Sonic Automotive, Inc. Continues Portfolio Maximization Strategy; Q3 Revenues and Volume Up Over Strong Prior Year Quarter
CHARLOTTE, N.C., Oct. 26 /PRNewswire-FirstCall/ -- Sonic Automotive, Inc. (NYSE: SAH), one of the nation's largest automotive retailers, today reported that 2010 third quarter adjusted earnings from continuing operations were $0.27 per diluted share, compared to an adjusted $0.26 per diluted share from continuing operations in the same prior year quarter. The adjustments are detailed further in the attached tables.
Business Overview – Strong Top Line Growth Over Prior Year
Commenting on the quarter, B. Scott Smith, the Company's President, said, "Our total revenues were up approximately 9% over a prior year quarter that included the positive effects of the Cash for Clunkers program. Our strategy of portfolio maximization is built on utilizing predictable, repeatable and sustainable processes at our dealerships through our operating playbooks. These playbooks, coupled with the lowest associate turnover rate in our Company's history, are driving our current operating performance. As we increase revenue in a challenging yet improving economic environment, we continue to take steps to control expenses. We expect to see the results of some recent activity on this front as we progress through the fourth quarter and head into next year."
Capital Structure – Lower Debt and Strong Cash Flow Generation
During the third quarter, the Company completed the redemption of $20 million of its 8.625% senior subordinated notes. The Company also recently announced the planned redemption of the remaining $16 million of its 4.25% convertible notes. Mr. Smith commented, "The $49 million of debt repurchases which we will have completed this year will save us $3.5 million in annual cash interest expense. We expect to use our excess cash flow from operations to further reduce our non-mortgage debt over the next several years. At the same time, we expect to continue to replace our leased dealerships with mortgaged properties as the opportunity arises. With the internal growth opportunities we see in our portfolio maximization strategy, we expect to drive future revenue and profit growth without the risk and capital commitment associated with dealership acquisitions."
New and Used Retail Vehicles – Combined Revenue Increases 9%
New vehicle retail revenue increased 4% and used vehicle retail revenue increased 20% for the third quarter of 2010 compared to the same quarter last year. Jeff Dyke, the Company's EVP of Operations, stated, "We are pleased with the growth in our new vehicle revenue given that our strong import and luxury brand mix benefited in such a big way from the Cash for Clunkers program last year. Our 20% growth in used vehicle revenue was fueled by 15% volume growth along with a 5% increase in the average selling price. Every quarter we move closer to our near-term goal of 100 used vehicles per store per month. We have seen our average grow by approximately 30 vehicles per dealership since we started this process. Increasing that average at each dealership by another 25 vehicles per month would add over $600 million in annual revenue based on this quarter's average selling price. That's why we remain convinced that our focus on portfolio maximization and internal growth is the right strategy at this point in our Company's evolution."
Service, Parts & Body Shop – Revenue Growth Continues in Key Profit Center
Sonic's Service, Parts & Body Shop revenue for the third quarter was up nearly 6% compared to the prior year quarter. Mr. Dyke stated, "Our customer pay business was up 4% and we saw some stabilization in our warranty repair business. We have seen steady growth in this high margin piece of our business all year and, if these trends continue, our current group of stores is on track to deliver their highest annual fixed operations gross profit. We have several exciting pilot programs underway to drive more customer traffic in this key area of our business."
Presentation materials for the Company's October 26, 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 page.
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 call ID # 15968314
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.
