Sonic Automotive, Inc. Profits up 46%

Download as PDF

Related Documents

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

CHARLOTTE, N.C., Feb. 28, 2012 /PRNewswire/ -- 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

2011

2011

2010

2010

2010





As Reported

Adjustments

As Adjusted

As Reported

Adjustments

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)



























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.





















Year Ended December 31,

Year Ended December 31,





2011

2011

2011

2011

2011

2011





As Reported

Adjustments

As Adjusted

As Reported

Adjustments

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

Loss






From Continuing

From Discontinued






Operations

Operations

Net Income




Weighted


Per


Per


Per




Average


Share


Share


Share

As Reported:

Shares

Amount

Amount

Amount

Amount

Amount

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

Loss






From Continuing

From Discontinued






Operations

Operations

Net Income




Weighted


Per


Per


Per




Average


Share


Share


Share

As Reported:

Shares

Amount

Amount

Amount

Amount

Amount

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

Loss






From Continuing

From Discontinued






Operations

Operations

Net Income




Weighted


Per


Per


Per




Average


Share


Share


Share

As Reported:

Shares

Amount

Amount

Amount

Amount

Amount

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

Loss






From Continuing

From Discontinued






Operations

Operations

Net Income




Weighted


Per


Per


Per




Average


Share


Share


Share

As Reported:

Shares

Amount

Amount

Amount

Amount

Amount

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


SOURCE Sonic Automotive, Inc.

Released February 28, 2012