Exhibit 99.1
SONIC AUTOMOTIVE, INC. REPORTS 27% INCREASE IN EARNINGS PER SHARE
FROM CONTINUING OPERATIONS DRIVEN BY RECORD REVENUE FOR THIRD QUARTER
CHARLOTTE, N.C. – October 25, 2005 – Sonic Automotive, Inc. (NYSE: SAH), a leader in automotive retailing, today reported that its 2005 third quarter earnings from continuing operations were $28.5 million, or $0.65 per diluted share, compared to $21.9 million, or $0.51 per diluted share, in the prior year period.
“We demonstrated strong growth across all of our lines of business this quarter. This strong growth, along with our continued focus on margin and cost improvements, resulted in a 27% increase in earnings per share from continuing operations, including charges of $0.07 to $0.09 per diluted share in both periods related to hurricane disruption and other less significant charges. Given the uncertainty surrounding the impact the manufacturer incentive programs have had on normal sales seasonality, we are maintaining our current target for earnings per share from continuing operations of $2.25 to $2.35 for the full year 2005. This estimate is based on an expected level of annual new vehicle industry sales of 16.9 million units,” said Chairman and Chief Executive Officer O. Bruton Smith.
Revenue increased $182 million to a record $2.1 billion or 9.5% above the prior year quarter. On a same store basis, revenue increased 6.0% from the same quarter last year.
Jeffrey C. Rachor, President and Chief Operating Officer stated, “We experienced strong same store results this quarter even after considering the disruption caused in our Houston and Beaumont, Texas platforms as a result of Hurricane Rita during the last half of September. In addition to our overall revenue growth, we were pleased with the 3.8% same store revenue growth and 60 basis point margin expansion in our fixed operations business which helped maintain our gross margin and profitability in a very competitive new vehicle environment. In addition, as a result of continued emphasis on key initiatives, gross margins in our used car business improved 70 basis points to 10.8% for the quarter compared to the same period last year.”
Mr. Rachor continued, “Our expense reduction initiatives continue to bring value as demonstrated by the 320 basis point decline in our SG&A expenses as a percentage of gross profit compared to the same quarter last year. We remain on target to achieve our goal of a 78% ratio for the full year.”
Debt-to-total capital, net of cash, at September 30, 2005 was 45.1%. At the end of the quarter, the company had approximately $229.0 million available under its revolving credit facility. The company has approximately $27.9 million in authorization available for future stock repurchases.
About Sonic Automotive
Sonic Automotive, Inc., a Fortune 300 company based in Charlotte, N.C., is one of the largest automotive retailers in the United States operating 177 franchises and 38 collision repair centers. Sonic can be reached on the Web at www.sonicautomotive.com.
Included herein are forward-looking statements, including statements pertaining to anticipated earnings per share from continuing operations, SG&A expense levels and new vehicle industry sales levels. 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 Exhibit 99.1 to the company’s quarterly report on Form 10-Q for the quarter ended June 30, 2005. The company does not undertake any obligation to update forward-looking information.
2
Sonic Automotive, Inc.
