Sonic Automotive, Inc. Reports Record Q1 Results

Adjusted Continuing Operations EPS of $0.39

News provided by

Sonic Automotive, Inc.

Apr 26, 2016, 07:30 ET

CHARLOTTE, N.C., April 26, 2016 /PRNewswire/ --

First Quarter 2016 Results

  • Record Q1 pre-owned units of 29,333, up 4.3% over the prior year quarter
  • Record Q1 finance and insurance ("F&I") gross profit of $81.3 million, up 8.9% over the prior year quarter
  • Record Q1 fixed operations gross profit of $166.0 million, up 6.2% over the prior year quarter
  • Record Q1 total gross profit of $345.2 million, up 3.0% over the prior year quarter
  • EchoPark® stores retailed 941 units

Sonic Automotive, Inc. (NYSE: SAH), one of the nation's largest automotive retailers, today reported adjusted net income from continuing operations for the first quarter of 2016 of $18.2 million, or $0.39 per diluted share.  Included in these adjusted amounts are pre-tax expenses of $3.6 million, or $0.05 per diluted share, related to the Company's EchoPark® operations.  Adjusted net income from continuing operations and related diluted earnings per share are non-GAAP financial measures.  The schedules included in this press release reconcile these non-GAAP financial measures to the comparable GAAP financial measures.

Adjusted net income from continuing operations for the first quarter of 2015 was $18.8 million, or $0.37 per diluted share. Included in these adjusted amounts are pre-tax expenses of $4.9 million, or $0.06 per share, related to the Company's EchoPark® operations.

On a GAAP basis, net income from continuing operations and related diluted earnings per share for the first quarter of 2016 were $14.5 million and $0.31 per share, respectively, compared to $14.4 million and $0.28 per diluted share, respectively, for the first quarter of 2015. 

Jeff Dyke, Sonic's EVP of Operations, stated, "We are pleased with our operating results during the quarter.  Strong performances in the fixed operations and the F&I areas drove the overall increase in gross profit to record levels.  We continued to see gross profit compression in new vehicles and expect this to continue until inventory supply corrects to more normalized levels.  The used vehicle market continues to demonstrate its resiliency despite the compression related to new vehicles.  Our EchoPark® stores continue to grow and mature. The expansion in Denver is on schedule and we anticipate opening two additional stores in the second quarter of 2016 and another by the end of the year.  We are also happy to announce we will be introducing the EchoPark® brand to the Texas and Carolinas markets in 2017 where we have been actively accumulating property."

B. Scott Smith, the Company's Chief Executive Officer, noted, "Execution of our core strategies continued in the first quarter.  Our commitment to return capital through dividends and share repurchases has rewarded our long-term stockholders.  Subsequent to the end of the quarter, we repurchased an additional 363,000 shares for approximately $6.4 million.  In addition to the real estate and construction activities related to EchoPark®, we are aggressively replacing leased properties with image-compliant facilities on owned land.  We anticipate investing approximately $250 million in land and facilities in the current year funded by mortgages and cash generated through operations.  These hard assets are the cornerstones of our long-term plan.  We are maintaining our guidance of adjusted diluted earnings per share from continuing operations for 2016 to be between $2.07 and $2.17 per share."

Dividend

Sonic's Board of Directors approved a quarterly dividend of $0.05 per share payable in cash for stockholders of record on June 15, 2016.  The dividend will be payable on July 15, 2016. 

First Quarter Earnings Conference Call

Senior management will host a conference call today at 11:00 A.M. (Eastern) to discuss the quarter's results. To access the live broadcast of the call over the Internet go to: www.sonicautomotive.com, then click on "Our Company," then "Investor Relations," then "Earnings Conference Calls."

Presentation materials for the conference call can be accessed on the Company's website at www.sonicautomotive.com by clicking on the "Investor Relations" tab under "Our Company" and choosing "Webcasts & Presentations."

The conference call will also be available live by dialing in 10 minutes prior to the start of the call at:

Domestic: 1.877.450.3867
International: 1.706.643.0958
Conference ID: 81083014

A conference call replay will be available one hour following the call for seven days and can be accessed by calling:

Domestic: 1.855.859.2056
International: 1.404.537.3406
Conference ID: 81083014

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 anticipated expansion of our EchoPark® store initiatives and the anticipated amount of investments related to capital expenditures. 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 views, including without limitation, economic conditions in the markets in which we operate, new and used vehicle industry sales volume, the success of our operational strategies, the rate and timing of overall economic recovery or decline, and the risk factors described in the Company's annual report on Form 10-K for the year ending December 31, 2015. The Company does not undertake any obligation to update forward-looking information.

