Sonic Automotive, Inc. Reports Strong Operating Performance for the Second Quarter
CHARLOTTE, N.C., Aug. 2, 2006 -- Sonic Automotive, Inc. , a leader in automotive retailing, today announced that revenue for the second quarter 2006 increased $181 million or 9.8% from second quarter 2005. This was driven by strong same store sales performance (up 3.7%) and the impact of acquisitions. Sales of used vehicles were very strong, with a total revenue increase of 20.9%. Same store used vehicle revenue was up 15%.
Second quarter 2006 earnings from continuing operations were $18.6 million, or $0.42 per diluted share, compared to $28.3 million, or $0.65 per diluted share, in the prior year period. During the second quarter of 2006, the Company recorded charges of $27.6 million, or $0.27 per diluted share from continuing operations and $0.11 per diluted share from discontinued operations. As discussed on the Company's conference call on July 19, 2006, these charges resulted primarily from the Company's decision to exit certain facility leases and cancel various facility improvement projects. The results for the quarter ended June 30, 2006 also include $0.01 per diluted share of stock option expense related to the Company's adoption of SFAS 123R.
Selling, general and administrative expenses as a percentage of gross profit was 78.7% for the quarter compared with 75.4% a year ago. Absent the charges noted above, it was 74.1%, an improvement of 130 basis points, and the Company's operating margin would have been the highest since 2002.
"We continue to be excited by the results of our key operating initiatives. During the quarter, we were able to increase our same store revenue while maintaining margin." said President and Chief Operating Officer Jeffrey C. Rachor. "In an increasingly competitive new vehicle environment, our used vehicle sales initiative and fixed operation performance continues to drive our overall profitability. All segments of our business showed strong growth and we are particularly pleased that, for the first time in the Company's history, we exceeded a 50% gross margin in our fixed operations business. This is a testament to the strength of our brand mix and the effectiveness of our core operating strategies."
Presentation materials for the Company's August 2, 2006 earnings conference call can be accessed on the Company's website at http://www.sonicautomotive.com/ by clicking on the "For Investors" tab and choosing "Webcasts & Presentations" on the left side of the screen.
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 173 franchises and 38 collision repair centers. Sonic can be reached on the Web at http://www.sonicautomotive.com/.
Included herein are forward-looking statements. 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 the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2006. 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 Six Months Ended
6/30/2006 6/30/2005 6/30/2006 6/30/2005
Revenues
Retail new vehicles $ 1,153,155 $ 1,067,403 $ 2,172,729 $ 1,953,941
Fleet vehicles 96,207 90,411 181,318 169,579
New vehicles 1,249,362 1,157,814 2,354,047 2,123,520
Used vehicles 336,726 278,580 637,352 539,876
Wholesale vehicles 128,451 129,558 257,721 239,143
Total vehicles 1,714,539 1,565,952 3,249,120 2,902,539
Parts, service and
collision repair 273,446 240,844 540,394 466,641
Finance, insurance
and other 45,755 46,153 91,724 87,619
Total revenues 2,033,740 1,852,949 3,881,238 3,456,799
Total gross profit 307,994 279,023 600,026 530,026
SG&A expenses 242,537 210,429 469,996 408,672
Depreciation 6,870 3,622 11,637 7,025
Operating income 58,587 64,972 118,393 114,329
Interest expense,
