UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~

March 31, 2024

☐	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☐ 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 ~~Charlotte, North Carolina~~		28211
~~(Address~~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 class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share

SAH

New 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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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 filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

☐ ~~(Do not check if a smaller reporting company)~~

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 ~~October~~April 23, ~~2017,~~2024, there were ~~31,166,205~~21,861,771 shares of the registrant’s Class A ~~common stock~~Common Stock, par value $0.01 per share, and 12,029,375 shares of the registrant’s Class B ~~common stock~~ ~~outstanding.~~

Common Stock, par value $0.01 per share, outstanding.

~~Uncertainty of Forward-Looking Statements and Information~~

UNCERTAINTY OF FORWARD-LOOKING STATEMENTS AND INFORMATION

This ~~Quarterly Report on Form 10-Q~~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” inof our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2023 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~~business expansion, ~~our One Sonic-One Experience initiative,~~ 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 ~~initiative and our One Sonic-One Experience initiative;~~

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 vehicle manufacturers, which may affect our ability to obtain desirable new vehicle models in inventory or to complete additional ~~acquisitions;~~

acquisitions or dispositions;

•the adverse resolution of one or more significant legal proceedings against us or our ~~franchised dealerships or pre-owned stores;~~

subsidiaries;

•changes in laws and regulations governing the operation of automobile franchises, accounting standards, taxation requirements and environmental laws;

•changes in vehicle and parts import quotas, duties, tariffs or other restrictions, including supply shortages that could be caused by 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 ~~retailing~~ industry, which not only ~~creates~~create pricing pressures on the products and services we offer, but also on businesses we may seek to acquire;

•our ability to successfully integrate ~~potential~~recent or future acquisitions;

•the significant control that our principal stockholders exercise over us and

our business matters; and

•the rate and timing of overall economic ~~recovery~~expansion or ~~decline.~~

contraction.

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

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30, 2017~~

MARCH 31, 2024

TABLE OF CONTENTS


				Page

PART I – FINANCIAL INFORMATION					1

Item 1.			Financial Statements ~~(unaudited)~~(Unaudited)				1

	Condensed Consolidated Statements of ~~Income~~Operations				1

	Condensed Consolidated Statements of Comprehensive ~~Income~~Operations				2

	Condensed Consolidated Balance Sheets				3

	Condensed Consolidated ~~Statement~~Statements of Stockholders’ Equity				4

	Condensed Consolidated Statements of Cash Flows				5

	Notes to Unaudited Condensed Consolidated Financial Statements				6

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations				20	18

Item 3.			Quantitative and Qualitative Disclosures About Market Risk				47	57

Item 4.			Controls and Procedures				49	58

PART II – OTHER INFORMATION					50	59

Item 1.			Legal Proceedings				50	59

Item 1A.			Risk Factors				51	60

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds				52	61
Item 5.		Other Information								62
Item 6.				Exhibits					53	63

SIGNATURES					54
		64

PART I – ~~FINANCIAL~~ FINANCIAL INFORMATION

Item 1. Financial Statements.

SONIC AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~

OPERATIONS

(Unaudited)


	Three Months Ended March 31,
	2024		2023
	(Dollars and shares in millions, except per share amounts)
Revenues:
Retail new vehicles	$	1,455.8	$	1,442.8
Fleet new vehicles	19.6		18.8
Total new vehicles	1,475.4		1,461.6
Used vehicles	1,215.6		1,344.9
Wholesale vehicles	77.3		85.6
Total vehicles	2,768.3		2,892.1
Parts, service and collision repair	446.7		430.5
Finance, insurance and other, net	169.0		168.6
Total revenues	3,384.0		3,491.2
Cost of sales:
Retail new vehicles	(1,359.4)		(1,304.7)
Fleet new vehicles	(18.9)		(17.9)
Total new vehicles	(1,378.3)		(1,322.6)
Used vehicles	(1,168.6)		(1,314.9)
Wholesale vehicles	(78.1)		(82.6)
Total vehicles	(2,625.0)		(2,720.1)
Parts, service and collision repair	(222.8)		(217.6)
Total cost of sales	(2,847.8)		(2,937.7)
Gross profit	536.2		553.5
Selling, general and administrative expenses	(392.2)		(412.8)
Impairment charges	(1.0)		—
Depreciation and amortization	(36.3)		(34.3)
Operating income	106.7		106.4
Other income (expense):
Interest expense, floor plan	(20.3)		(14.6)
Interest expense, other, net	(29.0)		(28.4)
Other income (expense), net	0.1		0.2
Total other income (expense)	(49.2)		(42.8)
Income before taxes	57.5		63.6
Provision for income taxes - benefit (expense)	(15.5)		(15.9)





Net income	$	42.0	$	47.7

Basic earnings per common share:


Earnings per common share	$	1.24	$	1.33
Weighted-average common shares outstanding	34.0		35.9
Diluted earnings per common share:


Earnings per common share	$	1.20	$	1.29
Weighted-average common shares outstanding	34.9		36.9

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(Dollars and shares in thousands, except per share amounts)

Revenues:

New vehicles

$
1,362,301

$
1,375,144

$
3,809,302

$
3,826,178

Used vehicles

659,724

660,974

1,936,088

1,881,514

Wholesale vehicles

43,098

70,522

130,174

153,141

Total vehicles

2,065,123

2,106,640

5,875,564

5,860,833

Parts, service and collision repair

347,717

361,709

1,060,873

1,059,093

Finance, insurance and other, net

92,861

89,579

262,832

254,940

Total revenues

2,505,701

2,557,928

7,199,269

7,174,866

Cost of Sales:

New vehicles

(1,296,063
)

(1,312,756
)

(3,622,264
)

(3,639,500
)
Used vehicles

(620,579
)

(621,352
)

(1,816,076
)

(1,764,393
)
Wholesale vehicles

(46,390
)

(73,029
)

(136,555
)

(158,566
)
Total vehicles

(1,963,032
)

(2,007,137
)

(5,574,895
)

(5,562,459
)
Parts, service and collision repair

(180,047
)

(191,706
)

(550,788
)

(554,867
)
Total cost of sales

(2,143,079
)

(2,198,843
)

(6,125,683
)

(6,117,326
)
Gross profit

362,622

359,085

1,073,586

1,057,540

Selling, general and administrative expenses

(283,974
)

(282,141
)

(870,139
)

(843,721
)
Impairment charges

(200
)

(6,089
)

(3,315
)

(6,240
)
Depreciation and amortization

(22,686
)

(19,928
)

(65,751
)

(57,302
)
Operating income (loss)

55,762

50,927

134,381

150,277

Other income (expense):

Interest expense, floor plan

(8,882
)

(6,672
)

(26,413
)

(19,797
)
Interest expense, other, net

(13,028
)

(13,016
)

(39,200
)

(37,560
)
Other income (expense), net

4

11

(14,490
)

120

Total other income (expense)

(21,906
)

(19,677
)

(80,103
)

(57,237
)
Income (loss) from continuing operations before taxes

33,856

31,250

54,278

93,040

Provision for income taxes for continuing operations - benefit (expense)

(14,126
)

(12,281
)

(22,254
)

(36,565
)
Income (loss) from continuing operations

19,730

18,969

32,024

56,475

Discontinued operations:

Income (loss) from discontinued operations before taxes

(481
)

(1,413
)

(1,650
)

(1,513
)
Provision for income taxes for discontinued operations - benefit (expense)

191

555

657

595

Income (loss) from discontinued operations

(290
)

(858
)

(993
)

(918
)
Net income (loss)

$
19,440

$
18,111

$
31,031

$
55,557

Basic earnings (loss) per common share:

Earnings (loss) per share from continuing operations

$
0.45

$
0.42

$
0.72

$
1.23

Earnings (loss) per share from discontinued operations

-

(0.02
)

(0.02
)

(0.02
)
Earnings (loss) per common share

$
0.45

$
0.40

$
0.70

$
1.21

Weighted average common shares outstanding

43,496

45,118

44,281

45,930

Diluted earnings (loss) per common share:

Earnings (loss) per share from continuing operations

$
0.45

$
0.42

$
0.72

$
1.22

Earnings (loss) per share from discontinued operations

(0.01
)

(0.02
)

(0.02
)

(0.02
)
Earnings (loss) per common share

$
0.44

$
0.40

$
0.70

$
1.20

Weighted average common shares outstanding

43,811

45,354

44,585

46,130

Dividends declared per common share

$
0.05

$
0.05

$
0.15

$
0.15

See notes to unaudited condensed consolidated financial statements.

SONIC AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME~~

OPERATIONS

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(In thousands)

Net income (loss)

$
19,440

$
18,111

$
31,031

$
55,557

Other comprehensive income (loss) before taxes:

    Change in fair value of interest rate swap and rate cap
        agreements

747

4,197

2,891

(3,479
)

Provision for income tax benefit (expense) related to
   components of other comprehensive income (loss)

(284
)

(1,595
)

(1,099
)

1,322

Other comprehensive income (loss)

463

2,602

1,792

(2,157
)

Comprehensive income (loss)

$
19,903

$
20,713

$
32,823

$
53,400


	Three Months Ended March 31,
	2024		2023
	(Dollars in millions)
Net income	$	42.0	$	47.7
Other comprehensive income (loss) before taxes:
Change in fair value and amortization of interest rate cap agreements	0.7		(0.1)

Total other comprehensive income (loss) before taxes	0.7		(0.1)
Provision for income tax benefit (expense) related to components of other comprehensive income (loss)	(0.2)		—
Other comprehensive income (loss)	0.5		(0.1)
Comprehensive income	$	42.5	$	47.6

See notes to unaudited condensed consolidated financial statements.

SONIC AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

		September 30,			December 31,
		2017			2016
		(Dollars in thousands)
	March 31, 2024								March 31, 2024		December 31, 2023
	(Dollars in millions, except per share amounts)									(Dollars in millions, except per share amounts)
ASSETS	ASSETS							ASSETS
Current Assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents		$	13,379		$	3,108
Receivables, net			410,945			430,242
Inventories			1,390,053			1,570,701
Other current assets			18,399			26,993
Total current assets			1,832,776			2,031,044
Property and Equipment, net			1,120,811			1,010,380
Goodwill			526,918			472,437
Other Intangible Assets, net			78,350			80,233
Operating Right-of-Use Lease Assets
Finance Right-of-Use Lease Assets
Other Assets			55,714			45,242
Total Assets		$	3,614,569		$	3,639,336


LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Notes payable - floor plan - trade		$	718,959		$	850,537
Notes payable - floor plan - trade
Notes payable - floor plan - trade
Notes payable - floor plan - non-trade			600,379			675,353
Trade accounts payable			102,122			117,740
Accrued interest			11,144			13,265
Operating short-term lease liabilities
Finance short-term lease liabilities

Other accrued liabilities
Other accrued liabilities
Other accrued liabilities			239,667			236,982
Current maturities of long-term debt			59,475			43,003
Total current liabilities			1,731,746			1,936,880
Long-Term Debt			1,016,390			839,675
Other Long-Term Liabilities			64,123			61,170
Deferred Income Taxes			79,336			76,447
Operating Long-Term Lease Liabilities
Finance Long-Term Lease Liabilities

Commitments and Contingencies
Commitments and Contingencies
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; 63,456,698 shares issued and 31,166,205 shares outstanding at September 30, 2017; 62,967,061 shares issued and 32,703,865 shares outstanding at December 31, 2016			635			630
Class B common stock, $0.01 par value; 30,000,000 shares authorized; 12,029,375 shares issued and outstanding at September 30, 2017 and December 31, 2016			121			121
Class A Convertible Preferred Stock, none issued
Class A Convertible Preferred Stock, none issued
Class A Convertible Preferred Stock, none issued
Class A Common Stock, $0.01 par value; 100,000,000 shares authorized; 69,047,806 shares issued and 21,861,407 shares outstanding at March 31, 2024; 68,618,393 shares issued and 21,931,785 shares outstanding at December 31, 2023
Class B Common Stock, $0.01 par value; 30,000,000 shares authorized; 12,029,375 shares issued and outstanding at March 31, 2024 and December 31, 2023
Paid-in capital			730,638			721,695
Retained earnings			565,563			541,146
Accumulated other comprehensive income (loss)			(470	)		(2,262	)
Treasury stock, at cost; 32,290,493 Class A common stock shares held at September 30, 2017 and 30,263,196 Class A common stock shares held at December 31, 2016			(573,513	)		(536,166	)
Treasury stock, at cost; 47,186,399 Class A Common Stock shares held at March 31, 2024 and 46,686,608 Class A Common Stock shares held at December 31, 2023
Total Stockholders’ Equity			722,974			725,164
Total Liabilities and Stockholders’ Equity		$	3,614,569		$	3,639,336

See notes to unaudited condensed consolidated financial statements.

SONIC AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

Accumulated

Class A

Class A

Class B

Other

Total

Common Stock

Treasury Stock

Common Stock

Paid-In

Retained

Comprehensive

Stockholders’

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Earnings

Income (Loss)

Equity

(In thousands)

Balance at December 31, 2016

62,967

$
630

(30,263
)

$
(536,166
)

12,029

$
121

$
721,695

$
541,146

$
(2,262
)

$
725,164

Shares awarded under stock compensation plans

490

5

-

-

-

-

41

-

-

46

Purchases of treasury stock

-

-

(2,027
)

(37,347
)

-

-

-

-

-

(37,347
)
Change in fair value of interest rate swap and rate cap agreements, net of tax expense of $1,099

-

-

-

-

-

-

-

-

1,792

1,792

Restricted stock amortization

-

-

-

-

-

-

8,902

-

-

8,902

Net income (loss)

-

-

-

-

-

-

-

31,031

-

31,031

Dividends declared

-

-

-

-

-

-

-

(6,614
)

-

(6,614
)
Balance at September 30, 2017

63,457

$
635

(32,290
)

$
(573,513
)

12,029

$
121

$
730,638

$
565,563

$
(470
)

$
722,974


	Class A Common Stock			Class A Treasury Stock			Class B Common Stock			Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
	(Dollars and shares in millions, except per share amounts)
Balance at December 31, 2022	67.6	$	0.7	(43.4)	$	(1,026.9)	12.0	$	0.1	$	819.4	$	1,100.3	$	1.6	$	895.2
Shares awarded under stock compensation plans	0.7	—		—	—		—	—		7.6		—		—		7.6
Purchases of treasury stock	—	—		(1.6)	(90.7)		—	—		—		—		—		(90.7)
Effect of cash flow hedge instruments, net of tax benefit	—	—		—	—		—	—		—		—		(0.1)		(0.1)
Stock compensation expense	—	—		—	—		—	—		5.0		—		—		5.0
Net income	—	—		—	—		—	—		—		47.7		—		47.7

Class A dividends declared ($0.28 per share)	—	—		—	—		—	—		—		(6.5)		—		(6.5)
Class B dividends declared ($0.28 per share)	—	—		—	—		—	—		—		(3.4)		—		(3.4)
Balance at March 31, 2023	68.3	$	0.7	(45.0)	$	(1,117.6)	12.0	$	0.1	$	832.0	$	1,138.1	$	1.5	$	854.8


	Class A Common Stock			Class A Treasury Stock			Class B Common Stock			Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
	(Dollars and shares in millions, except per share amounts)
Balance at December 31, 2023	68.6	$	0.7	(46.7)	$	(1,204.5)	12.0	$	0.1	$	855.4	$	1,238.6	$	1.6	$	891.9
Shares awarded under stock compensation plans	0.4	—		—	—		—	—		0.6		—		—		0.6
Purchases of treasury stock	—	—		(0.5)	(27.0)		—	—		—		—		—		(27.0)
Effect of cash flow hedge instruments, net of tax expense of $0.2	—	—		—	—		—	—		—		—		0.5		0.5
Stock compensation expense	—	—		—	—		—	—		6.6		—		—		6.6
Net income	—	—		—	—		—	—		—		42.0		—		42.0

Class A dividends declared ($0.30 per share)	—	—		—	—		—	—		—		(6.6)		—		(6.6)
Class B dividends declared ($0.30 per share)	—	—		—	—		—	—		—		(3.6)		—		(3.6)
Balance at March 31, 2024	69.0	$	0.7	(47.2)	$	(1,231.5)	12.0	$	0.1	$	862.6	$	1,270.4	$	2.1	$	904.4

See notes to unaudited condensed consolidated financial statements.

SONIC AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
	2024		2023
	(Dollars in millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	42.0	$	47.7
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment	31.5		30.0


Debt issuance cost amortization	1.6		1.6

Stock-based compensation expense	6.6		5.0
Deferred income taxes	(3.7)		(3.3)

Asset impairment charges	1.0		—
Gain on disposal of dealerships and property and equipment	1.5		0.1


Other	1.0		0.6
Changes in assets and liabilities that relate to operations:
Receivables	107.3		87.5
Inventories	(122.2)		(234.6)
Other assets	6.1		4.2
Notes payable - floor plan – trade	(7.7)		4.2
Trade accounts payable and other liabilities	5.1		23.0
Total adjustments	28.1		(81.7)
Net cash provided by (used in) operating activities	70.1		(34.0)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of businesses, net of cash acquired	—		(75.1)
Purchases of land, property and equipment	(43.8)		(37.2)
Proceeds from sales of property and equipment	4.4		4.8

Net cash used in investing activities	(39.4)		(107.5)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on notes payable - floor plan - non-trade	21.1		188.8
Borrowings on revolving credit facilities	15.6		—
Repayments on revolving credit facilities	(15.6)		—

Debt issuance costs	(4.9)		(1.3)
Principal payments of long-term debt	(22.0)		(19.5)
Principal payments of long-term lease liabilities	(2.1)		(2.2)
Purchases of treasury stock	(27.0)		(90.7)

Issuance of shares under stock compensation plans	0.6		7.6
Dividends paid	(10.2)		(10.2)
Net cash (used in) provided by financing activities	(44.5)		72.5
NET DECREASE IN CASH AND CASH EQUIVALENTS	(13.8)		(69.0)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	28.9		229.2
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	15.1	$	160.2



SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest, including amounts capitalized	$	34.3	$	26.5
Income taxes	$	(0.2)	$	(0.4)

Nine Months Ended September 30,

2017

2016

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$
31,031

$
55,557

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization of property, plant and equipment

65,747

57,298

Provision for bad debt expense

657

260

Other amortization

487

487

Debt issuance cost amortization

1,784

1,886

Debt discount amortization, net of premium amortization

157

226

Stock-based compensation expense

8,902

8,394

Deferred income taxes

2,745

8,004

Net distributions from equity investee

17

(123
)
Asset impairment charges

3,315

6,240

Loss (gain) on disposal of dealerships and property and equipment

(8,594
)

(245
)
Loss (gain) on exit of leased dealerships

2,016

1,109

Loss (gain) on retirement of debt

14,607

-

Changes in assets and liabilities that relate to operations:

Receivables

24,330

85,708

Inventories

191,077

94,910

Other assets

(4,286
)

63,763

Notes payable - floor plan - trade

(131,578
)

(130,579
)
Trade accounts payable and other liabilities

(14,282
)

(11,362
)
Total adjustments

157,101

185,976

Net cash provided by (used in) operating activities

188,132

241,533

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of businesses, net of cash acquired

(76,610
)

(15,861
)
Purchases of land, property and equipment

(181,893
)

(155,060
)
Proceeds from sales of property and equipment

392

1,050

Proceeds from sales of dealerships

22,578

-

Net cash provided by (used in) investing activities

(235,533
)

(169,871
)
CASH FLOWS FROM FINANCING ACTIVITIES:

Net (repayments) borrowings on notes payable - floor plan - non-trade

(74,974
)

(36,748
)
Borrowings on revolving credit facilities

253,668

183,275

Repayments on revolving credit facilities

(118,668
)

(187,478
)
Proceeds from issuance of long-term debt

288,419

99,592

Debt issuance costs

(4,673
)

(216
)
Principal payments and repurchase of long-term debt

(31,194
)

(25,735
)
Repurchase of debt securities

(210,914
)

-

Purchases of treasury stock

(37,347
)

(97,486
)
Income tax benefit (expense) associated with stock compensation plans

-

(1,101
)
Issuance of shares under stock compensation plans

46

9

Dividends paid

(6,691
)

(6,458
)
Net cash provided by (used in) financing activities

57,672

(72,346
)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

10,271

(684
)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

3,108

3,625

CASH AND CASH EQUIVALENTS, END OF PERIOD

$
13,379

$
2,941

SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:

Change in fair value of interest rate swap and rate cap agreements (net of tax expense of

$1,099 and benefit of $1,322 in the nine months ended September 30, 2017 and 2016, respectively)

$
1,792

$
(2,157
)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid (received) during the period for:

Interest, including amount capitalized

$
67,523

$
57,149

Income taxes

$
30,752

$
26,922

See notes to unaudited condensed consolidated financial statements.

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,~~(collectively referred to herein as “Sonic,” the “Company,” “we,” “us” ~~and~~or “our”) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023 are unaudited and have been prepared in accordance with ~~U.S.~~accounting principles generally accepted ~~accounting principles~~in the United States (the “U.S.”) (“~~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. ~~These~~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 operating results for interim periods are not necessarily indicative of the results to be expected for the entire fiscal year or future interim periods, because the first quarter normally contributes less operating profit than the second, third and fourth quarters. These interimaccompanying 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, ~~2016.~~

2023.

