Sonic Automotive, Inc. Fourth Quarter 2010 Adjusted Earnings Up $7.4 Million or 74%; Vehicle Sales Continue Double Digit Growth Trends
CHARLOTTE, N.C., Feb. 22, 2011 /PRNewswire/ -- Sonic Automotive, Inc. (NYSE: SAH), one of the nation's largest automotive retailers, today reported that 2010 fourth quarter earnings from continuing operations were $1.02 per diluted share compared to $0.46 per diluted share in the prior year quarter. On an adjusted basis, 2010 fourth quarter earnings from continuing operations were $0.30 per diluted share compared to $0.19 per diluted share in the prior year quarter. The adjustments for both periods, which include primarily impairment expenses and income tax benefits, are detailed further in the attached tables.
For the full year 2010, the Company reported earnings from continuing operations of $1.58 per diluted share compared to $1.07 per diluted share in the prior year. On an adjusted basis, full year earnings from continuing operations were $0.99 per diluted share compared to $0.81 per diluted share for the prior year period. The adjustments for both periods are detailed further in the attached tables.
Fourth Quarter 2010 Highlights
-- Total revenues up 17% over prior year quarter
-- New vehicle volume up 18%
-- Used vehicle volume up 17%; Record annual volume and gross profit
-- Parts and Service revenue up 8%; Record annual gross profit
Business Overview – Strong growth in all areas of the business
Commenting on the fourth quarter, B. Scott Smith, the Company's President, said, "We are pleased with our operating results this quarter and proud of the way our dealerships are embracing our operating playbook best practices. Sonic Automotive benefited from an improved automotive retail environment and our ongoing focus on growing our core business. We continued to see significant growth in new and used vehicle sales in both our domestic and our luxury/import dealerships as our eCommerce and other advertising strategies continued to take effect. We capped off a very successful quarter in December by having the most profitable month in the history of our Company."
New and Used Vehicles – New retail volume easily outpaces industry growth; Used volume continues double digit growth
Commenting on the Company's vehicle sales, Jeff Dyke, the Company's EVP of Operations noted, "The growth in our new vehicle business easily outpaced the overall industry growth of 13.5%. Our new vehicle retail revenue was up approximately 20% compared to the fourth quarter last year. We expect to see continued growth in this area as the industry continues its steady rebound and as we begin to introduce our new vehicle playbook in 2011."
Relative to used vehicle sales, Mr. Dyke stated, "We are proud to be the used vehicle leader among the public franchised automobile dealer groups. Even with the double digit growth we've enjoyed for several years now, we believe significant future growth opportunities remain in this piece of our business as we continue to implement the more advanced stages of our strategy. The most exciting thing about the growth opportunities in new and used vehicles is the impact it has on the other areas of our business."
Parts and Service – Revenues up 8%; Gross profit up 6%
Sonic's parts and service revenue for the fourth quarter was up 8% compared with the prior year quarter. Mr. Dyke stated, "Our parts and service business continued the growth trend that we've seen all year. Our merchandising efforts, our focus on customer service, and the growth in our new and used vehicle business are helping us retain customers and grow our parts and service business."
2011 Outlook
Scott Smith concluded his comments by stating, "We expect to see continued steady growth in the automotive retailing sector. We are targeting 2011 new vehicle industry volume of 12.5 million units. We currently expect earnings per share from continuing operations of between $1.18 and $1.28 for the full year 2011. We will have further comments on our 2011 outlook on our earnings call later today."
Presentation materials for the Company's February 22, 2011 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 "Investor Relations" tab under "Our Company" and choosing "Webcasts & Presentations" on the right side of the monitor.
To access the live broadcast of the call over the Internet go to:
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: 800-642-1687, Conference ID: 41490497, International callers dial (706) 645-9291.
