Sonic Automotive, Inc. Continues Strong Operating Trend in Second Quarter and Raises Full Year Earnings Guidance
CHARLOTTE, N.C., July 31 -- Sonic Automotive, Inc. , a leader in automotive retailing, today announced that second quarter 2007 earnings from continuing operations were $30.0 million, or $0.65 per diluted share, compared to $17.8 million, or $0.41 per diluted share*, in the prior year period.
"Our performance continues to validate the effectiveness of our key operating initiatives," said President and Chief Strategic Officer B. Scott Smith. "Our gross margin rate increased to 15.6% as a result of continuing growth in our higher-margin used vehicle, fixed operations and F&I departments. In addition to these revenue-oriented initiatives, we continue to see consistent reductions in our SG&A expenses as a percentage of gross profit. As a result of our strong performance over the first half of the year and our outlook for a stable operating environment over the second half, we are increasing our target for 2007 earnings per share from continuing operations to a range of $2.50 to $2.60. This does not include the impact of any unannounced acquisitions."
Sonic's Board of Directors has authorized an additional $30 million to be used in the Company's ongoing share repurchase program. Scott Smith said, "Sonic Automotive has maintained an active share repurchase program for a number of years as a means of offsetting dilution in the Company's stock, returning capital to shareholders and taking advantage of short-term volatility in the Company's share price. We will continue to execute this program in conjunction with our stated objectives for managing the Company's capital structure."
* During the second quarter of 2006, the Company recorded pretax charges of $27.6 million between continuing and discontinued operations related primarily to certain decisions made to improve the strategic focus of the Company.
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 37 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)
Second Quarter Ended Six Months Ended
06/30/2007 06/30/2006 06/30/2007 06/30/2006
Revenues
New retail vehicles $1,172,400 $1,173,471 $2,244,611 $2,210,772
Fleet vehicles 100,784 97,146 189,755 183,631
Used vehicles 364,062 346,424 694,297 656,632
Wholesale vehicles 107,828 131,250 222,619 263,725
Total vehicles 1,745,074 1,748,291 3,351,282 3,314,760
Parts, service and
collision repair 290,916 280,100 584,819 553,828
Finance, insurance and
other 54,360 45,502 103,118 91,381
Total revenues 2,090,350 2,073,893 4,039,219 3,959,969
Total gross profit 325,233 311,755 633,026 607,120
SG&A expenses 241,244 248,771 479,236 481,366
Depreciation 8,626 6,806 14,389 11,604
Operating income 75,363 56,178 139,401 114,150
Interest expense, floor plan 17,348 15,832 33,586 28,130
Interest expense, other 8,912 9,909 17,606 20,706
Other (expense) / income 86 (3) 96 (665)
Income from continuing
operations before taxes 49,189 30,434 88,305 64,649
Income taxes 19,210 12,586 34,439 25,666
Income from continuing
operations 29,979 17,848 53,866 38,983
Discontinued operations:
Loss from operations
and the sale of
discontinued franchises (5,159) (8,780) (10,725) (15,277)
Income tax benefit 1,548 3,120 3,218 5,564
Loss from discontinued
operations (3,611) (5,660) (7,507) (9,713)
Net income $26,368 $12,188 $46,359 $29,270
Diluted:
Weighted average common
shares outstanding 47,987 46,270 47,963 46,238
Earnings per share from
continuing operations $0.65 $0.41 $1.17 $0.89
Loss per share from
discontinued operations ($0.08) ($0.12) ($0.16) ($0.21)
Earnings per share $0.57 $0.29 $1.01 $0.68
Gross Margin Data
(Continuing Operations):
Retail new vehicles 7.3% 7.8% 7.3% 7.7%
Fleet vehicles 2.6% 2.5% 2.4% 2.8%
Total new vehicles 6.9% 7.4% 6.9% 7.3%
Used vehicles 9.3% 9.8% 9.5% 9.9%
Parts, service and
collision repair 51.4% 50.1% 50.5% 49.9%
Finance, insurance and
other 100.0% 100.0% 100.0% 100.0%
Overall gross margin 15.6% 15.0% 15.7% 15.3%
SG&A Expenses (Continuing Operations):
Personnel $139,910 $140,299 $274,668 $276,055
Advertising 16,706 16,599 32,204 31,090
Facility rent 25,694 25,487 51,421 49,157
Other 58,934 66,386 120,943 125,064
Total $241,244 $248,771 $479,236 $481,366
Unit Data (Continuing Operations):
New retail units 35,454 37,223 67,465 68,923
Fleet units 4,667 4,470 8,412 8,414
Used units 18,186 17,866 35,147 34,010
Wholesale units 11,807 13,932 24,626 27,309
Average price per unit:
New retail vehicles 33,068 31,525 33,271 32,076
Fleet vehicles 21,595 21,733 22,558 21,824
Used vehicles 20,019 19,390 19,754 19,307
Wholesale vehicles 9,133 9,421 9,040 9,657
Other Data:
Floorplan assistance
(continuing operations) $9,178 $9,803 $17,901 $18,118
Same store revenue
percentage changes:
New retail (1.6%) 0.2%
Fleet 3.2% 1.9%
Used 3.4% 4.2%
Parts, service and
collision repair 1.8% 3.5%
Finance, insurance
and other 17.4% 11.9%
Total (0.6%) 0.7%
Balance Sheet Data:
06/30/2007 12/31/2006
ASSETS
Current Assets:
Cash and cash equivalents $12,157 $12,696
Receivables, net 318,827 385,849
Inventories 1,109,214 991,984
Assets held for sale 176,536 160,571
Construction in progress
expected to be sold in
sale-leaseback transactions 4,516 26,198
Other current assets 31,474 35,834
Total current assets 1,652,724 1,613,132
Property and Equipment, Net 270,036 220,551
Goodwill, Net 1,247,721 1,155,428
Other Intangibles, Net 102,299 94,136
Other Assets 36,312 41,517
TOTAL ASSETS $3,309,092 $3,124,764
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Floor plan notes payable - trade $257,765 $377,943
Floor plan notes payable - non-trade 875,832 686,515
Trade accounts payable 68,048 68,016
Accrued interest 18,281 19,336
Other accrued liabilities 181,098 180,884
Liabilities associated with
assets held for sale - trade 48,338 54,229
Liabilities associated with
assets held for sale - non- trade 36,325 42,063
Current maturities of long-term debt 3,224 2,707
Total current liabilities 1,488,911 1,431,693
LONG-TERM DEBT 672,196 598,627
OTHER LONG-TERM LIABILITIES 200,562 190,604
STOCKHOLDERS' EQUITY 947,423 903,840
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,309,092 $3,124,764
Balance Sheet Ratios:
Current Ratio 1.11 1.13
Debt to Total Capital, Net of Cash 41.2% 39.4%