Results of Operations (unaudited)
(in thousands, except per share, unit data and percentage amounts)
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| 9/30/2005 |
9/30/2004 |
9/30/2005 |
9/30/2004 |
|||||||||||||
| Revenues |
||||||||||||||||
| Retail new vehicles |
$ | 1,213,082 | $ | 1,092,059 | $ | 3,366,536 | $ | 3,014,278 | ||||||||
| Fleet vehicles |
75,002 | 73,535 | 250,794 | 225,986 | ||||||||||||
| Total new vehicles |
1,288,084 | 1,165,594 | 3,617,330 | 3,240,264 | ||||||||||||
| Used vehicles |
324,841 | 299,219 | 933,543 | 854,041 | ||||||||||||
| Wholesale vehicles |
142,033 | 133,451 | 408,627 | 363,477 | ||||||||||||
| Total vehicles |
1,754,958 | 1,598,264 | 4,959,500 | 4,457,782 | ||||||||||||
| Parts, service and collision repair |
279,702 | 257,125 | 813,366 | 736,543 | ||||||||||||
| Finance, insurance and other |
52,834 | 50,316 | 148,378 | 138,739 | ||||||||||||
| Total revenues |
2,087,494 | 1,905,705 | 5,921,244 | 5,333,064 | ||||||||||||
| Total gross profit |
315,315 | 285,698 | 903,774 | 820,822 | ||||||||||||
| SG&A expenses |
242,669 | 229,189 | 704,600 | 642,670 | ||||||||||||
| Depreciation |
4,822 | 3,942 | 13,086 | 11,468 | ||||||||||||
| Operating income |
67,824 | 52,567 | 186,088 | 166,684 | ||||||||||||
| Interest expense, floor plan |
9,651 | 6,244 | 28,465 | 18,150 | ||||||||||||
| Interest expense, other |
11,994 | 11,335 | 34,445 | 31,277 | ||||||||||||
| Other income (expense) |
(8 | ) | 66 | 22 | 62 | |||||||||||
| Income from continuing operations before taxes |
46,171 | 35,054 | 123,200 | 117,319 | ||||||||||||
| Income taxes |
17,683 | 13,152 | 46,569 | 43,223 | ||||||||||||
| Income from continuing operations |
28,488 | 21,902 | 76,631 | 74,096 | ||||||||||||
| Discontinued operations: |
||||||||||||||||
| Loss from operations and the sale of discontinued franchises |
(2,738 | ) | (4,175 | ) | (9,181 | ) | (4,208 | ) | ||||||||
| Income tax benefit |
1,054 | 1,554 | 3,470 | 1,570 | ||||||||||||
| Loss from discontinued operations |
(1,684 | ) | (2,621 | ) | (5,711 | ) | (2,638 | ) | ||||||||
| Net income |
$ | 26,804 | $ | 19,281 | $ | 70,920 | $ | 71,458 | ||||||||
| Diluted: |
||||||||||||||||
| Weighted average common shares outstanding |
45,671 | 44,940 | 45,518 | 45,215 | ||||||||||||
| Earnings per share from continuing operations |
$ | 0.65 | $ | 0.51 | $ | 1.76 | $ | 1.71 | ||||||||
| Loss per share from discontinued operations |
$ | (0.04 | ) | $ | (0.06 | ) | $ | (0.13 | ) | $ | (0.05 | ) | ||||
| Earnings per share |
$ | 0.61 | $ | 0.45 | $ | 1.63 | $ | 1.66 | ||||||||
| Gross Margin Data: | ||||||||||||||||
| Retail new vehicles |
7.3 | % | 7.3 | % | 7.4 | % | 7.6 | % | ||||||||
| Fleet vehicles |
3.0 | % | 2.4 | % | 2.9 | % | 2.8 | % | ||||||||
| Total new vehicles |
7.0 | % | 7.0 | % | 7.1 | % | 7.2 | % | ||||||||
| Used vehicles retail |
10.8 | % | 10.1 | % | 10.7 | % | 10.6 | % | ||||||||
| Total vehicles retail |
7.8 | % | 7.6 | % | 7.9 | % | 7.9 | % | ||||||||
| Parts, service and collision repair |
49.4 | % | 48.8 | % | 49.0 | % | 48.8 | % | ||||||||
| Finance and insurance |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
| Overall gross margin |
15.1 | % | 15.0 | % | 15.3 | % | 15.4 | % | ||||||||
| SG&A Expenses: | ||||||||||||||||
| Personnel |
141,582 | 130,146 | 410,937 | 375,816 | ||||||||||||
| Advertising |
16,803 | 16,033 | 48,840 | 44,517 | ||||||||||||
| Facility rent |
23,198 | 20,113 | 67,907 | 57,734 | ||||||||||||
| Other |
61,086 | 62,897 | 176,916 | 164,603 | ||||||||||||