Sonic Automotive, Inc.
Results of Operations (Unaudited)


This release contains certain non-GAAP financial measures as defined under SEC rules, such as, but not limited to, adjusted income from continuing operations and related earnings per share data.  The Company has reconciled these measures to the most directly comparable GAAP measures in the release.  The Company believes that these non-GAAP financial measures improve the transparency of the Company's disclosure by providing period-to-period comparability of the Company's results from operations.






Three Months Ended March 31,


2016

2015


(In thousands, except per share and unit data)

Revenues:




New retail vehicles


$               1,149,437

$               1,190,215

Fleet vehicles


15,133

12,108

Total new vehicles

1,164,570

1,202,323

Used vehicles

598,355

593,742

Wholesale vehicles

44,374

41,656

Total vehicles

1,807,299

1,837,721

Parts, service and collision repair


346,054

323,194

Finance, insurance and other, net


81,273

74,600

Total revenues

2,234,626

2,235,515

Gross profit

345,150

334,959

Selling, general and administrative expenses

(284,375)

(270,862)

Impairment charges


-

(6,192)

Depreciation and amortization


(18,470)

(16,409)

Operating income (loss)

42,305

41,496

Other income (expense):



Interest expense, floor plan


(6,436)

(4,778)

Interest expense, other, net


(12,339)

(13,219)

Other income (expense), net


104

90

Total other income (expense)


(18,671)

(17,907)

Income (loss) from continuing operations before taxes


23,634

23,589

Provision for income taxes for continuing operations - benefit (expense)


(9,170)

(9,200)

Income (loss) from continuing operations

14,464

14,389

Income (loss) from discontinued operations

160

(422)

Net income (loss)

$                    14,624

$                    13,967





Diluted earnings (loss) per common share:



Earnings (loss) per share from continuing operations


$                        0.31

$                        0.28

Earnings (loss) per share from discontinued operations


-

(0.01)

Earnings (loss) per common share


$                        0.31

$                        0.27

Weighted average common shares outstanding

47,122

51,403





Gross Margin Data (Continuing Operations):



New retail vehicles


5.1%

5.3%

Fleet vehicles


0.2%

(0.6%)

Total new vehicles


5.0%

5.3%

Used vehicles


6.8%

6.9%

Wholesale vehicles


(2.4%)

(0.5%)

Parts, service and collision repair


48.0%

48.4%

Finance, insurance and other


100.0%

100.0%

Overall gross margin

15.4%

15.0%





SG&A Expenses (Continuing Operations):





Compensation

$                  169,041

$                  161,858

Advertising

15,347

15,332

Rent


18,720

18,254

Other

81,267

75,418

Total SG&A expenses


$                  284,375

$                  270,862

SG&A expenses as % of gross profit


82.4%

80.9%





Operating Margin %

1.9%

1.9%





Unit Data (Continuing Operations):



New retail units

30,156

31,334

Fleet units

449

355

Total new units


30,605

31,689

Used units


29,333

28,135

Wholesale units

8,423

7,777

Sonic Automotive, Inc.
Results of Operations (Unaudited)














Per Share Data
































Three Months Ended March 31, 2016




Income (Loss)

Income (Loss)








From Continuing

From Discontinued








Operations

Operations

Net Income (Loss)


Weighted


Per


Per


Per


Average


Share


Share


Share


Shares

Amount

Amount

Amount

Amount

Amount

Amount


(In thousands, except per share amounts)

Reported:














Earnings (loss) and shares

46,950

$     14,464


$         160


$     14,624


Effect of participating securities:














Non-vested restricted stock




(6)


-


(6)


Basic earnings (loss) and shares

46,950

$     14,458

$       0.31

$         160

$             -

$     14,618

$       0.31

Effect of dilutive securities:














Stock compensation plans

172












Diluted earnings (loss) and shares

47,122

$     14,458

$       0.31

$         160

$             -

$     14,618

$       0.31
















Adjustments (net of tax):














Storm damage and other


$       3,698

$       0.08

$       (320)

$      (0.01)

$       3,378

$       0.07

Total adjustments




$       3,698

$       0.08

$       (320)

$      (0.01)

$       3,378

$       0.07
















Adjusted:














Earnings (loss) and
















diluted earnings (loss) per share (1)


$     18,162

$       0.39

$       (160)

$      (0.01)

$     18,002

$       0.38
















(1) Net loss attributable to EchoPark® operations was $0.05 per fully diluted share in the three months ended March 31, 2016.






































