Sonic Automotive, Inc. Reports 27% Increase in Earnings Per Share From Continuing Operations Driven By Record Revenue for Third Quarter
CHARLOTTE, N.C., Oct. 25, 2005 -- Sonic Automotive, Inc. , a leader in automotive retailing, today reported that its 2005 third quarter earnings from continuing operations were $28.5 million, or $0.65 per diluted share, compared to $21.9 million, or $0.51 per diluted share, in the prior year period.
"We demonstrated strong growth across all of our lines of business this quarter. This strong growth, along with our continued focus on margin and cost improvements, resulted in a 27% percent increase in earnings per share from continuing operations, including charges of $0.07 to $0.09 per diluted share in both periods related to hurricane disruption and other less significant charges. Given the uncertainty surrounding the impact the manufacturer incentive programs have had on normal sales seasonality, we are maintaining our current target for earnings per share from continuing operations of $2.25 to $2.35 for the full year 2005. This estimate is based on an expected level of annual new vehicle industry sales of 16.9 million units," said Chairman and Chief Executive Officer O. Bruton Smith.
Revenue increased $182 million to a record $2.1 billion or 9.5% above the prior year quarter. On a same store basis, revenue increased 6.0% from the same quarter last year.
Jeffrey C. Rachor, President and Chief Operating Officer stated, "We experienced strong same store results this quarter even after considering the disruption caused in our Houston and Beaumont, Texas platforms as a result of Hurricane Rita during the last half of September. In addition to our overall revenue growth, we were pleased with the 3.8% same store revenue growth and 60 basis point margin expansion in our fixed operations business which helped maintain our gross margin and profitability in a very competitive new vehicle environment. In addition, as a result of continued emphasis on key initiatives, gross margins in our used car business improved 70 basis points to 10.8% for the quarter compared to the same period last year."
Mr. Rachor continued, "Our expense reduction initiatives continue to bring value as demonstrated by the 320 basis point decline in our SG&A expenses as a percentage of gross profit compared to the same quarter last year. We remain on target to achieve our goal of a 78% ratio for the full year."
Debt-to-total capital, net of cash, at September 30, 2005 was 45.1%. At the end of the quarter, the company had approximately $229.0 million available under its revolving credit facility. The company has approximately $27.9 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 177 franchises and 38 collision repair centers. Sonic can be reached on the Web at http://www.sonicautomotive.com/.
Included herein are forward-looking statements, including statements pertaining to anticipated earnings per share from continuing operations, SG&A expense levels and new vehicle industry sales levels. 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, risks associated with acquisitions and the risk factors described in Exhibit 99.1 to the company's quarterly report on Form 10-Q for the quarter ended June 30, 2005. 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 Nine Months Ended
9/30/2005 9/30/2004 9/30/2005 9/30/2004
Revenues
Retail new vehicles $1,213,082 $1,092,059 $3,366,536 $3,014,278
Fleet vehicles 75,002 73,535 250,794 225,986
Total new vehicles 1,288,084 1,165,594 3,617,330 3,240,264
Used vehicles 324,841 299,219 933,543 854,041
Wholesale vehicles 142,033 133,451 408,627 363,477
Total vehicles 1,754,958 1,598,264 4,959,500 4,457,782
Parts, service and
collision repair 279,702 257,125 813,366 736,543
Finance, insurance and
other 52,834 50,316 148,378 138,739
Total revenues 2,087,494 1,905,705 5,921,244 5,333,064
