Sonic Automotive, Inc. Reports 21% Vehicle Revenue Growth; Adjusted Continuing Ops Profit Up 41% Over Prior Year Quarter

News provided by

Sonic Automotive, Inc.

Jul 29, 2010, 07:30 ET

CHARLOTTE, N.C., July 29 /PRNewswire-FirstCall/ -- Sonic Automotive, Inc. (NYSE: SAH), the nation's third-largest automotive retailer, today reported that 2010 second quarter adjusted earnings from continuing operations were $15.6 million, up 41% from adjusted earnings from continuing operations in the same prior year period. On a per share basis, the Company earned an adjusted $0.27 per diluted share from continuing operations, compared to an adjusted $0.23 per diluted share from continuing operations in the same prior year quarter.  The adjustments, which are related primarily to debt refinancing activities and mark-to-market adjustments on interest rate swaps, are detailed further in the attached tables.  During the second quarter, the Company completed the retirement of $200 million of our 8.625% senior subordinated notes using proceeds from a debt offering that was completed in March 2010.    

Business Overview – Revenue Growth In Every Business Line Over Q2 of Last Year

Commenting on the quarter, B. Scott Smith, the Company's President, said, "We are pleased with the growth in both revenues and profits over the second quarter of last year.  Our new vehicle business is up both sequentially and over the same period last year as we continue to see economic stabilization in certain segments of our geographic footprint.  The growth in our used vehicle business continues to drive incremental revenue in our fixed operations and F&I departments.  Our strategy for some time has been focused on standardizing our operating procedures through the rollout of our operational playbooks.  Results this quarter demonstrate one of the primary benefits of our operational playbooks – they create growth opportunities not just in their specific area of the business but across all of our business lines."

New and Used Vehicles – Revenue Increases 19% and 23%, Respectively

New vehicle retail revenue increased 19% and used vehicle retail revenue increased 23% for the second quarter of 2010 compared to the same quarter last year.  Jeff Dyke, the Company's EVP of Operations, stated, "We are pleased with our new vehicle growth, particularly given that our volume declines in 2009 were not as severe as what the overall industry experienced due to our favorable brand and geographic mix.  Our dealerships continue to take market share and outperform the competition in their local markets.  We are excited to announce that our New Car Playbook will be introduced to our stores later this year.  We expect it to provide us many of the same successes that we have already received from our proven Used Vehicle Playbook.  We also continue to be very pleased with our used vehicle volume growth especially when we consider the 20% growth comes on top of 12% growth in 2009.  We continue to show that the used car business has tremendous upside potential as the second quarter was our largest used vehicle volume and gross profit quarter in our Company's history."

Service, Parts & Body Shop – Revenue and Gross Profit Both Increase

Sonic's Service, Parts & Body Shop revenue for the second quarter was up approximately 5% compared to the prior year quarter, while gross profit dollars were up over 3%.  Mr. Dyke stated, "Our operational strategies in parts and service are specifically designed to increase the non-warranty pieces of our business to respond to improved vehicle quality, fewer units in operation and changing warranty programs.  We have seen consistent growth in both our customer pay business and in the revenues we earn for reconditioning work done on pre-owned vehicles."  

Presentation materials for the Company's July 29, 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 monitor.

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 ID: 86991682

About Sonic Automotive

Sonic Automotive, Inc., a Fortune 500 company based in Charlotte, N.C., is the nation's third-largest automotive retailer, operating 140 franchises.  Sonic can be reached on the web at www.sonicautomotive.com.

Included herein are forward-looking statements, including statements with respect to economic stabilization and business improvement, future success and impacts from the implementation of our various operational playbooks, future cash flow generation, growth opportunities and future debt retirement.  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 or further decline 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 March 31, 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





6/30/2010

Adjustments

6/30/2010

6/30/2009

Adjustments

6/30/2009

Revenues












New retail vehicles

$      848,610

$                 -

$      848,610

$    711,083

$             -

$    711,083

Fleet vehicles

53,843

-

53,843

61,213

-

61,213

Total new vehicles

902,453

-

902,453

772,296

-

772,296

Used vehicles

470,365

-

470,365

382,091

-

382,091

Wholesale vehicles

30,111

-

30,111

33,903

-

33,903


Total vehicles

1,402,929

-

1,402,929

1,188,290

-

1,188,290

Parts, service and collision repair

287,095

-

287,095

274,032

-

274,032

Finance, insurance and other

45,985

-

45,985

38,847

-

38,847


Total revenues

1,736,009

-

1,736,009

1,501,169

-

1,501,169

Total gross profit

285,019

-

285,019

259,699

-

259,699

SG&A expenses

(228,372)

647

(227,725)

(205,767)

-

(205,767)

Impairment charges

(1)


(1)

(5,030)

5,030

-

Depreciation


(8,675)

-

(8,675)