Recent Accounting Pronouncements– 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, 2023 for further discussion of recent accounting pronouncements.

In ~~May 2014,~~November 2023, the Financial Accounting Standards Board ~~(the “FASB”)~~ issued Accounting Standards Update (“ASU”) ~~2014-09~~2023-07, “Segment Reporting (Accounting Standards Codification Topic 820): Improvements to ~~amend the accounting guidance on revenue recognition.~~Reportable Segment Disclosures.” The amendments ~~in this ASU are intended~~require the disclosure of significant segment expenses as well as expanded interim disclosures, along with other changes to ~~provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices and improve~~segment disclosure requirements. The ~~amendments in this ASU must~~standard will be applied using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients or (ii) a modified retrospective approach with the cumulative effect of initially adopting the standard recognized at the date of adoption (which requires additional footnote disclosures). This ASU is effective for reporting periods beginning after December 15, 2017. Earlier application is permitted only as of reporting periods beginning after December 15, 2016. Sonic plans to adopt this ASU effective January 1, 2018 and anticipates adopting the modified retrospective transition approach. While management is still evaluating the specific financial statement impact and quantitative and qualitative disclosure impact of the provisions of this ASU, management generally expects similar performance obligations to result under this ASU as compared with deliverables and separate units of accounting under current U.S. GAAP and does not expect the adoption of this standard to have a material impact on its financial statements, revenue recognition practices or internal controls. As a result, management expects the amounts and timing of revenue recognition to generally remain the same, with the exception of the timing of revenue recognition related to service and collision repair orders that are incomplete as of a reporting date and certain finance and insurance income earned in periods subsequent to the completion of the initial performance obligation, neither of which are expected to have a material impact on reported results of operations.

In February 2016, the FASB issued ASU 2016-02 to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this ASU require that leases are classified as either finance or operating leases, a right-of-use asset and lease liability is recognized in the statement of financial position, and repayments are classified within operating activities in the statement of cash flows. The amendments in this ASU are to be applied using a modified retrospective approach and are effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2018 (early adoption is permitted). Sonic plans to adopt this ASU effective January 1, 2019. While management is still evaluating the impact of adopting the provisions of this ASU, management expects that upon adoption of this ASU, the presentation of certain items in Sonic’s consolidated financial position, cash flows and other disclosures will be materially impacted, primarily due to the recognition of a right-of-use asset and an associated liability and a change in the timing and classification of certain items in Sonic’s results of operations as a result of the derecognition of the lease liability.

~~In March 2016, the FASB issued ASU 2016-09 to simplify several aspects of the accounting for share-based payment transactions. For public companies, this ASU is effective for fiscal years,~~2023, and interim periods ~~within those fiscal years,~~ beginning after December 15, 2016 (early adoption is permitted). Sonic adopted this ASU effective January 1, 2017. Upon adoption of this ASU, interim period and annual income tax expense is affected by stock option exercises and restricted stock and restricted stock unit vesting activity, potentially creating volatility in Sonic’s effective income tax rate from period to period. See the heading “Income Tax Expense” below for further discussion of2024. We are currently evaluating the impact ofthat the adoption of ~~this ASU on Sonic’s effective income tax rate for~~ the ~~three and nine months ended September 30, 2017.~~

In August 2016, the FASB issued ASU 2016-15 related to the classification of certain cash receipts and cash payments on the statement of cash flows. For public companies, this ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 (early adoption is permitted). Sonic plans to adopt this ASU effective January 1, 2018. Upon adoption of this ASU, the presentation of certain items in Sonic’s cash flows and other disclosures may be impacted.

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~In August 2017, the FASB issued ASU 2017-12 which amends the hedge accounting recognition and presentation requirements in ASC 815.~~ ~~This ASU expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation~~provisions of the effects of the hedging instrument and the hedged item in the financial statements. It also includes certain targeted improvements to simplify the application of current guidance related to hedge accounting. ~~For public companies, this~~ ASU ~~is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 (early adoption is permitted).~~ ~~Sonic is currently in the process of evaluating the effects of this pronouncement~~will have on ~~its~~our consolidated financial statements.

Principles of Consolidation –All of ~~Sonic’s~~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.

~~Lease Exit Accruals~~ Certain amounts and percentages may not compute due to rounding.

Revenue Recognition – ~~Lease exit accruals relate~~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 ~~facilities Sonic has ceased using~~receive in ~~its operations that remain subject to a current lease agreement. The accruals represent the present value of the lease payments, net of estimated~~exchange for those goods or ~~actual sublease proceeds, for the remaining life of the operating leases and other accruals necessary to satisfy the lease commitment to the landlord. These situations could~~services. We do not include the ~~relocation~~cost of ~~an existing facility or~~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 third-party vehicle financing and the sale of third-party service, warranty and other insurance contracts; and (5) the performance of vehicle maintenance and repair services and the sale of related parts and accessories. The transaction price for a ~~dealership~~retail vehicle sale is specified in the contract with the customer and encompasses both cash and non-cash considerations. In the context of a retail vehicle sale, customers frequently trade in their existing vehicles. The value of this trade-in is determined based on its stand-alone selling price as specified in the contract, utilizing various third-party pricing sources. There are no other non-cash forms of consideration associated with retail vehicle sales, and sales are reported net of sales tax and other similar assets. Generally, performance obligations are satisfied when the ~~buyer~~associated vehicle is delivered to a customer and customer acceptance has occurred, over time as the maintenance and repair services are performed, or at the 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.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 ~~subleasing~~collected.

The accompanying unaudited condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 include approximately $3.7 million and $31.8 million, respectively, related to contract assets from F&I retro revenues recognition, which are recorded in receivables, net. In addition, we recorded approximately $19.8 million related to contract assets from F&I retro revenues recognition in other assets as of March 31, 2024. Changes in contract assets from December 31, 2023 to March 31, 2024 were primarily due to ordinary business activity, including the ~~property~~receipt of cash for ~~either the remaining term~~amounts earned and recognized in prior periods. Please refer to Note 1, “Description of ~~the lease or for an amount~~Business and Summary of rent equal to Sonic’s obligation under the lease, or situations in which a store is closed as a result of the associated franchise being terminated by Sonic or the manufacturer and no other operations continue on the leased property. See Note 12, “Commitments and Contingencies,Significant Accounting Policies,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2023 for further ~~discussion.~~

~~A summary~~discussion of our revenue recognition policies and processes.

Earnings Per Share –The calculation of diluted earnings per share considers the ~~activity~~potential dilutive effect of ~~these operating lease exit accruals consists of the following:~~

(In thousands)

Balance at December 31, 2016

$
9,790

Lease exit expense (1)

2,016

Payments (2)

(2,671
)
Other (3)

(1,377
)
Balance at September 30, 2017

$
7,758

~~(1)~~

Expense of approximately $0.1 million is recorded in interest expense, other, net and expense of approximately $0.8 million is recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of income. In addition, expense of ~~approximately $1.1 million is recorded in income (loss) from discontinued operations before taxes in the accompanying condensed consolidated statements of income.~~

outstanding restricted stock units, restricted stock and stock options granted under Sonic’s stock compensation plans (and any non-forfeitable dividends paid on such awards).

~~(2)~~

Amount is recorded as an offset to rent expense, with approximately $0.7 million recorded in selling, general and administrative expenses in the accompanying condensed consolidated statements of income and approximately $2.0 million recorded in income (loss) from discontinued operations before taxes in the accompanying condensed consolidated statements of income.

~~(3)~~

~~Amount represents the cash settlement of accruals related to certain deferred maintenance costs and other liabilities related to lease termination.~~

~~Income Tax Expense –~~ The overall effective tax rate from continuing operations was 41.7% and 41.0% for the three and nine months ended September 30, 2017, respectively, and was 39.3% for both the three and nine months ended September 30, 2016. Income tax expense for the three and nine months ended September 30, 2017 includes a $0.4 million discrete charge related to a non-deductible asset impairment charge. Income tax expense for the nine months ended September 30, 2017 includes a benefit of approximately $0.5 million as a result of the adoption of ASU 2016-09 discussed above. Sonic’s effective tax rate varies from year to year based on the distribution of taxable income between states in which Sonic operates and other tax adjustments. Sonic expects the effective tax rate in future periods to fall within a range of 38.0% to 40.0% before the impact, if any, of changes in valuation allowances related to deferred income tax assets or discrete tax adjustments.

2. Business Acquisitions and Dispositions

~~Acquisitions~~ –

We did not acquire any businesses during the three months ended March 31, 2024. During the three months ended ~~September 30, 2017, Sonic~~March 31, 2023, we acquired ~~a stand-alone pre-owned vehicle~~one business (consisting of five locations) in our Powersports Segment (as defined below) for an aggregate gross purchase price (including inventory acquired and subsequently funded by floor plan notes payable) of approximately ~~$76.6~~$75.1 million. ~~During~~The allocation of the ~~nine months ended September 30, 2016, Sonic acquired three stand-alone pre-owned vehicle businesses~~approximately $75.1 million aggregate gross purchase price included inventory of approximately $11.1 million, property and ~~related~~equipment of approximately $0.7 million, franchise assets of approximately $22.6 million, goodwill of approximately $11.9 million, real estate ~~for~~of approximately ~~$15.9~~$29.0 million, other assets of approximately $0.1 million, and other liabilities of approximately $0.3 million.

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Dispositions~~ – ~~Sonic disposed of one mid-line import franchise during~~

During the three months ended ~~September 30, 2017 that generated net cash of approximately $22.6 million. Sonic~~March 31, 2024, we terminated two luxury franchises, in addition to closing the remaining seven Northwest Motorsport stores within the EchoPark Segment (as defined below). We did not dispose of any ~~franchises~~businesses during the ~~nine~~three months ended ~~September 30, 2016.~~

March 31, 2023.

Revenues and other activities associated with disposed ~~dealerships classified as discontinued operations were as follows:~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(In thousands)

Income (loss) from operations

$
(119
)

$
(212
)

$
(561
)

$
(539
)

Lease exit accrual adjustments and charges

(362
)

(1,201
)

(1,089
)

(974
)

Pre-tax income (loss)

$
(481
)

$
(1,413
)

$
(1,650
)

$
(1,513
)

Total revenues

$
-

$
-

$
-

$
-

~~Revenues and other activities associated with disposed dealerships~~stores, terminated franchises or closed stores that remain in continuing operations were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In thousands)
						Three Months Ended March 31,
						Three Months Ended March 31,
						Three Months Ended March 31,
									2024				2024	2023
Income (loss) from operations	$	(70	)	$	160		$	203		$	124
Gain (loss) on disposal		8,490			29			8,466			(30	)
Gain (loss) on disposal, termination and closure charges
Lease exit accrual adjustments and charges
Pre-tax income (loss)	$	8,420		$	189		$	8,669		$	94
Total revenues	$	7,082		$	17,679		$	36,447		$	49,778
Total Revenues

3. Inventories

Inventories consist of the following:


	March 31, 2024		December 31, 2023
	(In millions)
New vehicles	$	938.5	$	799.6
Used vehicles	481.5		505.7
Service loaners (1)	177.8		172.7
Parts, accessories and other	102.7		100.3
Inventories	$	1,700.5	$	1,578.3

September 30, 2017

December 31, 2016

(In thousands)

New vehicles

$
894,382

$
1,088,814

Used vehicles

296,929

282,288

Service loaners

130,657

128,821

Parts, accessories and other

68,085

70,778

Net inventories

$
1,390,053

$
1,570,701

(1)Service loaner inventory includes approximately $31.6 million and $22.7 million as of March 31, 2024 and December 31, 2023, respectively, related to vehicles that are leased directly from the manufacturer on a short-term basis. A corresponding liability is included within notes payable - floor plan - trade on the accompanying unaudited condensed consolidated balance sheets.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. Property and Equipment

Property and equipment, net consists of the following:


	March 31, 2024		December 31, 2023
	(In millions)
Land	$	491.9	$	493.0
Buildings and improvements	1,426.3		1,425.8
Furniture, fixtures and equipment	550.5		563.3
Construction in progress	83.5		61.4
Total, at cost	2,552.2		2,543.5
Less accumulated depreciation	(929.2)		(927.8)
Subtotal	1,623.0		1,615.7
Less assets held for sale (1)	(24.2)		(14.7)
Property and equipment, net	$	1,598.8	$	1,601.0

September 30, 2017

December 31, 2016

(In thousands)

Land

$
351,367

$
306,457

Building and improvements

869,382

777,766

Software and computer equipment

143,239

128,366

Parts and service equipment

104,483

93,901

Office equipment and fixtures

95,236

86,216

Company vehicles

9,595

9,107

Construction in progress

61,676

62,982

Total, at cost

1,634,978

1,464,795

Less accumulated depreciation

(510,678
)

(450,184
)
Subtotal

1,124,300

1,014,611

Less assets held for sale (1)

(3,489
)

(4,231
)
Property and equipment, net

$
1,120,811

$
1,010,380

(1)Classified in other current assets in the accompanying unaudited condensed consolidated balance sheets.

~~In the three and nine months ended September 30, 2017, capital~~

Capital expenditures were approximately ~~$60.7~~$43.8 million and ~~$181.9~~$37.2 million ~~respectively, and~~ in the three ~~and nine~~ months ended ~~September 30, 2016, capital expenditures were approximately $46.1 million~~March 31, 2024 and ~~$155.1 million,~~2023, respectively. Capital expenditures in all periods were primarily related to ~~real estate acquisitions,~~ construction of new franchised dealerships and ~~pre-owned~~EchoPark and powersports stores, building improvements and equipment purchased for use in ~~Sonic’s~~our franchised dealerships and ~~pre-owned~~EchoPark and powersports stores. Certain capital expenditures are recognized in the Franchised Dealerships Segment to better monitor project development costs prior to transferring the capitalized asset balance to the appropriate entity or operating segment upon project completion. Assets held for sale as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016 consists~~2023 consisted of ~~vacant land~~real property not currently used in operations that ~~Sonic expects~~we expect to dispose of in the next 12 months.

~~Impairment~~

Fixed asset impairment charges for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 were approximately ~~$0.2~~$1.0 million, ~~and $3.3 million, respectively,~~ which ~~include the~~related to capitalized IT project write-off ~~of goodwill and property and equipment as part of the closure of two stand-alone pre-owned stores that were purchased in 2016, and the write-off of~~ costs associated with ~~certain construction projects. Impairment~~our decision to close the remaining Northwest Motorsport stores in January 2024. There were no fixed asset impairment charges for the three ~~and nine~~ months ended September 30, 2016 were approximately $6.1 million and $6.2 million, respectively, related to the write-off of property and equipment to be demolished in conjunction with a facility construction project and the write-off of costs associated with certain construction projects.

March 31, 2023.

5. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill ~~was approximately $526.9 million and $472.4 million, as of September 30, 2017 and~~for the year ended December 31, ~~2016, respectively. Sonic allocated approximately $60.0 million of goodwill to~~2023 and the ~~current year acquisition, reduced goodwill by approximately $4.6 million for the disposition of a dealership and impaired approximately $0.9 million of goodwill in the nine~~three months ended ~~September 30, 2017 related to the closure of two stand-alone pre-owned stores that~~March 31, 2024 were ~~purchased in 2016. The carrying amount of goodwill is net~~as follows:


	Franchised Dealerships Segment		EchoPark Segment		Powersports Segment		Total
	(In millions)
Balance at December 31, 2022 (1)	$	221.8	$	—	$	9.2	$	231.0
Additions through current year acquisitions	—		—		11.9		11.9
Reductions from dispositions	(1.8)		—		—		(1.8)

Prior year acquisition allocations	9.8		—		2.9		12.7
Balance at December 31, 2023 (1)	$	229.8	$	—	$	24.0	$	253.8
Additions through current year acquisitions	—		—		—		—
Reductions from dispositions	—		—		—		—
Reductions from impairment	—		—		—		—
Prior year acquisition allocations	—		—		—		—
Balance at March 31, 2024 (1)	$	229.8	$	—	$	24.0	$	253.8

(1)Net of accumulated impairment losses of ~~approximately $797.6~~$1.1 billion and $202.9 million related to the Franchised Dealerships Segment and ~~$796.7 million, as of September 30, 2017 and December 31, 2016,~~the EchoPark Segment, respectively.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The changes in the carrying amount of franchise assets ~~was approximately $73.5 million and $74.9 million, as of September 30, 2017 and~~for the year ended December 31, ~~2016, respectively. Sonic reduced franchise assets by approximately $1.4 million for~~2023 and the ~~disposition of a dealership in the nine~~three months ended ~~September 30, 2017.~~

~~At December~~March 31, 2016, Sonic had approximately $5.3 million of definite life intangibles related to favorable lease agreements. After the effect of amortization of the definite life intangibles, the balance recorded at September 30, 2017 was approximately $4.9 million. Both franchise assets and favorable lease agreement assets are included in other intangible assets, net in the accompanying condensed consolidated balance sheets.

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

2024 were as follows:


	Franchised Dealerships Segment		EchoPark Segment		Powersports Segment		Total
	(In millions)
Balance at December 31, 2022	$	371.7	$	1.9	$	23.1	$	396.7
Additions through current year acquisitions	—		—		22.6		22.6
Reductions from dispositions	—		(1.9)		—		(1.9)


Balance at December 31, 2023	$	371.7	$	—	$	45.7	$	417.4
Additions through current year acquisitions	—		—		—		—
Reductions from dispositions	—		—		—		—


Balance at March 31, 2024	$	371.7	$	—	$	45.7	$	417.4

6. Long-Term Debt

Long-term debt consists of the following:

September 30, 2017

December 31, 2016

(In thousands)

2016 Revolving Credit Facility (1)

$
135,000

$
-

7.0% Senior Subordinated Notes due 2022 (the “7.0% Notes”)

-

200,000

5.0% Senior Subordinated Notes due 2023 (the “5.0% Notes”)

289,273

289,273

6.125% Senior Subordinated Notes due 2027 (the “6.125% Notes”)

250,000

-

Mortgage notes to finance companies-fixed rate, bearing interest from 3.51% to 7.03%

197,053

176,369

Mortgage notes to finance companies-variable rate, bearing interest at 1.50 to 2.90
percentage points above one-month or three-month LIBOR

214,132

227,342

Net debt discount and premium (2)

-

(1,258
)
Debt issuance costs

(13,625
)

(13,328
)
Other

4,032

4,280

Total debt

$
1,075,865

$
882,678

Less current maturities

(59,475
)

(43,003
)
Long-term debt

$
1,016,390

$
839,675

~~(1)~~

~~The interest rate on the 2016 Revolving Credit Facility (as defined below) was 225 basis points above LIBOR for both September 30, 2017 and December 31, 2016.~~


	March 31, 2024		December 31, 2023
	(In millions)
Revolving Credit Facility (1)	$	—	$	—


4.625% Senior Notes due 2029 (the “4.625% Notes”)	650.0		650.0
4.875% Senior Notes due 2031 (the “4.875% Notes”)	500.0		500.0
Mortgage Facility (2)	307.0		311.0
Mortgage notes to finance companies - fixed rate, bearing interest from 2.05% to 7.03%	152.8		163.0
Mortgage notes to finance companies - variable rate, bearing interest at 1.50% to 2.90% above one-month or three-month SOFR	67.9		75.6


Subtotal	$	1,677.7	$	1,699.6
Debt issuance costs	(26.3)		(23.0)
Total debt	1,651.4		1,676.6
Less current maturities	(68.0)		(60.1)
Long-term debt	$	1,583.4	$	1,616.5

~~(2)~~

~~December 31, 2016 includes a $1.1 million discount associated with the 7.0% Notes and a $0.2 million discount associated with mortgage notes payable.~~

(1)The interest rate on the Revolving Credit Facility (as defined below) was 125 basis points above one-month Adjusted Term SOFR (as defined in the Credit Facilities) at March 31, 2024 and 125 basis points above one-month Term SOFR (as defined in the Credit Facilities) at December 31, 2023.

~~2016~~

(2)The interest rate on the Mortgage Facility (as defined below) was 150 basis points above one-month Adjusted Term SOFR at March 31, 2024 and 150 basis points above one-month Term SOFR at December 31, 2023.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Credit Facilities

On ~~November 30, 2016, Sonic entered into an~~April 14, 2021, we amended and restated our syndicated revolving credit facility (the ~~“2016 Revolving~~“Revolving Credit Facility”) and ~~amended and restated~~our syndicated new and used vehicle floor plan credit facilities (the ~~“2016 Floor~~“Floor Plan Facilities” and, together with the ~~2016~~ Revolving Credit Facility, the ~~“2016~~“Credit Facilities”). The amendment and restatement of the Credit ~~Facilities”~~Facilities extended the scheduled maturity dates to April 14, 2025. On October 8, 2021, we amended the Credit Facilities to, among other things: (1) increase the aggregate commitments; and (2) permit the issuance of the 4.625% Notes and the 4.875% Notes. On October 7, 2022, we amended the Credit Facilities to, among other things: (i) replace the Credit Facilities’ London InterBank Offered Rate (“LIBOR”),-based Eurodollar reference interest rate option with Term SOFR (as defined in the Credit Facilities, inclusive of a 10-basis point credit spread adjustment); (ii) amend the provisions relating to the basis for inclusion of real property owned by the Company or certain of its subsidiaries in the borrowing base for the Revolving Credit Facility; (iii) amend the minimum amount of commitments under the Revolving Credit Facility and the proportion that such commitments may compose of the total Credit Facility commitments made by the lenders; and (iv) adjust aspects of the offset account used for voluntary reductions to interest under the Floor Plan Facilities.

