Exhibit 99.1
SONIC AUTOMOTIVE, INC. REPORTS SECOND QUARTER EARNINGS
CHARLOTTE, N.C. –July 26, 2005 –Sonic Automotive, Inc. (NYSE: SAH), a leader in automotive retailing, today reported that its 2005 second quarter income from continuing operations was $28.7 million, or $0.66 per diluted share, compared to $30.6 million, or $0.70 per diluted share, in the prior year period.
“We were very pleased with both our growth in revenue during the quarter and the overall strength of consumer spending. Sonic Automotive posted strong same store sales growth in every business segment. As expected, interest rate increases negatively impacted earnings despite lower inventory levels and we saw continued pressure on new vehicle margins. We continue to believe that the second half of 2005 will produce favorable year over year performance improvement,” said Chairman and Chief Executive Officer O. Bruton Smith.
Revenue increased $248 million to $2.1 billion or 13.7% above the prior year quarter. On a same store basis, revenue increased 8.6% from the same quarter last year.
“Our focus on operating process improvements continues to gain traction,” said President and Chief Operating Officer Jeffrey C. Rachor. “Positive same store sales growth in the first quarter followed by 8.6% growth in the second quarter indicates that progress was made. New vehicle inventory was well managed to a 45 days supply. We finalized a standard data structure and began conversion to a single dealer management system, which are fundamental to standardization. An additional indicator of progress is that associate turnover is significantly lower than at this time last year. These trends give us confidence in our long-term strategy.”
Mr. Rachor continued, “Consistent with our portfolio enrichment strategy, we completed the acquisition of Mercedes-Benz of Santa Monica, Ca. The store is one of the premier Mercedes-Benz dealerships in the country and should generate more than $160 million in annual revenue. Five dealerships were sold in the quarter and four others are pending.”
Debt-to-total capital, net of cash, at June 30, 2005 was 48.0%. While the ratio reflects the purchase price of the recently completed acquisition, the long-term goal continues to be 40%. At the end of the quarter, the company had $171 million available under its revolving credit facility. The company has $28 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 186 franchises and 39 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 disposition activity, anticipated improvements in operating performance and anticipated revenue from recent acquisitions. 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 March 31, 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 | Six Months Ended | |||||||||||||||
| 6/30/2005 | 6/30/2004 | 6/30/2005 | 6/30/2004 | |||||||||||||
Revenues | ||||||||||||||||
Retail new vehicles | $ | 1,176,434 | $ | 1,025,530 | $ | 2,153,454 | $ | 1,922,218 | ||||||||
Fleet vehicles | 93,134 | 82,008 | 175,792 | 152,452 | ||||||||||||
Total new vehicles | 1,269,568 | 1,107,538 | 2,329,246 | 2,074,670 | ||||||||||||
Used vehicles | 313,940 | 282,131 | 608,702 | 554,822 | ||||||||||||
Wholesale vehicles | 143,275 | 122,427 | 266,594 | 230,026 | ||||||||||||
Total vehicles | 1,726,783 | 1,512,096 | 3,204,542 | 2,859,518 | ||||||||||||
Parts, service and collision repair | 274,489 | 245,251 | 533,664 | 479,418 | ||||||||||||
Finance, insurance and other | 50,370 | 46,720 | 95,544 | 88,422 | ||||||||||||
Total revenues | 2,051,642 | 1,804,067 | 3,833,750 | 3,427,358 | ||||||||||||
Total gross profit | 308,499 | 279,159 | 588,459 | 535,124 | ||||||||||||
SG&A expenses | 236,952 | 210,400 | 461,931 | 413,481 | ||||||||||||
Depreciation | 4,268 | 4,036 | 8,264 | 7,527 | ||||||||||||
Operating income | 67,279 | 64,723 | 118,264 | 114,116 | ||||||||||||
Interest expense, floor plan | 10,100 | 6,269 | 18,815 | 11,906 | ||||||||||||
Interest expense, other | 11,321 | 10,362 | 22,451 | 19,942 | ||||||||||||
Other income (expense) | 13 | (32 | ) | 30 | (3 | ) | ||||||||||
Income from continuing operations before taxes | 45,871 | 48,060 | 77,028 | 82,265 | ||||||||||||
Income taxes | 17,202 | 17,433 | 28,886 | 30,071 | ||||||||||||
Income from continuing operations | 28,669 | 30,627 | 48,142 | 52,194 | ||||||||||||
Discontinued operations: | ||||||||||||||||
Loss from operations and the sale of discontinued franchises | (2,663 | ) | (1,004 | ) | (6,442 | ) | (32 | ) | ||||||||
Income tax benefit | 998 | 369 | 2,416 | 16 | ||||||||||||
Loss from discontinued operations | (1,665 | ) | (635 | ) | (4,026 | ) | (16 | ) | ||||||||
Net income | $ | 27,004 | $ | 29,992 | $ | 44,116 | $ | 52,178 | ||||||||
Diluted: | ||||||||||||||||
