2022Q2TRUE0001043509--12-31200334zerozero— millionzerozero3.856.1253.517.031.52.92.502.25P1Y5.06.1250.0 million0.0 millionAccumulated Other Comprehensive Income (Loss)For further discussion of Sonic’s accumulated other comprehensive income (loss), see Note 13, “Accumulated Other Comprehensive Income (Loss),” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, 2021. For further discussion of Sonic’s defined benefit pension plan, see Note 10, “Employee Benefit Plans,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, 2021.For further discussion of Sonic’s accumulated other comprehensive income (loss), see Note 13, “Accumulated Other Comprehensive Income (Loss),” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, 2021. For further discussion of Sonic’s defined benefit pension plan, see Note 10, “Employee Benefit Plans,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
FORM 10-Q/A
______________________________________
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 1-13395
______________________________________
SONIC AUTOMOTIVE, INC.
(Exact name of registrant as specified in its charter)
______________________________________
Delaware
56-2010790
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
      4401 Colwick Road
28211
Charlotte,North Carolina
         (Address of principal executive offices)(Zip Code)
(704) 566-2400
(Registrant’s telephone number, including area code)
______________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.01 per shareSAHNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer☐  Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  
As of July 26, 2022, there were 27,236,398 shares of the registrant’s Class A Common Stock and 12,029,375 shares of the registrant’s Class B Common Stock outstanding.




EXPLANATORY NOTE
Unless the context requires otherwise, references to “we,” “us,” “our,” and “Sonic,” refer to Sonic Automotive, Inc. and its subsidiaries.
We have prepared this Amendment No. 1 (this “Amendment”) to our Quarterly Report on Form 10-Q for the quarter and six month periods ended June 30, 2022, which was originally filed with the Securities and Exchange Commission on July 28, 2022 (the “Original 10-Q”) to reflect the restatement of our previously issued Condensed Consolidated Statements of Operations for the quarter ended June 30, 2022.
As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by the Sonic’s principal executive officer and principal financial officer are filed as exhibits 31.1, 31.2, 32.1 and 32.2 to this Form 10-Q/A.
Internal Control over Financial Reporting
In connection with this restatement, Sonic has re-evaluated the effectiveness of our disclosure controls and procedures for the three months ended June 30, 2022. Management has concluded that, in light of the error described below, a material weakness exists in certain internal controls over financial reporting related to the revenue recognition process at a single dealership acquired in December 2021. Based upon such re-evaluation, and due to such material weakness, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2022.
Background of the Restatement
On October 28, 2022, we filed a Current Report on Form 8-K under Item 4.02 with the Securities and Exchange Commission relating to previously issued financial statements as described below. As indicated in the Current Report on Form 8-K under Item 4.02, we determined that a restatement was necessary due to the effect of an error in its Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2022. The impact on the 2021 consolidated financial statements was immaterial.
During the quarter ended September 30, 2022, we identified an error related to the revenue recognition process at a single dealership acquired in December 2021. Specifically, we did not apply the guidance in ASC 606 Revenue from Contracts with Customers related to transactions which required net reporting of certain fleet sales transactions within the Condensed Consolidated Statements of Operations. The effect of the error was an overstatement of fleet revenue and an equal overstatement of fleet cost of sales. No other financial statements were affected and there was no impact on note disclosures, unless related to the items in the table below.
The tables below reflect the sections of the Sonic’s condensed consolidated statements of operations that were impacted by the error.
Three Months Ended June 30, 2022Six Months Ended June 30, 2022
(Dollars in millions)As ReportedAdjustmentsAs RestatedAs ReportedAdjustmentsAs Restated
Revenues:
Fleet new vehicles$166.4 $(146.6)$19.8 $315.0 $(277.0)$38.0 
Total new vehicles$1,510.7 $(146.6)$1,364.1 $3,010.6 $(277.0)$2,733.6 
Total vehicles$3,081.5 $(146.6)$2,934.9 $6,121.0 $(277.0)$5,844.0 
Total revenues$3,652.8 $(146.6)$3,506.2 $7,239.4 $(277.0)$6,962.4 
Cost of sales:
Fleet new vehicles$(165.5)$146.6 $(18.9)$(313.2)$277.0 $(36.2)
Total new vehicles$(1,341.5)$146.6 $(1,194.9)$(2,672.8)$277.0 $(2,395.8)
Total vehicles$(2,864.0)$146.6 $(2,717.4)$(5,685.4)$277.0 $(5,408.4)
Total cost of sales$(3,064.0)$146.6 $(2,917.4)$(6,079.3)$277.0 $(5,802.3)
To assist in the review of this filing, this 10-Q/A sets forth the Original 10-Q in its entirety, as amended to reflect the changes described above. We believe that presenting all of the amended and restated information in this 10-Q/A allows readers to review all pertinent data in a single presentation. This 10-Q/A amends and restates the Financial Statements to reflect the restated numbers to correct the error. In addition, in this 10-Q/A, corresponding changes were also made to the Part I, Item 2, under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to reflect the restated numbers and Part I, Item 4, under “Controls and Procedures” to reflect an updated evaluation of our financial controls and procedures.




