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Sonic Automotive, Inc. Reports Strong Operating Performance, Earnings Growth and Hits Leverage Target


November 2006
 Filed under: CAR CONSUMER Car News | CAR CONSUMER Headlines
CHARLOTTE, N.C., Oct. 31 /PRNewswire-FirstCall/ -- Sonic Automotive, Inc. (NYSE:SAH) , a leader in automotive retailing, today announced that its 2006 third quarter earnings from continuing operations were $29.1 million, or $0.66 per diluted share, compared to $28.6 million, or $0.65 per diluted share, in the prior year period. The results for the quarter ended September 30, 2006 include $0.01 per diluted share of stock option expense related to the Company's adoption of SFAS 123R.
Total revenue for the third quarter of 2006 increased 7.5% with same store revenue up 2.8%. Selling, general and administrative expenses as a percentage of gross profit improved to 74.7% for the quarter compared to 75.6% a year ago. The Company's debt-to-capital ratio was 40% at September 30, 2006, compared to 46.0% at December 31, 2005.

"We continued our consistent trend of improved operating performance and increased profits in a challenging market environment as a result of our favorable brand mix and the ongoing implementation of our operating initiatives," said President and COO Jeffrey C. Rachor. "Our used vehicle sales outperformed the industry and our fixed operations growth and margin reflect successful execution of our strategy. I am particularly pleased that we achieved our debt-to-capital target of 40%."

Presentation materials for the Company's October 31, 2006 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 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 at 11:00 A.M. (Eastern) 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 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) Three Months Ended Nine Months Ended 09/30/2006 09/30/2005 09/30/2006 09/30/2005 Revenues Retail new vehicles $1,194,944 $1,123,393 $3,401,632 $3,107,640 Fleet vehicles 87,405 71,569 268,723 241,148 New vehicles 1,282,349 1,194,962 3,670,355 3,348,788 Used vehicles 324,482 296,073 977,487 847,542 Wholesale vehicles 126,438 131,409 388,759 375,266 Total vehicles 1,733,269 1,622,444 5,036,601 4,571,596 Parts, service and collision repair 281,328 251,654 829,891 727,694 Finance, insurance and other 53,064 49,570 146,228 138,434 Total revenues 2,067,661 1,923,668 6,012,720 5,437,724 Total gross profit 316,966 290,954 926,776 830,866 SG&A expenses 236,766 220,039 714,979 636,750 Depreciation 5,688 4,243 17,399 11,455 Operating income 74,512 66,672 194,398 182,661 Interest expense, floor plan 15,523 8,600 43,709 25,119 Interest expense, other 10,481 11,787 33,415 33,593 Other (expense) / income 19 (10) (647) 15 Income from continuing operations before taxes 48,527 46,275 116,627 123,964 Income taxes 19,420 17,676 46,642 46,731 Income from continuing operations 29,107 28,599 69,985 77,233 Discontinued operations: Loss from operations and the sale of discontinued franchises (806) (2,842) (19,534) (9,945) Income tax benefit 307 1,047 7,427 3,632 Loss from discontinued operations (499) (1,795) (12,107) (6,313) Net income $28,608 $26,804 $57,878 $70,920 Diluted: Weighted average common shares outstanding 45,682 45,671 46,051 45,518 Earnings per share from continuing operations $0.66 $0.65 $1.59 $1.77 Loss per share from discontinued operations ($0.01) ($0.04) ($0.26) ($0.14) Earnings per share $0.65 $0.61 $1.33 $1.63 Gross Margin Data (Continuing Operations): Retail new vehicles 7.6% 7.4% 7.6% 7.6% Fleet vehicles 2.4% 3.0% 2.7% 2.9% Total new vehicles 7.2% 7.1% 7.3% 7.2% Used vehicles retail 9.8% 10.8% 10.3% 10.6% Total vehicles retail 7.8% 7.9% 7.9% 7.9% Parts, service and collision repair 50.0% 49.7% 49.9% 49.5% Finance, insurance and other 100.0% 100.0% 100.0% 100.0% Overall gross margin 15.3% 15.1% 15.4% 15.3% SG&A Expenses (Continuing Operations): Personnel $136,902 $129,591 $414,291 $374,759 Advertising 17,019 15,367 48,122 44,235 Facility rent 25,153 20,346 73,864 59,472 Other 57,692 54,735 178,702 158,284 Total $236,766 $220,039 $714,979 $636,750 Unit Data (Continuing Operations): New retail units 37,967 36,736 106,945 100,846 Fleet units 3,931 3,127 12,267 10,934 New units 41,898 39,863 119,212 111,780 Used units 17,439 16,409 51,491 46,678 Total units retailed 59,337 56,272 170,703 158,458 Wholesale units 14,396 15,239 41,621 42,382 Average price per unit: New retail vehicles 31,473 30,580 31,807 30,816 Fleet vehicles 22,235 22,887 21,906 22,055 Total new vehicles 30,606 29,977 30,788 29,959 Used vehicles 18,607 18,043 18,984 18,157 Wholesale vehicles 8,783 8,623 9,340 8,854 Other Data: Same store revenue percentage changes: New retail 1.8% 3.0% Fleet 20.2% 9.8% New total 2.9% 3.5% Used 4.7% 9.6% Parts, service and collision repair 5.1% 5.7% Finance, insurance and other 4.4% 2.8% Total 2.8% 4.3% Balance Sheet Data: 09/30/2006 12/31/2005 ASSETS Current Assets: Cash and cash equivalents $22,664 $7,566 Receivables, net 323,212 396,225 Inventories 921,299 1,016,457 Assets held for sale 145,706 73,837 Construction in progress and land expected to be sold in sale-leaseback transactions 48,039 95,131 Other current assets 27,170 27,484 Total current assets 1,488,090 1,616,700 Property and Equipment, Net 217,224 148,267 Goodwill, Net 1,154,653 1,122,538 Other Intangibles, Net 95,791 88,696 Other Assets 40,006 49,300 TOTAL ASSETS $2,995,764 $3,025,501 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Floor plan notes payable - trade $426,005 $579,022 Floor plan notes payable - non-trade 533,433 410,296 Trade accounts payable 69,978 91,101 Accrued interest 15,321 17,378 Other accrued liabilities 197,329 167,060 Liabilities associated with assets held for sale - trade 56,582 45,953 Liabilities associated with assets held for sale - non-trade 37,522 6,937 Current maturities of long-term debt 3,013 2,747 Total current liabilities 1,339,183 1,320,494 LONG-TERM DEBT 607,427 712,311 OTHER LONG-TERM LIABILITIES 35,549 29,479 DEFERRED INCOME TAXES 130,600 132,419 STOCKHOLDERS' EQUITY 883,005 830,798 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,995,764 $3,025,501 Balance Sheet Ratios: Current Ratio 1.11 1.22 Debt to Total Capital, Net of Cash 40.0% 46.0%

Source: Sonic Automotive, Inc.

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