floor plan 15,610 8,777 27,742 16,167
Interest expense, other 11,022 11,054 22,785 21,672
Other (expense) / income (1) 12 (667) 24
Income from continuing
operations before taxes 31,954 45,153 67,199 76,514
Income taxes 13,380 16,873 26,880 28,578
Income from continuing
operations 18,574 28,280 40,319 47,936
Discontinued operations:
Loss from operations
and the sale of
discontinued
franchises (10,299) (1,945) (17,827) (5,927)
Income tax benefit 3,913 669 6,778 2,107
Loss from discontinued
operations (6,386) (1,276) (11,049) (3,820)
Net income $ 12,188 $ 27,004 $ 29,270 $ 44,116
Diluted:
Weighted average
common shares
outstanding 46,270 45,421 46,238 45,440
Earnings per share
from continuing
operations $0.42 $0.65 $0.92 $1.10
Loss per share from
discontinued
operations ($0.13) ($0.03) ($0.24) ($0.08)
Earnings per share $0.29 $0.62 $0.68 $1.02
Gross Margin Data (Continuing Operations):
Retail new vehicles 7.7% 7.7% 7.6% 7.6%
Fleet vehicles 2.5% 2.8% 2.9% 2.9%
Total new vehicles 7.3% 7.3% 7.3% 7.2%
Used vehicles retail 10.4% 10.3% 10.6% 10.5%
Total vehicles retail 8.0% 7.9% 8.0% 7.9%
Parts, service and
collision repair 50.2% 49.6% 49.9% 49.5%
Finance, insurance
and other 100.0% 100.0% 100.0% 100.0%
Overall gross margin 15.1% 15.1% 15.5% 15.3%
SG&A Expenses (Continuing Operations):
Personnel $ 139,194 $ 124,638 $ 273,425 $ 241,217
Advertising 16,434 15,075 30,686 28,407
Facility rent 24,526 19,418 47,422 38,111
Other 62,383 51,298 118,463 100,937
Total $ 242,537 $ 210,429 $ 469,996 $ 408,672
Unit Data (Continuing Operations):
New retail units 36,673 34,376 67,908 63,177
Fleet units 4,436 4,232 8,336 7,807
New units 41,109 38,608 76,244 70,984
Used units 17,460 15,052 33,170 29,626
Total units
retailed 58,569 53,660 109,414 100,610
Wholesale units 13,582 14,425 26,593 26,536
Average price per unit:
New retail
vehicles 31,444 31,051 31,995 30,928
Fleet vehicles 21,688 21,364 21,751 21,721
Total new
vehicles 30,391 29,989 30,875 29,915
Used vehicles 19,286 18,508 19,215 18,223
Wholesale vehicles 9,457 8,981 9,691 9,012
Other Data:
Same store revenue percentage changes:
New retail 1.8% 3.6%
Fleet 4.8% 5.4%
New total 2.0% 3.8%
Used 15.0% 11.7%
Parts, service and
collision repair 5.5% 6.5%
Finance, insurance
and other -2.5% 1.7%
Total 3.7% 5.1%
Balance Sheet Data:
6/30/2006 12/31/2005
ASSETS
Current Assets:
Cash and cash equivalents $ 18,342 $ 7,566
Receivables, net 340,437 396,225
Inventories 1,051,815 1,016,457
Assets held for sale 219,358 73,837
Construction in progress expected to be
sold in sale-leaseback transactions 70,500 95,131
Other current assets 28,293 27,484
Total current assets 1,728,745 1,616,700
Property and Equipment, Net 174,487 148,267
Goodwill, Net 1,153,168 1,122,538
Other Intangibles, Net 80,200 88,696
Other Assets 58,380 49,300
TOTAL ASSETS $ 3,194,980 $ 3,025,501
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Floor plan notes payable - trade $ 450,602 $ 579,022
Floor plan notes payable - non-trade 649,370 410,296
Trade accounts payable 80,583 91,101
Accrued interest 18,687 17,378
Other accrued liabilities 172,172 167,060
Liabilities associated with assets
held for sale - trade 93,334 45,953
Liabilities associated with assets
held for sale - non-trade 57,323 6,937
Current maturities of long-term debt 2,727 2,747
Total current liabilities 1,524,798 1,320,494
LONG-TERM DEBT 644,863 712,311
OTHER LONG-TERM LIABILITIES 37,532 29,479
DEFERRED INCOME TAXES 131,140 132,419
STOCKHOLDERS' EQUITY 856,647 830,798
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,194,980 $ 3,025,501
Balance Sheet Ratios:
Current Ratio 1.13 1.22
Debt to Total Capital, Net of Cash 42.3% 46.0%
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