On March 13, 2024, we amended the Credit Facilities (the “Sixth Credit Facility Amendment”) to extend the maturity date to March 13, 2029, with a permitted one-year extension option thereafter, and reduce the aggregate commitments to $2.4 billion. The commitment under the new vehicle revolving floor plan facility was increased to $1.35 billion, the commitment under the used vehicle revolving floor plan facility was reduced to $700.0 million and the commitment under the revolving credit facility remained at $350.0 million. The Sixth Credit Facility Amendment also includes an accordion feature in which ~~are scheduled~~the aggregate commitments may be increased at the Company’s option up to ~~mature~~$450.0 million allocated between the three facilities on ~~November 30, 2021.~~

a pro rata basis. The Sixth Credit Facility Amendment also contains the provision indicating that the Revolving Credit Facility commitments cannot be reduced below $50.0 million and may not consist of more than 40% of total commitments.

In addition, the Sixth Credit Facility Amendment (i) increased the basket for quarterly dividends from $0.12 to $0.18 per share of qualified capital stock; (ii) provided additional flexibility for the Company to make asset sales and repurchases of its qualified capital stock; (iii) removed the covenant requiring the Company to maintain a specified consolidated liquidity ratio; and (iv) amended the definition of “Adjusted Term SOFR” to clarify that it is inclusive of a 10-basis point credit spread adjustment. Amounts outstanding under the Credit Facilities bear interest at rates based upon specified credit spreads above Adjusted Term SOFR.

Availability under the ~~2016~~ Revolving Credit Facility is calculated as the lesser of ~~$250.0~~the current $350.0 million commitment or a borrowing base ~~calculated based on~~(the “Revolving Borrowing Base”) collateralized by certain eligible assets, less ~~the aggregate face amount of~~ any outstanding letters of credit ~~under~~and borrowings. As of March 31, 2024, the 2016 Revolving Credit Facility (the “2016 Revolving Borrowing Base”). The 2016 Revolving Credit Facility may be increased at Sonic’s option up to $300.0 million upon satisfaction of certain conditions. Based on balances as of September 30, 2017, the 2016 Revolving Borrowing Base was ~~approximately $236.3 million. As of September 30, 2017, Sonic~~$350.0 million and we had ~~$135.0 million outstanding borrowings and approximately $17.3~~$11.5 million in outstanding letters of credit ~~under the 2016 Revolving Credit Facility,~~and no borrowings, resulting in ~~total borrowing~~$338.5 million of availability ~~of $84.0 million~~ under the ~~2016~~ Revolving Credit Facility.

~~7.0%~~

Our obligations under the Credit Facilities are guaranteed by the Company and certain subsidiaries and are secured by a pledge of substantially all of the assets of the guarantors. We have agreed under the Credit Facilities not to pledge any assets to any third parties (other than those explicitly allowed to be pledged by the amended terms of the Credit Facilities), including other lenders, subject to certain stated exceptions, including floor plan financing arrangements. In addition, the Credit Facilities contain certain negative covenants, including covenants which could restrict or prohibit indebtedness, liens, the payment of dividends and other stockholder distributions, capital expenditures and material dispositions and acquisitions of assets, as well as other customary covenants and default provisions. Specifically, the Credit Facilities permit quarterly cash dividends on our Class A and Class B Common Stock up to $0.18 per share so long as no Event of Default (as defined in the Credit Facilities) has occurred and is continuing and provided that we remain in compliance with all financial covenants under the Credit Facilities. Dividends greater than $0.18 per share are permitted subject to limitations on restricted payments set forth in the Credit Facilities.

4.625%Notes

On ~~July 2, 2012, Sonic~~October 27, 2021, we issued ~~$200.0~~$650.0 million in aggregate principal amount of ~~unsecured senior subordinated 7.0%~~4.625% Notes, which ~~were scheduled to~~will mature on ~~July~~November 15, ~~2022.~~

~~On March 27, 2017,~~2029. Sonic ~~repurchased all of~~used the ~~outstanding 7.0% Notes using~~ net proceeds from the issuance of the ~~6.125% Notes. Sonic paid approximately $213.7 million in cash, including an early redemption premium and accrued and unpaid interest, to extinguish~~4.625% Notes, along with the ~~7.0% Notes and recognized a loss of approximately $14.6 million on the repurchase~~net proceeds of the ~~7.0%~~4.875% Notes, ~~recorded~~to fund the acquisition of RFJ Auto Partners, Inc. and its subsidiaries completed in ~~other income (expense), net in the accompanying condensed consolidated statements of income.~~

December 2021 (“RFJ Acquisition”) and to repay existing debt.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~5.0% Notes~~

~~On May 9, 2013, Sonic issued $300.0 million in aggregate principal amount of unsecured senior subordinated 5.0% Notes which mature on May 15, 2023.~~

The ~~5.0%~~4.625% Notes were issued atunder an Indenture, dated as of October 27, 2021 (the “2029 Indenture”), by and among the Company, certain subsidiary guarantors named therein (collectively, the “Guarantors”) and U.S. Bank National Association, as trustee (the “trustee”). The 4.625% Notes are unconditionally guaranteed, jointly and severally, on a ~~price of 100.0%~~senior unsecured basis initially by all of the ~~principal amount thereof. The 5.0% Notes are guaranteed by Sonic’s~~Company’s domestic operating subsidiaries. ~~Interest~~The parent company has no independent assets or operations. The non-domestic operating subsidiary that is not a guarantor is considered minor. Under certain circumstances set forth in the 2029 Indenture, the guarantees of the certain subsidiaries of the Company comprising the EchoPark Business (as defined in the 2029 Indenture) may be released. The 2029 Indenture also provides substantial flexibility for the Company to enter into fundamental transactions involving the EchoPark Business. The 2029 Indenture provides that interest on the ~~5.0%~~4.625% Notes iswill be payable semi-annually in arrears on May 15 and November 15 of each ~~year. On September 30, 2016, Sonic repurchased approximately $10.7 million~~year beginning May 15, 2022. The 2029 Indenture also contains other restrictive covenants and default provisions common for an issue of ~~its outstanding 5.0%~~senior notes of this nature. The 4.625% Notes ~~for approximately $10.6 million in cash, plus accrued and unpaid interest related thereto. See~~are redeemable by the Company under certain circumstances. For further discussion of the 4.625% Notes, see Note 6, “Long-Term Debt,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2016 for further discussion.~~

~~6.125%~~2023.

4.875% Notes

On ~~March 10, 2017, Sonic~~October 27, 2021, we issued ~~$250.0~~$500.0 million in aggregate principal amount of ~~unsecured senior subordinated 6.125%~~4.875% Notes, which will mature on ~~March~~November 15, ~~2027. The 6.125% Notes were issued at a price of 100.0% of the principal amount thereof.~~2031. Sonic used the net proceeds from the issuance of the ~~6.125%~~4.875% Notes, along with the net proceeds of the 4.625% Notes, to ~~repurchase~~fund the RFJ Acquisition and to repay existing debt.

The 4.875% Notes were issued under an Indenture, dated as of October 27, 2021 (the “2031 Indenture”), by and among the Company, the Guarantors and the trustee. The 4.875% Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis initially by all of the ~~outstanding 7.0% Notes on March 27, 2017. Remaining proceeds from the issuance of the 6.125% Notes will be used for general corporate purposes. The 6.125% Notes are guaranteed by Sonic’s~~Company’s domestic operating subsidiaries. ~~Interest~~The parent company has no independent assets or operations. The non-domestic operating subsidiary that is not a guarantor is considered minor. Under certain circumstances set forth in the 2031 Indenture, the guarantees of the certain subsidiaries of the Company comprising the EchoPark Business (as defined in the 2031 Indenture) may be released. The 2031 Indenture also provides substantial flexibility for the Company to enter into fundamental transactions involving the Echo-Park Business. The 2031 Indenture provides that interest on the ~~6.125%~~4.875% Notes iswill be payable semi-annually in arrears on ~~March~~May 15 and ~~September~~November 15 of each ~~year. Sonic may redeem~~year beginning May 15, 2022. The 2031 Indenture also contains other restrictive covenants and default provisions common for an issue of senior notes of this nature. The 4.875% Notes are redeemable by the ~~6.125% Notes, in whole or in part, at any time on or after March 15, 2022 at the following redemption prices, which are expressed as percentages~~Company under certain circumstances. For further discussion of the ~~principal amount:~~

4.875% Notes, see Note 6, “Long-Term Debt,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, 2023.

	~~Redemption~~ ~~Price~~
~~Beginning on March 15, 2022~~		~~103.063~~	%
~~Beginning on March 15, 2023~~		~~102.042~~	%
~~Beginning on March 15, 2024~~		~~101.021~~	%
~~Beginning on March 15, 2025 and thereafter~~		~~100.000~~	%

~~Before March 15, 2022, Sonic may redeem all or~~

Mortgage Facility

On November 22, 2019, we entered into a ~~part~~delayed draw-term loan credit agreement, which was scheduled to mature on November 22, 2024 (the “Mortgage Facility”). On October 11, 2021, we entered into an amendment to the Mortgage Facility to permit the consummation of the ~~6.125%~~RFJ Acquisition and the issuance of the 4.625% Notes atand the 4.875% Notes. On November 17, 2022, we entered into an amendment to the Mortgage Facility to, among other things, extend the scheduled maturity date to November 17, 2027.

On November 17, 2022, in connection with the closing of the Fourth Mortgage Facility Amendment, the Company incurred a ~~redemption price equal~~$320.0 million term loan, with a portion of the proceeds used to ~~100.0% of~~repay the entire $77.6 million principal amount of a prior term loan. The $320.0 million borrowing amortizes on a fixed schedule through the ~~6.125% Notes redeemed, plus~~maturity date. In addition, the ~~Applicable Premium~~lenders under the Mortgage Facility committed to providing, upon the terms set forth in the Fourth Mortgage Facility Amendment and upon the pledging of sufficient collateral by the Company, delayed draw-term loans in an aggregate principal amount up to $85.0 million (the “Delayed Draw Credit Facility”) and revolving loans in an aggregate principal amount not to exceed $95.0 million. Based on this, the aggregate commitments of the lenders under the Mortgage Facility equaled a total of $500.0 million, after satisfaction of the conditions set forth in the Mortgage Facility, including the appraisal and pledging of collateral of a specified value. The Fourth Mortgage Facility Amendment also (i) replaced the Mortgage Facility’s LIBOR-based Eurodollar reference interest rate option one-month Term SOFR (as defined in the ~~indenture governing the 6.125% Notes)~~Mortgage Facility); and ~~any accrued and unpaid interest, if any,~~(ii) made changes to the ~~redemption date.~~ ~~In addition,~~pricing grid for loans incurred under the Mortgage Facility, specifying credit spreads based on ~~or before March 15, 2020, Sonic may redeem up to 35% of~~ the aggregate principal amount of the 6.125% Notes at a redemption price equal to 106.125% of the par value of the 6.125% Notes redeemed, plus accrued and unpaid interest, if any, to the redemption date with proceeds from certain equity offerings. The indenture governing the 6.125% Notes also provides that holders of the 6.125% Notes may require Sonic to repurchase the 6.125% Notes at a purchase price equal to 101.0% of the par value of the 6.125% Notes, plus accrued and unpaid interest, if any, to the date of purchase if Sonic undergoes a Change of ControlCompany’s Consolidated Total Lease Adjusted Leverage Ratio (as defined in the ~~indenture governing~~Mortgage Facility). As permitted by this amendment, the ~~6.125% Notes).~~

~~The indenture governing~~Company incurred a term loan under the ~~6.125% Notes contains certain specified restrictive covenants. Sonic has agreed not~~Delayed Draw Credit Facility with a principal amount of $7.0 million on November 18, 2022.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On March 22, 2024, we entered into an amendment to ~~pledge any assets~~the Mortgage Facility (the “Fifth Mortgage Facility Amendment”) to ~~any third-party lender of senior subordinated debt except under certain limited circumstances. Sonic also has agreed~~conform to certain other limitations or prohibitions concerning the incurrence of other indebtedness, guarantees, liens, certain types of investments, certain transactions with affiliates, mergers, consolidations, issuance of preferred stock, cash dividends to stockholders, distributions, redemptions and the sale, assignment, lease, conveyance or disposal of certain assets. Specifically, the indenture governing the 6.125% Notes limits Sonic’s ability to pay quarterly cash dividends on Sonic’s Class A and Class B common stock in excess of $0.12 per share. Sonic may only pay quarterly cash dividends on Sonic’s Class A and Class B common stock if Sonic complies with the terms of the ~~indenture governing~~Sixth Credit Facility Amendment including (i) adding certain specified share exchange transactions as permitted restricted payments and dispositions; (ii) removing the ~~6.125% Notes. Sonic was~~requirement that the Company maintain a specified consolidated liquidity ratio; and (iii) increasing the basket for quarterly dividends from $0.12 to $0.18 per share of qualified capital stock.

As of March 31, 2024, we had $307.0 million of outstanding borrowings and $173.0 million available under the Mortgage Facility.

Interest on the Mortgage Facility is paid monthly in ~~compliance with all restrictive covenants in~~arrears. Amortizing principal payments are scheduled to be $4.0 million per quarter from the ~~indenture governing~~quarter ending March 31, 2023 through the ~~6.125% Notes as of~~quarter ending December 31, 2024 and $6.0 million per quarter from the quarter ending March 31, 2025 through the quarter ending September 30, ~~2017.~~

~~Sonic’s obligations under~~2027 with the ~~6.125% Notes may be accelerated by~~remaining balance due on the ~~holders of 25%~~November 17, 2027 maturity date. The Company has the right to prepay outstanding principal at any time without premium or penalty provided the prepayment amount exceeds $0.5 million.

For further discussion of the ~~outstanding principal amount of~~Mortgage Facility, see Note 6, “Long-Term Debt,” to the ~~6.125%~~consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, 2023.

Mortgage Notes then outstanding if certain events of default occur, including: (1) defaults in the payment of principal or interest when due; (2) defaults in the performance, or breach, of Sonic’s covenants under the 6.125% Notes; and (3) certain defaults under other agreements under which Sonic or its subsidiaries have outstanding indebtedness in excess of $50.0 million.

~~Mortgage Notes~~

~~During the nine months ended September 30,~~ ~~2017, Sonic obtained approximately $38.4 million in mortgage financing related~~ to ~~seven of its operating locations.~~ Finance Companies

As of ~~September 30,~~ ~~2017~~,March 31, 2024, the ~~weighted average~~weighted-average interest rate of our other outstanding mortgage notes (excluding the Mortgage Facility) was ~~4.01%~~5.20% and the total outstanding mortgage principal balance of these notes (excluding the Mortgage Facility) was approximately ~~$411.2 million, related to approximately 45% of Sonic’s operating locations.~~$220.8 million. These mortgage

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

notes require monthly payments of principal and interest through their respective maturities, ~~and~~ are secured by the underlying ~~properties.~~properties and contain certain cross-default provisions. Maturity dates for these mortgage notes range ~~between 2017 and~~from 2024 to 2033.

Covenants

~~Sonic agreed under the 2016~~

The Credit Facilities ~~not to pledge any assets to any third party (other than those explicitly allowed under~~and the ~~amended terms of the 2016 Credit Facilities), including other lenders, subject to certain stated exceptions, including floor plan financing arrangements. In addition, the 2016 Credit Facilities~~Mortgage Facility contain certain negative covenants, including covenants which could restrict or prohibit indebtedness, liens, the payment of dividends and other restricted payments, capital expenditures and material dispositions and acquisitions of assets, as well as other customary covenants and default provisions.

~~Sonic was~~ The Credit Facilities and the Mortgage Facility also contain limitations on our ability to pledge assets to third parties, subject to certain stated exceptions.

We were in compliance with the financial covenants under the ~~2016~~ Credit Facilities and the Mortgage Facility as of ~~September 30, 2017.~~March 31, 2024. Financial covenants include required specified ratios (as each is defined in the ~~2016 Credit Facilities) of:~~

Covenant

Minimum
Consolidated
Liquidity
Ratio

Minimum
Consolidated
Fixed Charge
Coverage
Ratio

Maximum
Consolidated
Total Lease
Adjusted Leverage
Ratio

Required ratio

1.05

1.20

5.75

September 30, 2017 actual

1.12

1.75

4.84

~~The 2016~~ Credit Facilities and the Mortgage Facility) of:


	Covenant
	Minimum Consolidated Fixed Charge Coverage Ratio	Maximum Consolidated Total Lease Adjusted Leverage Ratio
Required ratio	1.20	5.75
March 31, 2024 actual	1.94	3.10

The Credit Facilities and the Mortgage Facility contain events of default, including cross defaults to other material indebtedness, change of control events and other events of default customary for syndicated commercial credit facilities. Upon the future occurrence of an event of default, ~~Sonic~~we could be required to immediately repay all outstanding amounts under the ~~2016~~ Credit ~~Facilities.~~

Facilities and the Mortgage Facility.

After giving effect to the applicable restrictions on the payment of dividends under ~~its~~our debt agreements, as of ~~September~~ ~~30, 2017, Sonic~~March 31, 2024, we had approximately ~~$113.6~~$264.1 million of net income and retained earnings free of such restrictions. ~~Sonic was~~We were in compliance with all restrictive covenants under our debt agreements as of ~~September~~ ~~30, 2017~~.

March 31, 2024.

In addition, many of ~~Sonic’s~~our facility leases are governed by a guarantee agreement between the landlord and ~~Sonic~~us that contains financial and operating covenants. The financial covenants under the guarantee agreement are identical to those under the ~~2016~~ Credit Facilities and the Mortgage Facility with the exception of one additional financial covenant related to the ratio of ~~EBTDAR~~EBITDAR to Rent (as defined in the guarantee agreement) with a required ratio of no less than 1.50 to 1.00. As of ~~September 30, 2017,~~March 31, 2024, the ratio was ~~3.83~~11.70 to 1.00.

~~Derivative Instruments and Hedging Activities~~

Sonic has interest rate cash flow swap agreements to effectively convert a portion of its LIBOR-based variable rate debt to a fixed rate. In addition, Sonic has interest rate cap agreements to limit its exposure to increases in LIBOR rates above certain levels. Under the terms of these cash flow swaps and interest rate caps, interest rates reset monthly. The fair value of these interest rate swap and rate cap positions at September 30, 2017 was a net asset of approximately $1.4 million, with approximately $3.8 million included in other assets and approximately $0.5 million included in other current assets in the accompanying condensed consolidated balance sheets, offset partially by approximately $1.8 million included in other accrued liabilities and approximately $1.1 million included in other long-term liabilities in the accompanying condensed consolidated balance sheets. The fair value of the interest rate swap positions at December 31, 2016 was a net liability of approximately $3.7 million, with approximately $4.1 million included in other accrued liabilities and approximately $2.4 million included in other long-term liabilities in the accompanying condensed consolidated balance sheets, offset partially by approximately $2.8 million included in other assets in the accompanying condensed consolidated balance sheets.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Under the terms of these cash flow swaps, Sonic will receive~~

7. Commitments and ~~pay interest based on the following:~~

Notional
Amount

Pay
Rate

Receive Rate (1)

Maturing Date
(In millions)

$
6.8

4.655%

one-month LIBOR

December 10, 2017
$
250.0

1.887%

one-month LIBOR

June 30, 2018
$
125.0

1.900%

one-month LIBOR

July 1, 2018
$
50.0

(2)

2.320%

one-month LIBOR

July 1, 2019
$
200.0

(2)

2.313%

one-month LIBOR

July 1, 2019
$
100.0

(3)

1.384%

one-month LIBOR

July 1, 2020
$
125.0

(2)

1.158%

one-month LIBOR

July 1, 2019
$
150.0

(3)

1.310%

one-month LIBOR

July 1, 2020
$
125.0

1.020%

one-month LIBOR

July 1, 2018
$
62.5

(4)

2.000%

one-month LIBOR

July 1, 2021
$
62.5

(4)

2.000%

one-month LIBOR

July 1, 2021
$
62.5

(4)

2.000%

one-month LIBOR

July 1, 2021
$
62.5

(4)

2.000%

one-month LIBOR

July 1, 2021

~~(1)~~

~~The one-month LIBOR rate was approximately 1.232% at September 30, 2017.~~

Contingencies

~~(2)~~

~~The effective date of these forward-starting swaps is July 2, 2018.~~

~~(3)~~

~~The effective date of these forward-starting swaps is July 1, 2019.~~

~~(4)~~

The notional amount of these interest rate caps adjusts over the term of the agreement as follows: $62.5 million from September 1, 2017 to June 30, 2018, $93.75 million from July 1, 2018 to June 30, 2019, $78.125 million from July 1, 2019 to June 30, 2020, and $37.5 million from July 1, 2020 to July 1, 2021.

