Exhibit 99.1
Sonic Automotive, Inc. Reports 21% Vehicle Revenue Growth;
Adjusted Continuing Ops Profit Up 41% Over Prior Year Quarter
CHARLOTTE, N.C. – July 29, 2010 – 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 Reported             As Adjusted     As Reported             As 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 %)                
 
                                            
                                                 
    2010     2009  
Description of Adjustments:
                
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 Reported             As Adjusted     As Reported             As 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 %)                
 
                                            
                                                 
    2010     2009  
Description of Adjustments:
                
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