UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2014
OR
¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-13395
SONIC AUTOMOTIVE, INC.
(Exact name of registrant as specified in its charter)
Delaware |
|
56-2010790 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
4401 Colwick Road Charlotte, North Carolina |
|
28211 |
(Address of principal executive offices) |
|
(Zip Code) |
(704) 566-2400
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
x |
|
Accelerated filer |
|
¨ |
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|
|||
Non-accelerated filer |
|
¨ (Do not check if a smaller reporting company) |
|
Smaller reporting company |
|
¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of October 17, 2014, there were 39,145,916 shares of Class A Common Stock and 12,029,375 shares of Class B Common Stock outstanding.
INDEX TO FORM 10-Q
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Page |
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3 |
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ITEM 1. |
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3 |
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3 |
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4 |
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Unaudited Condensed Consolidated Balance Sheets – September 30, 2014 and December 31, 2013 |
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5 |
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6 |
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7 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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8 |
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ITEM 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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22 |
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ITEM 3. |
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42 |
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ITEM 4. |
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43 |
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44 |
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ITEM 1A. |
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44 |
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ITEM 2. |
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45 |
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ITEM 6. |
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46 |
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48 |
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49 |
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2
SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
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|
|
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|
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||||||||||
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Third Quarter Ended September 30, |
|
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Nine Months Ended September 30, |
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||||||||||
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2014 |
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2013 |
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2014 |
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2013 |
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||||
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(Dollars and shares in thousands, except per share amounts) |
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|||||||||||||
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Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New vehicles |
|
$ |
1,327,837 |
|
|
$ |
1,261,270 |
|
|
$ |
3,773,234 |
|
|
$ |
3,651,486 |
|
|
|
Used vehicles |
|
|
583,570 |
|
|
|
559,848 |
|
|
|
1,747,254 |
|
|
|
1,625,006 |
|
|
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Wholesale vehicles |
|
|
41,433 |
|
|
|
42,731 |
|
|
|
127,797 |
|
|
|
134,556 |
|
|
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Total vehicles |
|
|
1,952,840 |
|
|
|
1,863,849 |
|
|
|
5,648,285 |
|
|
|
5,411,048 |
|
|
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Parts, service and collision repair |
|
|
325,740 |
|
|
|
309,600 |
|
|
|
973,646 |
|
|
|
913,290 |
|
|
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Finance, insurance and other, net |
