Sonic Automotive, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Property and Equipment

Property and Equipment

12 Months Ended

Dec. 31, 2011

4.	Property and Equipment

Property and equipment consists of the following:


	December 31,
	2011			2010
	(In thousands)
Land	$	131,865		$	76,357
Building and improvements		455,650			353,088
Office equipment and fixtures		92,920			77,654
Parts and service equipment		61,561			56,651
Company vehicles		8,391			8,137
Construction in progress		16,191			48,230

Total, at cost		766,578			620,117
Less accumulated depreciation		(214,541	)		(181,837	)

Subtotal		552,037			438,280
Less assets held for sale		—			(2,020	)

Property and equipment, net	$	552,037		$	436,260

In January 2011, Sonic purchased five dealership properties which it was previously leasing through long-term operating leases for approximately $75.2 million, utilizing cash on hand and borrowings under the then existing syndicated revolving credit facility and floor plan facility (the “2010 Credit Facilities”). See Note 6, “Long-Term Debt,” for further discussion of the 2010 Credit Facilities.

Interest capitalized in conjunction with construction projects was approximately $2.3 million, $2.3 million and $0.7 million for the years ended December 31, 2011, 2010 and 2009, respectively. As of December 31, 2011, commitments for facility construction projects totaled approximately $18.9 million.

During the years ended December 31, 2011, 2010 and 2009, property and equipment impairment charges were recorded as noted in the following table:


Year ended December 31,	Continuing Operations		Discontinued Operations
	(In millions)
2011	$	1.2	$	—
2010		0.2		—
2009		18.1		5.0

Impairment charges related to continuing operations were related to the abandonment of construction projects, the abandonment and disposal of dealership equipment or Sonic’s estimate that based on historical and projected operating losses for certain dealerships, these dealerships would not be able to recover recorded property and equipment asset balances.

Impairment charges related to assets held for sale were recorded in discontinued operations based on the estimated fair value of the property and equipment to be sold in connection with the disposal of the associated dealerships. During the year ended December 31, 2009, approximately $3.8 million of the impairment charge in discontinued operations was related to Sonic’s General Motors franchise agreements that were terminated by the manufacturer as of December 31, 2009.

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

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