UNCERTAINTY OF FORWARD-LOOKING STATEMENTS AND INFORMATION
This report contains, and written or oral statements made from time to time by us or by our authorized officers may contain, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address our future objectives, plans and goals, as well as our intent, beliefs and current expectations regarding future operating performance, results and events, and can generally be identified by words such as “may,” “will,” “should,” “could,” “believe,” “expect,” “estimate,” “anticipate,” “intend,” “plan,” “foresee” and other similar words or phrases.
These forward-looking statements are based on our current estimates and assumptions and involve various risks and uncertainties. As a result, you are cautioned that these forward-looking statements are not guarantees of future performance, and that actual results could differ materially from those projected in these forward-looking statements. Factors which may cause actual results to differ materially from our projections include those risks described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 and elsewhere in this report, as well as:
the number of new and used vehicles sold in the United States as compared to our expectations and the expectations of the market;
our ability to generate sufficient cash flows or to obtain additional financing to fund our EchoPark expansion, capital expenditures, our share repurchase program, dividends on our common stock, acquisitions and general operating activities;
our business and growth strategies, including, but not limited to, our EchoPark store operations;
the reputation and financial condition of vehicle manufacturers whose brands we represent, the financial incentives vehicle manufacturers offer and their ability to design, manufacture, deliver and market their vehicles successfully;
our relationships with manufacturers, which may affect our ability to obtain desirable new vehicle models in inventory or to complete additional acquisitions or dispositions;
the adverse resolution of one or more significant legal proceedings against us or our franchised dealerships or EchoPark stores;
changes in laws and regulations governing the operation of automobile franchises, accounting standards, taxation requirements and environmental laws, including any change in laws or regulations in response to the COVID–19 pandemic;
changes in vehicle and parts import quotas, duties, tariffs or other restrictions, including supply shortages that could be caused by the COVID-19 pandemic, global political and economic factors, or other supply chain disruptions;
the inability of vehicle manufacturers and their suppliers to obtain, produce and deliver vehicles or parts and accessories to meet demand at our franchised dealerships for sale and use in our parts, service and collision repair operations;
general economic conditions in the markets in which we operate, including fluctuations in interest rates, inflation, vehicle valuations, employment levels, the level of consumer spending and consumer credit availability;
high levels of competition in the retail automotive industry, which not only create pricing pressures on the products and services we offer, but also on businesses we may seek to acquire;
our ability to successfully integrate RFJ Auto (as defined herein) and future acquisitions;
the significant control that our principal stockholders exercise over us and our business matters;
the rate and timing of overall economic expansion or contraction; and
the severity and duration of the COVID-19 pandemic and the actions taken by vehicle manufacturers, governmental authorities, businesses or consumers in response to the pandemic, including in response to a worsening or “next wave” of the pandemic as a result of new variants of the virus or otherwise.
These forward-looking statements speak only as of the date of this report or when made, and we undertake no obligation to revise or update these statements to reflect subsequent events or circumstances, except as required under the federal securities laws and the rules and regulations of the U.S. Securities and Exchange Commission.




