Sonic Automotive, Inc. Reports Continued Earnings Strength for Third Quarter of 2009
CHARLOTTE, N.C., Oct. 27, 2009 -- Sonic Automotive, Inc. , the nation's third-largest automotive retailer, today reported that 2009 third quarter earnings from continuing operations were $0.22 per diluted share which includes an after-tax gain of $0.01 per diluted share, related to the Company's repurchase of convertible notes. This compares to a loss from continuing operations of $0.38 per diluted share, in the prior year quarter. The results for the prior year quarter include the after-tax effect of impairment charges, lease exit accruals and hurricane damage of $0.53 per diluted share.
Business Overview - Strong operating results and improved capital structure
B. Scott Smith, the Company's President, said, "We are pleased with what we were able to accomplish this quarter at Sonic Automotive. In addition to continuing to post strong operating results we completed a very successful public refinancing of our 2010 debt obligations. The offering in late September allowed us to de-lever our balance sheet, remove some extremely dilutive convertible debt from our capital structure and mitigate future refinancing risk in the near term. This also paves the way for what we believe will be a successful refinancing of our upcoming syndicated credit facility. This offering would not have been possible without the strong fundamentals of our business model which is evident in our consistent operating performance and cash flow generation throughout this business cycle."
New Vehicles - Strongest year-over-year market share performance to date
Commenting on the Company's new car sales, Mr. Smith noted, "The combination of increased customer traffic from the CARS program and the continued execution of our e-Commerce strategies resulted in Sonic posting its strongest year-over-year new vehicle performance so far this year. We have now had eight consecutive months of new car market share gains. In addition to the improved unit volume, our new vehicle retail margins were up 70 basis points to 7.6% and our new vehicle days supply was at 39 days."
Used Vehicles - Used vehicle volume up 25%
Overall used vehicle unit volume was up 25% and total used vehicle revenue was up over 18% for the third quarter of 2009 compared to the third quarter of 2008. Jeff Dyke, the Company's EVP of Operations, stated, "Our used vehicle volume continued to grow throughout the quarter despite the heavy emphasis on new vehicle sales stemming from the CARS program. Our used-to-new ratio, which has continued to improve throughout the year, was at 80% for the third quarter. Our certified pre-owned business, which has been a consistent strength for Sonic, remains strong at 34% of our overall used vehicle volume. We are growing our used vehicle business by continuing to expand our presence across the entire spectrum of the used vehicle market."
Parts and Service - Margin expansion continues with stable revenues
Sonic's parts and service revenue for the third quarter was flat with the prior year quarter while the gross margin at 50.6% represents an improvement over the prior year third quarter margin of 49.6% and the second quarter 2009 margin of 50.3%.
Mr. Dyke stated, "Our parts and service business continues to add a substantial amount of stability to our results of operations. We have steadily grown our fixed operations margin every quarter this year as a result of the pricing, merchandising and other strategies being implemented with the rollout of our parts and service playbook. We have every reason to expect this trend will continue as the rollout progresses."
Presentation materials for the Company's October 27, 2009 earnings conference call at 11:00 A.M. (Eastern) 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 right side of the monitor.
To access the live broadcast of the call over the Internet go to: www.ccbn.com or www.sonicautomotive.com
A live audio of the 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, International callers dial (706) 645-9291 Conference ID: 34082140
About Sonic Automotive
Sonic Automotive, Inc., a Fortune 300 company based in Charlotte, N.C., is the nation's third-largest automotive retailer, operating 153 franchises. Sonic can be reached on the web at www.sonicautomotive.com.
Included herein are forward-looking statements, including statements with respect to future debt refinancing. 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 current report on Form 8-K filed August 21, 2009. 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)
Third Quarter Ended Nine Months Ended
9/30/2009 9/30/2008 9/30/2009 9/30/2008
--------- --------- --------- ---------
Revenues
New retail vehicles $776,578 $889,237 $2,005,486 $2,700,879
Fleet vehicles 48,789 53,234 164,160 278,007
Total new vehicles 825,367 942,471 2,169,646 2,978,886
Used vehicles 365,501 308,158 1,034,444 994,906
Wholesale vehicles 33,220 64,995 97,478 216,378
------ ------ ------ -------
Total vehicles 1,224,088 1,315,624 3,301,568 4,190,170
