Exhibit 99.1
Sonic Automotive, Inc. Closes a Strong 2006 with Fourth Quarter Continuing Ops Earnings up 6% Over Prior Year.
CHARLOTTE, N.C. – February 27, 2007 – Sonic Automotive, Inc. (NYSE: SAH), a leader in automotive retailing, today announced that its 2006 fourth quarter earnings from continuing operations were up 6.3% at $28.4 million, or $0.63 per diluted share, compared to $26.7 million, or $0.61 per diluted share, in the prior year period. The Company is finalizing its conclusions regarding hedge accounting treatment for its 2005 convertible notes which it does not currently believe will have a material impact on reported results. The results for the quarter ended December 31, 2006 include $0.01 per diluted share of stock option expense related to the Company’s adoption of SFAS 123R.
Total revenue for the fourth quarter of 2006 increased 6.5% with overall same store revenue up 2.7%. Luxury brands accounted for 54% of our total revenue, a new record for Sonic Automotive. Inventory days supply remains in good condition with new vehicles at 48 days and used vehicles at 37 days. Selling, general and administrative expenses as a percentage of gross profit improved to 73.9% for the quarter compared to 74.7% a year ago. The Company’s operating margin was 3.8%, up 20 basis points from the fourth quarter of last year. The Company’s debt-to-capital ratio was 39.5% at December 31, 2006, down from 46.0% at December 31, 2005.
“We ended 2006 on a strong note by continuing our trend of consistent same store sales performance while maintaining margins and controlling expenses,” said President and COO Jeffrey C. Rachor. “We are proud of the operating progress we made in 2006. As we look ahead to 2007, we believe our standardized processes, continued operating execution, and lower leverage put us in a favorable position for disciplined growth. Specifically, we expect to add to our luxury and import brand mix by targeting acquisitions of 10% to 15% of annual revenues in 2007. This acquisition growth is not included in our 2007 earnings guidance.”
Commenting further on 2007, Mr. Rachor said, “We expect to see a stable operating environment with overall same store revenues increasing between two and four percent. We are targeting earnings per share from continuing operations of $2.48 to $2.58 in 2007, which does not include any potential acquisitions. We completed a number of facility projects in the second half of 2006 to increase the service capacity in several of our luxury stores. We anticipate that some of our 2007 operating improvement will be offset by higher rent expense as we grow into this additional capacity. Also included in our guidance is approximately $0.08 of share dilution to account for our contingently convertible notes issued in 2005. All of these items will be discussed in further detail on our quarterly earnings call.”
Presentation materials for the Company’s February 27, 2007 earnings conference call 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 left side of the screen.
To access the live broadcast of the conference call over the Internet go to:
www.ccbn.com or www.sonicautomotive.com
A live audio of the conference 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 (domestic) or (706) 645-9291 (international), conference call ID # 8080861.
