Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.23.3
Fair Value Measurements
$ in Thousands
9 Months Ended
Sep. 30, 2023
USD ($)
Fair Value Disclosures [Abstract]  
Fair Value Measurements
8. Fair Value Measurements
Assets and liabilities recorded at fair value in the accompanying unaudited condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022 were as follows:
Fair Value Based on Significant Other Observable Inputs (Level 2)
September 30, 2023 December 31, 2022
(In millions)
Assets:
Cash surrender value of life insurance policies (1) $ 41.3  $ 38.2 
Interest rate caps designated as hedges (2) 2.9  — 
Total assets $ 44.2  $ 38.2 
Liabilities:
Deferred compensation plan (3) $ 24.5  $ 21.1 
Total liabilities $ 24.5  $ 21.1 
(1)Included in other assets in the accompanying unaudited condensed consolidated balance sheets.
(2)As of September 30, 2023, approximately $2.1 million and $0.8 million were included in other current assets and other assets, respectively, in the accompanying unaudited condensed consolidated balance sheets.
(3)Included in other long-term liabilities in the accompanying unaudited condensed consolidated balance sheets.

In conjunction with the approximately $75.2 million charge recorded during the second quarter of 2023 and the subsequent $4.8 million charge recorded in the third quarter of 2023 related to our decisions to indefinitely suspend operations at certain EchoPark locations and to close certain Northwest Motorsport stores discussed above, Sonic was required to adjust certain real estate assets to fair value on a non-recurring basis. After $5.7 million of adjustments during the second quarter of 2023, the recorded balances were $55.5 million at June 30, 2023. The book value of such assets may be reevaluated as changes in circumstances require. There were no instances during the three months ended September 30, 2023 that required a fair value measurement of assets ordinarily measured at fair value on a non-recurring basis.
As of September 30, 2023 and December 31, 2022, the fair values of Sonic’s financial instruments, including receivables, notes receivable from finance contracts, notes payable – floor plan, trade accounts payable, borrowings under the revolving credit facilities and certain mortgage notes, approximated their carrying values due either to length of maturity or existence of variable interest rates that approximate prevailing market rates.
As of September 30, 2023 and December 31, 2022, the fair value and the carrying value of Sonic’s significant fixed rate long-term debt were as follows:
September 30, 2023 December 31, 2022
Fair Value Carrying Value Fair Value Carrying Value
(In millions)
4.875% Notes (1) $ 397.5  $ 500.0  $ 390.3  $ 500.0 
4.625% Notes (1) $ 536.3  $ 650.0  $ 519.5  $ 650.0 
Mortgage Notes (2) $ 159.0  $ 166.3  $ 174.0  $ 186.6 
(1)As determined by market quotations from similar securities as of September 30, 2023 and December 31, 2022, respectively (Level 2).
(2)As determined by the DCF method (Level 2).
For further discussion of Sonic’s fair value measurements, see Note 11, “Fair Value Measurements,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, 2022.
Real Estate, Fair Value $ 55,500