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 various operational playbooks, 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 and the risk factors described in the Company's annual report on Form 10-K for the year ending December 31, 2009 and the quarterly report on Form 10-Q for the quarter ending September 30, 2010. 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 Three Months Ended
As As As As
Reported Adjusted Reported Adjusted
12/31/2010 Adjustments 12/31/2010 12/31/2009 Adjustments 12/31/2009
Revenues
New retail
vehicles $ 975,849 $ - $ 975,849 $ 811,914 $ - $ 811,914
Fleet vehicles 58,363 - 58,363 50,798 - 50,798
Total new vehicles 1,034,212 - 1,034,212 862,712 - 862,712
Used vehicles 437,258 - 437,258 370,015 - 370,015
Wholesale vehicles 40,705 - 40,705 41,551 - 41,551
Total
vehicles 1,512,175 - 1,512,175 1,274,278 - 1,274,278
Parts, service and
collision repair 285,357 - 285,357 264,269 - 264,269
Finance, insurance
and other 47,361 - 47,361 38,138 - 38,138
Total
revenues 1,844,893 - 1,844,893 1,576,685 - 1,576,685
Total gross profit 284,525 - 284,525 256,409 - 256,409
SG&A expenses (224,155) - (224,155) (209,660) 5,165 (204,495)
Impairment charges (117) 117 - (17,753) 17,753 -
Depreciation (9,381) - (9,381) (11,014) 2,536 (8,478)
Operating income 50,872 117 50,989 17,982 25,454 43,436
Interest expense,
floor plan (5,921) - (5,921) (4,887) - (4,887)
Interest expense,
other, net (15,319) - (15,319) (20,286) 2,833 (17,453)
Interest expense,
non-cash,
convertible debt (1,739) - (1,739) (2,235) - (2,235)
Interest expense /
amortization,
non-cash, cash flow
swaps 519 (519) - (6,410) 6,410 -
Other income
(expense), net (3) - (3) (9,196) 9,198 2
Income (loss) from
continuing
operations before
taxes 28,409 (402) 28,007 (25,032) 43,895 18,863
Provision for
income taxes -
benefit (expense) 37,409 (48,006) (10,597) 53,091 (61,965) (8,874)
Income (loss) from
continuing
operations 65,818 (48,408) 17,410 28,059 (18,070) 9,989
Income (loss) from
discontinued
operations (1,464) 602 (862) (13,809) 10,831 (2,978)
Net income (loss) $ 64,354 $ (47,806) $ 16,548 $ 14,250 $ (7,239) $ 7,011
Diluted:
Weighted average
common shares
outstanding 66,042 - 66,042 65,634 - 65,634
Earnings (loss)
per share from
continuing
operations $ 1.02 $ (0.72) $ 0.30 $ 0.46 $ (0.27) $ 0.19
Earnings (loss)
per share from
discontinued
operations (0.02) - (0.02) (0.21) 0.16 (0.05)
Earnings (loss)
per share $ 1.00 $ (0.72) $ 0.28 $ 0.25 $ (0.11) $ 0.14
Gross Margin Data
(Continuing
Operations):
Retail new
vehicles 6.5% 6.5% 7.1% 7.1%
Fleet vehicles 3.5% 3.5% 3.1% 3.1%
Total
new
vehicles 6.3% 6.3% 6.9% 6.9%
Used vehicles
retail 7.3% 7.3% 7.7% 7.7%
Total
vehicles
retail 6.6% 6.6% 7.1% 7.1%
Wholesale vehicles (2.7%) (2.7%) (6.4%) (6.4%)
Parts, service and
collision repair 49.4% 49.4% 50.4% 50.4%
Finance, insurance
and other 100.0% 100.0% 100.0% 100.0%
Overall
gross
margin 15.4% 15.4% 16.3% 16.3%
SG&A Expenses
(Continuing
Operations):
