Sonic Automotive, Inc. (

SAH

)

Q4 2010 Earnings Conference Call

February 22, 2011, 11:00 am ET

Executives

Scott Smith – President and Chief Strategic Officer

Dave Cosper – Vice Chairman and CFO

Jeff Dyke – EVP, Operations

Analysts

Scott Stember – Sidoti & Company

Rick Nelson – Stephens Inc.

Patrick Archambault – Goldman Sachs

Colin Langan – UBS

Vivek Alok – JPMorgan

Presentation

Operator

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Good morning and welcome to the Sonic Automotive fourth quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session (Operator Instructions).

As a reminder, ladies and gentlemen, this call is being recorded today, February 22, 2011. Presentation materials which management will be reviewing on the conference call can be accessed on the company’s website at www.sonicautomotive.com by selecting the Investor Relations under the Our Company tab and choosing Webcast and Presentation.

At this time, I would like to remind everyone that during this conference call management may discuss financial projections, expectations about the company’s products or markets, or otherwise make statements about the future.

Such statements are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These risks and uncertainties are detailed in the company’s filings with the Securities and Exchange Commission. Thank you.

I would now like to introduce Mr. Scott Smith, Co-Founder and President of Sonic Automotive. Mr. Smith you may begin your conference.

Scott Smith

Good morning ladies and gentlemen, I’m Scott Smith Co-Founder, President and Chief Strategic Officer. Welcome to Sonic Automotive’s fourth quarter 2010 earnings conference call. Joining me on the call today are the company’s Vice Chairman and Chief Financial Officer, Mr. Dave Cosper; our Executive Vice President of Operations, Jeff Dyke; David Smith the company’s Vice President and Greg Young, our Vice President of Finance.

Today I will provide a little overview of the quarter. I will then turn the call over to Dave Cosper for a financial review. Jeff Dyke will follow Dave and give an update on our operational trends. We will then wrap up the call with a summary of our outlook for 2011 and open the call for your questions.

We spent a fair amount of time last quarter discussion our operational and financial strategies. You will recall that we discussed driving organic growth through the refinement and execution of our operational playbooks. Focusing on our balance sheet and continuing to reduce our non-mortgage debt while continuing to convert lease properties to Sonic ownership and focusing on our customers by continuing to refine our e-commerce processes and overall customer experience by implementing predictable, repeatable and sustainable processes.

We continue to see that benefit of all of these strategies during the fourth quarter. Our new vehicle volume easily exceeded the industry growth. The overall SAAR was up approximately 14.5% with the retail SAAR up 6%. Our new vehicle volume was up 18.3% revenue was up 20%. Used vehicles continue their strong year-over-year double-digit growth trend and as a result further refinement in implementation where used vehicle playbooks and buying strategy. All this incremental volume continued to drive our F&I performance which was up 24% over last year.

Our parts and service revenue was up 8% for the quarter and 5% for the year, during a time when a number of people were expected to fixed operations growth to be flat at best. While growing our top line we also reduced our SG&A to 78.8% of growth in the quarter and hit our full year SG&A target. All of this resulted in adjusted income from continuing operations growing by 74% with EPS from continuing ops coming in at $0.30 per diluted share.

Our balance sheet is in the best shape ever we continue to look for ways and opportunities to reduce our non-mortgage debt. Dave will also go into more detail on recent successes we’ve had in continuing to convert lease properties to Sonic ownership. With that I will turn the call over to Dave.

Dave Cosper

Thank you Scott and good morning everyone. Revenue for the quarter reached over $1.8 billion up 17% from 2009. Gross profit was up 11% and SG&A as a percent of growth improved to 78.8%. Adjusted operating profit for the quarter was $51 million up nearly $8 million or 17%. We saw further improvement in our interest cost primarily from our continued focus on de-levering.

Adjusted after tax profit from continuing ops was $17 million, up 17% from fourth quarter ’09 adjusted EPS for the quarter was $0.30 up $0.11 or 58% from ’09. I’ve highlighted on the slide improvement for total operations in bottom right and at the moment we have no stores for sale and therefore no unsold stores and discontinued operation. We work really hard to improve the results to the total company and adjusted EPS for total operations was $0.28 for the quarter double the result from 2009.

And these results really highlight our focus on investing in the base business, owning more of our properties and reducing debt and it’s paying off. Next slide please, this slide shows full year results for 2010. Adjusted net income for continuing operations was $57 million up 34% from 2009 adjusted EPS for continuing operations was $0.99. As with the fourth quarter substantial improvement was made in discontinued operations for the year and adjusted EPS for our total operations was $0.91 for the year up 44% from ’09.

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