SONIC AUTOMOTIVE, INC.
QUARTERLY REPORT ON FORM 10-Q/A
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022

TABLE OF CONTENTS
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.




PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
SONIC AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(Dollars and shares in millions, except per share amounts)
As RestatedAs Restated
Revenues:
Retail new vehicles$1,344.3 $1,453.2 $2,695.6 $2,587.2 
Fleet new vehicles19.8 9.7 38.0 32.0 
Total new vehicles1,364.1 1,462.9 2,733.6 2,619.2 
Used vehicles1,449.4 1,281.2 2,820.2 2,384.1 
Wholesale vehicles121.4 84.8 290.2 159.6 
Total vehicles2,934.9 2,828.9 5,844.0 5,162.9 
Parts, service and collision repair398.1 346.1 778.7 654.2 
Finance, insurance and other, net173.2 177.2 339.7 321.9 
Total revenues3,506.2 3,352.2 6,962.4 6,139.0 
Cost of sales:
Retail new vehicles(1,176.0)(1,335.1)(2,359.6)(2,399.9)
Fleet new vehicles(18.9)(9.4)(36.2)(31.4)
Total new vehicles(1,194.9)(1,344.5)(2,395.8)(2,431.3)
Used vehicles(1,402.3)(1,246.1)(2,725.0)(2,318.4)
Wholesale vehicles(120.2)(80.3)(287.6)(154.2)
Total vehicles(2,717.4)(2,670.9)(5,408.4)(4,903.9)
Parts, service and collision repair(200.0)(170.5)(393.9)(323.4)
Total cost of sales(2,917.4)(2,841.4)(5,802.3)(5,227.3)
Gross profit588.8 510.8 1,160.1 911.7 
Selling, general and administrative expenses(402.8)(320.6)(789.8)(610.0)
Depreciation and amortization(31.2)(24.8)(61.1)(48.4)
Operating income154.8 165.4 309.2 253.3 
Other income (expense):
Interest expense, floor plan(6.1)(4.3)(11.1)(9.4)
Interest expense, other, net(21.3)(10.1)(42.1)(20.4)
Other income (expense), net(0.2) 0.1 0.1 
Total other income (expense)(27.6)(14.4)(53.1)(29.7)
Income from continuing operations before taxes127.2 151.0 256.1 223.6 
Provision for income taxes for continuing operations - benefit (expense)(32.4)(37.0)(64.0)(55.9)
Income from continuing operations94.8 114.0 192.1 167.7 
Discontinued operations:
Income (loss) from discontinued operations before taxes (0.2) 0.5 
Provision for income taxes for discontinued operations - benefit (expense)   (0.1)
Income (loss) from discontinued operations (0.2) 0.4 
Net income$94.8 $113.8 $192.1 $168.1 
Basic earnings per common share:
Earnings per share from continuing operations$2.40 $2.74 $4.81 $4.03 
Earnings per share from discontinued operations   0.01 
Earnings per common share$2.40 $2.74 $4.81 $4.04 
Weighted-average common shares outstanding39.5 41.6 40.0 41.6 
Diluted earnings per common share:
Earnings per share from continuing operations$2.34 $2.63 $4.67 $3.86 
Earnings per share from discontinued operations   0.01 
Earnings per common share$2.34 $2.63 $4.67 $3.87 
Weighted-average common shares outstanding40.5 43.4 41.2 43.5 



See notes to unaudited condensed consolidated financial statements.


1


SONIC AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(Unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(Dollars in millions)
Net income$94.8 $113.8 $192.1 $168.1 
Other comprehensive income (loss) before taxes:
Change in fair value and amortization of interest rate cap agreements0.4 0.5 0.7 0.9 
Total other comprehensive income (loss) before taxes0.4 0.5 0.7 0.9 
Provision for income tax benefit (expense) related to components of other comprehensive income (loss)(0.1)(0.1)(0.2)(0.3)
Other comprehensive income (loss)0.3 0.4 0.5 0.6 
Comprehensive income$95.1 $114.2 $192.6 $168.7 





See notes to unaudited condensed consolidated financial statements.