Personnel $ 130,676 $ - $ 130,676 $ 116,683 $ - $ 116,683
Advertising 10,463 - 10,463 11,802 - 11,802
Rent and rent
related 32,515 - 32,515 33,559 (1,091) 32,468
Other 50,501 - 50,501 47,616 (4,074) 43,542
Total $ 224,155 $ - $ 224,155 $ 209,660 $ (5,165) $ 204,495
SG&A Expenses as %
of Gross Profit 78.8% 78.8% 81.8% 79.8%
Operating Margin % 2.8% 2.8% 1.1% 2.8%
Unit Data
(Continuing
Operations):
New retail units 27,011 22,882
Fleet units 2,289 1,895
Total new units 29,300 24,777
Used units 21,429 18,338
Total
units
retailed 50,729 43,115
Wholesale units 6,501 6,636
Other Data:
Continuing
Operations revenue
percentage
changes:
New
retail 20.2% 11.0%
Fleet 14.9% (10.7%)
Total New
Vehicles 19.9% 9.5%
Used 18.2% 22.8%
Parts,
service
and
collision
repair 8.0% 0.0%
Finance,
insurance
and other 24.2% 11.9%
Total 17.0% 10.2%
Description of Adjustments: 2010 2009 Continuing Operations: Lease exit accruals $ - $ 1,091 Franchise tax assessment - 2,924 Property impairment charges 117 15,553 Franchise agreement impairment charges - 2,200 Cash-flow swap ineffectiveness and amortization (519) 6,410 Derivative mark-to-market - 1,150 Depreciation add-back - 2,536 Debt restructuring charges - 2,833 Loss on debt extinguishment - 9,198 Total pre-tax adjustments $ (402) 43,895 Tax effect of above items 152 (20,651) Valuation allowance recovery (48,158) (41,314) Total adjustments $ (48,408) $ (18,070) Discontinued Operations: Lease exit accruals $ 859 $ 23,236 Property impairment charges - 3,170 Total pre-tax adjustments 859 26,406 Tax effect of above items (257) (9,440) Valuation allowance recovery - (6,135) Total adjustments $ 602 $ 10,831
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.
Twelve Months Ended Twelve Months Ended
As As As As
Reported Adjusted Reported Adjusted
12/31/2010 Adjustments 12/31/2010 12/31/2009 Adjustments 12/31/2009
Revenues
New retail $ $ $ $
vehicles 3,438,988 $ - 3,438,988 3,014,960 $ - 3,014,960
Fleet vehicles 207,212 - 207,212 214,988 - 214,988
Total new vehicles 3,646,200 - 3,646,200 3,229,948 - 3,229,948
Used vehicles 1,776,581 - 1,776,581 1,451,870 - 1,451,870
Wholesale vehicles 149,041 - 149,041 147,002 - 147,002
Total
vehicles 5,571,822 - 5,571,822 4,828,820 - 4,828,820
Parts, service and
collision repair 1,128,054 - 1,128,054 1,071,825 - 1,071,825
Finance, insurance
and other 180,968 - 180,968 154,696 - 154,696
Total
revenues 6,880,844 - 6,880,844 6,055,341 - 6,055,341
Total gross profit 1,114,678 - 1,114,678 1,032,672 - 1,032,672
SG&A expenses (896,697) 647 (896,050) (829,220) 4,015 (825,205)
Impairment charges (249) 249 - (23,460) 23,460 -
Depreciation (35,110) - (35,110) (34,879) - (34,879)
Operating income 182,622 896 183,518 145,113 27,475 172,588
Interest expense,
floor plan (21,536) - (21,536) (19,812) - (19,812)
Interest expense,
other, net (63,343) 1,464 (61,879) (78,284) 11,992 (66,292)
Interest expense,
non-cash,
convertible debt (6,914) - (6,914) (679) (11,300) (11,979)
Interest expense /
amortization,
