SONIC AUTOMOTIVE INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1

Attached files

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8-K - FORM 8-K - SONIC AUTOMOTIVE INC	d307598d8k.htm
EX-99.3 - EXHIBIT 99.3 - SONIC AUTOMOTIVE INC	d307598dex993.htm
EX-99.2 - EXHIBIT 99.2 - SONIC AUTOMOTIVE INC	d307598dex992.htm

Exhibit 99.1

Sonic Automotive, Inc. Profits up 46%

Record Revenues Exceed Industry Growth; SG&A at 4 Year Low

CHARLOTTE, N.C. – February 28, 2012 – Sonic Automotive, Inc. (NYSE: SAH), one of the nation’s largest automotive retailers, today reported 2011 fourth quarter adjusted earnings from continuing operations of $25.4 million for a 46% increase over the prior year adjusted results. Adjusted earnings per diluted share increased 43% to $0.43 compared to $0.30 in the prior year quarter. The adjustments for both periods, which include primarily impairment and legal settlement charges in 2011 and income tax benefits and impairment charges in 2010, are detailed further in the attached tables.

For the full year 2011, the Company reported adjusted earnings from continuing operations of $1.39 per diluted share compared to $0.99 per diluted share in the prior year. The adjustments for both periods are detailed further in the attached tables.

2011 Highlights – New retail volume outpaces industry; Record Used Vehicle Growth; Expense leverage continues

•

Total Q4 revenues up 12% over prior year quarter; Up 14% for full year

•

New vehicle retail volume up 15% in Q4; Exceeds industry growth of 10%

•

Used vehicle volume up 11% for the quarter; Up 14% for full year; Record annual sales volume

•

Parts and Service revenue up 3% in Q4; Up 5% for full year; Record sales volume

•

Adjusted SG&A to gross profit down 220 bps to 76.6% for the quarter

Commenting on the overall results, Jeff Dyke, the Company’s EVP of Operations noted, “Our new and used volume growth continues to exceed industry averages as our team implements our operating playbook strategy. Our team’s focus on used car processes has produced double-digit volume growth for 11 consecutive quarters. This translates into a 15% compound annual growth rate over the last 4 years. We continue to believe there are significant future growth opportunities throughout the business as we continue the implementation of our strategic initiatives. The top line growth continued to drive incremental gross profit dollars which allowed us to further leverage our expense structure with fourth quarter adjusted SG&A to gross profit coming in at 76.6% which is the lowest level in several years.”

2012 Outlook

Commenting on the fourth quarter and the 2012 outlook, B. Scott Smith, the Company’s President, said, “Sonic Automotive wrapped up one of the strongest years in our Company’s history. We have proven that our single-minded focus on delivering predictable, repeatable and sustainable processes through our Playbooks, coupled with our culture and plain, old-fashioned teamwork can produce superior results without the integration risk of acquisitions. We expect to see continued steady growth in the automotive retailing sector and are targeting 2012 new vehicle industry volume of 13.5 million units. We currently expect earnings per share from continuing operations of between $1.55 and $1.65 for the full year 2012. We will have further comments on our 2012 outlook on our earnings call later today.”

Fourth Quarter Earnings Conference Call

Senior management will host a conference call today at 11:00 A.M. (Eastern) to discuss the quarter’s results. To access the live broadcast of the call over the Internet go to: www.sonicautomotive.com, then click on “Our Company”, then “Investor Relations”, then “Earnings Conference Calls”.

Presentation materials for the conference call can be accessed on the Company’s website at www.sonicautomotive.com by clicking on the “Investor Relations” tab under “Our Company” and choosing “Webcasts & Presentations”.

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: 800-585-8367, Conference ID: 14200, International callers dial (404) 537-3406.

About Sonic Automotive

Sonic Automotive, Inc., a Fortune 500 company based in Charlotte, N.C., is one of the nation’s largest automotive retailers. Sonic can be reached on the web at www.sonicautomotive.com.

Included herein are forward-looking statements, including statements with respect to growth in new and used vehicle sales, future success and impacts from the implementation of our strategic initiatives, future new vehicle industry volume and expected earnings per share. 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 in the markets in which we operate, new and used vehicle sales volume, the success of our operational strategies, the rate and timing of overall economic recovery or decline and the risk factors described in the Company’s annual report on Form 10-K for the year ending December 31, 2010 and the quarterly report on Form 10-Q for the quarter ending September 30, 2011. 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)

This release contains certain non-GAAP financial measures as defined under SEC rules, such as, but not limited to, adjusted income from continuing operations, related earnings per share data and adjusted EBITDA. The Company has reconciled these measures to the most directly comparable GAAP measures in the release. The Company believes that these non-GAAP financial measures improve the transparency of the Company’s disclosure by providing period-to-period comparability of the Company’s results from operations.


