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

9 Months Ended

Sep. 30, 2018

Segment InformationAs of September 30, 2018, 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) stand-alone pre-owned vehicle specialty retail locations that buy and sell used vehicles, perform vehicle repair and maintenance services, and arrange finance and insurance products under the EchoPark brand (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 Chief Financial Officer; and (3) the Company’s President. Sonic has determined that its operating segments also represent its reportable segments.

Reportable segment revenues and segment income (loss) for the three and nine months ended September 30, 2018 and 2017 are as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2018		2017		2018		2017
	(In thousands)
Revenues:
Franchised Dealerships Segment	$	2,284,931	$	2,448,574	$	6,879,783	$	7,051,291
EchoPark Segment	185,918		57,127		497,589		147,978
Total consolidated revenues	$	2,470,849	$	2,505,701	$	7,377,372	$	7,199,269


	Three Months Ended September 30,						Nine Months Ended September 30,
	2018		2017		2018		2017
	(In thousands)
Segment income (loss) (1):
Franchised Dealerships Segment (2)	$	40,971	$	51,486	$	130,856	$	125,553
EchoPark Segment (3)	(5,026)		(4,606)		(46,699)		(17,585)
Total segment income (loss)	35,945		46,880		84,157		107,968
Interest expense, other, net	(13,313)		(13,028)		(40,144)		(39,200)
Other income (expense), net	—		4		107		(14,490)
Income (loss) from continuing operations before taxes	$	22,632	$	33,856	$	44,120	$	54,278

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

(2) For the three months ended September 30, 2018, the above amount includes approximately $0.3 million of net loss on the disposal of franchised dealerships, approximately $1.6 million of executive transition costs and approximately $1.2 million of storm-related physical damage and legal costs. For the three months ended September 30, 2017, the above amount includes approximately $8.5 million of net gain on the disposal of franchised dealerships, offset partially by approximately $3.5 million of storm-related physical damage and legal costs and approximately $0.2 million of impairment expense.

For the nine months ended September 30, 2018, the above amount includes approximately $38.9 million of net gain on the disposal of franchised dealerships, offset partially by approximately $5.8 million of storm-related physical damage and legal costs, approximately $2.2 million of lease exit charges, approximately $1.6 million of executive transition costs and approximately $14.0 million of impairment expense. For the nine months ended September 30, 2017, the above amount includes approximately $8.5 million of net gain on the disposal of franchised dealerships, offset partially by approximately $10.3 million of storm-related physical damage and legal costs, approximately $0.3 million of lease exit charges, approximately $14.6 million of net loss on the extinguishment of debt, approximately $0.7 million of double-carry interest and approximately $3.3 million of impairment expense.

(3) For the three months ended September 30, 2017, the above amount includes approximately $0.5 million of long-term compensation-related charges.

For the nine months ended September 30, 2018, the above amount includes approximately $32.5 million of long-term compensation-related charges. For the nine months ended September 30, 2017, the above amount includes approximately $0.6 million of lease exit charges and approximately $0.5 million of long-term compensation-related charges.