Included herein are forward-looking statements, including statements with respect to future success and impacts from the implementation of our various operational playbooks, future expense reductions, future cash flow generation, growth opportunities, future debt retirement and mortgage activity and future used vehicle and fixed operations sales and gross profit trends. 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 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 June 30, 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
9/30/2010 Adjustments 9/30/2010 9/30/2009 Adjustments 9/30/2009
Revenues
New retail
vehicles $ 886,355 $ - $ 886,355 $ 854,902 $ - $ 854,902
Fleet
vehicles 51,354 - 51,354 48,814 - 48,814
Total new
vehicles 937,709 - 937,709 903,716 - 903,716
Used
vehicles 453,815 - 453,815 379,389 - 379,389
Wholesale
vehicles 47,597 - 47,597 34,588 - 34,588
Total
vehicles 1,439,121 - 1,439,121 1,317,693 - 1,317,693
Parts,
service and
collision
repair 283,741 - 283,741 268,801 - 268,801
Finance,
insurance
and other 47,398 - 47,398 43,403 - 43,403
Total
revenues 1,770,260 - 1,770,260 1,629,897 - 1,629,897
Total gross
profit 281,799 - 281,799 274,303 - 274,303
SG&A expenses (226,331) - (226,331) (214,140) - (214,140)
Impairment
charges (87) 87 - (620) 620 -
Depreciation (8,731) - (8,731) (8,131) - (8,131)
Operating
income 46,650 87 46,737 51,412 620 52,032
Interest
expense,
floor plan (5,430) - (5,430) (4,533) - (4,533)
Interest
expense,
other, net (15,226) - (15,226) (18,277) 1,678 (16,599)
Interest
expense,
non-cash,
convertible
debt (1,768) - (1,768) 7,818 (11,400) (3,582)
Interest
expense,
non-cash,
cash flow
swaps (1,484) 1,484 - (2,180) 2,180 -
Other
(expense) /
income, net (351) 403 52 2,449 (2,453) (4)
Income /
(loss) from
continuing
operations
before taxes 22,391 1,974 24,365 36,689 (9,375) 27,314
Income tax
(expense) /
benefit (8,442) (744) (9,186) (16,510) 4,218 (12,292)
Income /
(loss) from
continuing
operations 13,949 1,230 15,179 20,179 (5,157) 15,022
Income /
(Loss) from
discontinued
operations (964) - (964) (4,585) 2,332 (2,253)
Net income $ 12,985 $ 1,230 $ 14,215 $ 15,594 $ (2,825) $ 12,769
Diluted:
Weighted
average
common
shares
outstanding 65,851 - 65,851 63,195 - 63,195
Earnings /
(loss) per
share from
continuing
operations $ 0.25 $ 0.02 $ 0.27 $ 0.24 $ 0.02 $ 0.26
Earnings /
(loss) per
share from
discontinued
operations (0.02) - (0.02) (0.07) 0.04 (0.03)
Earnings /
(loss) per
share $ 0.23 $ 0.02 $ 0.25 $ 0.17 $ 0.06 $ 0.23
Gross Margin
Data
(Continuing
Operations):
Retail new
vehicles 6.6% 6.6% 7.3% 7.3%
Fleet
vehicles 3.1% 3.1% 2.9% 2.9%
Total new
vehicles 6.4% 6.4% 7.0% 7.0%
Used
vehicles
retail 7.8% 7.8% 8.5% 8.5%
Total
vehicles
retail 7.5% 7.5% 7.2% 7.2%
Wholesale
vehicles (3.1%) (3.1%) (4.7%) (4.7%)
Parts,
service and
collision
repair 49.6% 49.6% 50.9% 50.9%
Finance,
insurance
and other 100.0% 100.0% 100.0% 100.0%
Overall
gross margin 15.9% 15.9% 16.8% 16.8%
SG&A Expenses
(Continuing
Operations):
Personnel $ 132,316 $ - $ 132,316 $ 125,438 $ - $ 125,438
Advertising 12,642 - 12,642 11,345 - 11,345
Rent and
rent related 32,743 - 32,743 33,413 - 33,413
Other 48,630 - 48,630 43,944 - 43,944
Total $ 226,331 $ - $ 226,331 $ 214,140 $ - $ 214,140
SG&A Expenses
as % of Gross
Profit 80.3% 80.3% 78.1% 78.1%
Operating
Margin % 2.6% 2.6% 3.2% 3.2%
Unit Data
(Continuing
Operations):
New retail
units 25,780 27,100
Fleet units 2,020 1,975
New units 27,800 29,075
Used units 22,987 20,097
Total units
retailed 50,787 49,172
Wholesale
units 7,272 6,929
Other Data:
Continuing
Operations
revenue
percentage
changes:
New retail 3.7% (12.9%)
Fleet 5.2% 3.8%
Total New
Vehicles 3.8% (12.1%)
Used 19.6% 14.8%
Parts,
service and
collision
repair 5.6% (2.2%)
Finance,
insurance
and other 9.2% (6.0%)
Total 8.6% (6.9%)
Description of Adjustments: 2010 2009 Continuing Operations: Mark-to-market on cash flow swaps $ 1,484 $ 2,180 Debt restructuring charges 403 (775) Mark-to-market on derivative liability - (11,400) PP&E impairments 87 413 Goodwill impairments - 207 Total pretax $ 1,974 $ (9,375) Tax effect (744) 4,218 Total $ 1,230 $ (5,157) Discontinued Operations: Lease exit accruals $ - $ 4,350 Tax effect - (2,018) Total $ - $ 2,332
Sonic Automotive, Inc.
