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, 2019

As of September 30, 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 and nine months ended September 30, 2019 and 2018 are as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands)
Revenues:
Franchised Dealerships Segment	$	2,390,503	$	2,284,931	$	6,852,474	$	6,879,783
EchoPark Segment	312,217		185,918		853,465		497,589
Total consolidated revenues	$	2,702,720	$	2,470,849	$	7,705,939	$	7,377,372


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands)
Segment income (loss) (1):
Franchised Dealerships Segment (2)	$	51,028	$	40,971	$	172,884	$	130,856
EchoPark Segment (3)	2,530		(5,026)		5,218		(46,699)
Total segment income (loss)	53,558		35,945		178,102		84,157
Interest expense, other, net	(13,013)		(13,313)		(39,494)		(40,144)
Other income (expense), net	(5)		—		90		107
Income (loss) from continuing operations before taxes	$	40,540	$	22,632	$	138,698	$	44,120

(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 $1.6 million of executive transition costs, approximately $1.2 million of storm-related physical damage and legal costs and approximately $0.3 million of net loss on the disposal of franchised dealerships,

For the nine months ended September 30, 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 of executive transition costs. 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 $14.0 million of impairment expense, approximately $5.8 million of storm-related physical damage and legal costs, approximately $2.2 million of lease exit charges and approximately $1.6 million of executive transition costs.

(3) For the three months ended September 30, 2019, the above amount includes approximately $1.1 million of impairment expense related to real estate assets held for sale at former EchoPark locations. For the nine months ended September 30, 2019, the above amount includes approximately $3.1 million of impairment expense related to real estate assets held for sale at former EchoPark locations. For the nine months ended September 30, 2018, the above amount includes approximately $32.5 million of long-term compensation-related charges.