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Sonic Automotive Reports Parts and Service Revenue Up 3%

Published: March 5, 2012

CHARLOTTE, N.C. — Sonic Automotive, Inc., one of the nation’s largest automotive retailers, this week reported 2011 fourth quarter adjusted earnings from continuing operations of $25.4 millionfor a 46% increase over the prior year adjusted results.  Adjusted earnings per diluted share increased 43% to $0.43compared 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

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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 atwww.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 endingSeptember 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