sonic automotive sahstephens20june20conference20presentation
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Cautionary Notice Regarding
Forward-Looking Statements
• This presentation contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
• These forward-looking statements are not historical facts, but only predictions by our company and/or our company’s management.
• These statements generally can be identified by lead-in words such as “believe,” “expect” “anticipate,” “intend,” “plan,” “foresee” and other similar words. Similarly, statements that describe our company’s objectives, plans or goals are also forward-looking statements.
• You are cautioned that these forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Among others, factors that could materially adversely affect actual results and performance include those risk factors that are listed in Sonic Automotive’s Form 10-Q for the quarter ended March 31, 2008.
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Sonic Automotive, Inc.
• #298 among the Fortune 500
• $8.3 Billion in Revenues
• Brand and Geographic diversity– 168 franchises
– 32 collision repair centers
– 33 vehicle brands
– 15 states
– 26 metro markets
Major metro area served
North/West Division – 41.4%
South/East Division – 58.6%
Percent of Total Revenues
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Strategic Progression2008
• Expense Control
- Advertising
- Variable Comp
• Store Financial Modeling
• Leverage Reduction
• Growth Initiatives
- Pre-owned
- F&I and Fixed Ops
• Portfolio Enrichment
• Regional Infrastructure
• Corporate Infrastructure:
- Treasury
- Profit Analysis
- Project Management
• Refine Capital Allocation
2004-2007
• Used Vehicle
Strategy –
Phase II
• F&I Strategy
• Digital Marketing
• Fixed Operations
• Capital Allocation
•Associate Training
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Sonic Sales Mix of Select Brands (% of Total Revenue)
6.7%7.9%
3.8%
9.5%
0.0%
6.8% 6.7%
23.2%
13.5%
11.2%
6.1%
18.7%
9.5% 9.5% 9.4%
6.9%
Honda Toyota Lexus BMW Mercedes Cadillac GM (excl.
Cadillac)
Ford
FY 1999 FY 2007
• Actively manage brand portfolio to stay ahead of market trends
Portfolio Enrichment Strategy
Focus on brands with higher margins and higher growth potential
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Percent of Total Revenues within Division
4% 29% 67%
27% 24% 49%
7% 33% 60%
0% 20% 40% 60% 80% 100%
CA Only
Eastern
Western
Domestic Import Luxury
Geographic Brand Mix
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Used Vehicle Strategy
Trade Desk
Phase II – In Process
Phase III
Web-Tail
Maximize Margin
Volume Growth
Increased ProfitabilityRight inventory, Right Location, Right Price
On-line
Branding
Virtual Lot
Sonic “Auto
Pilot”
Optimizing
Inventory
Market Shift to
Consumer
Control
Basic Process rollout (best practices)
Less Wholesale/Keep more trades
Common Technology (S.I.M.S) Inventory
Control
Process
Standardization
Phase I - Complete
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Used to New Ratio
47% 48%
52%
64%
40%
45%
50%
55%
60%
65%
70%
2005 2006 2007 Q1 2008
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Used Vehicle Unit Trend
63%
55%
52% 52% 55%
60%
37%
45% 48% 48%
45% 40%
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2003 2004 2005 2006 2007 Q1 2008
Retail Units Wholesale Units
Phase I Objectives:
• Getting the basics right
• Retain more trades for retail
• Technology introduction
Phase II Objectives:
• Trade desk
• Improve pricing
• Getting the right inventory at the
right place at the right price
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$1,191
$1,009
$1,118
$578
$814
$907
$733
2001 2002 2003 2004 2005 2006 2007
50.5%
45.8%
50.1%
49.1%
48.3%48.6%
47.4%
2001 2002 2003 2004 2005 2006 2007
REVENUE ($ in millions)
Parts, Service and Collision Repair
Grow service capacity in high margin brands
Operating Initiatives
Continue to expand service stall capacity
GROSS MARGIN RATE
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Finance and InsuranceProfit per Unit (excluding fleet sales)
Continue training on Electronic Menu
Focus on extended Service Agreements to Drive Product Penetration
$938
$939$925 $929
$953
$1,004
$1,078
2003 2004 2005 2006 2007 Q1
2008
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Associate Training Initiative
Certified Professional
Chartered Professional
Master Professional
Sonic Learning and
Development Strategy
Written Communication:
Reference material, self-study,
career planning
Video Learning – Role
playing activities, specific job
duty training
Web-Based Learning –
Interactive course presentation
Live Training – Hands-on
training, small group activities
Sonic Training Certification Levels
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Phase 1 Marketing Plan
Traffic Generation
Merchandising
Action
Search Engine
Optimization -
Organic
Search
Engine
Marketing Advertising
Inventory
Online Service
AppointmentVideo
Information
Dealership Sales Team
Drive more
traffic
through more
targeted
marketing
Build customer
friendly websites
that create
engagement
Deliver the
offer – buy here,
buy now!
Fulfill the customer
experience through
disciplined Sales
Process
Parts & Body
shop
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Prudent, Opportunistic Acquisition Growth
Consistent Leverage and Balance Sheet Management
Shift to Owning More Real Estate to Take Advantage of
Lower Financing Rates
Disciplined Capital Allocation and Capital Expenditures –
Invest Money Where We Make Money
Financial Strategy
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Financial Performance(amounts in millions, except per share data)
2007 2006 2008 2007
Revenue $8,337 $7,985 $1,901 $1,883
Gross Profit $1,291 $1,228 $306 $298
– Margin 15.5% 15.4% 16.1% 15.8%
Operating Profit
– Amount $296 $262 $55 $61
– Margin 3.6% 3.3% 2.9% 3.2%
Net Income
– Continuing Operations $114.8 $96.8 $18.0 $22.3
– Total Operations 95.5 81.1 14.2 20.0
EPS
– Continuing Operations $2.54 $2.18 $0.44 $0.49
– Total Operations 2.13 1.85 0.35 0.44
YTD Q1
7
(1) Includes Q2 2006 pretax charge of $27.6m.
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Same Store Revenue Growth
(8.2%)
11.5%
0.7%
5.9%
(2.9%)
(23.5%)
(4.0%)
New Used Fixed
Operations
F&I Sub Total Wholesale Total
(0.7%)
9.8%
3.0%
9.1%
1.9%
(14.9%)
0.9%
New Used Fixed
Operations
F&I Sub Total Wholesale Total
FY 2007
Q1 2008
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SG&A Expenses as % of Gross Profit
2003 2004 2005 2006 2007 Q1 2008
All Other SG&A Rent
6.0%
71.9%
8.0%
•Continued improvements in compensation and other operating expenses
•Favorable brand mix should continue to improve this metric
6.9%7.4%
71.0% 68.9% 68.8%
77.9% 77.9%76.3%
(1) Excludes Q2 non-cash charges
(1) 66.8%
76.8%74.9%
7.1%
66.8%
8.4%
79.3%
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Capitalization
54.0%
60.6%57.6%
53.7%53.7%
41.3%
43.6%
39.5%
39.4%
46.0%
2005 2006 2007 Act Q1 2008 Pro Forma
Q1 2008Equity Debt Mortgages
46.3%42.4% 46.3%Debt to Cap With Mortgages
2.9% 2.7% 5.0%
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