Three Months Ended March 31, 2015




Income (Loss)

Income (Loss)








From Continuing

From Discontinued








Operations

Operations

Net Income (Loss)


Weighted


Per


Per


Per


Average


Share


Share


Share


Shares

Amount

Amount

Amount

Amount

Amount

Amount


(In thousands, except per share amounts)

Reported:














Earnings (loss) and shares


50,854

$     14,389


$       (422)


$     13,967


Effect of participating securities:














Non-vested restricted stock














and stock units




(5)


-


(5)


Basic earnings (loss) and shares


50,854

$     14,384

$       0.28

$       (422)

$      (0.01)

$     13,962

$       0.27

Effect of dilutive securities:














Stock compensation plans


549












Diluted earnings (loss) and shares

51,403

$     14,384

$       0.28

$       (422)

$      (0.01)

$     13,962

$       0.27
















Adjustments (net of tax):














Storm damage and other




$          634

$       0.02

$             -

$            -

$          634

$       0.02

Impairment charges


3,777

0.07

-

-

3,777

0.07

Total adjustments




$       4,411

$       0.09

$             -

$            -

$       4,411

$       0.09
















Adjusted:














Earnings (loss) and
















diluted earnings (loss) per share (2)


$     18,800

$       0.37

$       (422)

$     (0.01)

$     18,378

$       0.36
















(2) Net loss attributable to EchoPark® operations was $0.06 per fully diluted share in the three months ended March 31, 2015.




















Sonic Automotive, Inc.
Results of Operations (Unaudited)








New Vehicles




















Three Months Ended March 31,

Better / (Worse)


2016

2015

Change

% Change


(In thousands, except units and per unit data)

Reported:







Revenue

$          1,164,570

$          1,202,323

$             (37,753)

(3.1%)

Gross profit


$               58,424

$               63,350

$               (4,926)

(7.8%)

Unit sales

30,605

31,689

(1,084)

(3.4%)

Revenue per unit


$               38,052

$               37,941

$                     111

0.3%

Gross profit per unit


$                 1,909

$                 1,999

$                    (90)

(4.5%)

Gross profit as a % of revenue


5.0%

5.3%

(30)

bps












Three Months Ended March 31,

Better / (Worse)


2016

2015

Change

% Change


(In thousands, except units and per unit data)

Same Store:







Revenue

$          1,164,570

$          1,189,495

$             (24,925)

(2.1%)

Gross profit

$               58,375

$               62,498

$               (4,123)

(6.6%)

Unit sales

30,605

31,372

(767)

(2.4%)

Revenue per unit


$               38,052

$               37,916

$                     136

0.4%

Gross profit per unit

$                 1,907

$                 1,992

$                    (85)

(4.3%)

Gross profit as a % of revenue

5.0%

5.3%

(30)

bps










Sonic Automotive, Inc.
Results of Operations (Unaudited)











Used Vehicles




















Three Months Ended March 31,

Better / (Worse)


2016

2015

Change

% Change


(In thousands, except units and per unit data)

Reported:







Revenue

$             598,355

$             593,742

$                  4,613

0.8%

Gross profit


$               40,531

$               40,844

$                  (313)

(0.8%)

Unit sales

29,333

28,135

1,198

4.3%

Revenue per unit


$               20,399

$               21,103

$                  (704)

(3.3%)

Gross profit per unit


$                 1,382

$                 1,452

$                    (70)

(4.8%)

Gross profit as a % of revenue

6.8%

6.9%

(10)

bps












Three Months Ended March 31,

Better / (Worse)


2016

2015

 Change

% Change


(In thousands, except units and per unit data)

Same Store:







Revenue

$             598,355

$             584,987

$                13,368

2.3%

Gross profit


$               40,690

$               41,008

$                  (318)

(0.8%)

Unit sales

29,333

27,687

1,646

5.9%

Revenue per unit


$               20,399

$               21,129

$                  (730)

(3.5%)

Gross profit per unit


$                 1,387

$                 1,481

$                    (94)

(6.3%)

Gross profit as a % of revenue

6.8%

7.0%

(20)

bps










Sonic Automotive, Inc.
Results of Operations (Unaudited)








Wholesale Vehicles




















Three Months Ended March 31,

Better / (Worse)


2016

2015

Change

% Change


(In thousands, except units and per unit data)

Reported:








Revenue


$                 44,374

$                 41,656

$                   2,718

6.5%

Gross profit (loss)


$                (1,078)

$                   (210)

$                   (868)

(413.3%)

Unit sales


8,423

7,777

646

8.3%

Revenue per unit


$                  5,268

$                  5,356

$                     (88)

(1.6%)

Gross profit (loss) per unit

$                  (128)

$                    (27)

$                   (101)

(374.1%)

Gross profit (loss) as a % of revenue

(2.4%)

(0.5%)

(190)

bps













Three Months Ended March 31,

Better / (Worse)


2016

2015

Change

% Change


(In thousands, except units and per unit data)

Same Store:








Revenue


$                44,353

$                41,253

$                   3,100

7.5%

Gross profit (loss)


$               (1,076)

$                  (197)

$                   (879)

(446.2%)

Unit sales


8,418

7,688

730

9.5%

Revenue per unit

$                  5,269

$                  5,366

$                     (97)