non-cash, cash flow
swaps (4,883) 4,883 - (11,769) 11,769 -
Other income
(expense), net (7,525) 7,665 140 (6,677) 6,746 69
Income (loss) from
continuing
operations before
taxes 78,421 14,908 93,329 27,892 46,682 74,574
Provision for
income taxes -
benefit (expense) 17,504 (53,985) (36,481) 29,275 (61,464) (32,189)
Income (loss) from
continuing
operations 95,925 (39,077) 56,848 57,167 (14,782) 42,385
Income (loss) from
discontinued
operations (5,996) 625 (5,371) (25,619) 15,457 (10,162)
Net income (loss) $ 89,929 $ (38,452) $ 51,477 $ 31,548 $ 675 $ 32,223
Diluted:
Weighted average
common shares
outstanding 65,794 - 65,794 55,832 - 55,832
Earnings (loss)
per share from
continuing
operations $ 1.58 $ (0.59) $ 0.99 $ 1.07 $ (0.26) $ 0.81
Earnings (loss)
per share from
discontinued
operations (0.09) 0.01 (0.08) (0.45) 0.27 (0.18)
Earnings (loss)
per share $ 1.49 $ (0.58) $ 0.91 $ 0.62 $ 0.01 $ 0.63
Gross Margin Data
(Continuing
Operations):
Retail new
vehicles 6.7% 6.7% 7.0% 7.0%
Fleet vehicles 3.0% 3.0% 3.5% 3.5%
Total
new
vehicles 6.5% 6.5% 6.8% 6.8%
Used vehicles
retail 7.9% 7.9% 8.5% 8.5%
Total
vehicles
retail 6.9% 6.9% 7.3% 7.3%
Wholesale vehicles (3.4%) (3.4%) (3.7%) (3.7%)
Parts, service and
collision repair 49.8% 49.8% 50.4% 50.4%
Finance, insurance
and other 100.0% 100.0% 100.0% 100.0%
Overall
gross
margin 16.2% 16.2% 17.1% 17.1%
SG&A Expenses
(Continuing
Operations):
Personnel $ 526,577 $ - $ 526,577 $ 470,293 $ - $ 470,293
Advertising 46,908 - 46,908 44,736 - 44,736
Rent and rent
related 130,739 - 130,739 131,262 (1,091) 130,171
Other 192,473 (647) 191,826 182,929 (2,924) 180,005
Total $ 896,697 $ (647) $ 896,050 $ 829,220 $ (4,015) $ 825,205
SG&A Expenses as %
of Gross Profit 80.4% 80.4% 80.3% 79.9%
Operating Margin % 2.7% 2.7% 2.4% 2.9%
Unit Data
(Continuing
Operations):
New retail units 98,820 90,664
Fleet units 8,331 8,697
Total new units 107,151 99,361
Used units 90,290 75,795
Total
units
retailed 197,441 175,156
Wholesale units 24,128 25,271
Other Data:
Continuing
Operations revenue
percentage
changes:
New
retail 14.1% (18.4%)
Fleet (3.6%) (31.8%)
Total New
Vehicles 12.9% (19.4%)
Used 22.4% 8.1%
Parts,
service
and
collision
repair 5.2% (2.2%)
Finance,
insurance
and other 17.0% (14.2%)
Total 13.6% (12.2%)
Description of Adjustments: 2010 2009 Continuing Operations: Hail storm related expenses $ 647 $ - Lease exit accruals - 1,091 Franchise tax assessment - 2,924 Property impairment charges 249 18,066 Goodwill impairment charges - 1,094 Franchise agreement impairment charges - 4,300 Cash-flow swap ineffectiveness and amortization 4,883 11,769 Derivative mark-to-market - (11,300) Debt restructuring charges 1,464 11,992 Loss on debt extinguishment 7,665 6,746 Total pre-tax adjustments $ 14,908 $ 46,682 Tax effect of above items (5,827) (20,150) Valuation allowance recovery (48,158) (41,314) Total adjustments $ (39,077) $ (14,782) Discontinued Operations: Lease exit accruals $ 859 $ 27,586 Property impairment charges - 4,992 Goodwill impairment charges - 1,586 Total pre-tax adjustments $ 859 $ 34,164 Tax effect of above items (234) (12,572) Valuation allowance recovery - (6,135) Total adjustments $ 625 $ 15,457
