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Summary of Significant Accounting Policies
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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| Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies |
1. Summary of Significant Accounting Policies
Basis of Presentation — The accompanying Unaudited Condensed Consolidated Financial
Statements for the second quarter and six-month periods ended June 30, 2011 and 2010 have been
prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the
“SEC”). All significant intercompany accounts and transactions have been eliminated. These
Unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all
material normal recurring adjustments necessary to fairly state the financial position and the
results of operations for the periods presented. The results for interim periods are not
necessarily indicative of the results to be expected for the entire fiscal year. These interim
financial statements should be read in conjunction with the audited Consolidated Financial
Statements of Sonic Automotive, Inc. (“Sonic” or the “Company”) for the year ended December 31,
2010, which were included in Sonic’s Annual Report on Form 10-K.
Reclassifications — The Unaudited Condensed Consolidated Statements of Income for the second
quarter and six-month periods ended June 30, 2010 reflect the reclassification of balances from
continuing operations to discontinued operations from the prior year presentation for additional
franchises sold and terminated or identified for sale subsequent to June 30, 2010. The Unaudited
Condensed Consolidated Statements of Income for the second quarter and six-month periods ended June
30, 2010 also reflect the reclassification of balances from discontinued operations to continuing
operations for franchises identified for sale as of June 30, 2010, but which Sonic has decided to
retain and operate as of June 30, 2011. There were no franchises held for sale at June 30, 2011.
Lease Exit Accruals — Lease exit accruals relate to facilities Sonic has ceased using in its
operations. The accruals represent the present value of the lease payments, net of estimated
sublease proceeds, for the remaining life of the operating leases and other accruals necessary to
satisfy the lease commitment to the landlord. A summary of the activity of these lease exit
accruals consists of the following:
Income Tax Expense — The overall effective tax rates for the second quarter and
six-month periods ended June 30, 2011 and 2010 are higher than federal statutory rates due to the
effect of state income taxes. The overall effective tax rate from continuing operations was 40.0%
for the second quarter and six-month periods ended June 30, 2011. The overall effective tax rate
from continuing operations was 40.4% and 41.5% for the second quarter and six-month periods ended
June 30, 2010, respectively. The effective rate for the second quarter and six-month periods ended
June 30, 2011 was lower than the prior year period due to the level of overall taxable income and
the shift in the distribution of taxable income between states in which Sonic operates.
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