations (1,778) - (1,778) (2,637) 1,096 (1,541)
Net income $ 4,154 $ 1,557 $ 5,711 $ 1,678 $ 917 $ 2,595
Diluted:
Weighted average
common shares
outstanding 52,579 - 52,579 40,338 - 40,338
Earnings / (loss) per
share from continuing
operations $0.11 $0.03 $0.14 $0.11 $ (0.01) $0.10
Earnings / (loss) per
share from
discontinued
operations (0.03) - (0.03) (0.07) 0.03 (0.04)
Earnings / (loss) per
share $0.08 $0.03 $0.11 $0.04 $0.02 $0.06
Gross Margin Data
(Continuing
Operations):
Retail new vehicles 7.1% 7.1% 6.8% 6.8%
Fleet vehicles 3.7% 3.7% 4.3% 4.3%
Total
new
vehicles 7.0% 7.0% 6.6% 6.6%
Used vehicles retail 7.9% 7.9% 9.4% 9.4%
Total
vehicles
retail 7.3% 7.3% 7.5% 7.5%
Wholesale vehicles (2.2%) (2.2%) (0.2%) (0.2%)
Parts, service and
collision repair 50.3% 50.3% 49.6% 49.6%
Finance, insurance and
other 100.0% 100.0% 100.0% 100.0%
Overall gross
margin 17.2% 17.2% 18.0% 18.0%
SG&A Expenses
(Continuing
Operations):
Personnel $ 132,542 $ - $ 132,542 $ 116,080 $ - $ 116,080
Advertising 11,437 - 11,437 11,052 - 11,052
Facility rent 35,833 - 35,833 35,307 - 35,307
Other 44,498 - 44,498 43,481 382 43,863
Total $ 224,310 $ - $ 224,310 $ 205,920 $ 382 $ 206,302
SG&A Expenses as % of
Gross Profit 83.5% 0.0% 83.5% 83.2% 0.2% 83.4%
Operating Margin % 2.3% 0.0% 2.3% 2.5% (0.1%) 2.4%
Unit Data (Continuing
Operations):
New retail units 21,484 19,498
Fleet units 1,750 2,255
New units 23,234 21,753
Used units 21,750 17,411
Total units
retailed 44,984 39,164
Wholesale units 5,200 6,532
Other Data:
Same store revenue
percentage changes:
New retail 13.8% (33.4%)
Fleet (19.4%) (48.1%)
Total New
Vehicles 11.3% (34.8%)
Used 28.7% (8.3%)
Parts,
service and
collision
repair 2.8% (4.3%)
Finance,
insurance and
other 17.4% (29.8%)
Total 13.2% (25.7%)
Description of
Adjustments: 2010 2009
Continuing Operations:
Impairment
charges $ 44 $ 57
Debt
restructuring 295 2,047
Cash flow
swaps 1,683 (2,429)
Double-carry
interest 709 -
Total pretax $ 2,731 $ (325)
Tax effect (1,174) 146
Total $ 1,557 $ (179)
Discontinued
Operations:
Impairment
charges $ - $ 1,528
Tax effect - (432)
Total $ - $ 1,096
SOURCE Sonic Automotive
Released April 27, 2010