Sonic Automotive, Inc. Reports Second Quarter Earnings
CHARLOTTE, N.C., July 26 -- Sonic Automotive, Inc. , a leader in automotive retailing, today reported that its 2005 second quarter income from continuing operations was $28.7 million, or $0.66 per diluted share, compared to $30.6 million, or $0.70 per diluted share, in the prior year period.
"We were very pleased with both our growth in revenue during the quarter and the overall strength of consumer spending. Sonic Automotive posted strong same store sales growth in every business segment. As expected, interest rate increases negatively impacted earnings despite lower inventory levels and we saw continued pressure on new vehicle margins. We continue to believe that the second half of 2005 will produce favorable year over year performance improvement," said Chairman and Chief Executive Officer O. Bruton Smith.
Revenue increased $248 million to $2.1 billion or 13.7% above the prior year quarter. On a same store basis, revenue increased 8.6% from the same quarter last year.
"Our focus on operating process improvements continues to gain traction," said President and Chief Operating Officer Jeffrey C. Rachor. "Positive same store sales growth in the first quarter followed by 8.6% growth in the second quarter indicates that progress was made. New vehicle inventory was well managed to a 45 days supply. We finalized a standard data structure and began conversion to a single dealer management system, which are fundamental to standardization. An additional indicator of progress is that associate turnover is significantly lower than at this time last year. These trends give us confidence in our long-term strategy."
Mr. Rachor continued, "Consistent with our portfolio enrichment strategy, we completed the acquisition of Mercedes-Benz of Santa Monica, Ca. The store is one of the premier Mercedes-Benz dealerships in the country and should generate more than $160 million in annual revenue. Five dealerships were sold in the quarter and four others are pending."
Debt-to-total capital, net of cash, at June 30, 2005 was 48.0%. While the ratio reflects the purchase price of the recently completed acquisition, the long-term goal continues to be 40%. At the end of the quarter, the company had $171 million available under its revolving credit facility. The company has $28 million in authorization available for future stock repurchases.
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 186 franchises and 39 collision repair centers. Sonic can be reached on the Web at http://www.sonicautomotive.com/.
Sonic Automotive, Inc.
Results of Operations (unaudited)
(in thousands, except per share, unit data and percentage amounts)
Three Months Ended Six Months Ended
06/30/2005 06/30/2004 06/30/2005 06/30/2004
Revenues
Retail new vehicles $1,176,434 $1,025,530 $2,153,454 $1,922,218
Fleet vehicles 93,134 82,008 175,792 152,452
Total new vehicles 1,269,568 1,107,538 2,329,246 2,074,670
Used vehicles 313,940 282,131 608,702 554,822
Wholesale vehicles 143,275 122,427 266,594 230,026
Total vehicles 1,726,783 1,512,096 3,204,542 2,859,518
Parts, service and
collision repair 274,489 245,251 533,664 479,418
Finance, insurance and
other 50,370 46,720 95,544 88,422
Total revenues 2,051,642 1,804,067 3,833,750 3,427,358
Total gross profit 308,499 279,159 588,459 535,124
SG&A expenses 236,952 210,400 461,931 413,481
Depreciation 4,268 4,036 8,264 7,527
Operating income 67,279 64,723 118,264 114,116
Interest expense, floor plan 10,100 6,269 18,815 11,906
Interest expense, other 11,321 10,362 22,451 19,942
Other income (expense) 13 (32) 30 (3)