2


SONIC AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, 2022December 31, 2021
(Dollars in millions)
ASSETS
Current Assets:
Cash and cash equivalents$327.1 $299.4 
Receivables, net345.9 401.1 
Inventories1,240.4 1,261.2 
Other current assets157.5 122.4 
Total current assets2,070.9 2,084.1 
Property and Equipment, net1,491.6 1,458.8 
Goodwill423.5 416.4 
Other Intangible Assets, net486.6 480.2 
Operating Right-of-Use Lease Assets276.5 293.2 
Finance Right-of-Use Lease Assets211.4 179.9 
Other Assets63.0 62.5 
Total Assets$5,023.5 $4,975.1 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Notes payable - floor plan - trade$77.5 $89.8 
Notes payable - floor plan - non-trade1,153.7 1,178.6 
Trade accounts payable134.6 133.3 
Operating short-term lease liabilities36.4 36.2 
Finance short-term lease liabilities54.2 52.7 
Other accrued liabilities350.2 350.5 
Current maturities of long-term debt76.5 50.6 
Total current liabilities1,883.1 1,891.7 
Long-Term Debt1,462.0 1,510.7 
Other Long-Term Liabilities92.5 96.0 
Operating Long-Term Lease Liabilities247.3 264.8 
Finance Long-Term Lease Liabilities168.6 135.5 
Commitments and Contingencies
Stockholders’ Equity:
Class A Convertible Preferred Stock, none issued
  
Class A Common Stock, $0.01 par value; 100,000,000 shares authorized; 67,134,072 shares issued and 27,236,398 shares outstanding at June 30, 2022; 66,501,072 shares issued and 28,692,532 shares outstanding at December 31, 2021
0.7 0.7 
Class B Common Stock, $0.01 par value; 30,000,000 shares authorized; 12,029,375 shares issued and outstanding at June 30, 2022 and December 31, 2021
0.1 0.1 
Paid-in capital804.6 790.2 
Retained earnings1,223.5 1,051.7 
Accumulated other comprehensive income (loss)(0.8)(1.3)
Treasury stock, at cost; 39,897,674 Class A Common Stock shares held at June 30, 2022 and 37,808,540 Class A Common Stock shares held at December 31, 2021
(858.1)(765.0)
Total Stockholders’ Equity1,170.0 1,076.4 
Total Liabilities and Stockholders’ Equity$5,023.5 $4,975.1 



See notes to unaudited condensed consolidated financial statements.


3


SONIC AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)

Class A
Common Stock
Class A
Treasury Stock
Class B
Common Stock
Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders’ Equity
SharesAmountSharesAmountSharesAmount
(Dollars and shares in millions, except per share amounts)
Balance at March 31, 202166.0 $0.7 (36.8)$(713.9)12.0 $0.1 $771.1 $771.9 $(3.4)$826.5 
Shares awarded under stock compensation plans0.4  — — — — 6.8 — — 6.8 
Purchases of treasury stock— —   — — — — —  
Effect of cash flow hedge instruments, net of tax expense of $0.1
— — — — — — — — 0.4 0.4 
Restricted stock amortization and stock option amortization— — — — — — 3.9 — — 3.9 
Net income— — — — — — — 113.8 — 113.8 
Class A dividends declared ($0.12 per share)
— — — — — — — (3.6)— (3.6)
Class B dividends declared ($0.12
per share)
— — — — — — — (1.4)— (1.4)
Balance at June 30, 202166.4 $0.7 (36.8)$(713.9)12.0 $0.1 $781.8 $880.7 $(3.0)$946.4 

Class A
Common Stock
Class A
Treasury Stock
Class B
Common Stock
Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders’ Equity
SharesAmountSharesAmountSharesAmount
(Dollars and shares in millions, except per share amounts)
Balance at March 31, 202267.0 $0.7 (38.5)$(798.7)12.0 $0.1 $795.1 $1,138.9 $(1.1)$1,135.0 
Shares awarded under stock compensation plans0.1  — — — — 0.9 — — 0.9 
Purchases of treasury stock— — (1.4)(59.4)— — — — — (59.4)
Effect of cash flow hedge instruments, net of tax expense of $0.1
— — — — — — — — 0.3 0.3 
Restricted stock amortization and stock option amortization— — — — — — 8.6 — — 8.6 
Net income— — — — — — — 94.8 — 94.8 
Class A dividends declared ($0.25 per share)
— — — — — — — (7.2)— (7.2)
Class B dividends declared ($0.25
per share)
— — — — — — — (3.0)— (3.0)
Balance at June 30, 202267.1 $0.7 (39.9)$(858.1)12.0 $0.1 $804.6 $1,223.5 $(0.8)$1,170.0 












See notes to unaudited condensed consolidated financial statements.