	Three Months Ended December 31,									Three Months Ended December 31,
	2011 As Reported			2011 Adjustments			2011 As Adjusted			2010 As Reported			2010 Adjustments			2010 As Adjusted
Revenues
New retail vehicles	$	1,134,337		$	—		$	1,134,337		$	975,849		$	—		$	975,849
Fleet vehicles		51,335			—			51,335			58,363			—			58,363

Total new vehicles		1,185,672			—			1,185,672			1,034,212			—			1,034,212
Used vehicles		488,152			—			488,152			437,258			—			437,258
Wholesale vehicles		48,141			—			48,141			40,705			—			40,705

Total vehicles		1,721,965			—			1,721,965			1,512,175			—			1,512,175
Parts, service and collision repair		292,400			—			292,400			285,357			—			285,357
Finance, insurance and other		56,433			—			56,433			47,361			—			47,361

Total revenues		2,070,798			—			2,070,798			1,844,893			—			1,844,893
Total gross profit		305,295			—			305,295			284,525			—			284,525
Selling, general and administrative expenses		(240,779	)		6,816			(233,963	)		(224,155	)		—			(224,155	)
Impairment charges		(991	)		991			—			(117	)		117			—
Depreciation and amortization		(10,586	)		—			(10,586	)		(9,381	)		—			(9,381	)

Operating income (loss)		52,939			7,807			60,746			50,872			117			50,989
Interest expense, floor plan		(4,871	)		—			(4,871	)		(5,921	)		—			(5,921	)
Interest expense, other, net		(14,697	)		—			(14,697	)		(15,319	)		—			(15,319	)
Interest expense, non-cash, convertible debt		(1,574	)		—			(1,574	)		(1,739	)		—			(1,739	)
Interest expense / amortization, non-cash, cash flow swaps		(161	)		—			(161	)		519			(519	)		—
Other income (expense), net		(277	)		—			(277	)		(3	)		—			(3	)

Income (loss) from continuing operations before taxes		31,359			7,807			39,166			28,409			(402	)		28,007
Provision for income taxes - benefit (expense)		(10,988	)		(2,733	)		(13,721	)		37,409			(48,006	)		(10,597	)

Income (loss) from continuing operations		20,371			5,074			25,445			65,818			(48,408	)		17,410
Income (loss) from discontinued operations		167			284			451			(1,464	)		602			(862	)

Net income (loss)	$	20,538		$	5,358		$	25,896		$	64,354		$	(47,806	)	$	16,548


Diluted:
Weighted average common shares outstanding		64,467			—			64,467			66,042			—			66,042
Earnings (loss) per share from continuing operations	$	0.35		$	0.08		$	0.43		$	1.02		$	(0.72	)	$	0.30
Earnings (loss) per share from discontinued operations		—			—			—			(0.02	)		—			(0.02	)

Earnings (loss) per share	$	0.35		$	0.08		$	0.43		$	1.00		$	(0.72	)	$	0.28

Gross Margin Data (Continuing Operations):
New retail vehicles		6.2	%					6.2	%		6.5	%					6.5	%
Fleet vehicles		3.3	%					3.3	%		3.5	%					3.5	%
Total new vehicles		6.1	%					6.1	%		6.3	%					6.3	%
Used vehicles		7.1	%					7.1	%		7.3	%					7.3	%
Wholesale vehicles		(2.2	%)					(2.2	%)		(2.7	%)					(2.7	%)
Parts, service and collision repair		49.1	%					49.1	%		49.4	%					49.4	%
Finance, insurance and other		100.0	%					100.0	%		100.0	%					100.0	%
Overall gross margin		14.7	%					14.7	%		15.4	%					15.4	%
SG&A Expenses (Continuing Operations):
Personnel	$	139,217								$	130,467
Advertising		12,114									10,463
Rent and rent related		30,648									32,204
Other		58,800									51,021

Total	$	240,779		$	(6,816	)	$	233,963		$	224,155		$	—		$	224,155
SG&A Expenses as % of Gross Profit		78.9	%					76.6	%		78.8	%					78.8	%
Operating Margin %		2.6	%					2.9	%		2.8	%					2.8	%
Unit Data (Continuing Operations):
New retail units		30,928									27,011
Fleet units		1,940									2,289