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 171 franchises and 37 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 acquisition activity, earnings per share from continuing operations, operating improvements, as well as anticipated industry conditions. 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 quarterly report on Form 10-Q for the quarter ended September 30, 2006. 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 | Twelve Months Ended | |||||||||||||||
| 12/31/2006 | 12/31/2005 | 12/31/2006 | 12/31/2005 | |||||||||||||
| Revenues |
||||||||||||||||
| Retail new vehicles |
$ | 1,154,414 | $ | 1,063,630 | $ | 4,554,739 | $ | 4,171,269 | ||||||||
| Fleet vehicles |
73,822 | 71,502 | 342,545 | 312,651 | ||||||||||||
| New vehicles |
1,228,236 | 1,135,132 | 4,897,284 | 4,483,920 | ||||||||||||
| Used vehicles |
298,187 | 279,109 | 1,275,020 | 1,126,651 | ||||||||||||
| Wholesale vehicles |
104,887 | 123,323 | 493,512 | 498,589 | ||||||||||||
| Total vehicles |
1,631,310 | 1,537,564 | 6,665,816 | 6,109,160 | ||||||||||||
| Parts, service and collision repair |
279,376 | 256,716 | 1,114,870 | 988,432 | ||||||||||||
| Finance, insurance and other |
47,726 | 44,453 | 191,388 | 181,128 | ||||||||||||
| Total revenues |
1,958,412 | 1,838,733 | 7,972,074 | 7,278,720 | ||||||||||||
| Total gross profit |
305,062 | 286,178 | 1,231,582 | 1,117,045 | ||||||||||||
| SG&A expenses |
225,310 | 213,700 | 939,825 | 850,450 | ||||||||||||
| Depreciation |
6,031 | 6,935 | 23,409 | 18,390 | ||||||||||||
| Operating income |
73,721 | 65,543 | 268,348 | 248,205 | ||||||||||||
| Interest expense, floor plan |
15,939 | 10,374 | 59,609 | 35,493 | ||||||||||||
| Interest expense, other |
9,334 | 11,728 | 42,785 | 45,368 | ||||||||||||
| Other (expense) / income |
56 | 30 | (597 | ) | 45 | |||||||||||
| Income from continuing operations before taxes |
48,504 | 43,471 | 165,357 | 167,389 | ||||||||||||
| Income taxes |
20,149 | 16,809 | 66,791 | 61,414 | ||||||||||||
| Income from continuing operations |
28,355 | 26,662 | 98,566 | 105,975 | ||||||||||||
| Discontinued operations: |
||||||||||||||||
| Loss from operations and the sale of discontinued franchises |
(6,330 | ) | (6,747 | ) | (26,090 | ) | (16,647 | ) | ||||||||
| Income tax benefit |
1,214 | 1,026 | 8,641 | 2,533 | ||||||||||||
| Loss from discontinued operations |
(5,116 | ) | (5,721 | ) | (17,449 | ) | (14,114 | ) | ||||||||
| Net income |
$ | 23,239 | $ | 20,941 | $ | 81,117 | $ | 91,861 | ||||||||
| Diluted: |
||||||||||||||||
| Weighted average common shares outstanding |
46,902 | 45,578 | 46,265 | 45,533 | ||||||||||||
| Earnings per share from continuing operations |
$ | 0.63 | $ | 0.61 | $ | 2.22 | $ | 2.42 | ||||||||
| Loss per share from discontinued operations |
($ | 0.11 | ) | ($ | 0.13 | ) | ($ | 0.37 | ) | ($ | 0.30 | ) | ||||
| Earnings per share |
$ | 0.52 | $ | 0.48 | $ | 1.85 | $ | 2.12 | ||||||||
| Gross Margin Data (Continuing Operations): |
||||||||||||||||
| Retail new vehicles |
7.6 | % | 7.8 | % | 7.6 | % | 7.6 | % | ||||||||
| Fleet vehicles |
2.1 | % | 3.2 | % | 2.6 | % | 3.0 | % | ||||||||
| Total new vehicles |
7.3 | % | 7.5 | % | 7.3 | % | 7.3 | % | ||||||||
| Used vehicles |
9.5 | % | 10.4 | % | 10.1 | % | 10.5 | % | ||||||||
| Total vehicles |
7.1 | % | 7.4 | % | 7.2 | % | 7.3 | % | ||||||||
| Parts, service and collision repair |
50.4 | % | 49.7 | % | 50.0 | % | 49.5 | % | ||||||||
| Finance, insurance and other |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
| Overall gross margin |
15.6 | % | 15.6 | % | 15.4 | % | 15.3 | % | ||||||||
| SG&A Expenses (Continuing Operations): |