(8,183)

-

(8,183)

Operating income

47,971

647

48,618

40,719

5,030

45,749

Interest expense, floor plan

(5,507)

-

(5,507)

(5,492)

-

(5,492)

Interest expense, other, net

(15,683)

519

(15,164)

(23,216)

6,712

(16,504)

Interest expense, non-cash, convertible debt

(1,730)

-

(1,730)

(3,643)

-

(3,643)

Interest expense, non-cash, cash flow swaps 

(2,235)

2,235

-

(1,908)

1,908

-

Other (expense) / income, net

(7,235)

7,259

24

20

-

20

Income / (loss) from continuing operations before taxes

15,581

10,660

26,241

6,480

13,650

20,130

Income tax (expense) / benefit

(6,300)

(4,310)

(10,610)

(2,916)

(6,143)

(9,059)

Income / (loss) from continuing operations

9,281

6,350

15,631

3,564

7,507

11,071

Income / (Loss) from discontinued operations

(845)

-

(845)

(3,538)

1,313

(2,225)

Net income


$          8,436

$           6,350

$        14,786

$             26

$       8,820

$        8,846
















Diluted:












Weighted average common shares outstanding

65,807

-

65,807

41,604

-

53,810

















Earnings / (loss) per share from continuing operations


$0.17

$0.10

$0.27

$0.08

$         0.15

$0.23

Earnings / (loss) per share from discontinued operations

(0.01)

(0.01)

(0.02)

(0.08)

0.04

(0.04)

Cumulative effect of change in accounting principle












Earnings / (loss) per share

$0.16

$0.09

$0.25

$0.00

$0.19

$0.19
















Gross Margin Data (Continuing Operations):




























Retail new vehicles

7.1%


7.1%

7.0%


7.0%

Fleet vehicles

1.9%


1.9%

3.6%


3.6%

Total new vehicles

6.8%


6.8%

6.8%


6.8%

Used vehicles retail

7.7%


7.7%

8.1%


8.1%


Total vehicles retail

7.1%


7.1%

7.5%


7.5%

Wholesale vehicles

(6.1%)


(6.1%)

(3.7%)


(3.7%)

Parts, service and collision repair

49.9%


49.9%

50.6%


50.6%

Finance, insurance and other

100.0%


100.0%

100.0%


100.0%


Overall gross margin

16.4%


16.4%

17.3%


17.3%
















SG&A Expenses (Continuing Operations):




























Personnel

$      135,845

$                 -

$      135,845

$    117,740

$             -

$    117,740

Advertising

12,964

-

12,964

11,220

-

11,220

Facility rent

32,717

-

32,717

32,132

-

32,132

Other

46,846

(647)

46,199

44,675

-

44,675

Total

$      228,372

$             (647)

$      227,725

$    205,767

$             -

$    205,767
















SG&A Expenses as % of Gross Profit

80.1%


79.9%

79.2%


79.2%
















Operating Margin %

2.8%


2.8%

2.7%


3.0%
















Unit Data (Continuing Operations):




























New retail units

24,854




21,574




Fleet units

2,272




2,572




New units

27,126




24,146




Used units

24,624




20,568





Total units retailed

51,750




44,714




Wholesale units

5,266




5,313



















Other Data:




























Same store revenue percentage changes:













New retail

19.3%




(31.8%)





Fleet

(12.0%)




(47.7%)





Total New Vehicles

16.9%




(33.4%)





Used

23.1%




3.5%





Parts, service and collision repair

4.8%




(3.8%)





Finance, insurance and other

18.4%




(25.7%)





Total

15.6%




(22.9%)



































Description of Adjustments:

2010


2009






Continuing Operations:













Hail damage

$             647


$                -







Debt restructuring


7,259


6,712







Cash flow swaps

2,235


1,908







Impairment charges

-


5,030







Double-carry interest

519


-







Total pretax

$        10,660


$        13,650







Tax effect

(4,310)


(6,143)







Total

$          6,350


$          7,507






































Discontinued Operations:













Impairment charges

$                -


$          1,880







Tax effect

-


(567)







Total

$                -


$          1,313



















Sonic Automotive, Inc.