Sonic previously had non-hedging swaps that have matured, but the instruments impact on the income statement is as follows: for the interest rate swaps not designated as cash flow hedges, the changes in the fair value of these swaps are recognized through earnings and are included in interest expense, other, net in the accompanying condensed consolidated statements of income. For the three and nine months ended September 30, 2017, these items were a benefit of approximately $0.1 million and $0.3 million, respectively, and for the three and nine months ended September 30, 2016, these items were a benefit of approximately $0.2 million and $0.4 million, respectively.

For the interest rate swaps and rate caps that qualify as cash flow hedges, the changes in the fair value of these instruments are recorded in other comprehensive income (loss) in the accompanying condensed consolidated statements of comprehensive income and are disclosed in the supplemental schedule of non-cash financing activities in the accompanying condensed consolidated statements of cash flows. The incremental interest expense (the difference between interest paid and interest received) related to these instruments was approximately $0.7 million and $2.6 million for the three and nine months ended September 30, 2017, respectively, and approximately $1.5 million and $4.1 million for the three and nine months ended September 30, 2016, respectively, and is included in interest expense, other, net in the accompanying condensed consolidated statements of income and the interest paid amount is disclosed in the supplemental disclosures of cash flow information in the accompanying condensed consolidated statements of cash flows. The estimated net expense expected to be reclassified out of accumulated other comprehensive income (loss) into results of operations during the next 12 months is approximately $0.8 million.

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~7. Per Share Data and Stockholders’ Equity~~

The calculation of diluted earnings per share considers the potential dilutive effect of stock options and shares under Sonic’s stock compensation plans. Certain of Sonic’s non-vested restricted stock awards contain rights to receive non-forfeitable dividends and, thus, are considered participating securities and are included in the two-class method of computing earnings per share. The following tables illustrate the dilutive effect of such items on earnings per share for the three and nine months ended September 30, 2017 and 2016:

Three Months Ended September 30, 2017

Income (Loss)

Income (Loss)

From Continuing

From Discontinued

Net

Operations

Operations

Income (Loss)

Weighted

Per

Per

Per

Average

Share

Share

Share

Shares

Amount

Amount

Amount

Amount

Amount

Amount

(In thousands, except per share amounts)

Earnings (loss) and shares

43,496

$
19,730

$
(290
)

$
19,440

Effect of participating securities:

Non-vested restricted stock

(18
)

-

(18
)

Basic earnings (loss) and shares

43,496

$
19,712

$
0.45

$
(290
)

$
-

$
19,422

$
0.45

Effect of dilutive securities:

Stock compensation plans

315

Diluted earnings (loss) and shares

43,811

$
19,712

$
0.45

$
(290
)

$
(0.01
)

$
19,422

$
0.44

Three Months Ended September 30, 2016

Income (Loss)

Income (Loss)

From Continuing

From Discontinued

Net

Operations

Operations

Income (Loss)

Weighted

Per

Per

Per

Average

Share

Share

Share

Shares

Amount

Amount

Amount

Amount

Amount

Amount

(In thousands, except per share amounts)

Earnings (loss) and shares

45,118

$
18,969

$
(858
)

$
18,111

Effect of participating securities:

Non-vested restricted stock

(11
)

-

(11
)

Basic earnings (loss) and shares

45,118

$
18,958

$
0.42

$
(858
)

$
(0.02
)

$
18,100

$
0.40

Effect of dilutive securities:

Stock compensation plans

236

Diluted earnings (loss) and shares

45,354

$
18,958

$
0.42

$
(858
)

$
(0.02
)

$
18,100

$
0.40

Nine Months Ended September 30, 2017

Income (Loss)

Income (Loss)

From Continuing

From Discontinued

Net

Operations

Operations

Income (Loss)

Weighted

Per

Per

Per

Average

Share

Share

Share

Shares

Amount

Amount

Amount

Amount

Amount

Amount

(In thousands, except per share amounts)

Earnings (loss) and shares

44,281

$
32,024

$
(993
)

$
31,031

Effect of participating securities:

Non-vested restricted stock

(28
)

-

(28
)

Basic earnings (loss) and shares

44,281

$
31,996

$
0.72

$
(993
)

$
(0.02
)

$
31,003

$
0.70

Effect of dilutive securities:

Stock compensation plans

304

Diluted earnings (loss) and shares

44,585

$
31,996

$
0.72

$
(993
)

$
(0.02
)

$
31,003

$
0.70

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Nine Months Ended September 30, 2016

Income (Loss)

Income (Loss)

From Continuing

From Discontinued

Net

Operations

Operations

Income (Loss)

Weighted

Per

Per

Per

Average

Share

Share

Share

Shares

Amount

Amount

Amount

Amount

Amount

Amount

(In thousands, except per share amounts)

Earnings (loss) and shares

45,930

$
56,475

$
(918
)

$
55,557

Effect of participating securities:

Non-vested restricted stock

(31
)

-

(31
)

Basic earnings (loss) and shares

45,930

$
56,444

$
1.23

$
(918
)

$
(0.02
)

$
55,526

$
1.21

Effect of dilutive securities:

��

Stock compensation plans

200

Diluted earnings (loss) and shares

46,130

$
56,444

$
1.22

$
(918
)

$
(0.02
)

$
55,526

$
1.20

~~8. Contingencies~~

~~Legal and Other Proceedings~~

Sonic is involved, and expects to continue to be involved, in various legal and administrative proceedings arising out of the conduct of its business, including regulatory investigations and private civil actions brought by plaintiffs purporting to represent a potential class or for which a class has been certified. Although Sonic vigorously defends itself in all legal and administrative proceedings, the outcomes of pending and future proceedings arising out of the conduct of Sonic’s business, including litigation with customers, employment-related lawsuits, contractual disputes, class actions, purported class actions and actions brought by governmental authorities, cannot be predicted with certainty. An unfavorable resolution of one or more of these matters could have a material adverse effect on Sonic’s business, financial condition, results of operations, cash flows or prospects.

~~Included in other accrued liabilities and other long-term liabilities at~~ ~~September 30, 2017 was approximately $3.0 million and $0.2 million, respectively, in reserves that Sonic was holding for pending proceedings. Included in~~ ~~other accrued liabilities and other long-term liabilities~~ at December 31, 2016 was approximately $0.3 million and $0.2 million, respectively, for such reserves. Except as reflected in such reserves, Sonic is currently unable to estimate a range of reasonably possible loss, or a range of reasonably possible loss in excess of the amount accrued, for pending proceedings.

Guarantees and Indemnification Obligations

In accordance with the terms of ~~Sonic’s~~our operating lease agreements, ~~Sonic’s~~our dealership subsidiaries, acting as lessees, generally agree to indemnify the lessor from certain exposure arising as a result of the use of the leased premises, including environmental exposure and repairs to leased property upon termination of the lease. In addition, ~~Sonic has~~we have generally agreed to indemnify the lessor in the event of a breach of the lease by the lessee.

In connection with dealership dispositions and facility relocations, certain of ~~Sonic’s~~our subsidiaries have assigned or sublet to the buyer their interests in real property leases associated with such dealerships. In general, the subsidiaries retain responsibility for the performance of certain obligations under such leases, including rent payments and repairs to leased property upon termination of the lease, to the extent that the assignee or the sublessee does not perform. In the event an assignee or a sublessee does not perform its obligations, Sonic remains liable for the lease payments. See Note 12, “Commitments and Contingencies,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, 2016 for further discussion.

such obligations.

In accordance with the terms of agreements entered into for the sale of ~~Sonic’s~~our dealerships, ~~Sonic~~we generally ~~agrees~~agree to indemnify the buyer from certain liabilities and costs arising subsequent to the date of sale, including environmental exposure and exposure resulting from the breach of representations or warranties made in accordance with the agreements. While ~~Sonic’s~~our exposure with respect to environmental remediation ~~and repairs~~ is difficult to quantify, ~~Sonic’s~~our maximum exposure associated with these general indemnifications was approximately ~~$0.5~~$8.0 million atas of both ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016.~~2023. These indemnifications typically expire within a period of one to three years following the date of sale. The estimated fair value of these indemnifications was not material and the amount recorded for this contingency was not significant at ~~September 30, 2017.~~

~~Sonic~~March 31, 2024.

We also ~~guarantees~~guarantee the floor plan commitments of ~~its~~our 50%-owned joint venture, and the amount of ~~which was approximately $2.8 million~~such guarantee at both ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016.~~

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Earnout Consideration~~

~~In association~~2023 was approximately $4.3 million.

Legal Matters

Sonic is involved, and expects to continue to be involved, in various legal and administrative proceedings arising out of the conduct of its business, including regulatory investigations and private civil actions brought by plaintiffs purporting to represent a potential class or for which a class has been certified. Although Sonic is unable to predict with certainty the ~~acquisition~~outcome of any litigation, regulatory investigation or inquiry, in the opinion of management, Sonic does not believe it is reasonably possible that its current and threatened legal proceedings will have a material adverse effect on Sonic’s business, ~~Sonic entered into an earnout agreement whereby~~financial position or consolidated results of operations. Given the ~~seller may be entitled~~inherent unpredictability of these types of proceedings, however, it is possible that future adverse outcomes could have a material adverse effect on Sonic’s financial results.

There were no significant liabilities recorded related to ~~certain earnout payments based on the acquired business achieving certain earnings targets over a 10-year period, not to exceed a maximum aggregate earnout payment~~legal matters as of ~~$80.0 million. As management has not yet finalized the purchase accounting estimates for this acquisition, the estimated fair value of this earnout agreement~~March 31, 2024 and ~~the amount recorded for this contingency have not yet been determined.~~

9.December 31, 2023.

8. Fair Value Measurements

In determining fair value, Sonic uses various valuation approaches including market, income and/or cost approaches. “Fair Value Measurements and Disclosures” in the Accounting Standards Codification establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of Sonic. Unobservable inputs are inputs that reflect Sonic’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that Sonic has the ability to access. Assets utilizing Level 1 inputs include marketable securities that are actively traded, including Sonic’s stock or public bonds.

Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Assets and liabilities utilizing Level 2 inputs include cash flow swap instruments and deferred compensation plan balances.

Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Asset and liability measurements utilizing Level 3 inputs include those used in estimating fair value of non-financial assets and non-financial liabilities in purchase acquisitions, those used in assessing impairment of property, plant and equipment and other intangibles and those used in the reporting unit valuation in the annual goodwill impairment evaluation.

The availability of observable inputs can vary and is affected by a wide variety of factors. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment required by Sonic in determining fair value is greatest for assets and liabilities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input (Level 3 being the lowest level) that is significant to the fair value measurement.

Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, Sonic’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. Sonic uses inputs that are current as of the measurement date, including during periods when the market may be abnormally high or abnormally low. Accordingly, fair value measurements can be volatile based on various factors that may or may not be within Sonic’s control.

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Assets and liabilities recorded at fair value in the accompanying unaudited condensed consolidated balance sheets as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016 are~~2023 were as follows:

Fair Value Based on
Significant Other Observable
Inputs (Level 2)

September 30, 2017

December 31, 2016

(In thousands)

Assets:

Cash surrender value of life insurance policies (1)

$
32,745

$
31,475

Cash flow swaps and interest rate caps designated as hedges (2)

4,290

2,772

Total assets

$
37,035

$
34,247

Liabilities:

Cash flow swaps and interest rate caps designated as hedges (3)

$
2,903

$
6,135

Cash flow swaps not designated as hedges (4)

-

346

Deferred compensation plan (5)

17,216

14,824

Total liabilities

$
20,119

$
21,305


	Fair Value Based on Significant Other Observable Inputs (Level 2)
	March 31, 2024		December 31, 2023
	(In millions)
Assets:
Cash surrender value of life insurance policies (1)	$	43.9	$	42.9
Interest rate caps designated as hedges (2)	1.1		1.0
Total assets	$	45.0	$	43.9

~~(1)~~

(1)Included in other assets ~~in the accompanying condensed consolidated balance sheets.~~

~~(2)~~

As of September 30, 2017, approximately $0.5 million and $3.8 million were included in other current assets and other assets, respectively, in the accompanying condensed consolidated balance sheets. As of December 31, 2016, approximately $2.8 million was included in other assets in the accompanying condensed consolidated balance sheets.

~~(3)~~

As of September 30, 2017, approximately $1.8 million and $1.1 million were included in other accrued liabilities and other long-term liabilities, respectively, in the accompanying condensed consolidated balance sheets. As of December 31, 2016, approximately $3.7 million and $2.4 million were included in other accrued liabilities and other long-term liabilities, respectively, in the accompanying condensed consolidated balance sheets.

~~(4)~~

~~Included in other accrued liabilities in the accompanying condensed consolidated balance sheets.~~

~~(5)~~

~~Included in other long-term liabilities in the accompanying condensed consolidated balance sheets.~~

During the three months ended September 30, 2016, Sonic acquired three stand-alone pre-owned vehicle businesses and related real estate. As a result of continued operating losses at these locations, management decided to cease operations of two of these businesses during the nine months ended September 30, 2017. As these businesses were never integrated into the reporting unit after acquisition, and thus the benefits of acquired goodwill were never realized by the rest of the reporting unit, Sonic determined that it was appropriate to impair approximately $0.9 million of goodwill related to the closure of these two businesses. In addition, Sonic impaired approximately $0.8 million of property and equipment related to the two closed businesses’ operating locations. Other than these items, there were no instances in the nine months ended September 30, 2017 which required a fair value measurement of assets ordinarily measured at fair value on a non-recurring basis. These assets will be evaluated as of the annual valuation assessment date of October 1, 2017, or as events or changes in circumstances require.

accompanying unaudited condensed consolidated balance sheets.

(2)As of ~~September 30, 2017~~March 31, 2024, approximately $1.1 million was included in other current assets in the accompanying unaudited condensed consolidated balance sheets. As of December 31, 2023, approximately $1.0 million was included in other current assets in the accompanying unaudited condensed consolidated balance sheets.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2024 and December 31, ~~2016,~~2023, the fair values of Sonic’s financial instruments, including receivables, notes receivable from finance contracts, notes payable – floor plan, trade accounts payable, borrowings under the revolving credit facilities and certain mortgage notes, approximated their carrying values due either to length of maturity or existence of variable interest rates that approximate prevailing market rates.

~~SONIC AUTOMOTIVE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~At September 30, 2017~~

As of March 31, 2024 and December 31, ~~2016,~~2023, the fair value and the carrying value of Sonic’s significant fixed rate long-term debt were as follows:

September 30, 2017

December 31, 2016

Fair Value

Carrying Value

Fair Value

Carrying Value

(In thousands)

7.0% Notes (1)

$
-

$
-

$
211,000

$
198,871

5.0% Notes (1)

$
282,764

$
289,273

$
284,934

$
289,273

6.125% Notes (1)

$
256,875

$
250,000

$
-

$
-

Mortgage Notes (2)

$
200,614

$
197,053

$
185,979

$
176,369

Other (2)

$
3,836

$
4,031

$
4,057

$
4,280

~~(1)~~

~~As determined by market quotations as of September 30, 2017 and December 31, 2016, respectively (Level 1).~~

~~(2)~~

March 31, 2024 December 31, 2023
Fair Value Carrying Value Fair Value Carrying Value
(In millions)
4.875% Notes (1) $ 435.0 $ 500.0 $ 447.5 $ 500.0
4.625% Notes (1) $ 578.5 $ 650.0 $ 591.5 $ 650.0
Mortgage Notes (2) $ 147.1 $ 152.8 $ 156.6 $ 163.0

(1)As determined by market quotations from similar securities as of March 31, 2024 and December 31, 2023, respectively (Level 2).

(2)As determined by the discounted ~~cash flows (Level 3).~~

~~10. Accumulated Other Comprehensive Income (Loss)~~

~~The changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2017 are as follows:~~

Gains and
Losses on
Cash Flow
Hedges

Defined
Benefit
Pension
Plan

Total
Accumulated
Other
Comprehensive
Income (Loss)

(In thousands)

Balance at December 31, 2016

$
(2,085
)

$
(177
)

$
(2,262
)

Other comprehensive income (loss) before reclassifications (1)

27

-

27

Amounts reclassified out of accumulated
other comprehensive income (loss) (2)

1,765

-

1,765

Net current-period other comprehensive income (loss)

1,792

-

1,792

Balance at September 30, 2017

$
(293
)

$
(177
)

$
(470
)

~~(1)~~

~~Net of tax expense of $18.~~

~~(2)~~

~~Net of tax expense of $1,081.~~

~~See the heading “Derivative Instruments and Hedging Activities” in Note 6, “Long-Term Debt,” for further discussion of Sonic’s~~ cash flow ~~hedges.~~ method (Level 2).

For further discussion of Sonic’s ~~defined benefit pension plan,~~fair value measurements, see Note ~~10, “Employee Benefit Plans,~~11, “Fair Value Measurements,” to the consolidated financial statements in Sonic’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

~~11.~~2023.

9. Segment Information

As of ~~September 30, 2017,~~March 31, 2024, Sonic had ~~two~~three operating ~~segments comprised of:~~segments: (1) retail automotive franchises that sell new vehicles and buy and sell used vehicles, sell replacement parts, perform vehicle ~~repair~~maintenance, warranty and ~~maintenance~~repair services, and arrange finance and insurance products (the “Franchised Dealerships Segment”) ~~and~~; (2) ~~stand-alone~~ pre-owned vehicle specialty retail locations that ~~buy~~provide guests an opportunity to search our nationwide inventory, purchase a pre-owned vehicle, select finance and insurance products and sell their current vehicle to us (the “EchoPark Segment”); and (3) retail locations that sell new and used powersports vehicles, perform vehicle ~~repair~~maintenance, warranty and ~~maintenance~~repair services, and arrange finance and insurance products ~~under the EchoPark and other pre-owned brands~~ (the ~~“Pre-Owned Stores~~“Powersports Segment”).

Sonic has determined that its operating segments also represent its reportable segments.

The ~~operating~~reportable 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~~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 and President;~~Officer; (2) the Company’s ~~Executive Vice President and Chief Financial Officer;~~President; and (3) the Company’s ~~Executive Vice President of Operations. Sonic has determined that its operating segments also represent its reportable segments.~~

Chief Financial Officer.

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Reportable segment ~~revenues~~financial information for the three months ended March 31, 2024 and ~~segment~~2023 were as follows:


	Three Months Ended March 31,
	2024		2023
	(In millions)
Segment Revenues:
Franchised Dealerships Segment revenues:
Retail new vehicles	$	1,439.9	$	1,421.0
Fleet new vehicles	19.6		18.8
Total new vehicles	1,459.5		1,439.8
Used vehicles	729.3		767.6
Wholesale vehicles	48.6		58.4
Parts, service and collision repair	439.9		423.8
Finance, insurance and other, net	119.6		117.1
Franchised Dealerships Segment revenues	$	2,796.9	$	2,806.7

EchoPark Segment revenues:
Retail new vehicles	$	—	$	1.0
Used vehicles	482.9		572.5
Wholesale vehicles	28.6		27.0

Finance, insurance and other, net	47.9		50.0
EchoPark Segment revenues	$	559.4	$	650.5

Powersports Segment revenues:
Retail new vehicles	$	15.9	$	20.8


Used vehicles	3.4		4.8
Wholesale vehicles	0.1		0.2
Parts, service and collision repair	6.8		6.7
Finance, insurance and other, net	1.5		1.5
Powersports Segment revenues	$	27.7	$	34.0

Total consolidated revenues	$	3,384.0	$	3,491.2


	Three Months Ended March 31,
	2024		2023
	(In millions)
Segment Income (Loss) (1):
Franchised Dealerships Segment (2)	$	62.7	$	109.8
EchoPark Segment (3)	(2.9)		(46.8)
Powersports Segment	(2.3)		0.6
Total segment income	$	57.5	$	63.6
Impairment charges (4)	(1.0)		—
Income before taxes	$	56.5	$	63.6

(1)Segment income (loss) for each segment is defined as income (loss) before taxes and impairment charges.

(2)For the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024, amount includes approximately $2.2 million of pre-tax charges for severance and ~~2016 are as follows:~~

long-term compensation expense and approximately $1.0 million of pre-tax impairment charges related to property and equipment.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(In thousands)

Revenues:

Franchised Dealerships

$
2,448,574

$
2,514,240

$
7,051,291

$
7,077,666

Pre-Owned Stores

57,127

43,688

147,978

97,200

Total consolidated revenues

$
2,505,701

$
2,557,928

$
7,199,269

$
7,174,866

(3)For the three months ended March 31, 2024, amount includes approximately $2.1 million of pre-tax charges for severance and long-term compensation expense and approximately $2.1 million of pre-tax charges related to closed store accrued expenses related to the indefinite suspension of operations at certain EchoPark locations. For the three months ended March 31, 2023, amount includes approximately $2.0 million of pre-tax charges for long-term compensation expense.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(In thousands)

Segment income (loss) (1):

Franchised Dealerships

$
51,384

$
48,265

$
125,397

$
141,119

Pre-Owned Stores

(4,504
)

(4,010
)

(17,429
)

(10,639
)

Total segment income (loss)

46,880

44,255

107,968

130,480

Interest expense, other, net

(13,028
)

(13,016
)

(39,200
)

(37,560
)

Other income (expense), net

4

11

(14,490
)

120

Income (loss) from continuing operations before taxes

$
33,856

$
31,250

$
54,278

$
93,040

~~(1)~~

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

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(4)For the three months ended March 31, 2024, amount includes approximately $1.0 million of pre-tax property and equipment charges for the Franchised Dealerships Segment.


