Quarterly report pursuant to Section 13 or 15(d)

Business Acquisitions and Dispositions

v2.4.0.8
Business Acquisitions and Dispositions
 9 Months Ended
Sep. 30, 2014
Business Combinations [Abstract]  
Business Acquisitions and Dispositions

2. Business Acquisitions and Dispositions

Acquisitions – Sonic acquired one mid-line import franchise during the third quarter ended September 30, 2014 and one luxury franchise during the nine-month period ended September 30, 2014 for a combined aggregate purchase price of approximately $15.3 million. The balance sheet as of September 30, 2014 includes preliminary allocations of the purchase price of the acquired assets and liabilities based on their estimated fair market values at the date of acquisition and are subject to final adjustment. On a pro forma basis as if the results of these acquisitions had been included in Sonic’s consolidated results for the entire third quarter and nine-month periods ended September 30, 2014 and 2013, revenue and net income would not have been materially different from Sonic’s reported revenue and net income for these periods.

Dispositions – As discussed in Note 1, “Summary of Significant Accounting Policies,” the FASB issued ASU 2014-08 which amended the definition of and reporting requirements for discontinued operations. Sonic elected to adopt and apply this guidance beginning with its Quarterly Report on Form 10-Q for the period ended June 30, 2014. The results of operations for those dealerships that were classified as discontinued operations as of March 31, 2014 are included in income (loss) from discontinued operations in the accompanying Unaudited Condensed Consolidated Statements of Income and will continue to be reported within discontinued operations in the future. There were no unsold dealerships classified in discontinued operations at March 31, 2014. Revenues and other activities associated with dealerships classified as discontinued operations were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

(900

)

 

$

(1,389

)

 

$

(1,670

)

 

$

(22

)

 

 

Gain (loss) on disposal

 

 

148

 

 

 

(57

)

 

 

201

 

 

 

(435

)

 

 

Lease exit accrual adjustments and charges

 

 

1,006

 

 

 

(611

)

 

 

631

 

 

 

(1,977

)

 

 

Pre-tax income (loss)

 

$

254

 

 

$

(2,057

)

 

$

(838

)

 

$

(2,434

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning with disposals occurring during the second quarter ended June 30, 2014, only the operating results of disposals that represent a strategic shift that has (or will have) a major impact on Sonic’s results of operations and financial position will be included in the income (loss) from discontinued operations in the accompanying Unaudited Condensed Consolidated Statements of Income. Sonic disposed of two franchises during the quarter ended September 30, 2014 and disposed of five franchises during the nine-month period ended September 30, 2014. These disposals generated net cash from disposition of approximately $14.9 million and $30.1 million, respectively.


Revenues and other activities associated with disposed dealerships that remain in continuing operations were as follows:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

(99

)

 

$

(132

)

 

$

268

 

 

$

(936

)

 

 

Gain (loss) on disposal

 

 

3,111

 

 

 

-

 

 

 

10,734

 

 

 

-

 

 

 

Pre-tax income (loss)

 

$

3,012

 

 

$

(132

)

 

$

11,002

 

 

$

(936

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

4,117

 

 

$

43,181

 

 

$

86,467

 

 

$

125,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In the ordinary course of business, Sonic evaluates its dealership franchises for possible disposition based on various performance criteria, and the disposals during the nine-month period ended September 30, 2014 represent dealerships identified based on their unprofitable operations and other operational considerations. As of September 30, 2014, Sonic had one franchise classified as held for sale, the disposition of which was completed subsequent to September 30, 2014. In the future, Sonic may also sell other franchises that are not currently held for sale.

The major classes of assets and liabilities classified as held for sale for all periods presented in the statement of financial position are as follows:

 

 

 

 

 

 

 

 

 

 

September 30, 2014

 

 

December 31, 2013

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

$

7,630

 

 

$

-

 

 

 

Property and equipment, net (1)

 

 

6,170

 

 

 

4,101

 

 

 

Goodwill

 

 

1,011

 

 

 

-

 

 

 

Assets held for sale

 

$

14,811

 

 

$

4,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities associated with assets held for sale - non-trade

 

$

6,587

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)   September 30, 2014 includes approximately $0.2 million related to franchises classified as held for sale, and

 

 

 

approximately $6.0 million related to real estate not being used in operations. December 31, 2013 includes

 

 

 

approximately $4.1 million related to real estate not being used in operations.