Results of Operations (Unaudited)











(in thousands, except per share, unit data and percentage amounts)















Six Months Ended

Six Months Ended





As Reported


As Adjusted

As Reported


As Adjusted





6/30/2010

Adjustments

6/30/2010

6/30/2009

Adjustments

6/30/2009

Revenues












New retail vehicles

$   1,589,555

$                 -

$   1,589,555

$ 1,362,443

$             -

$ 1,362,443

Fleet vehicles

97,495

-

97,495

115,376

-

115,376

Total new vehicles

1,687,050

-

1,687,050

1,477,819

-

1,477,819

Used vehicles

892,656

-

892,656

710,381

-

710,381

Wholesale vehicles

61,389

-

61,389

71,359

-

71,359


Total vehicles

2,641,095

-

2,641,095

2,259,559

-

2,259,559

Parts, service and collision repair

565,682

-

565,682

544,701

-

544,701

Finance, insurance and other

86,959

-

86,959

74,000

-

74,000


Total revenues

3,293,736

-

3,293,736

2,878,260

-

2,878,260

Total gross profit

553,343

-

553,343

506,672

-

506,672

SG&A expenses

(451,865)

647

(451,218)

(411,231)

-

(411,231)

Impairment charges

(45)


(45)

(5,087)

5,087

-

Depreciation


(17,000)

-

(17,000)

(15,776)

-

(15,776)

Operating income

84,433

647

85,080

74,578

5,087

79,665

Interest expense, floor plan

(10,413)

-

(10,413)

(10,660)

-

(10,660)

Interest expense, other, net

(32,873)

1,464

(31,409)

(39,950)

8,760

(31,190)

Interest expense, non-cash, convertible debt

(3,406)

-

(3,406)

(6,262)

-

(6,262)

Interest expense, non-cash, cash flow swaps

(3,918)

3,918

-

(3,179)

3,179

-

Other (expense) / income, net

(7,171)

7,259

88

70

-

70

Income / (loss) from continuing operations before taxes

26,652

13,288

39,940

14,597

17,026

31,623

Income tax (expense) / benefit

(11,061)

(5,514)

(16,575)

(6,569)

(7,662)

(14,231)

Income / (loss) from continuing operations

15,591

7,774

23,365

8,028

9,364

17,392

Income / (Loss) from discontinued operations

(3,001)

-

(3,001)

(6,324)

2,392

(3,932)

Net income


$        12,590

$           7,774

$        20,364

$        1,704

$     11,756

$      13,460
















Diluted:












Weighted average common shares outstanding

52,749

-

65,639

40,974

-

47,111

















Earnings / (loss) per share from continuing operations


$0.29

$0.13

$0.42

$0.19

$         0.20

$0.39

Earnings / (loss) per share from discontinued operations

(0.05)

-

(0.05)

(0.15)

0.07

(0.08)

Cumulative effect of change in accounting principle












Earnings / (loss) per share

$0.24

$0.13

$0.37

$0.04

$0.27

$0.31
















Gross Margin Data (Continuing Operations):




























Retail new vehicles

7.1%


7.1%

6.9%


6.9%

Fleet vehicles

2.7%


2.7%

3.9%


3.9%

Total new vehicles 

6.9%


6.9%

6.7%


6.7%

Used vehicles retail

7.8%


7.8%

8.7%


8.7%


Total vehicles retail

7.2%


7.2%

7.4%


7.4%

Wholesale vehicles

(4.1%)


(4.1%)

(1.8%)


(1.8%)

Parts, service and collision repair

50.1%


50.1%

50.1%


50.1%

Finance, insurance and other

100.0%


100.0%

100.0%


100.0%


Overall gross margin

16.8%


16.8%

17.6%


17.6%
















SG&A Expenses (Continuing Operations):




























Personnel

$      266,821

$                 -

$      266,821

$    232,858

$             -

$    232,858

Advertising

24,294

-

24,294

22,115

-

22,115

Facility rent

66,328

-

66,328

65,111

-

65,111

Other

94,422

(647)

93,775

91,147

-

91,147

Total

$      451,865

$             (647)

$      451,218

$    411,231

$             -

$    411,231
















SG&A Expenses as % of Gross Profit

81.7%


81.5%

81.2%


81.2%
















Operating Margin %

2.6%


2.6%

2.6%


2.8%
















Unit Data (Continuing Operations):




























New retail units

46,440




41,168




Fleet units

4,022




4,827




New units

50,462




45,995




Used units

46,326




37,924





Total units retailed

96,788




83,919




Wholesale units

10,459




11,826



















Other Data:




























Same store revenue percentage changes:













New retail

16.7%




(32.5%)





Fleet

(15.5%)




(47.9%)





Total New Vehicles

14.2%




(34.0%)





Used

25.7%




(2.2%)





Parts, service and collision repair

3.9%




(4.2%)





Finance, insurance and other

17.5%




(27.6%)





Total

14.4%




(24.3%)



































Description of Adjustments:

2010


2009






Continuing Operations:












Hail damage

$             647


$                -







Debt restructuring

7,259


8,760







Cash flow swaps

3,918


3,179







Impairment charges

-


5,087







Double-carry interest

1,464


-







Total pretax

$        13,288


$        17,026







Tax effect

(5,514)


(7,662)







Total

$          7,774


$          9,364






































Discontinued Operations:













Impairment charges

$                -


$          3,408







Tax effect

-


(1,016)







Total

$                -


$          2,392



















SOURCE Sonic Automotive, Inc.

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