|
|
77,024 |
|
|
|
68,747 |
|
|
|
223,340 |
|
|
|
203,461 |
|
|
|
Total revenues |
|
|
2,355,604 |
|
|
|
2,242,196 |
|
|
|
6,845,271 |
|
|
|
6,527,799 |
|
|
|
Cost of Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New vehicles |
|
|
(1,258,811 |
) |
|
|
(1,188,862 |
) |
|
|
(3,563,342 |
) |
|
|
(3,444,818 |
) |
|
|
Used vehicles |
|
|
(542,325 |
) |
|
|
(520,872 |
) |
|
|
(1,627,842 |
) |
|
|
(1,510,391 |
) |
|
|
Wholesale vehicles |
|
|
(42,519 |
) |
|
|
(45,928 |
) |
|
|
(130,290 |
) |
|
|
(140,899 |
) |
|
|
Total vehicles |
|
|
(1,843,655 |
) |
|
|
(1,755,662 |
) |
|
|
(5,321,474 |
) |
|
|
(5,096,108 |
) |
|
|
Parts, service and collision repair |
|
|
(170,460 |
) |
|
|
(160,453 |
) |
|
|
(506,361 |
) |
|
|
(468,784 |
) |
|
|
Total cost of sales |
|
|
(2,014,115 |
) |
|
|
(1,916,115 |
) |
|
|
(5,827,835 |
) |
|
|
(5,564,892 |
) |
|
|
Gross profit |
|
|
341,489 |
|
|
|
326,081 |
|
|
|
1,017,436 |
|
|
|
962,907 |
|
|
|
Selling, general and administrative expenses |
|
|
(270,144 |
) |
|
|
(254,564 |
) |
|
|
(803,031 |
) |
|
|
(748,479 |
) |
|
|
Impairment charges |
|
|
(208 |
) |
|
|
(18 |
) |
|
|
(215 |
) |
|
|
(69 |
) |
|
|
Depreciation and amortization |
|
|
(14,235 |
) |
|
|
(13,744 |
) |
|
|
(43,047 |
) |
|
|
(39,020 |
) |
|
|
Operating income (loss) |
|
|
56,902 |
|
|
|
57,755 |
|
|
|
171,143 |
|
|
|
175,339 |
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Interest expense, floor plan |
|
|
(4,406 |
) |
|
|
(5,463 |
) |
|
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(13,941 |
) |
|
|
(16,267 |
) |
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Interest expense, other, net |
|
|
(12,893 |
) |
|
|
(13,553 |
) |
|
|
(40,576 |
) |
|
|
(42,302 |
) |
|
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Other income (expense), net |
|
|
(1 |
) |
|
|
29 |
|
|
|
98 |
|
|
|
(28,143 |
) |
|
|
Total other income (expense) |
|
|
(17,300 |
) |
|
|
(18,987 |
) |
|
|
(54,419 |
) |
|
|
(86,712 |
) |
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|
Income (loss) from continuing operations before taxes |
|
|
39,602 |
|
|
|
38,768 |
|
|
|
116,724 |
|
|
|
88,627 |
|
|
|
Provision for income taxes - benefit (expense) |
|
|
(15,045 |
) |
|
|
(14,066 |
) |
|
|
(45,122 |
) |
|
|
(33,510 |
) |
|
|
Income (loss) from continuing operations |
|
|
24,557 |
|
|
|
24,702 |
|
|
|
71,602 |
|
|
|
55,117 |
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Income (loss) from operations and the sale of dealerships |
|
|
254 |
|
|
|
(2,057 |
) |
|
|
(838 |
) |
|
|
(2,434 |
) |
|
|
Income tax benefit (expense) |
|
|
(99 |
) |
|
|
682 |
|
|
|
327 |
|
|
|
852 |
|
|
|
Income (loss) from discontinued operations |
|
|
155 |
|
|
|
(1,375 |
) |
|
|
(511 |
) |
|
|
(1,582 |
) |
|
|
Net income (loss) |
|
$ |
24,712 |
|
|
$ |
23,327 |
|
|
$ |
71,091 |
|
|
$ |
53,535 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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Basic earnings (loss) per common share: |
|
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|
|
|
|
|
|
|
|
|
|
|
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|
|
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Earnings (loss) per share from continuing operations |
|
$ |
0.47 |
|
|
$ |
0.47 |
|
|
$ |
1.36 |
|
|
$ |
1.04 |
|
|
|
Earnings (loss) per share from discontinued operations |
|
|
- |
|
|
|
(0.03 |
) |
|
|
(0.01 |
) |
|
|
(0.03 |
) |
|
|
Earnings (loss) per common share |
|
$ |
0.47 |
|
|
$ |
0.44 |
|
|
$ |
1.35 |
|
|
$ |
1.01 |
|
|
|
Weighted average common shares outstanding |
|
|
52,070 |
|
|
|
52,553 |
|
|
|
52,333 |
|
|
|
52,578 |
|
|
|
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|
|
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Diluted earnings (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share from continuing operations |
|
$ |
0.47 |
|
|
$ |
0.46 |
|
|
$ |
1.35 |
|
|
$ |
1.03 |
|
|
|
Earnings (loss) per share from discontinued operations |
|
|
- |
|
|
|
(0.02 |
) |
|
|
(0.01 |
) |
|
|
(0.03 |
) |
|
|
Earnings (loss) per common share |
|
$ |
0.47 |
|
|
$ |
0.44 |
|
|
$ |
1.34 |
|
|
$ |
1.00 |
|
|
|
Weighted average common shares outstanding |
|
|
52,553 |
|
|
|
52,918 |
|
|
|
52,808 |
|
|
|
52,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share |
|
$ |
0.025 |
|
|
$ |
0.025 |
|
|
$ |
0.075 |
|
|
$ |
0.075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to Unaudited Condensed Consolidated Financial Statements.