||||||||||||||||
| Personnel |
$ | 129,126 | $ | 124,491 | $ | 543,258 | $ | 499,251 | ||||||||
| Advertising |
16,154 | 14,438 | 64,233 | 58,673 | ||||||||||||
| Facility rent |
24,421 | 21,769 | 98,139 | 81,241 | ||||||||||||
| Other |
55,609 | 53,002 | 234,195 | 211,285 | ||||||||||||
| Total |
$ | 225,310 | $ | 213,700 | $ | 939,825 | $ | 850,450 | ||||||||
| Unit Data (Continuing Operations): |
||||||||||||||||
| New retail units |
33,814 | 32,060 | 140,730 | 132,906 | ||||||||||||
| Fleet units |
3,250 | 3,206 | 15,517 | 14,140 | ||||||||||||
| New units |
37,064 | 35,266 | 156,247 | 147,046 | ||||||||||||
| Used units |
15,422 | 14,778 | 66,891 | 61,456 | ||||||||||||
| Total units retailed |
52,486 | 50,044 | 223,138 | 208,502 | ||||||||||||
| Wholesale units |
12,090 | 13,421 | 53,701 | 55,803 | ||||||||||||
| Average price per unit: |
||||||||||||||||
| New retail vehicles |
34,140 | 33,176 | 32,365 | 31,385 | ||||||||||||
| Fleet vehicles |
22,714 | 22,303 | 22,075 | 22,111 | ||||||||||||
| Total new vehicles |
33,138 | 32,188 | 31,343 | 30,493 | ||||||||||||
| Used vehicles |
19,335 | 18,887 | 19,061 | 18,333 | ||||||||||||
| Wholesale vehicles |
8,675 | 9,189 | 9,190 | 8,935 | ||||||||||||
| Other Data: |
||||||||||||||||
| Same store revenue percentage changes: |
||||||||||||||||
| New retail |
4.3 | % | 3.3 | % | ||||||||||||
| Fleet |
3.1 | % | 8.3 | % | ||||||||||||
| New total |
4.2 | % | 3.7 | % | ||||||||||||
| Used |
3.4 | % | 8.1 | % | ||||||||||||
| Parts, service and collision repair |
3.1 | % | 5.2 | % | ||||||||||||
| Finance, insurance and other |
4.4 | % | 2.8 | % | ||||||||||||
| Total |
2.7 | % | 3.9 | % | ||||||||||||
Balance Sheet Data:
| 12/31/2006 | 12/31/2005 | |||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 12,696 | $ | 7,566 | ||||
| Receivables, net |
385,849 | 396,225 | ||||||
| Inventories |
991,984 | 1,016,457 | ||||||
| Assets held for sale |
160,571 | 103,855 | ||||||
| Construction in progress and land expected to be sold in sale-leaseback transactions |
26,198 | 65,113 | ||||||
| Other current assets |
35,018 | 27,483 | ||||||
| Total current assets |
1,612,316 | 1,616,699 | ||||||
| Property and Equipment, Net |
220,551 | 148,267 | ||||||
| Goodwill, Net |
1,155,428 | 1,122,538 | ||||||
| Other Intangibles, Net |
94,136 | 88,696 | ||||||
| Other Assets |
41,517 | 49,301 | ||||||
| TOTAL ASSETS |
$ | 3,123,948 | $ | 3,025,501 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Floor plan notes payable - trade |
$ | 377,943 | $ | 579,022 | ||||
| Floor plan notes payable - non-trade |
686,515 | 410,296 | ||||||
| Trade accounts payable |
68,016 | 91,101 | ||||||
| Accrued interest |
19,336 | 17,378 | ||||||
| Other accrued liabilities |
180,574 | 167,060 | ||||||
| Liabilities associated with assets held for sale - trade |
54,229 | 45,953 | ||||||
| Liabilities associated with assets held for sale - non-trade |
42,063 | 6,937 | ||||||
| Current maturities of long-term debt |
2,707 | 2,747 | ||||||
| Total current liabilities |
1,431,383 | 1,320,494 | ||||||
| LONG-TERM DEBT |
598,627 | 712,311 | ||||||
| OTHER LONG-TERM LIABILITIES |
39,570 | 29,479 | ||||||
| DEFERRED INCOME TAXES |
151,034 | 132,419 | ||||||
| STOCKHOLDERS’ EQUITY |
903,334 | 830,798 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 3,123,948 | $ | 3,025,501 | ||||
| Balance Sheet Ratios: |
||||||||
| Current Ratio |
1.13 | 1.22 | ||||||
| Debt to Total Capital, Net of Cash |
39.5 | % | 46.0 | % | ||||