Sonic Automotive, Inc. Earnings Per Share Reconciliation (Unaudited) (In thousands, except per share data)
For the Three Months Ended December 31, 2009
Income Loss
From Continuing From Discontinued
Operations Operations Net Income
Weighted Per Per Per
Average Share Share Share
Shares Amount Amount Amount Amount Amount Amount
Earnings
(Loss) and $ $
Shares 51,868 28,059 $ 0.54 (13,809) $ (0.27) $ 14,250
Effect of
Participating
Securities:
Unvested
Restricted
Stock
and Stock
Units - (168) - (168)
Basic
Earnings
(Loss) Per $ $
Share 51,868 27,891 $ 0.54 (13,809) $ (0.27) $ 14,082 $ 0.27
Effect of
Dilutive
Securities:
Contingently
Convertible
Debt ( 5.0%
Convertible
Notes) 12,890 2,225 55 2,280
Stock
Compensation
Plans 876
Diluted
Earnings
(Loss) Per $ $
Share 65,634 30,116 $ 0.46 (13,754) $ (0.21) $ 16,362 $ 0.25
For the Three Months Ended December 31, 2010
Income Loss
From Continuing From Discontinued
Operations Operations Net Income
Weighted Per Per Per
Average Share Share Share
Shares Amount Amount Amount Amount Amount Amount
Earnings
(Loss) and $ $
Shares 52,401 65,818 $ 1.26 (1,464) $ (0.03) $ 64,354
Effect of
Participating
Securities:
Unvested
Restricted
Stock
and Stock
Units - (630) - (630)
Basic
Earnings
(Loss) Per $ $
Share 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) Per $ $
Share 66,042 67,501 $ 1.02 (1,461) $ (0.02) $ 66,040 $ 1.00
For the Twelve Months Ended December 31, 2009
Income Loss
From Continuing From Discontinued
Operations Operations Net Income
Weighted Per Per Per
Average Share Share Share
Shares Amount Amount Amount Amount Amount Amount
Earnings
(Loss) and $ $
Shares 43,836 57,167 $ 1.30 (25,619) $ (0.58) $ 31,548
Effect of
Participating
Securities:
Unvested
Restricted
Stock
and Stock
Units - (406) - (406)
Basic
Earnings
(Loss) Per $ $
Share 43,836 56,761 $ 1.29 (25,619) $ (0.58) $ 31,142 $ 0.71
Effect of
Dilutive
Securities:
Contingently
Convertible
Debt ( 6.0%
Convertible
Notes) 7,833 916 23 939
Contingently
Convertible
Debt ( 5.0%
Convertible
Notes) 3,496 2,225 55 2,280
Stock
Compensation
Plans 667
Diluted
Earnings
(Loss) Per $ $
Share 55,832 59,902 $ 1.07 (25,541) $ (0.45) $ 34,361 $ 0.62
For the Twelve Months Ended December 31, 2010
Income Loss
From Continuing From Discontinued
Operations Operations Net Income
Weighted Per Per Per
Average Share Share Share
Shares Amount Amount Amount Amount Amount Amount
Earnings
(Loss) and $ $
Shares 52,214 95,925 $ 1.84 (5,996) $ (0.11) $ 89,929
Effect of
Participating
Securities:
Unvested
Restricted
Stock
and Stock
Units - (921) - (921)
Basic
Earnings
(Loss) Per $ $
Share 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) Per $ $
Share 65,794 104,026 $ 1.58 (5,965) $ (0.09) $ 98,061 $ 1.49
SOURCE Sonic Automotive
Released February 22, 2011