4



SONIC AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Class A
Common Stock
Class A
Treasury Stock
Class B
Common Stock
Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders’ Equity
SharesAmountSharesAmountSharesAmount
(Dollars and shares in millions, except per share amounts)
Balance at December 31, 202065.6 $0.7 (35.8)$(671.7)12.0 $0.1 $767.5 $721.8 $(3.6)$814.8 
Shares awarded under stock compensation plans0.8  — — — — 6.8 — — 6.8 
Purchases of treasury stock— — (1.0)(42.2)— — — — — (42.2)
Effect of cash flow hedge instruments, net of tax expense of $0.3
— — — — — — — — 0.6 0.6 
Restricted stock amortization and stock option amortization— — — — — — 7.5 — — 7.5 
Net income— — — — — — — 168.1 — 168.1 
Class A dividends declared ($0.22 per share)
— — — — — — — (6.5)— (6.5)
Class B dividends declared ($0.22 per share)
— — — — — — — (2.7)— (2.7)
Balance at June 30, 202166.4 $0.7 (36.8)$(713.9)12.0 $0.1 $781.8 $880.7 $(3.0)$946.4 
Class A
Common Stock
Class A
Treasury Stock
Class B
Common Stock
Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total Stockholders’ Equity
SharesAmountSharesAmountSharesAmount
(Dollars and shares in millions, except per share amounts)
Balance at December 31, 202166.5 $0.7 (37.8)$(765.0)12.0 $0.1 $790.2 $1,051.7 $(1.3)$1,076.4 
Shares awarded under stock compensation plans0.6  — — — — 1.3 — — 1.3 
Purchases of treasury stock— — (2.1)(93.1)— — — — — (93.1)
Effect of cash flow hedge instruments, net of tax expense of $0.2
— — — — — — — — 0.5 0.5 
Restricted stock amortization and stock option amortization— — — — — — 13.1 — — 13.1 
Net income— — — — — — — 192.1 — 192.1 
Class A dividends declared ($0.37 per share)
— — — — — — — (14.3)— (14.3)
Class B dividends declared ($0.37 per share)
— — — — — — — (6.0)— (6.0)
Balance at June 30, 202267.1 $0.7 (39.9)$(858.1)12.0 $0.1 $804.6 $1,223.5 $(0.8)$1,170.0 




See notes to unaudited condensed consolidated financial statements.


5


SONIC AUTOMOTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
20222021
(Dollars in millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$192.1 $168.1 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment55.2 45.4 
Debt issuance cost amortization2.3 1.7 
Stock-based compensation expense13.1 7.5 
Deferred income taxes(7.4)(6.0)
Other(0.5)(0.5)
Changes in assets and liabilities that relate to operations:
Receivables58.8 14.5 
Inventories29.8 240.2 
Other assets1.6 10.5 
Notes payable - floor plan – trade(12.3)(552.4)
Trade accounts payable and other liabilities(26.4)36.4 
Total adjustments114.2 (202.7)
Net cash provided by (used in) operating activities306.3 (34.6)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of businesses, net of cash acquired(28.4)(28.6)
Purchases of land, property and equipment(100.4)(105.1)
Proceeds from sales of property and equipment10.0 0.7 
Proceeds from sales of dealerships 3.8 
Net cash used in investing activities(118.8)(129.2)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings on notes payable - floor plan - non-trade(24.9)314.3 
Borrowings on revolving credit facilities 4.9 
Repayments on revolving credit facilities (4.9)
Debt issuance costs(0.3)(4.7)
Principal payments of long-term debt(24.7)(30.7)
Principal payments of long-term lease liabilities(3.1)(2.1)
Purchases of treasury stock(93.1)(42.2)
Issuance of shares under stock compensation plans1.3 6.8 
Dividends paid(15.0)(8.3)
Net cash provided by (used in) financing activities(159.8)233.1 
NET INCREASE IN CASH AND CASH EQUIVALENTS27.7 69.3 
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR299.4 170.3 
CASH AND CASH EQUIVALENTS, END OF PERIOD$327.1 $239.6 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, including amount capitalized$52.6 $29.6 
Income taxes$59.0 $54.4 




See notes to unaudited condensed consolidated financial statements.