Income from continuing
operations before taxes 45,871 48,060 77,028 82,265
Income taxes 17,202 17,433 28,886 30,071
Income from continuing
operations 28,669 30,627 48,142 52,194
Discontinued operations:
Loss from operations and the
sale of discontinued
franchises (2,663) (1,004) (6,442) (32)
Income tax benefit 998 369 2,416 16
Loss from discontinued
operations (1,665) (635) (4,026) (16)
Net income $27,004 $29,992 $44,116 $52,178
Diluted:
Weighted average common
shares outstanding 45,421 45,333 45,440 45,354
Earnings per share from
continuing operations $0.66 $0.70 $1.11 $1.20
Loss per share from
discontinued operations ($0.04) ($0.01) ($0.09) $0.00
Earnings per share $0.62 $0.69 $1.02 $1.20
Gross Margin Data:
Retail new vehicles 7.6% 7.9% 7.5% 7.8%
Fleet vehicles 2.7% 2.8% 2.8% 2.9%
Total new vehicles 7.2% 7.5% 7.2% 7.4%
Used vehicles retail 10.4% 10.6% 10.6% 10.8%
Total vehicles retail 7.8% 8.1% 7.9% 8.1%
Parts, service and
collision repair 48.8% 48.9% 48.7% 48.8%
Finance and insurance 100.0% 100.0% 100.0% 100.0%
Overall gross margin 15.0% 15.5% 15.3% 15.6%
SG&A Expenses:
Personnel 138,764 123,490 269,355 245,669
Advertising 16,908 15,634 32,037 28,485
Facility rent 22,730 19,009 44,709 37,621
Other 58,550 52,267 115,830 101,706
Total 236,952 210,400 461,931 413,481
Unit Data:
New retail units 37,944 34,184 69,635 64,208
Fleet units 4,269 3,782 7,918 6,863
Total new units 42,213 37,966 77,553 71,071
Used units 17,175 16,004 33,764 32,186
Total units retailed 59,388 53,970 111,317 103,257
Wholesale units 16,210 14,489 30,020 27,890
Average price per unit:
New retail vehicles 31,004 30,000 30,925 29,937
Fleet vehicles 21,816 21,684 22,202 22,214
Total new vehicles 30,075 29,172 30,034 29,192
Used vehicles 18,279 17,629 18,028 17,238
Wholesale vehicles 8,839 8,450 8,881 8,248
Other Data:
Net cash provided by
(used in) operating
activities $14,472 $25,426 ($1,337) $26,048
Floorplan assistance
(continuing operations) $10,535 $9,544 $19,113 $18,081
Same store revenue
percentage changes:
New retail 9.1% 5.7%
Fleet 15.1% 16.4%
Total new 9.6% 6.5%
Used 6.1% 3.1%
Parts, service and
collision repair 5.4% 3.3%
Finance, insurance and
other 4.9% 4.3%
Total 8.6% 5.6%
Balance Sheets:
06/30/2005 12/31/2004
ASSETS
Current Assets:
Cash $8,278 $9,991
Receivables, net 371,640 357,403
Inventories 1,037,821 1,024,342
Assets held for sale 116,156 98,530
Other current assets 113,263 101,277
Total current assets 1,647,158 1,591,543
Property and Equipment, Net 140,438 134,490
Goodwill, Net 1,094,166 1,056,924
Other Intangibles, Net 89,336 84,777
Other Assets 39,206 33,877
TOTAL ASSETS $3,010,304 $2,901,611
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - floor
plan $962,395 $984,549
Trade accounts payable 86,400 88,616
Accrued interest 16,232 15,421
Other accrued
liabilities 181,211 175,510
Liabilities held for sale 77,141 66,309
Current maturities of
long-term debt 2,961 2,970
Total current
liabilities 1,326,340 1,333,375
LONG-TERM DEBT 749,259 668,826
OTHER LONG-TERM
LIABILITIES 27,367 28,888
DEFERRED INCOME TAXES 101,331 100,835
STOCKHOLDERS' EQUITY
Class A common stock 401 397
Class B common stock 121 121
Paid-in capital 447,778 441,503
Retained earnings 504,703 470,663
Accumulated other
comprehensive loss (452) (1,228)
Deferred compensation
related to restricted
stock (3,248) (3,408)
Treasury stock, at cost (143,296) (138,361)
Total stockholders'
equity 806,007 769,687
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,010,304 $2,901,611
Balance Sheet Data:
Current Ratio 1.24 1.19
Debt to Total Capital,
Net of Cash 48.0% 46.2%
LTM Return on
Stockholders' Equity 10.1% 11.7%