	Three Months Ended March 31,
	2024		2023
	(In millions)
Segment Impairment Charges:
Franchised Dealerships Segment	$	1.0	$	—
EchoPark Segment	—		—
Powersports Segment	—		—
Total impairment charges	$	1.0	$	—


	Three Months Ended March 31,
	2024		2023
	(In millions)
Segment Depreciation and Amortization:
Franchised Dealerships Segment	$	29.8	$	26.5
EchoPark Segment	5.5		7.0
Powersports Segment	1.0		0.8
Total depreciation and amortization	$	36.3	$	34.3


	Three Months Ended March 31,
	2024		2023
	(In millions)
Segment Floor Plan Interest Expense:
Franchised Dealerships Segment	$	16.0	$	9.9
EchoPark Segment	3.8		4.6
Powersports Segment	0.5		0.1
Total floor plan interest expense	$	20.3	$	14.6


	Three Months Ended March 31,
	2024		2023
	(In millions)
Segment Interest Expense, Other, Net:
Franchised Dealerships Segment	$	27.8	$	26.9
EchoPark Segment	0.7		0.9
Powersports Segment	0.5		0.6
Total interest expense, other, net	$	29.0	$	28.4

SONIC AUTOMOTIVE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


	Three Months Ended March 31,
	2024		2023
	(In millions)
Segment Capital Expenditures:
Franchised Dealerships Segment	$	43.0	$	31.0
EchoPark Segment	0.4		5.7
Powersports Segment	0.4		0.5
Total capital expenditures	$	43.8	$	37.2


	March 31, 2024		December 31, 2023
	(In millions)
Segment Assets:
Franchised Dealerships Segment	$	4,214.1	$	4,110.8
EchoPark Segment	638.2		667.9
Powersports Segment	220.2		212.0
Corporate and other:
Cash and cash equivalents	15.1		28.9
Floor plan deposit balance	320.0		345.0



Total assets	$	5,407.6	$	5,364.6

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2. Management’s Discussion andand Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the ~~Sonic Automotive, Inc.~~accompanying unaudited condensed consolidated financial statements and related notes thereto, ~~included elsewhere in this report,~~ as well as the consolidated financial statements and related notes thereto, “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” ~~appearing~~included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

~~Except to the extent that differences among operating segments are material to an understanding of our business taken as a whole,~~2023.

Unless otherwise noted, we present the discussion in this Management’s Discussion and Analysis of Financial Condition and Results of Operations on a consolidated basis.

To the extent that we believe a discussion of the differences among reportable segments will enhance a reader’s understanding of our financial condition, cash flows and other changes in financial condition and results of operations, the differences are discussed separately. Certain amounts and percentages may not compute due to rounding.

Unless otherwise noted, all discussion of increases or decreases are for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The following discussion of Franchised Dealerships Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store basis, except where otherwise noted. All currently operating franchised dealership stores are included within the same store group as of the first full month following the first anniversary of the store’s opening or acquisition. The following discussion of EchoPark Segment used vehicles, wholesale vehicles, and finance, insurance and other, net is on a reported basis, except where otherwise noted. All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market’s opening or acquisition. The following discussion of Powersports Segment new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a reported basis, except where otherwise noted. All currently operating stores in the Powersports Segment are included within the same store group as of the first full month following the first anniversary of the store’s opening or acquisition.

Overview

We are one of the largest automotive retailers in the ~~United States~~U.S. (as measured by reported total revenue). As a result of ~~September 30, 2017,~~the way we ~~operated 116 new vehicle franchises in 13 states (representing 25 different brands~~manage our business, we had three reportable segments as of ~~cars~~March 31, 2024: (1) the Franchised Dealerships Segment; (2) the EchoPark Segment; and ~~light trucks), 18 collision repair centers and eight pre-owned stores.~~(3) the Powersports Segment. For management and operational reporting purposes, we group certain businesses together that share management and inventory (principally used vehicles) into “stores.” As ~~a result~~ of ~~the way we manage our business, we had two operating segments as of September 30, 2017: (1) Franchised Dealerships Segment and (2) Pre-Owned Stores Segment. As of September 30, 2017,~~March 31, 2024, we operated ~~104~~108 stores in the Franchised Dealerships Segment, ~~and eight~~18 stores in the ~~Pre-Owned Stores~~EchoPark Segment and 13 stores in the Powersports Segment.

The Franchised Dealerships Segment consists of 132 new vehicle franchises (representing 26 different brands of cars and light trucks) and 16 collision repair centers in 18 states. The EchoPark Segment consists of 18 stores in 10 states. The Powersports Segment consists of nine franchises in two states.

The Franchised Dealerships Segment provides comprehensive sales and services, including (1) sales of both new and used cars and light trucks; (2) sales of replacement parts and performance of vehicle maintenance, manufacturer warranty repairs, and paint and collision repair services (collectively, “Fixed Operations”); and (3) arrangement of third-party financing, extended warranties, service contracts, ~~financing,~~ insurance and other aftermarket products (collectively, “F&I”) for our ~~customers.~~guests. The ~~Pre-Owned Stores~~EchoPark Segment ~~provides the same services (excluding new vehicle~~sells used cars and light trucks and arranges third-party F&I product sales ~~and manufacturer warranty repairs)~~for our guests in ~~stand-alone~~ pre-owned vehicle specialty retail locations, and ~~includes our EchoPark stores. Our pre-owned stores business operates~~does not offer customer-facing Fixed Operations services. The Powersports Segment offers guests: (1) sales of both new and used powersports vehicles (such as motorcycles, personal watercraft and all-terrain vehicles); (2) Fixed Operations activities; and (3) F&I services. All three segments generally operate independently ~~from our franchised dealerships business~~of one another with the exception of certain shared back-office functions and offers customers an exciting shopping and buying experience. Sales operations in our first EchoPark market in Denver, Colorado began in the fourth quarter of 2014. As of September 30, 2017, we had six EchoPark stores in operation in Colorado. By the end of 2018, we expect to break ground on approximately 10 EchoPark locations in the Florida, Georgia, North Carolina, South Carolina and Texas markets. We believe that the expansion of our pre-owned stores business will provide long-term benefits to our Company, our stockholders and our guests. However, in the short term, this strategic initiative may negatively impact our overall operating results as we allocate management and capital resources to this business.

In the fourth quarter of 2013, we announced a new customer experience initiative known as “One Sonic-One Experience” (“OSOE”). This initiative includes several new processes and proprietary technologies from inventory management, electronic desking and pricing tools to a fully developed “customer-centric” Customer Relationship Management tool. We believe that the development of these processes and technologies will allow us to better serve our guests by allowing them to control the buying process and move at their pace so that once the vehicle has been selected our team can utilize these processes and technologies to allow our guests to complete a new or pre-owned vehicle sales transaction in less than an hour. During the latter half of 2014 and throughout 2015, we rolled out the OSOE initiative at our dealerships in Charlotte, North Carolina. During 2016, we introduced the technology component of the initiative to 14 additional stores in our Alabama, California and Tennessee markets, and, in the first half of 2017, we launched OSOE at our BMW dealership in Greenville, South Carolina and our Audi and Honda dealerships in Pensacola, Florida. Additional market implementations are dependent upon the results of operations at our existing OSOE stores and the completion of migration activities and required market/brand specific technology modifications. We believe that our OSOE initiative will provide long-term benefits to our Company, our stockholders and our guests. However, in the short term, our OSOE initiative may negatively impact our overall operating results as we allocate management and capital resources to this initiative.

~~Executive Summary~~

~~The U.S. retail automotive industry’s total new vehicle seasonally adjusted annual rate of sales (“SAAR”) decreased 2.3% to 17.1 million vehicles in the three months ended September 30, 2017,~~ ~~from 17.5 million vehicles in the three months ended September 30, 2016, and~~ decreased 1.2% to 17.0 million vehicles, in the nine months ended September 30, 2017, compared to 17.2 million vehicles in the nine months ended September 30, 2016, according to data from Bloomberg Financial Markets, provided by Stephens Inc. For 2017, analysts’ average industry expectation for the new vehicle SAAR is approximately 17.0 million vehicles. We currently estimate the 2017 new vehicle SAAR will be between 16.8 million and 17.0 million vehicles. ~~Changes in consumer confidence,~~

corporate overhead costs.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~replacement demand as a result~~

Executive Summary

Retail Automotive Industry Performance

The U.S. retail automotive industry’s total new vehicle (retail and fleet combined) seasonally adjusted annual rate of ~~natural disasters,~~unit sales volume (the “total new vehicle SAAR”) increased 1% for the three months ended March 31, 2024 to approximately 15.4 million vehicles, compared to approximately 15.3 million vehicles for the three months ended March 31, 2023, according to the Power Information Network (“PIN”) from J.D. Power. We currently estimate the 2024 new vehicle industry volume will be between 15.5 million vehicles (flat compared to 2023) and 16.0 million vehicles (an increase of 3% compared to 2023). The effects of interest rates, changes in consumer confidence, availability of consumer financing, manufacturer inventory production levels, or incentive levels from ~~the~~ automotive manufacturers or shifts in such levels, or timing of consumer demand as a result of economic conditions, natural disasters or other unforeseen circumstances could cause the actual ~~2017~~2024 new vehicle ~~SAAR~~industry volume to vary from expectations. Many factors, including brand and geographic concentrations as well as the industry sales mix between retail and fleet new vehicle unit sales volume, have caused our past results to differ from the industry’s overall trend. Our ~~current operational focus is to grow~~new vehicle sales strategy focuses on our retail new vehicle sales (as opposed to fleet new vehicle ~~sales, which is a minimal part of our business),~~sales) and, as a result, we believe it is appropriate to compare our retail new vehicle unit sales volume to the industry retail new vehicle ~~SAAR~~seasonally adjusted annual rate of unit sales volume (the “retail new vehicle SAAR”) (which excludes fleet new vehicle sales). According to PIN from J.D. Power, the retail new vehicle SAAR ~~was 14.1~~remained flat at approximately 12.6 million vehicles for both the three months ended ~~September 30, 2017,~~March 31, 2024 and 2023.

Franchised Dealerships Segment

As a ~~decrease~~result of ~~1.4%~~the acquisition, disposition, termination or closure of certain franchised dealership stores in 2023 and 2024, the change in reported amounts from period to period may not be indicative of the ~~prior year period,~~ ~~and 13.8 million vehicles for the nine months ended September 30, 2017, flat compared to the prior year period~~.

~~We operate 19 franchise stores and five collision repair centers in the greater Houston market, which represent approximately 20%~~current or future operational or financial performance of our ~~total revenues. Hurricane Harvey affected store operations at all~~current group of our Houston market locations, resulting in temporary store closures in late August and early September 2017 as well as significant inventory and facility damage at certain locations. Hurricane Irma affected store operations in the Alabama, Florida and Georgia markets to varying degrees, resulting in temporary store closuresoperating stores.

Retail new vehicle revenue increased 3% during September 2017. Twenty-four stores in these markets were impacted by Hurricane Irma, with the most significant operational impact at 11 of our Florida stores. As of and since September 15, 2017, all of our businesses affected by Hurricanes Harvey and Irma were operating, with some stores operating on a limited basis due to facility damage and the impact of ongoing recovery efforts in these communities. Earlier in the third quarter of 2017, certain of our Ohio stores were impacted by a hail storm. The affected businesses are covered by insurance policies, subject to certain deductibles, resulting in estimated storm-related charges of approximately $3.0 million for the three months ended ~~September 30, 2017.~~

~~Our same store retail new vehicle revenue decreased 1.8% and 2.1% during the three and nine months ended September 30, 2017, respectively,~~March 31, 2024, driven primarily by a ~~1.7% and 2.3% decrease~~5% increase in retail new vehicle unit sales volume, ~~respectively.~~partially offset by a 2% decrease in retail new vehicle average selling prices. Retail new vehicle gross profit ~~increased 3.6%~~decreased 29% during the three months ended ~~September 30, 2017, driven~~March 31, 2024, due primarily ~~by an increase in~~to increased price competition as a result of higher levels of available inventory and higher inventory invoice cost, which combined to drive lower retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit decreased ~~1.0%~~$1,783 per unit, or 32%, to $3,716 per unit during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2024. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment new vehicle inventory days’ supply was approximately 50 and 31 days as of March 31, 2024 and 2023, respectively, as a result of increased manufacturer production levels.

Retail used vehicle revenue decreased 4% during the three months ended March 31, 2024, driven primarily by ~~lower~~a 7% decrease in retail ~~new~~used vehicle average selling prices, partially offset by a 4% increase in retail used vehicle unit sales volume. Retail ~~new~~used vehicle gross profit increased 1% during the three months ended March 31, 2024, primarily due to the 4% increase in retail used vehicle unit sales volume, partially offset by lower retail used vehicle gross profit per unit. Retail used vehicle gross profit per unit ~~increased $96,~~decreased $46 per unit, or ~~5.4%~~3%, to ~~$1,856 in~~$1,585 per unit during the three months ended ~~September 30, 2017,~~March 31, 2024 due primarily to higher inventory acquisition costs and lower selling prices due to increased ~~$26, or 1.4%, to $1,926 in~~price competition as a result of ongoing consumer affordability challenges, including the ~~nine months ended September 30, 2017.~~

~~Our same store retail used~~effect of higher interest rates. Wholesale vehicle ~~revenue decreased 2.1% and was flat~~gross profit (loss) worsened approximately $2.0 million during the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024 due primarily to a $382 per unit, or 110%, worsening of in wholesale vehicle gross profit (loss) per unit during the three months ended March 31, 2024. We generally focus on maintaining Franchised Dealerships Segment used vehicle inventory days’ supply in the 25- to 35-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility. On a trailing quarter cost of sales basis, our reported Franchised Dealerships Segment used vehicle inventory days’ supply was approximately 28 and 29 days as of March 31, 2024 and 2023, respectively.

Fixed Operations revenue increased 5% during the three months ended March 31, 2024, and Fixed Operations gross profit increased 6% during the three months ended March 31, 2024, driven primarily by higher repair order volume and higher parts and labor costs that were passed along to consumers. Fixed Operations gross margin increased 70 basis points, to 50.1%, during the three months ended March 31, 2024, primarily driven by an increase in warranty revenue contribution and higher customer pay and warranty gross margin.

F&I revenue increased 4% during the three months ended March 31, 2024, driven by a ~~2.3%~~4% increase in total retail vehicle unit sales volume. F&I gross profit per retail unit decreased $20 per unit, or 1%, to $2,350 per unit during the three months ended March 31, 2024. We believe that our proprietary software applications, playbook processes and ~~0.4%~~guest-centric selling approach enable us to optimize F&I gross profit and penetration rates (the number of F&I products sold per vehicle) across our F&I product lines.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EchoPark Segment

In January 2024, we closed the remaining seven Northwest Motorsport stores following the closure of three Northwest Motorsport stores in the third quarter of 2023.

Reported total revenues decreased 14% during the three months ended March 31, 2024, driven primarily by a 10% decrease in retail used vehicle unit sales volume and a 6% decrease in average retail used vehicle unit selling prices. Reported total gross profit increased 34% during the three months ended March 31, 2024, primarily due to a 150% increase in retail used vehicle gross profit per unit, to $294 per unit, partially offset by a 10% decrease in retail used vehicle unit sales volume.

Reported retail used vehicle revenue decreased 16% during the three months ended March 31, 2024, driven primarily by the decrease in retail used vehicle unit sales volume. F&I revenue decreased 4% during the three months ended March 31, 2024, driven primarily by the decrease in retail used vehicle unit sales volume, offset partially by a 6% increase in F&I gross profit per unit. Reported combined retail used vehicle and F&I gross profit per unit increased $1,049 per unit, or 55%, to $2,955 per unit during the three months ended March 31, 2024, due primarily to a 150% increase in retail used vehicle gross profit per unit and a 6% increase in F&I gross profit per unit.

Reported wholesale vehicle gross profit decreased approximately $1.7 million during the three months ended March 31, 2024, primarily due to a 139% decrease in wholesale vehicle gross profit per unit. We generally focus on maintaining EchoPark Segment used vehicle inventory days’ supply in the 30- to 40-day range, which may fluctuate seasonally, in order to limit our exposure to market pricing volatility. On a trailing quarter cost of sales basis, our reported EchoPark Segment used vehicle inventory days’ supply was approximately 36 and 48 days as of March 31, 2024 and 2023, respectively.

Same market total revenues increased 12% during the three months ended March 31, 2024, primarily attributable to a 13% increase in total retail used vehicle unit sales volume. The change in same market total retail vehicle unit sales volume is driven primarily by the closure of EchoPark and Northwest Motorsport locations in 2023 and the first quarter of 2024. Same market total gross profit increased 79% during the three months ended March 31, 2024, driven primarily by a 150% increase in retail used vehicle gross profit per unit.

Powersports Segment

Reported retail new vehicle revenue decreased 24% during the three months ended March 31, 2024, primarily driven by a 24% decrease in retail new vehicle unit sales volume. Retail new vehicle gross profit decreased 43% during the three months ended March 31, 2024, as a result of a 25% decrease in retail new vehicle gross profit per unit and lower retail new vehicle unit sales volume. Retail new vehicle gross profit per unit decreased $897 per unit, or 25%, to $2,676 per unit, due primarily to higher inventory invoice cost. On a trailing quarter cost of sales basis, our reported Powersports Segment new vehicle inventory days’ supply was approximately 225 and 140 days as of March 31, 2024 and 2023, respectively, varying based on manufacturer production levels, consumer demand and seasonality.

Reported retail used vehicle revenue decreased 30% during the three months ended March 31, 2024, primarily driven by a 24% decrease in retail used vehicle average selling prices and an 8% decrease in retail used vehicle unit sales volume. Retail used vehicle gross profit decreased ~~3.4% and 0.5%~~10% during the three ~~and nine~~ months ended ~~September 30, 2017, respectively, driven by~~March 31, 2024, as a ~~decrease in~~result of lower retail used vehicle unit sales volume. Retail used vehicle gross profit per unit decreased ~~$15,~~$143 per unit, or ~~1.2%~~6%, to ~~$1,224 in the three months ended September 30, 2017 and decreased $1, or 0.1%,~~$2,185 per unit, due primarily to $1,265 in the nine months ended September 30, 2017. Our same store wholesale vehicle gross loss increased approximately $0.7 million, or 28.8%, during the three months ended September 30, 2017, driven primarily by a 26.1% decrease in wholesale unit sales volume. Our same store wholesale vehicle gross loss increased approximately $0.8 million, or 15.7%, during the nine months ended September 30, 2017, driven primarily by higher losses per unit. The decrease in wholesale unit sales volume during the three and nine months ended September 30, 2017 was primarily driven by the seasonal fluctuations in the pre-owned vehicle market and effects oflower retail used vehicle ~~inventory optimization~~ ~~to prepare for consumer demand heading into the fourth quarter.~~ ~~We focus on maintaining used vehicle inventory days’ supply in the 30- to 40-day range in order to limit~~average selling prices. On a trailing quarter cost of sales basis, our ~~exposure to market pricing volatility. Our~~reported Powersports Segment used vehicle inventory days’ supply was approximately 3899 and 133 days as of ~~September 30, 2017, up one day compared to September 30, 2016 (adjusted for “stop-sale” vehicles).~~

~~Our same store~~March 31, 2024 and 2023, respectively.

Reported Fixed Operations revenue ~~decreased 4.1% and 0.5%~~remained flat during the three ~~and nine~~ months ended ~~September 30, 2017, respectively.~~March 31, 2024, and Fixed Operations gross profit decreased ~~1.5%~~6% during the three months ended ~~September 30, 2017,~~March 31, 2024, driven primarily by ~~lost business days as a result of Hurricanes Harvey and Irma. Fixed Operations gross profit increased 0.5% during the nine months ended September 30, 2017.~~lower repair order volume. Fixed Operations gross margin ~~increased 130~~decreased 250 basis points to ~~48.2% in~~46.4% during the three months ended ~~September 30, 2017,~~March 31, 2024, driven primarily by a decrease in customer pay revenue contribution and ~~increased 50 basis points to 48.0% in the nine months ended September 30, 2017, compared to the prior year period.~~

~~Our same store~~lower customer pay gross margin.

Reported F&I revenue ~~increased 2.7% and 1.1%~~remained flat during the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024, driven primarily by a ~~4.7%~~19% decrease in combined retail new and ~~2.6%~~used vehicle unit sales volume, offset by a 22% increase in F&I gross profit per retail ~~unit, respectively, offset partially by lower retail unit sales volume.~~unit. F&I gross profit per retail unit increased ~~$64~~$217 per unit, or 22%, to ~~$1,404 in~~$1,197 per unit during the three months ended ~~September 30, 2017 and increased $34 to $1,381 in~~March 31, 2024.