Weighted average common shares outstanding | 45,421 | 45,333 | 45,440 | 45,354 | ||||||||||||
Earnings per share from continuing operations | $ | 0.66 | $ | 0.70 | $ | 1.11 | $ | 1.20 | ||||||||
Loss per share from discontinued operations | $ | (0.04 | ) | $ | (0.01 | ) | $ | (0.09 | ) | $ | 0.00 | |||||
Earnings per share | $ | 0.62 | $ | 0.69 | $ | 1.02 | $ | 1.20 | ||||||||
Gross Margin Data: | ||||||||||||||||
Retail new vehicles | 7.6 | % | 7.9 | % | 7.5 | % | 7.8 | % | ||||||||
Fleet vehicles | 2.7 | % | 2.8 | % | 2.8 | % | 2.9 | % | ||||||||
Total new vehicles | 7.2 | % | 7.5 | % | 7.2 | % | 7.4 | % | ||||||||
Used vehicles retail | 10.4 | % | 10.6 | % | 10.6 | % | 10.8 | % | ||||||||
Total vehicles retail | 7.8 | % | 8.1 | % | 7.9 | % | 8.1 | % | ||||||||
Parts, service and collision repair | 48.8 | % | 48.9 | % | 48.7 | % | 48.8 | % | ||||||||
Finance and insurance | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Overall gross margin | 15.0 | % | 15.5 | % | 15.3 | % | 15.6 | % | ||||||||
SG&A Expenses: | ||||||||||||||||
Personnel | 138,764 | 123,490 | 269,355 | 245,669 | ||||||||||||
Advertising | 16,908 | 15,634 | 32,037 | 28,485 | ||||||||||||
Facility rent | 22,730 | 19,009 | 44,709 | 37,621 | ||||||||||||
Other | 58,550 | 52,267 | 115,830 | 101,706 | ||||||||||||
Total | 236,952 | 210,400 | 461,931 | 413,481 | ||||||||||||
Unit Data: | ||||||||||||||||
New retail units | 37,944 | 34,184 | 69,635 | 64,208 | ||||||||||||
Fleet units | 4,269 | 3,782 | 7,918 | 6,863 | ||||||||||||
Total new units | 42,213 | 37,966 | 77,553 | 71,071 | ||||||||||||
Used units | 17,175 | 16,004 | 33,764 | 32,186 | ||||||||||||
Total units retailed | 59,388 | 53,970 | 111,317 | 103,257 | ||||||||||||
Wholesale units | 16,210 | 14,489 | 30,020 | 27,890 | ||||||||||||
Average price per unit: | ||||||||||||||||
New retail vehicles | 31,004 | 30,000 | 30,925 | 29,937 | ||||||||||||
Fleet vehicles | 21,816 | 21,684 | 22,202 | 22,214 | ||||||||||||
Total new vehicles | 30,075 | 29,172 | 30,034 | 29,192 | ||||||||||||
Used vehicles | 18,279 | 17,629 | 18,028 | 17,238 | ||||||||||||
Wholesale vehicles | 8,839 | 8,450 | 8,881 | 8,248 | ||||||||||||
Other Data: | ||||||||||||||||
Net cash provided by (used in) operating activities | $ | 14,472 | $ | 25,426 | $ | (1,337 | ) | $ | 26,048 | |||||||
Floorplan assistance (continuing operations) | $ | 10,535 | $ | 9,544 | $ | 19,113 | $ | 18,081 | ||||||||
Same store revenue percentage changes: | ||||||||||||||||
New retail | 9.1 | % | 5.7 | % | ||||||||||||
Fleet | 15.1 | % | 16.4 | % | ||||||||||||
Total new | 9.6 | % | 6.5 | % | ||||||||||||
Used | 6.1 | % | 3.1 | % | ||||||||||||
Parts, service and collision repair | 5.4 | % | 3.3 | % | ||||||||||||
Finance, insurance and other | 4.9 | % | 4.3 | % | ||||||||||||
Total | 8.6 | % | 5.6 | % | ||||||||||||
Balance Sheets:
| 6/30/2005 | 12/31/2004 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 8,278 | $ | 9,991 | ||||
Receivables, net | 371,640 | 357,403 | ||||||
Inventories | 1,037,821 | 1,024,342 | ||||||
Assets held for sale | 116,156 | 98,530 | ||||||
Other current assets | 113,263 | 101,277 | ||||||
Total current assets | 1,647,158 | 1,591,543 | ||||||
Property and Equipment, Net | 140,438 | 134,490 | ||||||
Goodwill, Net | 1,094,166 | 1,056,924 | ||||||
Other Intangibles, Net | 89,336 | 84,777 | ||||||
Other Assets | 39,206 | 33,877 | ||||||
TOTAL ASSETS | $ | 3,010,304 | $ | 2,901,611 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Notes payable - floor plan | $ | 962,395 | $ | 984,549 | ||||
Trade accounts payable | 86,400 | 88,616 | ||||||
Accrued interest | 16,232 | 15,421 | ||||||
Other accrued liabilities | 181,211 | 175,510 | ||||||
Liabilities held for sale | 77,141 | 66,309 | ||||||
Current maturities of long-term debt | 2,961 | 2,970 | ||||||
Total current liabilities | 1,326,340 | 1,333,375 | ||||||
LONG-TERM DEBT | 749,259 | 668,826 | ||||||
OTHER LONG-TERM LIABILITIES | 27,367 | 28,888 | ||||||
DEFERRED INCOME TAXES | 101,331 | 100,835 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Class A common stock | 401 | 397 | ||||||
Class B common stock | 121 | 121 | ||||||
Paid-in capital | 447,778 | 441,503 | ||||||
Retained earnings | 504,703 | 470,663 | ||||||
Accumulated other comprehensive loss | (452 | ) | (1,228 | ) | ||||
Deferred compensation related to restricted stock | (3,248 | ) | (3,408 | ) | ||||
Treasury stock, at cost | (143,296 | ) | (138,361 | ) | ||||
Total stockholders’ equity | 806,007 | 769,687 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 3,010,304 | $ | 2,901,611 | ||||
Balance Sheet Data: | ||||||||
Current Ratio | 1.24 | 1.19 | ||||||
Debt to Total Capital, Net of Cash | 48.0 | % | 46.2 | % | ||||
LTM Return on Stockholders’ Equity | 10.1 | % | 11.7 | % | ||||