Annual report pursuant to Section 13 and 15(d)

Business Acquisitions and Dispositions

v3.6.0.2
Business Acquisitions and Dispositions
 12 Months Ended
Dec. 31, 2016
Business Combinations [Abstract]  
Business Acquisitions and Dispositions

2. Business Acquisitions and Dispositions

Acquisitions

Sonic acquired three stand-alone used vehicle dealership businesses and real estate for approximately $15.9 during the year ended December 31, 2016. These cash outflows were funded by cash from operations and borrowings under Sonic’s floor plan facilities. Sonic did not acquire any businesses during the year ended December 31, 2015. Sonic acquired two luxury franchises, one mid-line import franchise and one domestic franchise during the year ended December 31, 2014, for an aggregate purchase price of approximately $50.9 million in cash, net of cash acquired, including the underlying assets and real estate.

In addition to the three stand-alone used vehicle dealership businesses discussed above, Sonic opened two new manufacturer-awarded open point franchised dealerships and two new EchoPark® stores during the year ended December 31, 2016.

Dispositions

Sonic did not dispose of any dealerships during the year ended December 31, 2016, and disposed of four dealership franchises during the year ended December 31, 2015 and nine dealership franchises during the year ended December 31, 2014.  The dispositions during the years ended December 31, 2015 and 2014 generated cash of approximately $ 8.0 million and $74.8 million, respectively. In conjunction with dealership dispositions, Sonic has agreed to indemnify the buyers from certain liabilities and costs arising from operations or events that occurred prior to sale but which may or may not be known at the time of sale, including environmental liabilities and liabilities associated from the breach of representations or warranties made under the agreements. See Note 12, “Commitments and Contingencies,” for further discussion.

Results associated with dealerships classified as discontinued operations were as follows:

 

 

Year Ended December 31,

 

 

2016

 

 

2015

 

 

2014

 

 

(In thousands)

 

Income (loss) from operations

$

(1,100

)

 

$

(1,421

)

 

$

(2,515

)

Gain (loss) on disposal

 

(1

)

 

 

-

 

 

 

199

 

Lease exit accrual adjustments and charges

 

(1,020

)

 

 

(1,462

)

 

 

152

 

Pre-tax income (loss)

$

(2,121

)

 

$

(2,883

)

 

$

(2,164

)

Total revenues

$

-

 

 

$

-

 

 

$

-

 

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

 

 

Year Ended December 31,

 

 

2016

 

 

2015

 

 

2014

 

 

(In thousands)

 

Income (loss) from operations

$

(364

)

 

$

(4,958

)

 

$

(2,475

)

Gain (loss) on disposal

 

(47

)

 

 

2,748

 

 

 

11,079

 

Property and equipment impairment charges

 

(4

)

 

 

(10,096

)

 

 

(125

)

Pre-tax income (loss)

$

(415

)

 

$

(12,306

)

 

$

8,479

 

Total revenues

$

-

 

 

$

95,168

 

 

$

311,978

 

In the ordinary course of business, Sonic evaluates its dealership franchises for possible disposition based on various strategic and performance criteria. As of December 31, 2016, Sonic did not have any franchises classified as held for sale; however, in the future, Sonic may sell other franchises that are not currently held for sale.