Total new units		32,868									29,300
Used units		23,880									21,429
Wholesale units		7,304									6,501
Other Data:
Continuing Operations revenue percentage changes:
New retail vehicles		16.2	%								20.2	%
Fleet vehicles		(12.0	%)								14.9	%
Total new vehicles		14.6	%								19.9	%
Used vehicles		11.6	%								18.2	%
Parts, service and collision repair		2.5	%								8.0	%
Finance, insurance and other		19.2	%								24.2	%
Total revenues		12.2	%								17.0	%


Description of Adjustments:		2011						2010

Continuing Operations:
Lease exit adjustments and legal settlement charges	$	6,816					$	—
Property impairment charges		991						117
Cash-flow swap ineffectiveness and amortization		—						(519	)

Total pre-tax adjustments	$	7,807						(402	)
Tax effect of above items		(2,733	)					152
Valuation allowance recovery		—						(48,158	)

Total adjustments	$	5,074					$	(48,408	)

Discontinued Operations:
Lease exit adjustments	$	(798	)				$	859

Total pre-tax adjustments		(798	)					859
Tax effect of above items		1,082						(257	)

Total adjustments	$	284					$	602

Sonic Automotive, Inc.

Results of Operations (Unaudited)

(In thousands, except per share, unit data and percentage amounts)


	Year Ended December 31,									Year Ended December 31,
	2011 As Reported			2011 Adjustments			2011 As Adjusted			2010 As Reported			2010 Adjustments			2010 As Adjusted
Revenues
New retail vehicles	$	4,037,066		$	—		$	4,037,066		$	3,438,988		$	—		$	3,438,988
Fleet vehicles		223,204			—			223,204			207,212			—			207,212

Total new vehicles		4,260,270			—			4,260,270			3,646,200			—			3,646,200
Used vehicles		2,037,348			—			2,037,348			1,776,581			—			1,776,581
Wholesale vehicles		173,569			—			173,569			149,041			—			149,041

Total vehicles		6,471,187			—			6,471,187			5,571,822			—			5,571,822
Parts, service and collision repair		1,181,643			—			1,181,643			1,128,054			—			1,128,054
Finance, insurance and other		218,444			—			218,444			180,968			—			180,968

Total revenues		7,871,274			—			7,871,274			6,880,844			—			6,880,844
Total gross profit		1,209,119			—			1,209,119			1,114,678			—			1,114,678
Selling, general and administrative expenses		(952,436	)		6,816			(945,620	)		(896,697	)		647			(896,050	)
Impairment charges		(1,151	)		1,151			—			(249	)		249			—
Depreciation and amortization		(40,684	)		—			(40,684	)		(35,110	)		—			(35,110	)

Operating income (loss)		214,848			7,967			222,815			182,622			896			183,518
Interest expense, floor plan		(19,639	)		—			(19,639	)		(21,536	)		—			(21,536	)
Interest expense, other, net		(60,682	)		—			(60,682	)		(63,343	)		1,464			(61,879	)
Interest expense, non-cash, convertible debt		(6,724	)		—			(6,724	)		(6,914	)		—			(6,914	)
Interest expense / amortization, non-cash, cash flow swaps		(760	)		—			(760	)		(4,883	)		4,883			—
Other income (expense), net		(1,014	)		—			(1,014	)		(7,525	)		7,665			140

Income (loss) from continuing operations before taxes		126,029			7,967			133,996			78,421			14,908			93,329
Provision for income taxes - benefit (expense)		(48,382	)		(3,059	)		(51,441	)		17,504			(53,985	)		(36,481	)

Income (loss) from continuing operations		77,647			4,908			82,555			95,925			(39,077	)		56,848
Income (loss) from discontinued operations		(1,393	)		(387	)		(1,780	)		(5,996	)		625			(5,371	)

Net income (loss)	$	76,254		$	4,521		$	80,775		$	89,929		$	(38,452	)	$	51,477


Diluted:
Weighted average common shares outstanding		65,464			—			65,464			65,794			—			65,794
Earnings (loss) per share from continuing operations	$	1.31		$	0.08		$	1.39		$	1.58		$	(0.59	)	$	0.99
Earnings (loss) per share from discontinued operations		(0.02	)		(0.01	)		(0.03	)		(0.09	)		0.01			(0.08	)