(1.8%)

Gross profit (loss) per unit

$                  (128)

$                    (26)

$                   (102)

(392.3%)

Gross profit (loss) as a % of revenue


(2.4%)

(0.5%)

(190)

bps





















Sonic Automotive, Inc.
Results of Operations (Unaudited)






Parts, Service and Collision Repair ("Fixed Operations")




















Three Months Ended March 31,

Better / (Worse)


2016

2015

 Change

% Change

Reported:

(In thousands)

Revenue








Customer pay

$             147,394

$             137,623

$                 9,771

7.1%

Warranty

57,559

53,498

4,061

7.6%

Wholesale parts

45,309

45,012

297

0.7%

Internal, sublet and other


95,792

87,061

8,731

10.0%

Total


$             346,054

$             323,194

$               22,860

7.1%

Gross profit








Customer pay

$               80,358

$               75,678

$                 4,680

6.2%

Warranty


31,326

29,760

1,566

5.3%

Wholesale parts


7,941

8,138

(197)

(2.4%)

Internal, sublet and other


46,375

42,799

3,576

8.4%

Total

$             166,000

$             156,375

$                 9,625

6.2%

Gross profit as a % of revenue








Customer pay


54.5%

55.0%

(50)

bps

Warranty


54.4%

55.6%

(120)

bps

Wholesale parts

17.5%

18.1%

(60)

bps

Internal, sublet and other

48.4%

49.2%

(80)

bps

Total

48.0%

48.4%

(40)

bps











Sonic Automotive, Inc.
Results of Operations (Unaudited)






Parts, Service and Collision Repair ("Fixed Operations")




















Three Months Ended March 31,

Better / (Worse)


2016

2015

 Change

% Change

Same Store:

(In thousands)

Revenue








Customer pay


$             147,394

$             134,636

$               12,758

9.5%

Warranty

57,559

52,694

4,865

9.2%

Wholesale parts


45,309

44,201

1,108

2.5%

Internal, sublet and other


95,792

85,742

10,050

11.7%

Total


$             346,054

$             317,273

$               28,781

9.1%

Gross profit








Customer pay

$               80,358

$               74,050

$                 6,308

8.5%

Warranty


31,282

29,300

1,982

6.8%

Wholesale parts

7,941

7,988

(47)

(0.6%)

Internal, sublet and other


46,068

42,165

3,903

9.3%

Total

$             165,649

$             153,503

$               12,146

7.9%

Gross profit as a % of revenue








Customer pay

54.5%

55.0%

(50)

bps

Warranty

54.3%

55.6%

(130)

bps

Wholesale parts


17.5%

18.1%

(60)

bps

Internal, sublet and other


48.1%

49.2%

(110)

bps

Total

47.9%

48.4%

(50)

bps











Sonic Automotive, Inc.
Results of Operations (Unaudited)










Finance, Insurance and Other, Net ("F&I")



















Three Months Ended March 31,

Better / (Worse)


2016

2015

Change

% Change


(In thousands, except per unit data)

Reported:








Revenue

$               81,273

$               74,600

$                 6,673

8.9%

Gross profit per retail unit (excludes fleet)


$                 1,366

$                 1,254

$                    112

8.9%






















Three Months Ended March 31,

Better / (Worse)


2016

2015

Change

% Change


(In thousands, except per unit data)

Same Store:








Revenue

$               80,852

$               73,689

$                 7,163

9.7%

Gross profit per retail unit (excludes fleet)


$                 1,359

$                 1,255

$                    104

8.3%










Sonic Automotive, Inc.
Results of Operations (Unaudited)









Selling, General and Administrative ("SG&A") Expenses


















Three Months Ended March 31,

Better / (Worse)


2016

2015

 Change

% Change


(In thousands)

Reported:








Compensation


$             169,041

$             161,858

$               (7,183)

(4.4%)

Advertising


15,347

15,332

(15)

(0.1%)

Rent

18,720

18,254

(466)

(2.6%)

Other


81,267

75,418

(5,849)

(7.8%)

Total


$             284,375

$             270,862

$             (13,513)

(5.0%)










Total pre-tax adjustments


(6,042)

(1,051)

4,991

NM

Adjusted SG&A 


$             278,333

$             269,811

(8,522)

(3.2%)










SG&A expenses as a % of gross profit







Compensation


49.0%

48.3%

(70)

bps

Advertising


4.4%

4.6%

20

bps

Rent


5.4%

5.4%

0

bps

Other

23.6%

22.6%

(100)

bps

Total

82.4%

80.9%

(150)

bps











Total pre-tax adjustments .

(1.8%)

(0.3%)

150

bps

Adjusted SG&A as a % of gross profit


80.6%

80.6%

0

bps











NM = Not meaningful








SOURCE Sonic Automotive, Inc.