6

SONIC AUTOMOTIVE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies
Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Sonic Automotive, Inc. and its wholly owned subsidiaries (“Sonic,” the “Company,” “we,” “us” or “our”) for the three and six months ended June 30, 2022 and 2021 are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (the “U.S.”) (“GAAP”) for interim financial information and applicable rules and regulations of the U.S. Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all material normal, recurring adjustments necessary to fairly state the financial position, results of operations and cash flows for the periods presented. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in Sonic’s Annual Report on Form 10-K for the year ended December 31, 2021.
COVID-19 – The COVID-19 pandemic negatively impacted the global economy beginning in the first quarter of 2020 and continues to affect the global economy and supply chain. The impact on the economy has affected both consumer demand and the supply of manufactured goods, both of which continue to impact our business. The global automotive supply chain has been significantly disrupted since the onset of the pandemic, primarily related to the production of semiconductors and other components that are used in many modern automobiles, in addition to workforce-related production delays and stoppages. As a result, automobile manufacturing has operated for multiple years at lower than usual production levels, reducing the amount of new vehicle inventory and certain parts inventory available to our dealerships. These inventory constraints, coupled with strong consumer demand and elevated levels of consumer savings, have led to low new and used vehicle inventory and a high new and used vehicle pricing environment, which drove retail new vehicle unit sales volumes lower across the industry.
All of our store operations were impacted by the COVID-19 pandemic to varying degrees. State and local governmental restrictions on consumer and business activity may be tightened again if conditions related to the pandemic worsen as a result of future coronavirus variants.
Recent Accounting Pronouncements – In March 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Accounting Standards Codification (“ASC”) Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional guidance for a limited period of time to ease the potential accounting impact associated with transitioning away from reference rates that are expected to be discontinued, such as the London InterBank Offered Rate (“LIBOR”). The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The amendments in ASU 2020-04 could be adopted beginning January 1, 2020 and are effective through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, which clarifies that certain optional expedients and exceptions in ASC Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. We do not currently have any contracts that have been modified, amended or renegotiated to accommodate a transition to a new reference rate, but we will continue to evaluate any such modifications or amendments to our contracts to determine the applicability of this standard on our consolidated financial statements and related financial statement disclosures.
Principles of Consolidation All of our dealership and non-dealership subsidiaries are wholly owned and consolidated in the accompanying unaudited condensed consolidated financial statements, except for one 50%-owned dealership that is accounted for under the equity method. All material intercompany balances and transactions have been eliminated in the accompanying unaudited condensed consolidated financial statements.
Revenue Recognition – Revenue is recognized when a customer obtains control of promised goods or services and in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. We do not include the cost of obtaining contracts within the related revenue streams since we elected the practical expedient to expense the costs to obtain a contract when incurred.
Management has evaluated our established business processes, revenue transaction streams and accounting policies, and identified our material revenue streams to be: (1) the sale of new vehicles; (2) the sale of used vehicles to retail customers; (3) the sale of wholesale used vehicles at third-party auctions; (4) the arrangement of vehicle financing and the sale of service, warranty and other insurance contracts; and (5) the performance of vehicle maintenance and repair services and the sale of related parts and accessories. Generally, performance obligations are satisfied when the associated vehicle is either delivered to a customer and customer acceptance has occurred, over time as the maintenance and repair services are performed, or at the
7