Same store total revenues decreased 22% during the ~~nine~~three months ended ~~September 30, 2017. We believe that our proprietary software applications, playbook processes and customer-centric selling approach continue to drive increases~~March 31, 2024, driven primarily by a 22% decrease in ~~F&I~~total vehicle unit sales volume. Same store total gross profit decreased 25% during the three months ended March 31, 2024, driven primarily by a 28% decrease in retail new vehicle gross profit per ~~retail~~ unit. We believe we will continue to improve in this area as we refine our processes, train our associates and continue to sell high levels of retail new and used vehicles at our franchised dealerships and pre-owned stores.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Impairment charges decreased approximately $5.9 million~~

Results of Operations – Consolidated

As a result of the acquisition, disposition, termination or closure of certain franchised dealership stores and ~~$2.9 million during~~EchoPark stores in 2023 and 2024, the ~~three and nine months ended September 30, 2017, respectively. Impairment charges for~~change in consolidated reported amounts from period to period may not be indicative of the ~~three and nine months ended September 30, 2017~~current or future operational or financial performance of our current group of operating stores.

New Vehicles – Consolidated

New vehicle revenues include the ~~write-off~~sale of ~~goodwill and property and equipment related~~new vehicles, including new powersports vehicles, to retail customers, as well as the ~~closure~~sale of ~~two stand-alone pre-owned stores that were acquired in 2016, in addition~~fleet vehicles to the write-off of capitalized costs associated with certain construction projects. Impairment charges for the three and nine months ended September 30, 2016 include the write-off of property and equipment to be demolished in conjunction with a facility construction project and the write-off of costs associated with certain construction projects. Depreciation and amortization expense increased approximately $2.8 million and $8.4 million during the three and nine months ended September 30, 2017, respectively, due primarily to completed construction projects and purchases of fixed assetsbusinesses for use in their operations. New vehicle revenues and gross profit can be influenced by vehicle manufacturer incentives to consumers (which vary from cash-back incentives to low interest rate financing, among other things), the availability of consumer credit and the level and type of manufacturer-to-dealer incentives, as well as manufacturers providing adequate inventory allocations to our ~~franchised~~ dealerships to meet consumer demand. The automobile manufacturing industry is cyclical and ~~pre-owned stores. Interest expense, floor plan increased approximately $2.2 million~~historically has experienced periodic downturns characterized by oversupply and ~~$6.6 million for~~weak demand, both within specific brands and in the ~~three and nine months ended September 30, 2017, respectively, due primarily~~industry as a whole. As an automotive retailer, we seek to ~~higher effective interest rates on floor plan notes payable. Interest expense, other, net includes~~mitigate the effects of ~~higher stated/coupon interest related~~this sales cycle by maintaining a diverse brand mix of dealerships. Our brand diversity allows us to ~~approximately $0.7 million~~offer a broad range of ~~double-carry interest for the period during which the 7.0% Notes~~products at a wide range of prices from lower-priced economy automobiles to luxury automobiles and the 6.125% Notes were both outstanding during the nine months ended September 30, 2017. For the nine months ended September 30, 2017, other income (expense), net includes a charge of approximately $14.6 million related to the extinguishment of the 7.0% Notes.

Income from continuing operations before taxes for the three months ended September 30, 2017 increased approximately $2.6 million and was impacted by certain pre-tax charges, including a benefit of approximately $8.5 million from the disposal of a dealership, partially offset by an expense of approximately $3.0 million due to storm-related physical damage, approximately $1.0 million of legal and other charges and approximately $0.2 million of impairment charges. Income from continuing operations before taxes for the three months ended September 30, 2016 was impacted by certain pre-tax charges which include approximately $6.1 million of impairment charges and approximately $0.1 million of legal expense, partially offset by a benefit of approximately $2.4 million related to adjustments to storm-related physical damage accruals.

Income from continuing operations before taxes for the nine months ended September 30, 2017 decreased approximately $38.8 million and was impacted by certain pre-tax charges, including an expense of approximately $10.0 million due to storm-related physical damage, approximately $1.8 million of legal and other charges, and approximately $3.3 million of impairment charges, partially offset by a benefit of approximately $8.5 million from the disposal of a dealership. Interest expense, other, net during the nine months ended September 30, 2017 includes the effects of higher stated/coupon interest related to approximately $0.7 million of double-carry interest for the period during which the 7.0% Notes and the 6.125% Notes were both outstanding. For the nine months ended September 30, 2017, other income (expense), net includes a charge of approximately $14.6 million related to the extinguishment of the 7.0% Notes. Income from continuing operations before taxes for the nine months ended September 30, 2016 was impacted by certain pre-tax charges, which include approximately $3.6 million of expense due to storm-related physical damage, approximately $6.1 million of impairment charges and approximately $0.1 million of legal expense.

powersports vehicles.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table depicts the breakdown of our Franchised Dealerships Segment new vehicle revenues ~~from continuing operations~~ by brand for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016:~~

Three Months Ended September 30,

Nine Months Ended September 30,

Brand

2017

2016

2017

2016

Luxury:

BMW

17.2
%

19.7
%

19.1
%

20.1
%
Mercedes

9.5
%

10.7
%

10.1
%

10.2
%
Lexus

6.4
%

5.8
%

5.9
%

5.7
%
Audi

6.2
%

5.1
%

5.7
%

5.1
%
Land Rover

3.3
%

3.0
%

3.4
%

3.4
%
Cadillac

2.6
%

3.4
%

2.7
%

3.3
%
Porsche

2.5
%

2.3
%

2.5
%

2.3
%
MINI

1.3
%

1.5
%

1.4
%

1.7
%
Other luxury (1)

3.2
%

3.2
%

2.8
%

3.1
%
Total Luxury

52.2
%

54.7
%

53.6
%

54.9
%
Mid-line Import:

Honda

17.8
%

17.5
%

18.1
%

17.5
%
Toyota

12.6
%

11.7
%

12.1
%

11.5
%
Volkswagen

1.9
%

1.6
%

1.7
%

1.5
%
Hyundai

1.5
%

1.3
%

1.5
%

1.3
%
Other imports (2)

1.5
%

1.5
%

1.5
%

1.5
%
Total Mid-line Import

35.3
%

33.6
%

34.9
%

33.3
%
Domestic:

Ford

7.7
%

6.5
%

7.0
%

6.5
%
General Motors (3)

4.8
%

5.2
%

4.5
%

5.3
%
Total Domestic

12.5
%

11.7
%

11.5
%

11.8
%

Total

100.0
%

100.0
%

100.0
%

100.0
%

~~(1)~~

~~Includes Volvo, Acura, Infiniti and Jaguar.~~

2023:

~~(2)~~

~~Includes Nissan, Kia, Scion and Subaru.~~


	Three Months Ended March 31,
New Vehicle Brand	2024		2023
Luxury:
BMW	25	%	25	%
Mercedes	14	%	14	%
Lexus	6	%	5	%
Audi	5	%	6	%
Land Rover	5	%	4	%
Porsche	3	%	4	%
Cadillac	2	%	2	%
Volvo	1	%	1	%
MINI	1	%	1	%
Other Luxury (1)	—	%	1	%
Total Luxury	62	%	63	%
Mid-line Import:
Honda	11	%	10	%
Toyota	9	%	8	%
Volkswagen	2	%	2	%
Hyundai	1	%	2	%
Other Mid-line Import (2)	1	%	1	%
Total Mid-line Import	24	%	23	%
Domestic:
General Motors (3)	5	%	6	%
Chrysler	5	%	3	%
Ford	4	%	5	%
Total Domestic	14	%	14	%
Total	100	%	100	%

~~(3)~~

~~Includes Buick, Chevrolet and GMC.~~

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~Results of Operations~~

~~Unless otherwise noted, all discussion of increases or decreases for the three~~(1)Includes Alfa Romeo, Infiniti, Jaguar and ~~nine months ended September 30, 2017 are compared to the same prior year period, as applicable.~~ Maserati.

(2)Includes Mazda, Nissan and Subaru.

(3)Includes Buick, Chevrolet and GMC.

The following discussion of new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net are on a same store basis, except where otherwise noted. All currently operating continuing operations stores (both our franchised dealerships and pre-owned stores) are included within the same store group in the first full month following the first anniversary of the store’s opening or acquisition.

~~New Vehicles~~

~~The automobile~~U.S. retail ~~industry uses the total new vehicle SAAR to measure the annual amount of expected~~automotive industry’s new vehicle unit sales ~~activity (both retail and fleet sales) within the United States. The total and retail SAAR~~volume below ~~reflect~~reflects all brands marketed or sold in the ~~United States. The total and retail SAAR include~~U.S. This industry sales volume includes brands we do not sell and markets in which we do not ~~operate;~~operate, therefore, changes in our new vehicle unit sales volume may not trend directly in line with changes in the ~~total and retail SAAR.~~industry new vehicle unit sales volume. We believe that the industry retail ~~SAAR~~new vehicle unit sales volume is a more meaningful metric for comparing our new vehicle unit sales volume to the industry due to our minimal fleet vehicle business.

Three Months Ended September 30,

Nine Months Ended September 30,

(In millions of vehicles)
2017

2016

% Change

2017

2016

% Change

Retail SAAR (1)

14.1

14.3

(1.4
%)

13.8

13.8

0.0
%

Fleet SAAR

3.0

3.2

(6.2
%)

3.2

3.4

(5.9
%)

Total SAAR (2)

17.1

17.5

(2.3
%)

17.0

17.2

(1.2
%)

~~(1)~~

~~Source: PIN from J.D. Power~~

~~(2)~~

~~Source: Bloomberg Financial Markets, provided by Stephens Inc.~~

~~The following tables provide a reconciliation~~U.S. retail new vehicle SAAR, fleet new vehicle seasonally adjusted annual rate of ~~same store basis~~unit sales volume (the “fleet new vehicle SAAR”) and ~~reported basis for~~ total new ~~vehicles (retail and fleet sales):~~

vehicle SAAR were as follows:

Three Months Ended
September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit data)

Total new vehicle revenue:

Same store
$
1,348,084

$
1,365,641

$
(17,557
)

(1.3
%)
Acquisitions and dispositions

14,217

9,503

4,714

NM

Total as reported
$
1,362,301

$
1,375,144

$
(12,843
)

(0.9
%)

Total new vehicle gross profit:

Same store
$
64,316

$
62,202

$
2,114

3.4
%
Acquisitions and dispositions

1,922

186

1,736

NM

Total as reported
$
66,238

$
62,388

$
3,850

6.2
%

Total new vehicle units:

Same store

35,063

35,639

(576
)

(1.6
%)
Acquisitions and dispositions

426

415

11

NM

Total as reported

35,489

36,054

(565
)

(1.6
%)

NM = Not Meaningful


	Three Months Ended March 31,		Better / (Worse)
	2024	2023	% Change
	(In millions of vehicles)
U.S. Retail new vehicle SAAR (1)	12.6	12.6	—	%
U.S. Fleet new vehicle SAAR	2.8	2.7	4	%
U.S. Total new vehicle SAAR (1)	15.4	15.3	1	%

(1)Source: PIN from J.D. Power

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Nine Months Ended
September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit data)

Total new vehicle revenue:

Same store
$
3,749,137

$
3,799,558

$
(50,421
)

(1.3
%)
Acquisitions and dispositions

60,165

26,620

33,545

NM

Total as reported
$
3,809,302

$
3,826,178

$
(16,876
)

(0.4
%)

Total new vehicle gross profit:

Same store
$
183,239

$
186,356

$
(3,117
)

(1.7
%)
Acquisitions and dispositions

3,799

322

3,477

NM

Total as reported
$
187,038

$
186,678

$
360

0.2
%

Total new vehicle units:

Same store

97,348

99,275

(1,927
)

(1.9
%)
Acquisitions and dispositions

1,784

1,166

618

NM

Total as reported

99,132

100,441

(1,309
)

(1.3
%)

NM = Not Meaningful

Our consolidated reported new vehicle results ~~(including fleet) are~~(combined retail and fleet data) were as follows:

Three Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit and per unit data)

Reported new vehicle:

Revenue

$
1,362,301

$
1,375,144

$
(12,843
)

(0.9
%)
Gross profit

$
66,238

$
62,388

$
3,850

6.2
%
Unit sales

35,489

36,054

(565
)

(1.6
%)
Revenue per unit

$
38,387

$
38,141

$
246

0.6
%
Gross profit per unit

$
1,866

$
1,730

$
136

7.9
%
Gross profit as a % of revenue

4.9
%

4.5
%

40

bps

Nine Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit and per unit data)

Reported new vehicle:

Revenue

$
3,809,302

$
3,826,178

$
(16,876
)

(0.4
%)
Gross profit

$
187,038

$
186,678

$
360

0.2
%
Unit sales

99,132

100,441

(1,309
)

(1.3
%)
Revenue per unit

$
38,427

$
38,094

$
333

0.9
%
Gross profit per unit

$
1,887

$
1,859

$
28

1.5
%
Gross profit as a % of revenue

4.9
%

4.9
%

0

bps


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Reported new vehicle:
Retail new vehicle revenue	$	1,455.8		$	1,442.8		$	13.0	1	%
Fleet new vehicle revenue	19.6			18.8			0.8		4	%
Total new vehicle revenue	$	1,475.4		$	1,461.6		$	13.8	1	%

Retail new vehicle gross profit	$	96.4		$	138.1		$	(41.7)	(30)	%
Fleet new vehicle gross profit	0.7			0.9			(0.2)		(22)	%
Total new vehicle gross profit	$	97.1		$	139.0		$	(41.9)	(30)	%

Retail new vehicle unit sales	26,142			25,657			485		2	%
Fleet new vehicle unit sales	379			441			(62)		(14)	%
Total new vehicle unit sales	26,521			26,098			423		2	%

Revenue per new retail unit	$	55,689		$	56,233		$	(544)	(1)	%
Revenue per new fleet unit	$	51,708		$	42,680		$	9,028	21	%
Total revenue per new unit	$	55,632		$	56,004		$	(372)	(1)	%

Gross profit per new retail unit	$	3,688		$	5,381		$	(1,693)	(31)	%
Gross profit per new fleet unit	$	1,706		$	2,020		$	(314)	(16)	%
Total gross profit per new unit	$	3,660		$	5,325		$	(1,665)	(31)	%

Retail gross profit as a % of revenue	6.6		%	9.6		%	(300)		bps
Fleet gross profit as a % of revenue	3.3		%	4.7		%	(140)		bps
Total new vehicle gross profit as a % of revenue	6.6		%	9.5		%	(290)		bps

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~Our same store~~

For further analysis of new vehicle results, ~~(including fleet) are as follows:~~

Three Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit and per unit data)

Same store new vehicle:

Revenue

$
1,348,084

$
1,365,641

$
(17,557
)

(1.3
%)
Gross profit

$
64,316

$
62,202

$
2,114

3.4
%
Unit sales

35,063

35,639

(576
)

(1.6
%)
Revenue per unit

$
38,447

$
38,319

$
128

0.3
%
Gross profit per unit

$
1,834

$
1,745

$
89

5.1
%
Gross profit as a % of revenue

4.8
%

4.6
%

20

bps

Nine Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit and per unit data)

Same store new vehicle:

Revenue

$
3,749,137

$
3,799,558

$
(50,421
)

(1.3
%)
Gross profit

$
183,239

$
186,356

$
(3,117
)

(1.7
%)
Unit sales

97,348

99,275

(1,927
)

(1.9
%)
Revenue per unit

$
38,513

$
38,273

$
240

0.6
%
Gross profit per unit

$
1,882

$
1,877

$
5

0.3
%
Gross profit as a % of revenue

4.9
%

4.9
%

0

bps

~~Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016~~

~~Excluding fleet sales, our retail new vehicle revenue decreased 1.8%~~see the tables and ~~our retail new vehicle unit sales volume decreased 1.7%, driven primarily by decreases in retail new vehicle unit sales volume at our BMW, Mercedes~~discussion under the headings “New Vehicles - Franchised Dealerships Segment” and Cadillac dealerships, offset partially by increases in retail new vehicle unit sales volume at our Toyota, Audi and Volkswagen dealerships. Excluding fleet sales, our retail new vehicle gross profit increased approximately $2.2 million, or 3.6%, primarily driven by increases in retail new vehicle gross profit at our BMW, Ford and Audi dealerships. Our gross profit per retail new vehicle unit increased $96, or 5.4%, primarily driven by increases in gross profit per retail new vehicle unit at our BMW, Ford and Audi dealerships, offset partially by decreases in gross profit per retail new vehicle unit at our Cadillac, Mercedes and Jaguar dealerships. As a result of replacement vehicle demand due to Hurricane Harvey, our Houston market experienced an 11.0% increase in retail new vehicle unit sales volume and contributed $68 per unit to the overall increase in gross profit per retail new vehicle unit. Due in part to lost selling days due to Hurricane Irma, our Florida market experienced a 9.9% decrease in retail new vehicle unit sales volume.

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

Excluding fleet sales, our retail new vehicle revenue decreased 2.1% and our retail new vehicle unit sales volume decreased 2.3%, driven primarily by decreases in retail new vehicle unit sales volume at our BMW, General Motors (excluding Cadillac) and Mercedes dealerships, offset partially by increases in retail new vehicle unit sales volume at our Toyota, Honda and Hyundai dealerships. Excluding fleet sales, our retail new vehicle gross profit decreased approximately $1.8 million, or 1.0%, primarily driven by decreases in retail new vehicle gross profit at our Cadillac, General Motors (excluding Cadillac) and Lexus dealerships, offset partially by increases in retail new vehicle gross profit at our BMW, Honda and Ford dealerships. Our gross profit per retail new vehicle unit increased $26, or 1.4%, primarily driven by increases in gross profit per retail new vehicle unit at our BMW, Honda and Ford dealerships, offset partially by decreases in gross profit per retail new vehicle unit at our Cadillac, General Motors (excluding Cadillac) and Lexus dealerships. Our Houston market continued to weigh on our retail new vehicle results, experiencing a 3.4% decrease in retail new vehicle unit sales volume, despite the positive effects of increased retail new vehicle unit sales volume“New Vehicles - Powersports Segment” in the ~~three months ended September 30, 2017.~~

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Franchised Dealerships Segment and Powersports Segment sections, respectively, below.

Used Vehicles

– Consolidated

Used vehicle revenues include the sale of used vehicles, including used powersports vehicles, to retail customers and at wholesale. Used vehicle revenues are directly affected by a number of factors, including consumer demand for used vehicles, the pricing and level of manufacturer incentives on new vehicles, the number and quality of trade-ins and lease turn-ins available to our dealerships, the availability and pricing of used vehicles acquired at wholesale auction, and the availability of consumer credit.

~~The following tables provide a reconciliation~~ Depending on the mix of ~~same store basis~~inventory sourcing (trade-ins or purchases from customers versus wholesale auction), the days’ supply of used vehicle inventory, and ~~reported basis for~~the pricing strategy employed by the dealership, retail used ~~vehicles:~~

vehicle gross profit per unit and retail used vehicle gross profit as a percentage of revenue may vary significantly from historical levels given recent trends in the used vehicle environment.

Three Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit data)

Total used vehicle revenue:

Same store

$
640,993

$
654,938

$
(13,945
)

(2.1
%)
Acquisitions and dispositions

18,731

6,036

12,695

NM

Total as reported

$
659,724

$
660,974

$
(1,250
)

(0.2
%)

Total used vehicle gross profit:

Same store

$
36,541

$
37,841

$
(1,300
)

(3.4
%)
Acquisitions and dispositions

2,604

1,781

823

NM

Total as reported

$
39,145

$
39,622

$
(477
)

(1.2
%)

Total used vehicle units:

Same store

29,854

30,554

(700
)

(2.3
%)
Acquisitions and dispositions

987

379

608

NM

Total as reported

30,841

30,933

(92
)

(0.3
%)

~~NM = Not Meaningful~~

Nine Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit data)

Total used vehicle revenue:

Same store

$
1,867,337

$
1,867,041

$
296

0.0
%
Acquisitions and dispositions

68,751

14,473

54,278

NM

Total as reported

$
1,936,088

$
1,881,514

$
54,574

2.9
%

Total used vehicle gross profit:

Same store

$
111,547

$
112,153

$
(606
)

(0.5
%)
Acquisitions and dispositions

8,465

4,968

3,497

NM

Total as reported

$
120,012

$
117,121

$
2,891

2.5
%

Total used vehicle units:

Same store

88,211

88,592

(381
)

(0.4
%)
Acquisitions and dispositions

3,538

961

2,577

NM

Total as reported

91,749

89,553

2,196

2.5
%

~~NM = Not Meaningful~~

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our consolidated reported retail used vehicle results ~~are~~were as follows:

Three Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except units and per unit data)

Reported used vehicle:

Revenue

$
659,724

$
660,974

$
(1,250
)

(0.2
%)
Gross profit

$
39,145

$
39,622

$
(477
)

(1.2
%)
Unit sales

30,841

30,933

(92
)

(0.3
%)
Revenue per unit

$
21,391

$
21,368

$
23

0.1
%
Gross profit per unit

$
1,269

$
1,281

$
(12
)

(0.9
%)
Gross profit as a % of revenue

5.9
%

6.0
%

(10
)

bps

		Nine Months Ended September 30,						Better / (Worse)
		2017			2016			Change		% Change
		(In thousands, except units and per unit data)
Reported used vehicle:
	Three Months Ended March 31,																							Three Months Ended March 31,											Better / (Worse)
	2024																		2024							2023							Change						% Change
	(In millions, except unit and per unit data)																																(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue
Revenue
Revenue		$	1,936,088		$	1,881,514		$	54,574		2.9	%	$	1,215.6			$			$	1,344.9			$			$	(129.3)			(10)				(10)	%
Gross profit		$	120,012		$	117,121		$	2,891		2.5	%	Gross profit		$	47.0		$				$	30.0		$				$	17.0		57				57		%
Unit sales			91,749			89,553			2,196		2.5	%	Unit sales		44,056			45,531					45,531			(1,475)					(1,475)			(3)				(3)	%
Revenue per unit		$	21,102		$	21,010		$	92		0.4	%	Revenue per unit		$	27,593		$				$	29,538		$				$	(1,945)		(7)				(7)		%
Gross profit per unit		$	1,308		$	1,308		$	-		0.0	%	Gross profit per unit		$	1,068		$				$	660		$				$	408		62				62		%
Gross profit as a % of revenue			6.2	%		6.2	%		0	bps			Gross profit as a % of revenue		3.9		%					2.2		%					170			bps					bps

~~Our same store~~

For further analysis of used vehicle results, see the tables and discussion under the headings “Used Vehicles - Franchised Dealerships Segment,” “Used Vehicles and F&I - EchoPark Segment” and “Used Vehicles - Powersports Segment” in the Franchised Dealerships Segment, EchoPark Segment and Powersports Segment sections, respectively, below.