Earnings (loss) per share	$	1.29		$	0.07		$	1.36		$	1.49		$	(0.58	)	$	0.91

Gross Margin Data (Continuing Operations):
New retail vehicles		6.5	%					6.5	%		6.7	%					6.7	%
Fleet vehicles		3.2	%					3.2	%		3.0	%					3.0	%
Total new vehicles		6.3	%					6.3	%		6.5	%					6.5	%
Used vehicles		7.2	%					7.2	%		7.9	%					7.9	%
Wholesale vehicles		(3.3	%)					(3.3	%)		(3.4	%)					(3.4	%)
Parts, service and collision repair		49.1	%					49.1	%		49.8	%					49.8	%
Finance, insurance and other		100.0	%					100.0	%		100.0	%					100.0	%
Overall gross margin		15.4	%					15.4	%		16.2	%					16.2	%
SG&A Expenses (Continuing Operations):
Personnel	$	554,378								$	524,972
Advertising		53,311									46,908
Rent and rent related		124,917									129,354
Other		219,830									195,463

Total	$	952,436		$	(6,816	)	$	945,620		$	896,697		$	(647	)	$	896,050
SG&A Expenses as % of Gross Profit		78.8	%					78.2	%		80.4	%					80.4	%
Operating Margin %		2.7	%					2.8	%		2.7	%					2.7	%
Unit Data (Continuing Operations):
New retail units		114,132									98,820
Fleet units		8,626									8,331

Total new units		122,758									107,151
Used units		102,874									90,290
Wholesale units		26,630									24,128
Other Data:
Continuing Operations revenue percentage changes:
New retail vehicles		17.4	%								14.1	%
Fleet vehicles		7.7	%								(3.6	%)
Total new vehicles		16.8	%								12.9	%
Used vehicles		14.7	%								22.4	%
Parts, service and collision repair		4.8	%								5.2	%
Finance, insurance and other		20.7	%								17.0	%
Total revenues		14.4	%								13.6	%


Description of Adjustments:		2011						2010

Continuing Operations:
Hail storm related expenses	$	—					$	647
Lease exit adjustments and legal settlement charges		6,816						—
Property impairment charges		1,151						249
Cash-flow swap ineffectiveness and amortization		—						4,883
Debt restructuring charges		—						1,464
Loss on debt extinguishment		—						7,665

Total pre-tax adjustments	$	7,967					$	14,908
Tax effect of above items		(3,059	)					(5,827	)
Valuation allowance recovery		—						(48,158	)

Total adjustments	$	4,908					$	(39,077	)

Discontinued Operations:
Lease exit adjustments	$	(798	)				$	859

Total pre-tax adjustments	$	(798	)				$	859
Tax effect of above items		411						(234	)

Total adjustments	$	(387	)				$	625

Sonic Automotive, Inc.

Earnings Per Share Reconciliation (Unaudited)

(In thousands, except per share data)


	Three Months Ended December 31, 2011
			Income From Continuing Operations						Loss From Discontinued Operations						Net Income
As Reported:	Weighted Average Shares		Amount			Per Share Amount			Amount			Per Share Amount			Amount			Per Share Amount
Earnings (loss) and shares		52,194	$	20,371					$	167					$	20,538
Effect of participating securities:
Non-vested restricted stock and stock units		—		(266	)					—						(266	)

Basic earnings (loss) and shares		52,194	$	20,105		$	0.39		$	167		$	—		$	20,272		$	0.39
Effect of dilutive securities:
Contingently convertible debt (5.0% Convertible Notes)		11,713		2,330						—						2,330
Stock compensation plans		560

Diluted earnings (loss) and shares		64,467	$	22,435		$	0.35		$	167		$	—		$	22,602		$	0.35

Adjustments (net of tax):
Lease exit adjustments and legal settlement charges			$	4,430		$	0.07		$	284		$	—		$	4,714		$	0.07
Property impairment charges				644			0.01			—			—			644			0.01

Total adjustments			$	5,074		$	0.08		$	284		$	—		$	5,358		$	0.08
Adjusted:

Diluted earnings (loss) per share						$	0.43					$	—					$	0.43


	Three Months Ended December 31, 2010
			Income From Continuing Operations						Loss From Discontinued Operations						Net Income
As Reported:	Weighted Average Shares		Amount			Per Share Amount			Amount			Per Share Amount			Amount			Per Share Amount
Earnings (loss) and shares		52,401	$	65,818					$	(1,464	)				$	64,354
Effect of participating securities:
Non-vested restricted stock and stock units		—		(630	)					—						(630	)