3
SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
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|
|||||
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|
Third Quarter Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
||||||||||
|
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|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
||||
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
24,712 |
|
|
$ |
23,327 |
|
|
$ |
71,091 |
|
|
$ |
53,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of interest rate swap agreements |
|
|
4,037 |
|
|
|
350 |
|
|
|
5,223 |
|
|
|
13,377 |
|
|
|
Provision for income tax benefit (expense) related to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
components of other comprehensive income (loss) |
|
|
(1,534 |
) |
|
|
(133 |
) |
|
|
(1,985 |
) |
|
|
(5,083 |
) |
|
|
Other comprehensive income (loss) |
|
|
2,503 |
|
|
|
217 |
|
|
|
3,238 |
|
|
|
8,294 |
|
|
|
Comprehensive income (loss) |
|
$ |
27,215 |
|
|
$ |
23,544 |
|
|
$ |
74,329 |
|
|
$ |
61,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to Unaudited Condensed Consolidated Financial Statements.
4
SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
|
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|
|
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|
September 30, |
|
|
December 31, |
|
|
||
|
|
|
2014 |
|
|
2013 |
|
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||
|
|
|
(Dollars in thousands) |
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|
|||||
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,664 |
|
|
$ |
3,016 |
|
|
|
Receivables, net |
|
|
270,386 |
|
|
|
354,138 |
|
|
|
Inventories |
|
|
1,203,394 |
|
|
|
1,282,138 |
|
|
|
Assets held for sale |
|
|
14,811 |
|
|
|
4,101 |
|
|
|
Other current assets |
|
|
137,271 |
|
|
|
88,792 |
|
|
|
Total current assets |
|
|
1,627,526 |
|
|
|
1,732,185 |
|
|
|
Property and Equipment, net |
|
|
742,081 |
|
|
|
702,011 |
|
|
|
Goodwill |
|
|
474,088 |
|
|
|
476,315 |
|
|
|
Other Intangible Assets, net |
|
|
82,449 |
|
|
|
87,866 |
|
|
|
Other Assets |
|
|
57,769 |
|
|
|
52,793 |
|
|
|
Total Assets |
|
$ |
2,983,913 |
|
|
$ |
3,051,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
Notes payable - floor plan - trade |
|
$ |
630,667 |
|
|
$ |
681,030 |
|
|
|
Notes payable - floor plan - non-trade |
|
|
462,703 |
|
|
|
570,661 |
|
|
|
Trade accounts payable |
|
|
102,806 |
|
|
|
126,025 |
|
|
|
Accrued interest |
|
|
12,163 |
|
|
|
12,653 |
|
|
|
Other accrued liabilities |
|
|
200,839 |
|
|
|
185,951 |
|
|
|
Liabilities associated with assets held for sale - non-trade |
|
|
6,587 |
|
|
|
- |
|
|
|
Current maturities of long-term debt |
|
|
24,018 |
|
|
|
18,216 |
|
|
|
Total current liabilities |
|
|
1,439,783 |
|
|
|
1,594,536 |
|
|
|
Long-Term Debt |
|
|
759,463 |
|
|
|
730,157 |
|
|
|
Other Long-Term Liabilities |
|
|
71,476 |
|
|
|
81,286 |
|
|
|
Deferred Income Taxes |
|
|
59,620 |
|
|
|
31,552 |
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity: |
|
|
|
|
|
|
|
|
|
|
Class A convertible preferred stock, none issued |
|
|
- |
|
|
|
- |
|
|
|
Class A common stock, $0.01 par value; 100,000,000 shares authorized; |
|
|
|
|
|
|
|
|
|
|
62,006,636 shares issued and 39,438,090 shares outstanding at |
|
|
|
|
|
|
|
|
|
|
September 30, 2014; 61,584,248 shares issued and 40,683,984 shares |
|
|
|
|
|
|
|
|
|
|
outstanding at December 31, 2013 |
|
|
620 |
|
|
|
616 |
|
|
|