Wholesale Vehicles – Consolidated

Wholesale vehicle revenues are affected by retail new and used vehicle unit sales volume and the associated trade-in volume, as well as short-term, temporary and seasonal fluctuations in wholesale auction pricing. In recent years, wholesale vehicle prices and supply at auction have experienced periods of volatility, impacting our wholesale vehicle revenues and related gross profit (loss), as well as our retail used vehicle revenues and related gross profit. We believe that the current wholesale vehicle price environment is not sustainable in the long term and expect that average wholesale vehicle pricing and related gross profit (loss) will continue to return toward long-term normalized levels in the long run, but may continue to experience volatility through 2024 or beyond. Wholesale vehicle revenues are also significantly affected by our corporate inventory management strategy and policies, which are designed to optimize our total used vehicle inventory and expected gross profit levels and minimize inventory carrying risks.

Our consolidated reported wholesale vehicle results were as follows:

Three Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except units and per unit data)

Same store used vehicle:

Revenue

$
640,993

$
654,938

$
(13,945
)

(2.1
%)
Gross profit

$
36,541

$
37,841

$
(1,300
)

(3.4
%)
Unit sales

29,854

30,554

(700
)

(2.3
%)
Revenue per unit

$
21,471

$
21,435

$
36

0.2
%
Gross profit per unit

$
1,224

$
1,238

$
(14
)

(1.1
%)
Gross profit as a % of revenue

5.7
%

5.8
%

(10
)

bps


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue	$	77.3		$	85.6		$	(8.3)	(10)	%
Gross profit (loss)	$	(0.8)		$	3.0		$	(3.8)	(127)	%
Unit sales	8,112			8,406			(294)		(3)	%
Revenue per unit	$	9,530		$	10,169		$	(639)	(6)	%
Gross profit (loss) per unit	$	(89)		$	359		$	(448)	(125)	%
Gross profit (loss) as a % of revenue	(0.9)		%	3.5		%	(440)		bps

Nine Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except units and per unit data)

Same store used vehicle:

Revenue

$
1,867,337

$
1,867,041

$
296

0.0
%
Gross profit

$
111,547

$
112,153

$
(606
)

(0.5
%)
Unit sales

88,211

88,592

(381
)

(0.4
%)
Revenue per unit

$
21,169

$
21,075

$
94

0.4
%
Gross profit per unit

$
1,265

$
1,266

$
(1
)

(0.1
%)
Gross profit as a % of revenue

6.0
%

6.0
%

0

bps

For further analysis of wholesale vehicle results on a segment basis, see the tables and discussion under the headings “Wholesale Vehicles – Franchised Dealerships Segment,” “Wholesale Vehicles – EchoPark Segment” and “Wholesale Vehicles – Powersports Segment” in the Franchised Dealerships Segment, EchoPark Segment and Powersports Segment sections, respectively, below.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016~~

Used vehicle revenue decreased 2.1%, driven primarily by a 2.3% decrease in used vehicle unit sales volume. This decrease in used vehicle unit sales volume was primarily driven by decreases in used vehicle unit sales volume at our General Motors (excluding Cadillac), Mercedes and BMW dealerships, offset partially by an increase in used vehicle unit sales volume at our EchoPark stores. Used vehicle gross profit decreased approximately $1.3 million, or 3.4%, driven primarily by lower used vehicle unit sales volume and used vehicle gross profit per unit at our BMW dealerships, offset partially by an increase in used vehicle unit sales volume and used vehicle gross profit per unit at our Audi dealerships. Used vehicle gross profit per unit decreased $14, or 1.1%, driven primarily by a decrease in used vehicle gross profit per unit at our BMW dealerships, offset partially by increases in used vehicle gross profit per unit at our Audi and Cadillac dealerships. While our Houston market experienced an increase in retail new vehicle unit sales volume as a result of replacement vehicle demand due to Hurricane Harvey, our Houston market used vehicle unit sales volume decreased 3.3%. Our Florida market experienced a 13.8% decrease in used vehicle unit sales volume due to lost selling days as a result of Hurricane Irma, which did not generate the same replacement demand as Hurricane Harvey did in Houston.

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

Used vehicle revenue was flat, despite a 0.4% decrease in used vehicle unit sales volume. This decrease in used vehicle unit sales volume was primarily driven by decreases in used vehicle unit sales volume at our Ford and General Motors (excluding Cadillac) dealerships, offset partially by increases in used vehicle unit sales volume at our BMW and Audi dealerships. Used vehicle gross profit decreased approximately $0.6 million, or 0.5%, driven primarily by a decrease in used vehicle gross profit per unit at our BMW dealerships, offset partially by increases in used vehicle unit sales volume and used vehicle gross profit per unit at our Audi and Lexus dealerships. Used vehicle gross profit per unit was flat, driven by a decrease in used vehicle gross profit per unit at our BMW dealerships, offset partially by increases in used vehicle gross profit per unit at our Audi, Lexus and Toyota dealerships.

~~Wholesale Vehicles~~

Wholesale vehicle revenues are highly correlated with retail new and used vehicle sales and the associated trade-in volume. Wholesale vehicle revenues are also significantly affected by our portfolio-wide inventory management policies, which are designed to optimize our total used vehicle inventory. Wholesale vehicle revenue and unit sales volume fluctuations are typically a result of retail new and used vehicle unit sales volumes that generate additional trade-in vehicle volume that we are not always able to sell as retail used vehicles and choose to sell at auction. Whenever possible, we prefer to sell a used vehicle through retail channels rather than wholesaling the vehicle at auction.

~~The following tables provide a reconciliation of same store basis and reported basis for wholesale vehicles:~~

Three Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit data)

Total wholesale vehicle revenue:

Same store

$
41,946

$
69,898

$
(27,952
)

(40.0
%)
Acquisitions and dispositions

1,152

624

528

NM

Total as reported

$
43,098

$
70,522

$
(27,424
)

(38.9
%)

Total wholesale vehicle gross profit (loss):

Same store

$
(3,069
)

$
(2,382
)

$
(687
)

(28.8
%)
Acquisitions and dispositions

(223
)

(125
)

(98
)

NM

Total as reported

$
(3,292
)

$
(2,507
)

$
(785
)

(31.3
%)

Total wholesale vehicle units:

Same store

7,572

10,240

(2,668
)

(26.1
%)
Acquisitions and dispositions

260

137

123

NM

Total as reported

7,832

10,377

(2,545
)

(24.5
%)

~~NM = Not Meaningful~~

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Nine Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit data)

Total wholesale vehicle revenue:

Same store

$
126,330

$
152,022

$
(25,692
)

(16.9
%)
Acquisitions and dispositions

3,844

1,119

2,725

NM

Total as reported

$
130,174

$
153,141

$
(22,967
)

(15.0
%)

Total wholesale vehicle gross profit (loss):

Same store

$
(6,042
)

$
(5,222
)

$
(820
)

(15.7
%)
Acquisitions and dispositions

(339
)

(203
)

(136
)

NM

Total as reported

$
(6,381
)

$
(5,425
)

$
(956
)

(17.6
%)

Total wholesale vehicle units:

Same store

23,111

25,671

(2,560
)

(10.0
%)
Acquisitions and dispositions

811

341

470

NM

Total as reported

23,922

26,012

(2,090
)

(8.0
%)

~~NM = Not Meaningful~~

~~Our reported wholesale vehicle results are as follows:~~

Three Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit and per unit data)

Reported wholesale vehicle:

Revenue

$
43,098

$
70,522

$
(27,424
)

(38.9
%)
Gross profit (loss)

$
(3,292
)

$
(2,507
)

$
(785
)

(31.3
%)
Unit sales

7,832

10,377

(2,545
)

(24.5
%)
Revenue per unit

$
5,503

$
6,796

$
(1,293
)

(19.0
%)
Gross profit (loss) per unit

$
(420
)

$
(242
)

$
(178
)

(73.6
%)
Gross profit (loss) as a % of revenue

(7.6
%)

(3.6
%)

(400
)

bps

Nine Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit and per unit data)

Reported wholesale vehicle:

Revenue

$
130,174

$
153,141

$
(22,967
)

(15.0
%)
Gross profit (loss)

$
(6,381
)

$
(5,425
)

$
(956
)

(17.6
%)
Unit sales

23,922

26,012

(2,090
)

(8.0
%)
Revenue per unit

$
5,442

$
5,887

$
(445
)

(7.6
%)
Gross profit (loss) per unit

$
(267
)

$
(209
)

$
(58
)

(27.8
%)
Gross profit (loss) as a % of revenue

(4.9
%)

(3.5
%)

(140
)

bps

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~Our same store wholesale vehicle results are as follows:~~

Three Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit and per unit data)

Same store wholesale vehicle:

Revenue

$
41,946

$
69,898

$
(27,952
)

(40.0
%)
Gross profit (loss)

$
(3,069
)

$
(2,382
)

$
(687
)

(28.8
%)
Unit sales

7,572

10,240

(2,668
)

(26.1
%)
Revenue per unit

$
5,540

$
6,826

$
(1,286
)

(18.8
%)
Gross profit (loss) per unit

$
(405
)

$
(233
)

$
(172
)

(73.8
%)
Gross profit (loss) as a % of revenue

(7.3
%)

(3.4
%)

(390
)

bps

Nine Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit and per unit data)

Same store wholesale vehicle:

Revenue

$
126,330

$
152,022

$
(25,692
)

(16.9
%)
Gross profit (loss)

$
(6,042
)

$
(5,222
)

$
(820
)

(15.7
%)
Unit sales

23,111

25,671

(2,560
)

(10.0
%)
Revenue per unit

$
5,466

$
5,922

$
(456
)

(7.7
%)
Gross profit (loss) per unit

$
(261
)

$
(203
)

$
(58
)

(28.6
%)
Gross profit (loss) as a % of revenue

(4.8
%)

(3.4
%)

(140
)

bps

~~Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016~~

Wholesale vehicle revenue and unit sales volume decreased, while wholesale vehicle gross loss increased due to higher gross loss per unit. The decrease in wholesale vehicle unit sales volume was primarily driven by the seasonal fluctuations in the pre-owned vehicle market and effects of used vehicle inventory optimization to prepare for consumer demand heading into the fourth quarter.

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~Wholesale vehicle revenue and unit sales volume decreased, while wholesale vehicle gross loss increased due to higher gross loss per unit.~~

~~Parts, Service and Collision Repair (“Fixed Operations”)~~

Fixed Operations ~~revenue consists~~– Consolidated

Parts, service and collision repair revenues consist of ~~customer~~repairs and maintenance requested ~~orders~~and paid by customers (“customer pay”), warranty repairs (manufacturer-paid), wholesale parts (sales of parts and accessories to third-party automotive repair businesses) and internal, sublet and other. Parts and service revenue is driven by the volume and mix of warranty repairs versus customer pay repairs, available service capacity (a combination of service bay count and technician availability), vehicle quality, manufacturer recalls, customer loyalty, and ~~manufacturer~~ prepaid or ~~complimentary~~manufacturer-paid maintenance programs. Internal, sublet and other primarily relates to preparation and reconditioning work performed on vehicles in inventory that are later sold to ~~customers.~~a third party and may vary based on used vehicle inventory and sales volume from period to period. When that work is performed by one of our dealerships or stores, the work is classified as internal. In the event the work is performed by a third party on our behalf, it is classified as sublet.

We believe that, over time, vehicle quality will continue to improve, but vehicle complexity and the associated demand for repairs by qualified technicians at ~~our franchised~~manufacturer-affiliated dealerships ~~will~~may result in market share gains that could offset any revenue lost from improvement in vehicle quality. We also believe that, over the long term, we have the ability to continue to ~~add~~optimize service capacity and customer retention at our dealerships and stores to further increase Fixed Operations revenues. Manufacturers continue to extend new vehicle warranty periods (in particular for battery electric vehicles) and have also begun to include regular maintenance items in the warranty or complimentary maintenance program coverage. These factors, over the long term, combined with the extended manufacturer warranties on certified pre-owned vehicles, should facilitate ~~long-term~~ growth in our ~~service~~parts and ~~parts~~service business. Barriers to long-term growth may include reductions in the rate paid by manufacturers to dealers for warranty repair work performed, as well as the improved quality and design of vehicles that may ~~negatively~~ affect the level and frequency of future ~~warranty related~~

customer pay or warranty-related repair revenues.

Our consolidated reported Fixed Operations results were as follows:



	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions)
Reported Fixed Operations:
Revenue
Customer pay	$	210.2		$	203.4		$	6.8	3	%
Warranty	64.5			58.9			5.6		10	%
Wholesale parts	50.8			54.4			(3.6)		(7)	%
Internal, sublet and other	121.2			113.8			7.4		7	%
Total revenue	$	446.7		$	430.5		$	16.2	4	%

Gross profit
Customer pay	$	118.0		$	113.0		$	5.0	4	%
Warranty	38.5			34.6			3.9		11	%
Wholesale parts	8.9			9.7			(0.8)		(8)	%
Internal, sublet and other	58.5			55.6			2.9		5	%
Total gross profit	$	223.9		$	212.9		$	11.0	5	%

Gross profit as a % of revenue
Customer pay	56.2		%	55.6		%	60		bps
Warranty	59.7		%	58.7		%	100		bps
Wholesale parts	17.6		%	17.8		%	(20)		bps
Internal, sublet and other	48.2		%	48.9		%	(70)		bps
Total gross profit as a % of revenue	50.1		%	49.5		%	60		bps

For further analysis of Fixed Operations results, see the tables and discussion under the headings “Fixed Operations - Franchised Dealerships Segment” and “Fixed Operations - Powersports Segment” in the Franchised Dealerships Segment and Powersports Segment sections, respectively, below.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~revenues or frequency of customer pay visits. Although vehicle sales and sales of associated finance,~~

F&I – Consolidated

Finance, insurance and other, aftermarket products are cyclical and are affected by many factors, including overall economic conditions, consumer confidence, levels of discretionary personal income, interest rates and available credit, our Fixed Operations services are not as closely tied to vehicle sales and are not as dependent upon near-term sales volume. However, significant changes to the level of new vehicle unit sales volume or manufacturer recall and warranty activity could negatively impact our Fixed Operations results in the future.

In 2017, we changed the character of certain complimentary maintenance repair orders from customer pay to warranty. Accordingly, the customer pay and warranty amounts in the tables below reflect this change for the periods in 2017, but not for the periods in 2016, as it was administratively impractical to recalculate the 2016 amounts.

~~The following tables provide a reconciliation of same store basis and reported basis for Fixed Operations:~~

Three Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands)

Total Fixed Operations revenue:

Same store

$
344,344

$
358,896

$
(14,552
)

(4.1
%)
Acquisitions and dispositions

3,373

2,813

560

NM

Total as reported

$
347,717

$
361,709

$
(13,992
)

(3.9
%)

Total Fixed Operations gross profit:

Same store

$
165,856

$
168,334

$
(2,478
)

(1.5
%)
Acquisitions and dispositions

1,814

1,669

145

NM

Total as reported

$
167,670

$
170,003

$
(2,333
)

(1.4
%)

~~NM = Not Meaningful~~

Nine Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands)

Total Fixed Operations revenue:

Same store

$
1,045,707

$
1,051,289

$
(5,582
)

(0.5
%)
Acquisitions and dispositions

15,166

7,804

7,362

NM

Total as reported

$
1,060,873

$
1,059,093

$
1,780

0.2
%

Total Fixed Operations gross profit:

Same store

$
502,137

$
499,527

$
2,610

0.5
%
Acquisitions and dispositions

7,948

4,699

3,249

NM

Total as reported

$
510,085

$
504,226

$
5,859

1.2
%

~~NM = Not Meaningful~~

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~Our reported Fixed Operations results are as follows:~~

Three Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands)

Reported Fixed Operations:

Revenue

Customer pay

$
137,850

$
146,365

$
(8,515
)

(5.8
%)
Warranty

70,575

60,388

10,187

16.9
%
Wholesale parts

40,927

44,202

(3,275
)

(7.4
%)
Internal, sublet and other

98,365

110,754

(12,389
)

(11.2
%)
Total revenue

$
347,717

$
361,709

$
(13,992
)

(3.9
%)
Gross profit

Customer pay

$
74,302

$
79,153

$
(4,851
)

(6.1
%)
Warranty

38,821

32,176

6,645

20.7
%
Wholesale parts

6,958

7,566

(608
)

(8.0
%)
Internal, sublet and other

47,589

51,108

(3,519
)

(6.9
%)
Total gross profit

$
167,670

$
170,003

$
(2,333
)

(1.4
%)
Gross profit as a % of revenue

Customer pay

53.9
%

54.1
%

(20
)

bps

Warranty

55.0
%

53.3
%

170

bps

Wholesale parts

17.0
%

17.1
%

(10
)

bps

Internal, sublet and other

48.4
%

46.1
%

230

bps

Total gross profit as a % of revenue

48.2
%

47.0
%

120

bps

Nine Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands)

Reported Fixed Operations:

Revenue

Customer pay

$
415,179

$
443,007

$
(27,828
)

(6.3
%)
Warranty

213,155

172,759

40,396

23.4
%
Wholesale parts

127,014

133,533

(6,519
)

(4.9
%)
Internal, sublet and other

305,525

309,794

(4,269
)

(1.4
%)
Total revenue

$
1,060,873

$
1,059,093

$
1,780

0.2
%
Gross profit

Customer pay

$
222,086

$
240,833

$
(18,747
)

(7.8
%)
Warranty

117,809

92,951

24,858

26.7
%
Wholesale parts

21,839

23,305

(1,466
)

(6.3
%)
Internal, sublet and other

148,351

147,137

1,214

0.8
%
Total gross profit

$
510,085

$
504,226

$
5,859

1.2
%
Gross profit as a % of revenue

Customer pay

53.5
%

54.4
%

(90
)

bps

Warranty

55.3
%

53.8
%

150

bps

Wholesale parts

17.2
%

17.5
%

(30
)

bps

Internal, sublet and other

48.6
%

47.5
%

110

bps

Total gross profit as a % of revenue

48.1
%

47.6
%

50

bps

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~Our same store Fixed Operations results are as follows:~~

Three Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands)

Same store Fixed Operations:

Revenue

Customer pay

$
136,879

$
145,282

$
(8,403
)

(5.8
%)
Warranty

69,959

59,924

10,035

16.7
%
Wholesale parts

40,790

43,950

(3,160
)

(7.2
%)
Internal, sublet and other

96,716

109,740

(13,024
)

(11.9
%)
Total revenue

$
344,344

$
358,896

$
(14,552
)

(4.1
%)
Gross profit

Customer pay

$
73,781

$
78,528

$
(4,747
)

(6.0
%)
Warranty

38,508

31,893

6,615

20.7
%
Wholesale parts

6,935

7,525

(590
)

(7.8
%)
Internal, sublet and other

46,632

50,388

(3,756
)

(7.5
%)
Total gross profit

$
165,856

$
168,334

$
(2,478
)

(1.5
%)
Gross profit as a % of revenue

Customer pay

53.9
%

54.1
%

(20
)

bps

Warranty

55.0
%

53.2
%

180

bps

Wholesale parts

17.0
%

17.1
%

(10
)

bps

Internal, sublet and other

48.2
%

45.9
%

230

bps

Total gross profit as a % of revenue

48.2
%

46.9
%

130

bps

Nine Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands)

Same store Fixed Operations:

Revenue

Customer pay

$
411,036

$
439,677

$
(28,641
)

(6.5
%)
Warranty

210,795

171,379

39,416

23.0
%
Wholesale parts

126,069

132,758

(6,689
)

(5.0
%)
Internal, sublet and other

297,807

307,475

(9,668
)

(3.1
%)
Total revenue

$
1,045,707

$
1,051,289

$
(5,582
)

(0.5
%)
Gross profit

Customer pay

$
219,890

$
238,929

$
(19,039
)

(8.0
%)
Warranty

116,493

92,221

24,272

26.3
%
Wholesale parts

21,638

23,181

(1,543
)

(6.7
%)
Internal, sublet and other

144,116

145,196

(1,080
)

(0.7
%)
Total gross profit

$
502,137

$
499,527

$
2,610

0.5
%
Gross profit as a % of revenue

Customer pay

53.5
%

54.3
%

(80
)

bps

Warranty

55.3
%

53.8
%

150

bps

Wholesale parts

17.2
%

17.5
%

(30
)

bps

Internal, sublet and other

48.4
%

47.2
%

120

bps

Total gross profit as a % of revenue

48.0
%

47.5
%

50

bps

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Our Fixed Operations gross profit was negatively affected by temporary store closures in our Alabama, Florida, Georgia and Houston markets as a result of Hurricanes Harvey and Irma in August and September 2017. While we anticipate some incremental Fixed Operations customer pay work related to hurricane-damaged vehicles, we do not expect this sales volume to make up for lost selling days while stores in these markets were closed for business as a result of Hurricanes Harvey and Irma.