Parts, service and
collision repair 255,372 256,867 768,003 787,928
Finance, insurance
and other 41,302 43,259 110,663 139,355
------ ------ ------ -------
Total revenues 1,520,762 1,615,750 4,180,234 5,117,453
Total gross profit 257,468 259,360 729,727 816,348
SG&A expenses (203,694) (220,413) (588,834) (656,799)
Impairment charges (339) (25,476) (4,164) (25,809)
Depreciation and
amortization (8,080) (8,286) (24,523) (23,562)
------ ------ ------ -------
Operating income 45,355 5,185 112,206 110,178
Interest expense,
floor plan (4,324) (8,987) (14,368) (31,591)
Non-cash interest
expense, convertible
debt 7,818 (2,696) 1,556 (7,991)
Interest expense,
other, net (19,305) (15,859) (57,496) (40,803)
Other income
(expense), net 2,442 (9) 2,504 88
------ ------ ------ -------
Income (Loss) from
continuing operations
before taxes 31,986 (22,366) 44,402 29,881
Income tax (provision)
benefit (13,506) 7,301 (19,093) (13,598)
------ ------ ------ -------
Income (Loss) from
continuing operations 18,480 (15,065) 25,309 16,283
Discontinued
operations:
Loss from operations
and the sale of
discontinued
franchises (3,848) (17,878) (10,681) (30,581)
Income tax benefit 962 5,977 2,670 9,174
Loss from
discontinued
operations (2,886) (11,901) (8,011) (21,407)
------ ------ ------ -------
Net income (loss) $15,594 $(26,966) $17,298 $(5,124)
======= ======== ======= =======
Basic:
Weighted average
common shares
outstanding 42,305 40,138 41,130 40,447
Earnings (Loss) per
share from
continuing
operations $0.43 ($0.38) $0.61 $0.40
Loss per share from
discontinued
operations ($0.06) ($0.29) ($0.19) ($0.53)
Earnings (Loss) per
share $0.37 ($0.67) $0.42 ($0.13)
===== ====== ===== ======
Diluted:
Weighted average
common shares
outstanding 63,195 40,138 52,529 40,626
Earnings (Loss) per
share from
continuing
operations $0.22 ($0.38) $0.42 $0.40
Loss per share from
discontinued
operations ($0.05) ($0.29) ($0.16) ($0.53)
------ ------ ------ -------
Earnings (Loss) per
share $0.17 ($0.67) $0.26 ($0.13)
===== ====== ===== ======
Gross Margin Data
(Continuing Operations):
-------------------------
Retail new vehicles 7.6% 6.9% 7.3% 7.2%
Fleet vehicles 2.9% 4.8% 3.7% 2.3%
Total new
vehicles 7.3% 6.8% 7.0% 6.8%
Used vehicles retail 7.8% 8.4% 8.3% 8.9%
Total vehicles
retail 7.5% 7.2% 7.4% 7.3%
Wholesale vehicles (5.4%) (1.9%) (3.3%) (1.9%)
Parts, service and
collision repair 50.6% 49.6% 50.0% 49.6%
Finance, insurance
and other 100.0% 100.0% 100.0% 100.0%
Overall gross
margin 16.9% 16.1% 17.5% 16.0%
SG&A Expenses
(Continuing
Operations):
-------------
Personnel $118,345 $116,949 $337,737 $365,618
Advertising 10,734 12,817 31,333 42,405
Facility rent 22,560 27,257 67,225 68,736
Other 52,055 63,390 152,539 180,040
------ ------ ------- -------
Total $203,694 $220,413 $588,834 $656,799
SG&A Expenses as %
of Gross Profit
----------------
Personnel 45.9% 45.1% 46.3% 44.7%
Advertising 4.2% 4.9% 4.3% 5.2%
Facility rent 8.8% 10.5% 9.2% 8.4%
Other 20.2% 24.5% 20.9% 22.2%
----- ----- ----- -----
Total 79.1% 85.0% 80.7% 80.5%
Operating Margin % 3.0% 0.3% 2.7% 2.2%
Unit Data (Continuing
Operations):
---------------------
Third Quarter Ended Nine Months Ended
9/30/2009 9/30/2008 9/30/2009 9/30/2008
--------- --------- --------- ---------
New retail units 24,305 26,025 60,998 80,405
Fleet units 1,971 2,772 6,800 11,572
Used units 19,360 15,444 55,062 49,617
Wholesale units 6,612 8,636 17,414 27,559
Average price per
unit:
New retail vehicles $31,951 $34,169 $32,878 $33,591
Fleet vehicles 24,753 19,204 24,141 24,024
Used vehicles 18,879 19,953 18,787 20,052
Wholesale vehicles 5,024 7,526 5,598 7,851
Other Data:
-----------
Same store revenue
percentage changes:
New retail (12.7%) (25.9%)
Fleet (8.4%) (41.0%)
Total New
Vehicles (12.4%) (27.3%)
Used 18.6% 3.9%
Parts, service and
collision repair (0.7%) (2.7%)
Finance, insurance
and other (3.8%) (20.2%)
Total (5.9%) (18.4%)
===== ======
Balance Sheet Data:
--------------------
9/30/2009 12/31/2008(1)
--------- ------------
ASSETS
Current Assets:
Cash and cash
equivalents $614 $6,971
Restricted cash 106,913 -
Receivables, net 163,161 247,025
Inventories 657,475 916,837
Assets held for sale 176,128 406,576
Other current assets 16,900 16,822
Total current
assets 1,121,191 1,594,231
Property and
Equipment, Net 378,170 369,892
Goodwill, Net 403,048 327,007
Other Intangibles, Net 79,685 82,328
Other Assets 22,674 32,087
------ ------
TOTAL ASSETS $2,004,768 $2,405,545
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
---------------------
Current Liabilities:
Floor plan notes
payable $605,059 $921,023
Other current
liabilities 224,377 277,938
Liabilities
associated with
assets
held for sale 53,123 199,482
Current maturities
of long-term debt 105,750 738,447
------- -------
Total current
liabilities 988,309 2,136,890
LONG-TERM DEBT 556,243 -
OTHER LONG-TERM
LIABILITIES 109,562 71,132
STOCKHOLDERS' EQUITY 350,654 197,523
------- -------
TOTAL LIABILITIES
AND STOCKHOLDERS'
EQUITY $2,004,768 $2,405,545
========== ==========
(1) Restated for the adoption effects of ASC 470-20-65.