Sonic Automotive, Inc. Closes a Strong 2006 with Fourth Quarter Continuing Ops Earnings up 6% Over Prior Year
CHARLOTTE, N.C., Feb. 27, 2007 -- Sonic Automotive, Inc. , a leader in automotive retailing, today announced that its 2006 fourth quarter earnings from continuing operations were up 6.3% at $28.4 million, or $0.63 per diluted share, compared to $26.7 million, or $0.61 per diluted share, in the prior year period. The Company is finalizing its conclusions regarding hedge accounting treatment for its 2005 convertible notes which it does not currently believe will have a material impact on reported results. The results for the quarter ended December 31, 2006 include $0.01 per diluted share of stock option expense related to the Company's adoption of SFAS 123R.
Total revenue for the fourth quarter of 2006 increased 6.5% with overall same store revenue up 2.7%. Luxury brands accounted for 54% of our total revenue, a new record for Sonic Automotive. Inventory days supply remains in good condition with new vehicles at 48 days and used vehicles at 37 days. Selling, general and administrative expenses as a percentage of gross profit improved to 73.9% for the quarter compared to 74.7% a year ago. The Company's operating margin was 3.8%, up 20 basis points from the fourth quarter of last year. The Company's debt-to-capital ratio was 39.5% at December 31, 2006, down from 46.0% at December 31, 2005.
"We ended 2006 on a strong note by continuing our trend of consistent same store sales performance while maintaining margins and controlling expenses," said President and COO Jeffrey C. Rachor. "We are proud of the operating progress we made in 2006. As we look ahead to 2007, we believe our standardized processes, continued operating execution, and lower leverage put us in a favorable position for disciplined growth. Specifically, we expect to add to our luxury and import brand mix by targeting acquisitions of 10% to 15% of annual revenues in 2007. This acquisition growth is not included in our 2007 earnings guidance."
Commenting further on 2007, Mr. Rachor said, "We expect to see a stable operating environment with overall same store revenues increasing between two and four percent. We are targeting earnings per share from continuing operations of $2.48 to $2.58 in 2007, which does not include any potential acquisitions. We completed a number of facility projects in the second half of 2006 to increase the service capacity in several of our luxury stores. We anticipate that some of our 2007 operating improvement will be offset by higher rent expense as we grow into this additional capacity. Also included in our guidance is approximately $0.08 of share dilution to account for our contingently convertible notes issued in 2005. All of these items will be discussed in further detail on our quarterly earnings call."
Presentation materials for the Company's February 27, 2007 earnings conference call 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 left side of the screen.
To access the live broadcast of the conference call over the Internet go to:www.ccbn.com or www.sonicautomotive.com
A live audio of the conference 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 (domestic) or (706) 645-9291 (international), conference call ID # 8080861.
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 171 franchises and 37 collision repair centers. Sonic can be reached on the Web at www.sonicautomotive.com.
Included herein are forward-looking statements, including statements pertaining to anticipated acquisition activity, earnings per share from continuing operations, operating improvements, as well as anticipated industry conditions. 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 September 30, 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 Twelve Months Ended
12/31/2006 12/31/2005 12/31/2006 12/31/2005
Revenues
Retail new vehicles $1,154,414 $1,063,630 $4,554,739 $4,171,269
Fleet vehicles 73,822 71,502 342,545 312,651
New vehicles 1,228,236 1,135,132 4,897,284 4,483,920
Used vehicles 298,187 279,109 1,275,020 1,126,651
Wholesale vehicles 104,887 123,323 493,512 498,589
