Sonic Automotive, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Segment Information

Segment Information

3 Months Ended

Mar. 31, 2019

As of March 31, 2019, Sonic had two operating segments comprised of: (1) retail automotive franchises that sell new vehicles and buy and sell used vehicles, sell replacement parts, perform vehicle repair and maintenance services, and arrange finance and insurance products (the “Franchised Dealerships Segment”) and (2) pre-owned vehicle specialty retail locations that provide customers an opportunity to search, buy, service, finance and sell pre-owned vehicles (the “EchoPark Segment”).

The operating segments identified above are the business activities of Sonic for which discrete financial information is available and for which operating results are regularly reviewed by Sonic’s chief operating decision maker to assess operating performance and allocate resources. Sonic’s chief operating decision maker is a group of three individuals consisting of: (1) the Company’s Chief Executive Officer; (2) the Company’s President; and (3) the Company’s Chief Financial Officer. Sonic has determined that its operating segments also represent its reportable segments.

Reportable segment revenues and segment income (loss) for the three months ended March 31, 2019 and 2018 are as follows:


	Three Months Ended March 31,
	2019		2018
	(In thousands)
Revenues:
Franchised Dealerships Segment	$	2,139,571	$	2,269,269
EchoPark Segment	249,567		131,504
Total consolidated revenues	$	2,389,138	$	2,400,773


	Three Months Ended March 31,
	2019		2018
	(In thousands)
Segment income (loss) (1):
Franchised Dealerships Segment (2)	$	73,531	$	23,835
EchoPark Segment (3)	558		(14,324)
Total segment income (loss)	74,089		9,511
Interest expense, other, net	(12,853)		(13,456)
Other income (expense), net	100		89
Income (loss) from continuing operations before taxes	$	61,336	$	(3,856)

(1) Segment income (loss) for each segment is defined as operating income (loss) less interest expense, floor plan.

(2) For the three months ended March 31, 2019, the above amount includes approximately $46.7 million of net gain on the disposal of franchised dealerships, offset partially by approximately $6.3 million related to executive transition costs. For the three months ended March 31, 2018, the above amount includes approximately $4.8 million of lease exit charges, approximately $3.6 million of impairment charges and approximately $1.5 million of legal and other charges, offset partially by a net gain on the disposal of franchised dealerships of approximately $1.2 million.

(3) For the three months ended March 31, 2019, the above amount includes approximately $1.9 million of impairment charges related to fair value adjustments of real estate at former locations classified as held for sale. For the three months ended March 31, 2018, the above amount includes approximately $9.2 million of long-term compensation-related charges.