Exhibit 99.1
Sonic Automotive, Inc. Continues Portfolio Maximization Strategy; Q3 Revenues and
Volume Up Over Strong Prior Year Quarter
CHARLOTTE, N.C. — October 26, 2010 — 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 Reported             As Adjusted     As Reported             As 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 %)                
 
                                            
 
    2010             2009  
Description of Adjustments:
                        
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 Reported             As Adjusted     As Reported             As 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 %)                
 
                                            
 
    2010             2009  
Description of Adjustments:
                        
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