| Total |
242,669 | 229,189 | 704,600 | 642,670 | ||||||||||||
| Unit Data: | ||||||||||||||||
| New retail units |
39,825 | 36,336 | 109,460 | 100,544 | ||||||||||||
| Fleet units |
3,924 | 3,099 | 10,036 | 9,962 | ||||||||||||
| Total new units |
43,749 | 39,435 | 119,496 | 110,506 | ||||||||||||
| Used units |
18,239 | 16,965 | 52,003 | 49,151 | ||||||||||||
| Total units retailed |
61,988 | 56,400 | 171,499 | 159,657 | ||||||||||||
| Wholesale units |
16,644 | 15,627 | 46,664 | 43,517 | ||||||||||||
| Average price per unit: |
||||||||||||||||
| New retail vehicles |
30,460 | 30,054 | 30,756 | 29,980 | ||||||||||||
| Fleet vehicles |
19,114 | 23,729 | 24,989 | 22,685 | ||||||||||||
| Total new vehicles |
29,443 | 29,557 | 30,272 | 29,322 | ||||||||||||
| Used vehicles |
17,810 | 17,637 | 17,952 | 17,376 | ||||||||||||
| Wholesale vehicles |
8,534 | 8,540 | 8,757 | 8,353 | ||||||||||||
| Other Data: | ||||||||||||||||
| Floorplan assistance (continuing operations) |
$ | 9,925 | $ | 9,348 | $ | 29,038 | $ | 27,429 | ||||||||
| Same store revenue percentage changes: |
||||||||||||||||
| New retail |
7.0 | % | 6.2 | % | ||||||||||||
| Fleet |
2.0 | % | 11.7 | % | ||||||||||||
| Total new |
6.6 | % | 6.6 | % | ||||||||||||
| Used |
5.9 | % | 4.1 | % | ||||||||||||
| Parts, service and collision repair |
3.8 | % | 3.5 | % | ||||||||||||
| Finance, insurance and other |
3.5 | % | 4.0 | % | ||||||||||||
| Total |
6.0 | % | 5.8 | % | ||||||||||||
Condensed Consolidated Balance Sheet Data
| 9/30/2005 |
12/31/2004 |
|||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash |
$ | 6,453 | $ | 9,991 | ||||
| Receivables, net |
299,992 | 357,403 | ||||||
| Inventories |
894,701 | 1,024,342 | ||||||
| Assets held for sale |
91,501 | 98,530 | ||||||
| Other current assets |
116,970 | 101,277 | ||||||
| Total current assets |
1,409,617 | 1,591,543 | ||||||
| Property and Equipment, Net |
143,066 | 134,490 | ||||||
| Goodwill, Net |
1,095,444 | 1,056,924 | ||||||
| Other Intangibles, Net |
89,266 | 84,777 | ||||||
| Other Assets |
43,555 | 33,877 | ||||||
| TOTAL ASSETS |
$ | 2,780,948 | $ | 2,901,611 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Notes payable - floor plan |
$ | 793,590 | $ | 984,549 | ||||
| Trade accounts payable |
77,468 | 88,616 | ||||||
| Accrued interest |
12,465 | 15,421 | ||||||
| Other accrued liabilities |
186,981 | 175,510 | ||||||
| Liabilities held for sale |
59,622 | 66,309 | ||||||
| Current maturities of long-term debt |
2,872 | 2,970 | ||||||
| Total current liabilities |
1,132,998 | 1,333,375 | ||||||
| LONG-TERM DEBT |
686,862 | 668,826 | ||||||
| OTHER LONG-TERM LIABILITIES |
28,705 | 28,888 | ||||||
| DEFERRED INCOME TAXES |
101,530 | 100,835 | ||||||
| STOCKHOLDERS’ EQUITY |
||||||||
| Class A common stock |
402 | 397 | ||||||
| Class B common stock |
121 | 121 | ||||||
| Paid-in capital |
449,477 | 441,503 | ||||||
| Retained earnings |
526,456 | 470,663 | ||||||
| Accumulated other comprehensive loss |
(122 | ) | (1,228 | ) | ||||
| Deferred compensation related to restricted stock |
(2,185 | ) | (3,408 | ) | ||||
| Treasury stock, at cost |
(143,296 | ) | (138,361 | ) | ||||
| Total stockholders’ equity |
830,853 | 769,687 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 2,780,948 | $ | 2,901,611 | ||||
| Balance Sheet Data: | ||||||||
| Current Ratio |
1.24 | 1.19 | ||||||
| Debt to Total Capital, Net of Cash |
45.1 | % | 46.2 | % | ||||
| LTM Return on Stockholders’ Equity |
10.8 | % | 11.7 | % | ||||