Current report filing

Inventories and Related Notes Payable - Floor Plan

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Inventories and Related Notes Payable - Floor Plan
12 Months Ended
Dec. 31, 2011
Inventories and Related Notes Payable - Floor Plan [Abstract]  
Inventories and Related Notes Payable - Floor Plan

3. Inventories and Related Notes Payable - Floor Plan

Inventories consist of the following:

 

                 
    December 31,  
(In thousands)   2011     2010  

New vehicles

  $ 569,573     $ 628,939  

Used vehicles

    178,568       165,039  

Parts and accessories

    54,042       50,854  

Other

    60,950       58,389  
   

 

 

   

 

 

 

Inventories

  $ 863,133     $ 903,221  
   

 

 

   

 

 

 

Sonic finances all of its new and certain of its used vehicle inventory through standardized floor plan facilities with a syndicate of financial institutions and manufacturer-affiliated finance companies. The new and used floor plan facilities bear interest at variable rates based on prime and LIBOR. The weighted average interest rate for Sonic’s new vehicle floor plan facilities, for continuing operations and discontinued operations, was 2.39% and 2.71% for the years ended December 31, 2011 and 2010, respectively. Sonic’s floor plan interest expense related to the new vehicle floor plan arrangements is partially offset by amounts received from manufacturers in the form of floor plan assistance. Floor plan assistance received is capitalized in inventory and charged against cost of sales when the associated inventory is sold. For the years ended December 31, 2011, 2010 and 2009, for continuing operations and discontinued operations, Sonic recognized a reduction in cost of sales of approximately $26.7 million, $24.0 million and $22.6 million, respectively, related to manufacturer floor plan assistance.

The average interest rate for Sonic’s used vehicle floor plan facilities, for continuing operations and discontinued operations, was 2.71% and 2.88% for the years ended December 31, 2011 and 2010, respectively.

The new and used floor plan facilities are collateralized by vehicle inventories and other assets, excluding franchise and dealer agreements, of the relevant dealership subsidiary. The new and used floor plan facilities contain a number of covenants, including, among others, covenants restricting Sonic with respect to the creation of liens and changes in ownership, officers and key management personnel. Sonic was in compliance with all of these restrictive covenants as of December 31, 2011.