Sonic Automotive, Inc. Continues Portfolio Maximization Strategy; Q3 Revenues and Volume Up Over Strong Prior Year Quarter
CHARLOTTE, N.C., Oct. 26 /PRNewswire-FirstCall/ -- 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%) | |||||||||||||||
Description of Adjustments: | 2010 | 2009 | |||||||||
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%) | ||||||||||||||
Description of Adjustments: | 2010 | 2009 | |||||
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 | |||||
SOURCE Sonic Automotive
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