Sonic Automotive, Inc. (SAH) Q2 2012 Earnings Conference Call July 23, 2012 11:00 AM ET Executives David Smith - Executive Vice President, Director David Cosper - Vice Chairman, Chief Financial Officer Jeff Dyke - Executive Vice President, Operations Analysts Rick Nelson – Stephens Brett Hoselton – KeyBanc Colin Langan – UBS Scott Stember - Sidoti & Company Clint Fendley – Davenport John Murphy – Bank of America Merrill Lynch Presentation Operator
Previous Statements by SAH
» Sonic's Management Discusses Q1 2012 Results - Earnings Call Transcript
» Sonic Automotive's Management Discusses Q4 2011 Results - Earnings Call Transcript
» Sonic Automotive's CEO Discusses Q3 2011 Results - Earnings Call Transcript
» Sonic Automotive Management Discusses Q2 2011 Results - Earnings Call Transcript
I would now like to introduce Mr. David Smith, Executive Vice President of Sonic Automotive. Mr. Smith, you may begin your conference.David Smith Thank you, good morning and welcome to Sonic Automotive’s second quarter 2012 earnings call. I am David Smith, the company’s Executive Vice President. Joining me on the call today are Dave Cosper, our CFO and Jeff Dyke, our Executive Vice President of Operations. I will start today’s call with an overview of the quarter, after which I’ll turn it over to Dave for his review of our financial results, followed by Jeff with a look at our operating results. We’ll then have closing comments and open the call for your questions. With that, please turn to the next slide. Our business model and strategy continue to yield positive results. Our team delivered a record setting sales performance with nearly $2.2 billion in sales during the quarter, an increase of over $239 million, or over 12% from the prior year quarter. All of our revenue lines experienced sales growth, particularly our new retail vehicle sales improving over 22% versus a SAAR improvement of only 16%. We continue to keep expenses in line with our yearly expectations, and collectively we were able to increase net income from continuing operations nearly 20%. There were two items affecting our reported results, as can be seen from the slide, and Dave will speak to those in his comments. We have been very busy over the last several months and we were implementing a plan that we believe will benefit our shareholders and strengthen our company. If our outstanding tender offer for our 5% convertible notes is successful, we believe the benefits from an improved capital structure will be an important step toward higher overall profitability. We are excited about how these actions will affect the future of Sonic Automotive.
Now, I will hand the call over to Dave Cosper to review our financial performance.David Cosper Thank you David. As David mentioned, revenue increased 12% for the quarter and reached $2.2 billion. Gross profit was up 5% and operating profit increased to $60 million. After tax profit was $28 million, up 20% from last year and EPS was $0.46 for the quarter, up 21% from last year. During the quarter, we repurchased $20 million of our 5% convertible notes, and recorded a loss of $1.6 million after taxes. This reduced EPS by $0.03 for the quarter. We also successfully resolved the state tax matter that resulted in favorable tax accrual and valuation allowance adjustments, and this increased EPS by $0.06 for the quarter. Next slide please. SG&A as a percentage of gross profit was 77.8% for the quarter and this is in line with our full-year projection of 78%. The slight increase from last year is much about softer gross PURs [ph] as anything else. Our investment in technology and training remains on track as we move to substantially improve our sales effectiveness and shopping experience for our customers. Jeff will have some details on that in just a few minutes. Next slide. Net CapEx after mortgage funding was $24 million for the first six months of the year. Full-year expenses is expected at $95 million. Presently, we have three new stores under construction, and these are all are known property. And as these stores are completed, we plan to secure mortgage funds -- Next slide, please. This slide shows our bank covenants and as you can see, we’re comfortably compliant with all of them. David mentioned our efforts on improving our capital structure and basically we have a two set process to do this. For step 1, on July 2 nd we closed on $200 million of 10-year notes with a 7% coupon, and we are in the middle of step 2, which is a tender offering for all of our 5% convertible notes, and the tender offer period ends this Friday. Read the rest of this transcript for free on seekingalpha.com