Sonic Automotive, Inc. Reports First Quarter Earnings
CHARLOTTE, N.C., April 26 -- Sonic Automotive, Inc. , a leader in automotive retailing, today reported that its 2005 first quarter income from continuing operations was $19.4 million, or $0.45 per diluted share, compared to $22.3 million, or $0.51 per diluted share, in the prior year period. The results for the quarter include charges of $0.02 from hail damage in two Southeast markets.
"As previously indicated, first quarter challenges were expected. The shortfall, caused by excess inventory in the industry, sales pulled forward in December, and higher interest costs, occurred in January and February. Although these challenges continued, our performance in March improved over prior year," said Chairman and Chief Executive Officer O. Bruton Smith. "While uncertainty exists around the second quarter retail environment and industry inventory levels, we continue to believe that notable year-over-year performance improvement will occur in the second half of the year."
Revenue for the period increased 8.8% from the prior year first quarter to $1.8 billion. On a same store basis, total revenue in the quarter increased 1.7% from the same quarter last year and represents growth across the business.
"While we are disappointed by results in January and February, we continue to focus on operating process improvements," said President and Chief Operating Officer Jeffrey C. Rachor. "Same store sales improved, new vehicle inventory was well managed to 55 days supply, work continues on operating processes and we selected a single dealer management system vendor as a platform to drive standardization. We remain confident and on course in our long-term strategy."
Consistent with its portfolio enrichment strategy, the company completed the acquisition of Mercedes-Benz of Nashville, Tenn. The acquisition represents $55 million in annualized revenue. Two dealerships were sold in the quarter and five others are pending.
Debt-to-total capital, net of cash, at March 31, 2005 was 47.3%, with a continued long-term goal of 40%. At the end of the quarter, the company had $214 million available under its revolving credit facility. At quarter-end, the company had $31 million authorization available for stock repurchases. Moody's Investors Service announced April 14 that it upgraded Sonic Automotive's senior secured credit facility rating and confirmed other ratings. Additionally, Moody's reported that the company's overall rating outlook was improved to stable from negative.
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 187 franchises and 39 collision repair centers. Sonic can be reached on the Web at www.sonicautomotive.com .
Sonic Automotive, Inc.
Results of Operations (unaudited)
(in thousands, except per share, unit data and percentage amounts)
Three Months Ended
3/31/2004 3/31/2005
Revenues
Retail new vehicles $924,680 $996,725
Fleet vehicles 70,443 82,658
Total new vehicles 995,123 1,079,383
Used vehicles 285,657 305,860
Wholesale vehicles 111,096 126,282
Total vehicles 1,391,876 1,511,525
Parts, service and collision repair 242,895 267,415
Finance, insurance and other 43,330 46,536
Total revenues 1,678,101 1,825,476
Total gross profit 265,064 287,341
SG&A expenses 210,529 232,125
Depreciation 3,572 4,082
Operating income 50,963 51,134
Interest expense, floor plan 5,865 9,028
Interest expense, other 9,702 11,130
Other income 28 17
Income from continuing operations
before taxes 35,424 30,993
Income taxes 13,171 11,622
Income from continuing operations 22,253 19,371
Discontinued operations:
Loss from operations and the sale
of discontinued franchises (248) (3,615)
Income tax benefit 180 1,356
Loss from discontinued operations (68) (2,259)
Net income $22,185 $17,112
Diluted:
Weighted average common shares
outstanding 45,375 45,460
Income per share from continuing
operations $0.51 $0.45
Loss per share from discontinued
operations $0.00 ($0.05)
Net income per share $0.51 $0.40
Gross Margin Data:
Retail new vehicles 7.6% 7.5%
Fleet vehicles 3.0% 2.9%
Total new vehicles 7.3% 7.1%
Used vehicles retail 11.1% 10.9%
Total vehicles retail 8.1% 8.0%
Parts, service and collision repair 48.6% 48.5%
Finance and insurance 100.0% 100.0%
Overall gross margin 15.8% 15.7%
SG&A Expenses:
Personnel 126,373 134,367
Advertising 13,458 15,774
Facility rent 19,311 22,643
Other 51,387 59,341
Total 210,529 232,125
Unit Data:
New retail units 31,115 32,481
Fleet units 3,081 3,649
Total new units 34,196 36,130
Used units 17,036 17,334
Total units retailed 51,232 53,464
Wholesale units 13,917 14,264
Average price per unit:
New retail vehicles 29,718 30,686
Fleet vehicles 22,864 22,652
Total new vehicles 29,101 29,875
Used vehicles 16,768 17,645
Wholesale vehicles 7,983 8,853
Other Data:
Net cash used in operating activities ($2,234) ($15,515)
Floorplan assistance (continuing
operations) $8,857 $8,809
Same store revenue percentage
changes:
New retail 1.0%
Fleet 18.0%
Total new 2.2%
Used -0.5%
Parts, service and collision repair 0.9%
Finance, insurance and other 2.7%
Total 1.7%
Balance Sheets:
12/31/2004 3/31/2005
ASSETS
Current Assets:
Cash $9,991 $5,974
Receivables, net 357,403 330,764
Inventories 1,095,057 1,132,568
Assets held for sale 105,100 110,210
Other current assets 23,992 27,591
Total current assets 1,591,543 1,607,107
Property and Equipment, Net 134,490 139,344
Goodwill, Net 1,056,924 1,065,003
Other Intangibles, Net 84,777 87,206
Other Assets 33,877 35,981
TOTAL ASSETS $2,901,611 $2,934,641
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - floor plan $1,050,858 $1,050,896
Trade accounts payable 88,616 87,466
Accrued interest 15,421 12,067
Other accrued liabilities 175,510 157,383
Current maturities of long-term debt 2,970 3,016
Total current liabilities 1,333,375 1,310,828
LONG-TERM DEBT 668,826 707,556
OTHER LONG-TERM LIABILITIES 28,888 31,299
DEFERRED INCOME TAXES 100,835 101,256
STOCKHOLDERS' EQUITY
Class A common stock 397 398
Class B common stock 121 121
Paid-in capital 441,503 443,970
Retained earnings 470,663 482,736
Accumulated other comprehensive loss (1,228) (569)
Deferred compensation related to
restricted stock (3,408) (3,089)
Treasury stock, at cost (138,361) (139,865)
Total stockholders' equity 769,687 783,702
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $2,901,611 $2,934,641
Balance Sheet Data:
Current Ratio 1.19 1.23
Debt to Total Capital, Net of Cash 46.2% 47.3%
LTM Return on Stockholders'
Equity 11.7% 10.7%