Total gross profit 315,315 285,698 903,774 820,822
SG&A expenses 242,669 229,189 704,600 642,670
Depreciation 4,822 3,942 13,086 11,468
Operating income 67,824 52,567 186,088 166,684
Interest expense, floor
plan 9,651 6,244 28,465 18,150
Interest expense, other 11,994 11,335 34,445 31,277
Other income (expense) (8) 66 22 62
Income from continuing
operations before taxes 46,171 35,054 123,200 117,319
Income taxes 17,683 13,152 46,569 43,223
Income from continuing
operations 28,488 21,902 76,631 74,096
Discontinued operations:
Loss from operations and
the sale of
discontinued franchises (2,738) (4,175) (9,181) (4,208)
Income tax benefit 1,054 1,554 3,470 1,570
Loss from discontinued
operations (1,684) (2,621) (5,711) (2,638)
Net income $26,804 $19,281 $70,920 $71,458
Diluted:
Weighted average common
shares outstanding 45,671 44,940 45,518 45,215
Earnings per share from
continuing operations $0.65 $0.51 $1.76 $1.71
Loss per share from
discontinued operations ($0.04) ($0.06) ($0.13) ($0.05)
Earnings per share $0.61 $0.45 $1.63 $1.66
Gross Margin Data:
Retail new vehicles 7.3% 7.3% 7.4% 7.6%
Fleet vehicles 3.0% 2.4% 2.9% 2.8%
Total new vehicles 7.0% 7.0% 7.1% 7.2%
Used vehicles retail 10.8% 10.1% 10.7% 10.6%
Total vehicles retail 7.8% 7.6% 7.9% 7.9%
Parts, service and
collision repair 49.4% 48.8% 49.0% 48.8%
Finance and insurance 100.0% 100.0% 100.0% 100.0%
Overall gross margin 15.1% 15.0% 15.3% 15.4%
SG&A Expenses:
Personnel 141,582 130,146 410,937 375,816
Advertising 16,803 16,033 48,840 44,517
Facility rent 23,198 20,113 67,907 57,734
Other 61,086 62,897 176,916 164,603
Total 242,669 229,189 704,600 642,670
Unit Data:
New retail units 39,825 36,336 109,460 100,544
Fleet units 3,924 3,099 10,036 9,962
Total new units 43,749 39,435 119,496 110,506
Used units 18,239 16,965 52,003 49,151
Total units retailed 61,988 56,400 171,499 159,657
Wholesale units 16,644 15,627 46,664 43,517
Average price per unit:
New retail vehicles 30,460 30,054 30,756 29,980
Fleet vehicles 19,114 23,729 24,989 22,685
Total new vehicles 29,443 29,557 30,272 29,322
Used vehicles 17,810 17,637 17,952 17,376
Wholesale vehicles 8,534 8,540 8,757 8,353
Other Data:
Floorplan assistance
(continuing operations) $9,925 $9,348 $29,038 $27,429
Same store revenue
percentage changes:
New retail 7.0% 6.2%
Fleet 2.0% 11.7%
Total new 6.6% 6.6%
Used 5.9% 4.1%
Parts, service and
collision repair 3.8% 3.5%
Finance, insurance and
other 3.5% 4.0%
Total 6.0% 5.8%
Condensed Consolidated Balance Sheet Data
9/30/2005 12/31/2004
ASSETS
Current Assets:
Cash $6,453 $9,991
Receivables, net 299,992 357,403
Inventories 894,701 1,024,342
Assets held for sale 91,501 98,530
Other current assets 116,970 101,277
Total current assets 1,409,617 1,591,543
Property and Equipment,
Net 143,066 134,490
Goodwill, Net 1,095,444 1,056,924
Other Intangibles, Net 89,266 84,777
Other Assets 43,555 33,877
TOTAL ASSETS $2,780,948 $2,901,611
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - floor
plan $793,590 $984,549
Trade accounts payable 77,468 88,616
Accrued interest 12,465 15,421
Other accrued
liabilities 186,981 175,510
Liabilities held for
sale 59,622 66,309
Current maturities of
long-term debt 2,872 2,970
Total current
liabilities 1,132,998 1,333,375
LONG-TERM DEBT 686,862 668,826
OTHER LONG-TERM LIABILITIES 28,705 28,888
DEFERRED INCOME TAXES 101,530 100,835
STOCKHOLDERS' EQUITY
Class A common stock 402 397
Class B common stock 121 121
Paid-in capital 449,477 441,503
Retained earnings 526,456 470,663
Accumulated other
comprehensive loss (122) (1,228)
Deferred compensation
related to restricted
stock (2,185) (3,408)
Treasury stock, at cost (143,296) (138,361)
Total stockholders'
equity 830,853 769,687
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,780,948 $2,901,611
Balance Sheet Data:
Current Ratio 1.24 1.19
Debt to Total Capital,
Net of Cash 45.1% 46.2%
LTM Return on
Stockholders' Equity 10.8% 11.7%