Basic earnings (loss) and shares		52,401	$	65,188		$	1.24		$	(1,464	)	$	(0.02	)	$	63,724		$	1.22
Effect of dilutive securities:
Contingently convertible debt (5.0% Convertible Notes)		12,890		2,313						3						2,316
Stock compensation plans		751

Diluted earnings (loss) and shares		66,042	$	67,501		$	1.02		$	(1,461	)	$	(0.02	)	$	66,040		$	1.00

Adjustments (net of tax):
Property impairment charges			$	73		$	—		$	—		$	—		$	73		$	—
Cash-flow swap ineffectiveness and amortization				(323	)		—			—			—			(323	)		—
Lease exit adjustments				—			—			602			—			602			—
Valuation allowance recovery				(48,158	)		(0.72	)		—			—			(48,158	)		(0.72	)

Total adjustments			$	(48,408	)	$	(0.72	)	$	602		$	—		$	(47,806	)	$	(0.72	)
Adjusted:

Diluted earnings (loss) per share						$	0.30					$	(0.02	)				$	0.28

Sonic Automotive, Inc.

Earnings Per Share Reconciliation (Unaudited)

(In thousands, except per share data)


	Year Ended December 31, 2011
			Income From Continuing Operations						Loss From Discontinued Operations						Net Income
As Reported:	Weighted Average Shares		Amount			Per Share Amount			Amount			Per Share Amount			Amount			Per Share Amount
Earnings (loss) and shares		52,358	$	77,647					$	(1,393	)				$	76,254
Effect of participating securities:
Non-vested restricted stock and stock units		—		(958	)					—						(958	)

Basic earnings (loss) and shares		52,358	$	76,689		$	1.46		$	(1,393	)	$	(0.02	)	$	75,296		$	1.44
Effect of dilutive securities:
Contingently convertible debt (5.0% Convertible Notes)		12,517		9,300						—						9,300
Stock compensation plans		589

Diluted earnings (loss) and shares		65,464	$	85,989		$	1.31		$	(1,393	)	$	(0.02	)	$	84,596		$	1.29

Adjustments (net of tax):
Lease exit adjustments and legal settlement charges			$	4,199		$	0.07		$	(387	)	$	(0.01	)	$	3,812		$	0.06
Property impairment charges				709			0.01			—			—			709			0.01

Total adjustments			$	4,908		$	0.08		$	(387	)	$	(0.01	)	$	4,521		$	0.07
Adjusted:

Diluted earnings (loss) per share						$	1.39					$	(0.03	)				$	1.36


	Year Ended December 31, 2010
			Income From Continuing Operations						Loss From Discontinued Operations						Net Income
As Reported:	Weighted Average Shares		Amount			Per Share Amount			Amount			Per Share Amount			Amount			Per Share Amount
Earnings (loss) and shares		52,214	$	95,925					$	(5,996	)				$	89,929
Effect of participating securities:
Non-vested restricted stock and stock units		—		(921	)					—						(921	)

Basic earnings (loss) and shares		52,214	$	95,004		$	1.82		$	(5,996	)	$	(0.12	)	$	89,008		$	1.70
Effect of dilutive securities:
Contingently convertible debt (5.0% Convertible Notes)		12,890		9,022						31						9,053
Stock compensation plans		690

Diluted earnings (loss) and shares		65,794	$	104,026		$	1.58		$	(5,965	)	$	(0.09	)	$	98,061		$	1.49

Adjustments (net of tax):
Hail storm related expenses			$	394		$	—		$	—		$	—		$	394		$	—
Property impairment charges				152			—			—			—			152			—
Cash-flow swap ineffectiveness and amortization				2,974			0.05			—			—			2,974			0.05
Debt restructuring charges				892			0.01			—			—			892			0.01
Loss on debt extinguishment				4,669			0.07			—			—			4,669			0.07
Lease exit adjustments				—			—			625			0.01			625			0.01
Valuation allowance recovery				(48,158	)		(0.72	)		—			—			(48,158	)		(0.72	)

Total adjustments			$	(39,077	)	$	(0.59	)	$	625		$	0.01		$	(38,452	)	$	(0.58	)
Adjusted:

Diluted earnings (loss) per share						$	0.99					$	(0.08	)				$	0.91

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SONIC AUTOMOTIVE INC Reports