Results of Operations (Unaudited)
(in thousands, except per share, unit data and percentage amounts)
Nine Months Ended Nine Months Ended
As As As As
Reported Adjusted Reported Adjusted
9/30/2010 Adjustments 9/30/2010 9/30/2009 Adjustments 9/30/2009
Revenues
New retail $ $ $ $
vehicles 2,463,139 $ - 2,463,139 2,203,046 $ - 2,203,046
Fleet
vehicles 148,849 - 148,849 164,190 - 164,190
Total new
vehicles 2,611,988 - 2,611,988 2,367,236 - 2,367,236
Used
vehicles 1,339,323 - 1,339,323 1,081,855 - 1,081,855
Wholesale
vehicles 108,336 - 108,336 105,451 - 105,451
Total
vehicles 4,059,647 - 4,059,647 3,554,542 - 3,554,542
Parts,
service and
collision
repair 842,697 - 842,697 807,556 - 807,556
Finance,
insurance
and other 133,607 - 133,607 116,558 - 116,558
Total
revenues 5,035,951 - 5,035,951 4,478,656 - 4,478,656
Total gross
profit 830,153 - 830,153 776,263 - 776,263
SG&A expenses (672,542) 647 (671,895) (619,560) - (619,560)
Impairment
charges (132) 132 - (5,707) 5,707 -
Depreciation (25,729) - (25,729) (23,865) - (23,865)
Operating
income 131,750 779 132,529 127,131 5,707 132,838
Interest
expense,
floor plan (15,615) - (15,615) (14,925) - (14,925)
Interest
expense,
other, net (48,024) 1,464 (46,560) (57,998) 10,833 (47,165)
Interest
expense,
non-cash,
convertible
debt (5,175) - (5,175) 1,556 (11,300) (9,744)
Interest
expense,
non-cash,
cash flow
swaps (5,402) 5,402 - (5,359) 5,359 -
Other
(expense) /
income, net (7,522) 7,662 140 2,519 (2,453) 66
Income /
(loss) from
continuing
operations
before taxes 50,012 15,307 65,319 52,924 8,146 61,070
Income tax
(expense) /
benefit (19,905) (6,092) (25,997) (23,816) (3,666) (27,482)
Income /
(loss) from
continuing
operations 30,107 9,215 39,322 29,108 4,480 33,588
Income /
(Loss) from
discontinued
operations (4,532) - (4,532) (11,810) 4,771 (7,039)
Net income $ 25,575 $ 9,215 $ 34,790 $ 17,298 $ 9,251 $ 26,549
Diluted:
Weighted
average
common
shares
outstanding 65,711 - 65,711 52,529 - 52,529
Earnings /
(loss) per
share from
continuing
operations $ 0.56 $ 0.13 $ 0.69 $ 0.48 $ 0.21 $ 0.69
Earnings /
(loss) per
share from
discontinued
operations (0.07) 0.01 (0.06) (0.22) 0.09 (0.13)
Earnings /
(loss) per
share $ 0.49 $ 0.14 $ 0.63 $ 0.26 $ 0.30 $ 0.56
Gross Margin
Data
(Continuing
Operations):
Retail new
vehicles 6.8% 6.8% 7.0% 7.0%
Fleet
vehicles 2.8% 2.8% 3.6% 3.6%
Total new
vehicles 6.6% 6.6% 6.8% 6.8%
Used
vehicles
retail 8.0% 8.0% 8.8% 8.8%
Total
vehicles
retail 7.1% 7.1% 7.4% 7.4%
Wholesale
vehicles (3.6%) (3.6%) (2.7%) (2.7%)
Parts,
service and
collision
repair 50.0% 50.0% 50.4% 50.4%
Finance,
insurance
and other 100.0% 100.0% 100.0% 100.0%
Overall
gross margin 16.5% 16.5% 17.3% 17.3%
SG&A Expenses
(Continuing
Operations):
Personnel $ 396,067 $ - $ 396,067 $ 355,238 $ - $ 355,238
Advertising 36,445 - 36,445 32,934 - 32,934
Rent and
rent related 98,226 - 98,226 97,703 - 97,703
Other 141,804 (647) 141,157 133,685 - 133,685
Total $ 672,542 $ (647) $ 671,895 $ 619,560 $ - $ 619,560
SG&A Expenses
as % of Gross
Profit 81.0% 80.9% 79.8% 79.8%
Operating
Margin % 2.6% 2.6% 2.8% 3.0%
Unit Data
(Continuing
Operations):
New retail
units 71,809 67,782
Fleet units 6,042 6,802
New units 77,851 74,584
Used units 68,861 57,457
Total units
retailed 146,712 132,041
Wholesale
units 17,627 18,635
Other
Data:
Continuing
Operations
revenue
percentage
changes:
New retail 11.8% (26.5%)
Fleet (9.3%) (38.8%)
Total New
Vehicles 10.3% (27.5%)
Used 23.8% 2.4%
Parts,
service and
collision
repair 4.4% (4.1%)
Finance,
insurance
and other 14.6% (21.6%)
Total 12.4% (19.2%)
Description of Adjustments: 2010 2009 Continuing Operations: Hail damage $ 647 $ - Mark-to-market on cash flow swaps 5,402 5,359 (Gain) / loss on extinguishment of debt 7,662 (2,453) Debt restructuring charges - 10,833 Mark-to-market on derivative liability - (11,300) PP&E impairments 132 2,513 Franchise asset impairments - 2,100 Goodwill impairments - 1,094 Double-carry debt interest charges 1,464 - Total pretax $ 15,307 $ 8,146 Tax effect (6,092) (3,666) Total $ 9,215 $ 4,480 Discontinued Operations: Lease exit accruals $ - $ 4,350 PP&E impairments - 1,822 Goodwill impairment - 1,586 Total pretax $ - $ 7,758 Tax effect - (2,987) Total $ - $ 4,771
SOURCE Sonic Automotive
Released October 26, 2010