Class B common stock; $0.01 par value; 30,000,000 shares authorized; |
|
|
|
|
|
|
|
|
|
|
12,029,375 shares issued and outstanding at September 30, 2014 |
|
|
|
|
|
|
|
|
|
|
and December 31, 2013 |
|
|
121 |
|
|
|
121 |
|
|
|
Paid-in capital |
|
|
694,869 |
|
|
|
685,782 |
|
|
|
Retained earnings |
|
|
351,507 |
|
|
|
284,368 |
|
|
|
Accumulated other comprehensive income (loss) |
|
|
(5,344 |
) |
|
|
(8,582 |
) |
|
|
Treasury stock, at cost; 22,568,546 Class A shares held |
|
|
|
|
|
|
|
|
|
|
at September 30, 2014 and 20,900,264 Class A shares |
|
|
|
|
|
|
|
|
|
|
held at December 31, 2013 |
|
|
(388,202 |
) |
|
|
(348,666 |
) |
|
|
Total Stockholders' Equity |
|
|
653,571 |
|
|
|
613,639 |
|
|
|
Total Liabilities and Stockholders' Equity |
|
$ |
2,983,913 |
|
|
$ |
3,051,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to Unaudited Condensed Consolidated Financial Statements.
5
SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
Class A |
|
|
Class A |
|
|
Class B |
|
|
|
|
|
|
|
|
|
|
Other |
|
|
Total |
|
|||||||||||||||||
|
|
Common Stock |
|
|
Treasury Stock |
|
|
Common Stock |
|
|
Paid-In |
|
|
Retained |
|
|
Comprehensive |
|
|
Stockholders' |
|
|||||||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
Income (Loss) |
|
|
Equity |
|
||||||||||
|
|
(Dollars and shares in thousands) |
|
|||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013 |
|
|
61,584 |
|
|
$ |
616 |
|
|
|
(20,900 |
) |
|
$ |
(348,666 |
) |
|
|
12,029 |
|
|
$ |
121 |
|
|
$ |
685,782 |
|
|
$ |
284,368 |
|
|
$ |
(8,582 |
) |
|
$ |
613,639 |
|
Shares awarded under stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
compensation plans |
|
|
403 |
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,548 |
|
|
|
- |
|
|
|
- |
|
|
|
2,552 |
|
Purchases of treasury stock |
|
|
- |
|
|
|
- |
|
|
|
(1,669 |
) |
|
|
(39,536 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(39,536 |
) |
Income tax benefit associated with |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock compensation plans |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
336 |
|
|
|
- |
|
|
|
- |
|
|
|
336 |
|
Fair value of interest rate swap |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agreements, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expense of $1,985 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,238 |
|
|
|
3,238 |
|
Restricted stock amortization |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,203 |
|
|
|
- |
|
|
|
- |
|
|
|
6,203 |
|
Other |
|
|
20 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net income (loss) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
71,091 |
|
|
|
- |
|
|
|
71,091 |
|
Dividends ($0.075 per share) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,952 |
) |
|
|
- |
|
|
|
(3,952 |
) |
Balance at September 30, 2014 |
|
|
62,007 |
|
|
$ |
620 |
|
|
|
(22,569 |
) |
|
$ |
(388,202 |
) |
|
|
12,029 |
|
|
$ |
121 |
|
|
$ |
694,869 |
|
|
$ |
351,507 |
|
|
$ |
(5,344 |
) |
|
$ |
653,571 |
|
See notes to Unaudited Condensed Consolidated Financial Statements.
6
SONIC AUTOMOTIVE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2014 |
|
|
2013 |
|
||
|
|
(Dollars in thousands) |
|
|||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
71,091 |
|
|
$ |
53,535 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization of property, plant and equipment |
|
|
43,042 |
|
|
|
39,048 |
|
Provision for bad debt expense |
|
|
331 |
|
|
|
125 |
|
Other amortization |
|
|
987 |
|