Total vehicles 1,631,310 1,537,564 6,665,816 6,109,160
Parts, service and
collision repair 279,376 256,716 1,114,870 988,432
Finance, insurance and
other 47,726 44,453 191,388 181,128
Total revenues 1,958,412 1,838,733 7,972,074 7,278,720
Total gross profit 305,062 286,178 1,231,582 1,117,045
SG&A expenses 225,310 213,700 939,825 850,450
Depreciation 6,031 6,935 23,409 18,390
Operating income 73,721 65,543 268,348 248,205
Interest expense, floor
plan 15,939 10,374 59,609 35,493
Interest expense, other 9,334 11,728 42,785 45,368
Other (expense) / income 56 30 (597) 45
Income from continuing
operations before taxes 48,504 43,471 165,357 167,389
Income taxes 20,149 16,809 66,791 61,414
Income from continuing
operations 28,355 26,662 98,566 105,975
Discontinued operations:
Loss from operations and
the sale of discontinued
franchises (6,330) (6,747) (26,090) (16,647)
Income tax benefit 1,214 1,026 8,641 2,533
Loss from discontinued
operations (5,116) (5,721) (17,449) (14,114)
Net income $23,239 $20,941 $81,117 $91,861
Diluted:
Weighted average common
shares outstanding 46,902 45,578 46,265 45,533
Earnings per share from
continuing operations $0.63 $0.61 $2.22 $2.42
Loss per share from
discontinued operations ($0.11) ($0.13) ($0.37) ($0.30)
Earnings per share $0.52 $0.48 $1.85 $2.12
Gross Margin Data
(Continuing Operations):
Retail new vehicles 7.6% 7.8% 7.6% 7.6%
Fleet vehicles 2.1% 3.2% 2.6% 3.0%
Total new vehicles 7.3% 7.5% 7.3% 7.3%
Used vehicles 9.5% 10.4% 10.1% 10.5%
Total vehicles 7.1% 7.4% 7.2% 7.3%
Parts, service and
collision repair 50.4% 49.7% 50.0% 49.5%
Finance, insurance and
other 100.0% 100.0% 100.0% 100.0%
Overall gross margin 15.6% 15.6% 15.4% 15.3%
SG&A Expenses (Continuing
Operations):
Personnel $129,126 $124,491 $543,258 $499,251
Advertising 16,154 14,438 64,233 58,673
Facility rent 24,421 21,769 98,139 81,241
Other 55,609 53,002 234,195 211,285
Total $225,310 $213,700 $939,825 $850,450
Unit Data (Continuing
Operations):
New retail units 33,814 32,060 140,730 132,906
Fleet units 3,250 3,206 15,517 14,140
New units 37,064 35,266 156,247 147,046
Used units 15,422 14,778 66,891 61,456
Total units retailed 52,486 50,044 223,138 208,502
Wholesale units 12,090 13,421 53,701 55,803
Average price per unit:
New retail vehicles 34,140 33,176 32,365 31,385
Fleet vehicles 22,714 22,303 22,075 22,111
Total new vehicles 33,138 32,188 31,343 30,493
Used vehicles 19,335 18,887 19,061 18,333
Wholesale vehicles 8,675 9,189 9,190 8,935
Other Data:
Same store revenue
percentage changes:
New retail 4.3% 3.3%
Fleet 3.1% 8.3%
New total 4.2% 3.7%
Used 3.4% 8.1%
Parts, service and
collision repair 3.1% 5.2%
Finance, insurance and
other 4.4% 2.8%
Total 2.7% 3.9%
Balance Sheet Data:
12/31/2006 12/31/2005
ASSETS
Current Assets:
Cash and cash
equivalents $12,696 $7,566
Receivables, net 385,849 396,225
Inventories 991,984 1,016,457
Assets held for sale 160,571 103,855
Construction in progress
and land expected to be
sold in sale-leaseback
transactions 26,198 65,113
Other current assets 35,018 27,483
Total current assets 1,612,316 1,616,699
Property and Equipment,
Net 220,551 148,267
Goodwill, Net 1,155,428 1,122,538
Other Intangibles, Net 94,136 88,696
Other Assets 41,517 49,301
TOTAL ASSETS $3,123,948 $3,025,501
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Floor plan notes payable
- trade $377,943 $579,022
Floor plan notes payable
- non-trade 686,515 410,296
Trade accounts payable 68,016 91,101
Accrued interest 19,336 17,378
Other accrued
liabilities 180,574 167,060
Liabilities associated
with assets held for
sale - trade 54,229 45,953
Liabilities associated
with assets held for
sale - non-trade 42,063 6,937
Current maturities of
long-term debt 2,707 2,747
Total current
liabilities 1,431,383 1,320,494
LONG-TERM DEBT 598,627 712,311
OTHER LONG-TERM
LIABILITIES 39,570 29,479
DEFERRED INCOME TAXES 151,034 132,419
STOCKHOLDERS' EQUITY 903,334 830,798
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,123,948 $3,025,501
Balance Sheet Ratios:
Current Ratio 1.13 1.22
Debt to Total Capital,
Net of Cash 39.5% 46.0%
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