SONIC AUTOMOTIVE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
time of wholesale and retail parts sales. We do not have any revenue streams with significant financing components as payments are typically received within a short period of time following completion of the performance obligation(s).
Retrospective finance and insurance revenues (“F&I retro revenues”) are recognized when the product contract has been executed with the end customer and the transaction price is estimated each reporting period based on the expected value method using historical and projected data. F&I retro revenues can vary based on a variety of factors, including number of contracts and history of cancellations and claims. Accordingly, we utilize this historical and projected data to constrain the consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
We record revenue when vehicles are delivered to customers, as vehicle service work is performed and when parts are delivered. Conditions for completing a sale include having an agreement with the customer, including pricing, and it being probable that the proceeds from the sale will be collected.
The accompanying unaudited condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021 include approximately $27.6 million and $34.9 million, respectively, related to contract assets from F&I retro revenues recognition, which are recorded in receivables, net. Changes in contract assets from December 31, 2021 to June 30, 2022 were primarily due to ordinary business activity, including the receipt of cash for amounts earned and recognized in prior periods. Please refer to Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, 2021 for further discussion of our revenue recognition policies and processes.
Earnings Per Share The calculation of diluted earnings per share considers the potential dilutive effect of restricted stock units, restricted stock awards and stock options granted under Sonic’s stock compensation plans (and any non-forfeitable dividends paid on such awards).
Restatement of Previously Issued Condensed Consolidated Financial Statements Subsequent to the issuance of the condensed consolidated financial statements as of and for the three and six months ended June 30, 2022 in our Quarterly Report on Form 10-Q for the second quarter of 2022, we identified an error in the application of ASC Topic 606, Revenue Recognition, related to principal accounting (gross accounting) versus agent accounting (net accounting) for certain fleet transactions from a newly acquired subsidiary. It was determined that we should have applied net accounting to certain fleet transactions where our previously issued condensed consolidated financial statements accounted for the transactions on a gross accounting basis. The result of this error overstated both fleet new vehicles revenues and fleet new vehicles cost of sales, along with the associated subtotals, in our previously issued condensed consolidated statements of operations. There was no impact to other financial statement line items or disclosures, unless related to the items in the table below. The impact on the 2021 consolidated financial statements was immaterial.

We evaluated the effect of the corrections detailed in the tables below on the previously issued condensed consolidated financial statements, both individually and in the aggregate, in accordance with the guidance in ASC Topic 250, Accounting Changes and Error Corrections and concluded that the effect was material to the condensed consolidated financial statements for the three and six months ended June 30, 2022. The tables below reflect the line items of the Company’s condensed consolidated financial statements that were impacted by the error.
Three Months Ended June 30, 2022Six Months Ended June 30, 2022
As ReportedAdjustmentsAs RestatedAs ReportedAdjustmentsAs Restated
(In millions)
Revenues:
Fleet new vehicles$166.4 $(146.6)$19.8 $315.0 $(277.0)$38.0 
Total new vehicles$1,510.7 $(146.6)$1,364.1 $3,010.6 $(277.0)$2,733.6 
Total vehicles$3,081.5 $(146.6)$2,934.9 $6,121.0 $(277.0)$5,844.0 
Total revenues$3,652.8 $(146.6)$3,506.2 $7,239.4 $(277.0)$6,962.4 
Cost of sales:
Fleet new vehicles$(165.5)$146.6 $(18.9)$(313.2)$277.0 $(36.2)
Total new vehicles$(1,341.5)$146.6 $(1,194.9)$(2,672.8)$277.0 $(2,395.8)
Total vehicles$(2,864.0)$146.6 $(2,717.4)$(5,685.4)$277.0 $(5,408.4)
Total cost of sales$(3,064.0)$146.6 $(2,917.4)$(6,079.3)$277.0 $(5,802.3)
8

SONIC AUTOMOTIVE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. Business Acquisitions and Dispositions
We acquired one franchised dealership location during the six months ended June 30, 2022 for an aggregate gross purchase price (including inventory acquired and subsequently funded by floor plan notes payable) of approximately $20.9 million, including a $14.7 million impact of a post-close adjustment related to the acquisition of RFJ Auto Partners, Inc. completed in December 2021. The allocation of the roughly $6.2 million aggregate gross purchase price for the acquisition completed during the six months ended June 30, 2022 included inventory of approximately $3.1 million, property and equipment of approximately $