~~Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016~~

Our Fixed Operations revenue decreased approximately $14.6 million, or 4.1%, and Fixed Operations gross profit decreased approximately $2.5 million, or 1.5%, driven primarily by the impact of lost selling days as a result of Hurricanes Harvey and Irma. Combined customer pay and warranty gross profit increased approximately $1.9 million, or 1.7%, wholesale parts gross profit decreased approximately $0.6 million, or 7.8%, and internal, sublet and other gross profit decreased approximately $3.8 million, or 7.5%, on lower levels of used vehicle reconditioning.

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

Our Fixed Operations revenue decreased approximately $5.6 million, or 0.5%, driven primarily by the impact of lost selling days as a result of Hurricanes Harvey and Irma and decreases at our Honda, Mercedes, Ford and General Motors (excluding Cadillac) dealerships, while our Fixed Operations gross profit increased approximately $2.6 million, or 0.5%, driven primarily by increases at our Honda, Lexus and Audi dealerships. Combined customer pay and warranty gross profit increased approximately $5.2 million, or 1.6%, wholesale parts gross profit decreased approximately $1.5 million, or 6.7%, and internal, sublet and other gross profit decreased approximately $1.1 million, or 0.7%, on lower levels of used vehicle reconditioning.

~~Finance, Insurance and Other, Net (“F&I”)~~

~~F&I~~net revenues include commissions for arranging third-party vehicle financing and insurance, sales of third-party extended warranties and service contracts for vehicles, and sales of other aftermarket products. In connection with vehicle financing, extended warranties and service contracts, other aftermarket products and insurance contracts, we receive commissions from the third-party providers for originating these contracts. F&I revenues are recognized net of actual and estimated future chargebacks and other costs associated with originating ~~contracts.~~contracts (as a result, reported F&I revenues and F&I gross profit are the same amount, resulting in a 100% gross margin for F&I). F&I revenues are ~~driven~~affected by the level of new and retail used vehicle unit sales volume, the age and average selling price of vehicles sold, the level of manufacturer financing specials or leasing incentives, and our F&I penetration ~~rate.~~rate for each type of F&I product. The F&I penetration rate represents the number of finance contracts, ~~insurance contracts,~~ extended warranties and service contracts, ~~and~~ other aftermarket products or insurance contracts that we are able to originate per vehicle sold, expressed as a percentage. ~~Finance contract revenue may~~

Yield spread premium is another term for the commission earned by our dealerships for arranging vehicle financing for consumers. The amount of the commission could be ~~under pressure in future periods if manufacturers offer attractive~~zero, a flat fee or an actual spread between the interest rate charged to the consumer and the interest rate provided by the third-party direct financing ~~rates from their~~source (e.g., a commercial bank, credit union or manufacturer captive finance ~~affiliates because~~company). We have established caps on the potential yield spread premium our dealerships can earn with all finance sources. We believe the yield spread premium we ~~tend~~earn for arranging vehicle financing represents value to ~~earn~~ the consumer in numerous ways, including the following:

•lower ~~commissions~~cost, below-market financing is often available only from the manufacturers’ captives and franchised dealers;

•ease of access to multiple high-quality lending sources;

•lease-financing alternatives are largely available only from manufacturers’ captives or other indirect lenders;

•guests with substandard credit frequently do not have direct access to potential sources of sub-prime financing; and

•guests with significant “negative equity” in their current vehicle (i.e., the guest’s current vehicle is worth less than the balance of their vehicle loan or lease obligation) frequently are unable to pay off the loan on their current vehicle and finance the purchase or lease of a replacement new or used vehicle without the assistance of a franchised dealership’s network of lending sources.

Our consolidated reported F&I results were as follows:



	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit and per unit data)
Reported F&I:
Revenue	$	169.0	$	168.6	$	0.4	—	%
Total combined retail new and used vehicle unit sales	70,198		71,188		(990)		(1)	%
Gross profit per retail unit (excludes fleet)	$	2,407	$	2,369	$	38	2	%

For further analysis of F&I results, see the tables and discussion under ~~these programs.~~

the headings “F&I - Franchised Dealerships Segment,” “Used Vehicles and F&I - EchoPark Segment” and “F&I - Powersports Segment” in the Franchised Dealerships Segment, EchoPark Segment and Powersports Segment sections, respectively, below.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations – Franchised Dealerships Segment

As a result of the acquisition, disposition, termination or closure of certain franchised dealership stores in 2023 and 2024, the change in reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores. Please refer to the same store tables and discussion on the following pages for a more meaningful comparison and discussion of financial results on a comparable store basis.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

New Vehicles – Franchised Dealerships Segment

The following ~~tables provide~~table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis ~~and~~for new vehicles:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit data)
Retail new vehicle revenue:
Same store	$	1,435.5	$	1,398.8	$	36.7	3	%
Acquisitions, open points, dispositions and holding company	4.4		22.2		(17.8)		NM
Total as reported	$	1,439.9	$	1,421.0	$	18.9	1	%

Fleet new vehicle revenue:
Same store	$	19.6	$	18.9	$	0.7	4	%
Acquisitions, open points, dispositions and holding company	—		(0.1)		0.1		NM
Total as reported	$	19.6	$	18.8	$	0.8	4	%

Total new vehicle revenue:
Same store	$	1,455.1	$	1,417.7	$	37.4	3	%
Acquisitions, open points, dispositions and holding company	4.4		22.1		(17.7)		NM
Total as reported	$	1,459.5	$	1,439.8	$	19.7	1	%

Retail new vehicle gross profit:
Same store	$	93.7	$	132.3	$	(38.6)	(29)	%
Acquisitions, open points, dispositions and holding company	0.4		1.7		(1.3)		NM
Total as reported	$	94.1	$	134.0	$	(39.9)	(30)	%

Fleet new vehicle gross profit:
Same store	$	0.7	$	0.9	$	(0.2)	(22)	%
Acquisitions, open points, dispositions and holding company	—		—		—		NM
Total as reported	$	0.7	$	0.9	$	(0.2)	(22)	%

Total new vehicle gross profit:
Same store	$	94.4	$	133.2	$	(38.8)	(29)	%
Acquisitions, open points, dispositions and holding company	0.4		1.7		(1.3)		NM
Total as reported	$	94.8	$	134.9	$	(40.1)	(30)	%

Retail new vehicle unit sales:
Same store	25,225		24,053		1,172		5	%
Acquisitions, open points, dispositions and holding company	72		486		(414)		NM
Total as reported	25,297		24,539		758		3	%

Fleet new vehicle unit sales:
Same store	379		441		(62)		(14)	%
Acquisitions, open points, dispositions and holding company	—		—		—		NM
Total as reported	379		441		(62)		(14)	%

Total new vehicle unit sales:
Same store	25,604		24,494		1,110		5	%
Acquisitions, open points, dispositions and holding company	72		486		(414)		NM
Total as reported	25,676		24,980		696		3	%
NM = Not Meaningful

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment reported ~~basis for F&I:~~

new vehicle results were as follows:

Three Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except per unit data)

Total F&I revenue:

Same store
$
90,602

$
88,254

$
2,348

2.7
%
Acquisitions and dispositions

2,259

1,325

934

NM

Total as reported
$
92,861

$
89,579

$
3,282

3.7
%

Total F&I gross profit per retail unit (excludes fleet):

Same store
$
1,404

$
1,340

$
64

4.8
%
Total as reported
$
1,408

$
1,344

$
64

4.8
%

~~NM = Not Meaningful~~

Nine Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except per unit data)

Total F&I revenue:

Same store
$
253,957

$
251,204

$
2,753

1.1
%
Acquisitions and dispositions

8,875

3,736

5,139

NM

Total as reported
$
262,832

$
254,940

$
7,892

3.1
%

Total F&I gross profit per retail unit (excludes fleet):

Same store
$
1,381

$
1,346

$
35

2.6
%
Total as reported
$
1,389

$
1,351

$
38

2.8
%


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Reported new vehicle:
Retail new vehicle revenue	$	1,439.9		$	1,421.0		$	18.9	1	%
Fleet new vehicle revenue	19.6			18.8			0.8		4	%
Total new vehicle revenue	$	1,459.5		$	1,439.8		$	19.7	1	%

Retail new vehicle gross profit	$	94.1		$	134.0		$	(39.9)	(30)	%
Fleet new vehicle gross profit	0.7			0.9			(0.2)		(22)	%
Total new vehicle gross profit	$	94.8		$	134.9		$	(40.1)	(30)	%

Retail new vehicle unit sales	25,297			24,539			758		3	%
Fleet new vehicle unit sales	379			441			(62)		(14)	%
Total new vehicle unit sales	25,676			24,980			696		3	%

Revenue per new retail unit	$	56,921		$	57,907		$	(986)	(2)	%
Revenue per new fleet unit	$	51,708		$	42,680		$	9,028	21	%
Total revenue per new unit	$	56,844		$	57,638		$	(794)	(1)	%

Gross profit per new retail unit	$	3,722		$	5,463		$	(1,741)	(32)	%
Gross profit per new fleet unit	$	1,706		$	2,020		$	(314)	(16)	%
Total gross profit per new unit	$	3,692		$	5,402		$	(1,710)	(32)	%

Retail gross profit as a % of revenue	6.5		%	9.4		%	(290)		bps
Fleet gross profit as a % of revenue	3.3		%	4.7		%	(140)		bps
Total new vehicle gross profit as a % of revenue	6.5		%	9.4		%	(290)		bps

~~NM = Not Meaningful~~

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment same store new vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Same store new vehicle:
Retail new vehicle revenue	$	1,435.5		$	1,398.8		$	36.7	3	%
Fleet new vehicle revenue	19.6			18.9			0.7		4	%
Total new vehicle revenue	$	1,455.1		$	1,417.7		$	37.4	3	%

Retail new vehicle gross profit	$	93.7		$	132.3		$	(38.6)	(29)	%
Fleet new vehicle gross profit	0.7			0.9			(0.2)		(22)	%
Total new vehicle gross profit	$	94.4		$	133.2		$	(38.8)	(29)	%

Retail new vehicle unit sales	25,225			24,053			1,172		5	%
Fleet new vehicle unit sales	379			441			(62)		(14)	%
Total new vehicle unit sales	25,604			24,494			1,110		5	%

Revenue per new retail unit	$	56,909		$	58,157		$	(1,248)	(2)	%
Revenue per new fleet unit	$	51,708		$	42,680		$	9,028	21	%
Total revenue per new unit	$	56,832		$	57,878		$	(1,046)	(2)	%

Gross profit per new retail unit	$	3,716		$	5,499		$	(1,783)	(32)	%
Gross profit per new fleet unit	$	1,706		$	2,020		$	(314)	(16)	%
Total gross profit per new unit	$	3,686		$	5,437		$	(1,751)	(32)	%

Retail gross profit as a % of revenue	6.5		%	9.5		%	(300)		bps
Fleet gross profit as a % of revenue	3.3		%	4.7		%	(140)		bps
Total new vehicle gross profit as a % of revenue	6.5		%	9.4		%	(290)		bps

Same Store Franchised Dealerships Segment Retail New Vehicles –Three Months Ended ~~September 30, 20~~17March 31, 2024 Compared to Three Months Ended ~~September 30, 20~~16

~~F&I revenues~~March 31, 2023

Retail new vehicle revenue increased 3%, due primarily to a 5% increase in retail new vehicle unit sales volume, partially offset by a 2% decrease in retail new vehicle average selling prices. Retail new vehicle gross profit decreased approximately ~~$2.3~~$38.6 million, or ~~2.7%~~29%, ~~and F&I~~as a result of lower retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit decreased $1,783 per unit, or 32%, to $3,716 per unit, due primarily to increased price competition as a result of higher levels of available inventory than in the prior year period and higher inventory invoice costs.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Used Vehicles – Franchised Dealerships Segment

The following table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for retail used vehicles:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit data)
Retail used vehicle revenue:
Same store	$	726.0	$	753.9	$	(27.9)	(4)	%
Acquisitions, open points, dispositions and holding company	3.3		13.7		(10.4)		NM
Total as reported	$	729.3	$	767.6	$	(38.3)	(5)	%

Retail used vehicle gross profit:
Same store	$	40.5	$	40.1	$	0.4	1	%
Acquisitions, open points, dispositions and holding company	0.3		0.7		(0.4)		NM
Total as reported	$	40.8	$	40.8	$	—	—	%

Retail used vehicle unit sales:
Same store	25,552		24,601		951		4	%
Acquisitions, open points, dispositions and holding company	114		506		(392)		NM
Total as reported	25,666		25,107		559		2	%

NM = Not Meaningful

Our Franchised Dealerships Segment reported retail used vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue	$	729.3		$	767.6		$	(38.3)	(5)	%
Gross profit	$	40.8		$	40.8		$	—	—	%
Unit sales	25,666			25,107			559		2	%
Revenue per unit	$	28,418		$	30,573		$	(2,155)	(7)	%
Gross profit per unit	$	1,592		$	1,626		$	(34)	(2)	%
Gross profit as a % of revenue	5.6		%	5.3		%	30		bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment same store retail used vehicle results were as follows:



	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Same store retail used vehicle:
Revenue	$	726.0		$	753.9		$	(27.9)	(4)	%
Gross profit	$	40.5		$	40.1		$	0.4	1	%
Unit sales	25,552			24,601			951		4	%
Revenue per unit	$	28,414		$	30,646		$	(2,232)	(7)	%
Gross profit per unit	$	1,585		$	1,631		$	(46)	(3)	%
Gross profit as a % of revenue	5.6		%	5.3		%	30		bps

Same Store Franchised Dealerships Segment Retail Used Vehicles – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Retail used vehicle revenue decreased approximately $27.9 million, or 4%, driven primarily by a 7% decrease in retail used vehicle average selling prices, partially offset by a 4% increase in retail used vehicle unit sales volume. Retail used vehicle gross profit increased ~~$64,~~approximately $0.4 million, or ~~4.8%~~1%, driven primarily by a 4% increase in retail used vehicle unit sales volume, partially offset by a $46 per unit, or 3%, decrease in retail used vehicle gross profit per unit during the first quarter of 2024 due primarily to higher inventory acquisition costs and increased price competition as a result of ongoing consumer affordability challenges.

Wholesale Vehicles – Franchised Dealerships Segment

The following table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for wholesale vehicles:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit data)
Total wholesale vehicle revenue:
Same store	$	48.4	$	57.6	$	(9.2)	(16)	%
Acquisitions, open points, dispositions and holding company	0.2		0.8		(0.6)		NM
Total as reported	$	48.6	$	58.4	$	(9.8)	(17)	%

Total wholesale vehicle gross profit (loss):
Same store	$	(0.2)	$	1.8	$	(2.0)	(111)	%
Acquisitions, open points, dispositions and holding company	—		0.1		(0.1)		NM
Total as reported	$	(0.2)	$	1.9	$	(2.1)	(111)	%

Total wholesale vehicle unit sales:
Same store	5,094		5,389		(295)		(5)	%
Acquisitions, open points, dispositions and holding company	11		94		(83)		NM
Total as reported	5,105		5,483		(378)		(7)	%
NM = Not Meaningful

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment reported wholesale vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue	$	48.6		$	58.4		$	(9.8)	(17)	%
Gross profit (loss)	$	(0.2)		$	1.9		$	(2.1)	(111)	%
Unit sales	5,105			5,483			(378)		(7)	%
Revenue per unit	$	9,482		$	10,637		$	(1,155)	(11)	%
Gross profit (loss) per unit	$	(36)		$	324		$	(360)	(111)	%
Gross profit (loss) as a % of revenue	(0.4)		%	3.0		%	(340)		bps

Our Franchised Dealerships Segment same store wholesale vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Same store wholesale vehicle:
Revenue	$	48.4		$	57.6		$	(9.2)	(16)	%
Gross profit (loss)	$	(0.2)		$	1.8		$	(2.0)	(111)	%
Unit sales	5,094			5,389			(295)		(5)	%
Revenue per unit	$	9,487		$	10,679		$	(1,192)	(11)	%
Gross profit (loss) per unit	$	(36)		$	346		$	(382)	(110)	%
Gross profit (loss) as a % of revenue	(0.4)		%	3.2		%	(360)		bps

Same Store Franchised Dealerships Segment Wholesale Vehicles – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Wholesale vehicle revenue decreased approximately $9.2 million, or 16%, driven primarily by an 11% decrease in wholesale vehicle revenue per unit and a 5% decrease in wholesale vehicle unit sales volume during the first quarter of 2024. Wholesale vehicle gross profit (loss) worsened approximately $2.0 million, driven primarily by a $382 per unit, or 110%, worsening of wholesale vehicle gross profit (loss) per unit as a result of lower wholesale auction prices.

Fixed Operations – Franchised Dealerships Segment

The following table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for Fixed Operations:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions)
Total Fixed Operations revenue:
Same store	$	438.6	$	417.8	$	20.8	5	%
Acquisitions, open points, dispositions and holding company	1.3		6.0		(4.7)		NM
Total as reported	$	439.9	$	423.8	$	16.1	4	%

Total Fixed Operations gross profit:
Same store	$	219.6	$	206.3	$	13.3	6	%
Acquisitions, open points, dispositions and holding company	1.2		3.3		(2.1)		NM
Total as reported	$	220.8	$	209.6	$	11.2	5	%

NM = Not Meaningful

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment reported Fixed Operations results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions)
Reported Fixed Operations:
Revenue
Customer pay	$	208.3		$	200.8		$	7.5	4	%
Warranty	64.1			58.6			5.5		9	%
Wholesale parts	50.6			54.3			(3.7)		(7)	%
Internal, sublet and other	116.9			110.1			6.8		6	%
Total revenue	$	439.9		$	423.8		$	16.1	4	%

Gross profit
Customer pay	$	117.2		$	111.6		$	5.6	5	%
Warranty	38.2			34.4			3.8		11	%
Wholesale parts	8.8			9.7			(0.9)		(9)	%
Internal, sublet and other	56.6			53.9			2.7		5	%
Total gross profit	$	220.8		$	209.6		$	11.2	5	%

Gross profit as a % of revenue
Customer pay	56.3		%	55.6		%	70		bps
Warranty	59.6		%	58.7		%	90		bps
Wholesale parts	17.6		%	17.8		%	(20)		bps
Internal, sublet and other	48.2		%	49.0		%	(80)		bps
Total gross profit as a % of revenue	50.2		%	49.5		%	70		bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Franchised Dealerships Segment same store Fixed Operations results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions)
Same store Fixed Operations:
Revenue
Customer pay	$	207.5		$	198.3		$	9.2	5	%
Warranty	63.8			57.3			6.5		11	%
Wholesale parts	50.5			53.8			(3.3)		(6)	%
Internal, sublet and other	116.8			108.4			8.4		8	%
Total revenue	$	438.6		$	417.8		$	20.8	5	%

Gross profit
Customer pay	$	116.7		$	110.4		$	6.3	6	%
Warranty	38.0			33.7			4.3		13	%
Wholesale parts	8.9			9.6			(0.7)		(7)	%
Internal, sublet and other	56.0			52.6			3.4		6	%
Total gross profit	$	219.6		$	206.3		$	13.3	6	%

Gross profit as a % of revenue
Customer pay	56.3		%	55.6		%	70		bps
Warranty	59.6		%	58.8		%	80		bps
Wholesale parts	17.6		%	17.8		%	(20)		bps
Internal, sublet and other	47.9		%	48.5		%	(60)		bps
Total gross profit as a % of revenue	50.1		%	49.4		%	70		bps

Same Store Franchised Dealerships Segment Fixed Operations – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Fixed Operations revenue increased approximately $20.8 million, or 5%, and Fixed Operations gross profit increased approximately $13.3 million, or 6%. ~~The~~Customer pay gross profit increased approximately $6.3 million, or 6%, warranty gross profit increased approximately $4.3 million, or 13%, wholesale parts gross profit decreased approximately $0.7 million, or 7%, and internal, sublet and other gross profit increased approximately $3.4 million, or 6%. As consumer activity and vehicle miles driven have continued to improve from pandemic-induced lows in early 2020, we have experienced a recovery in Fixed Operations activity (in particular, related to customer pay repairs), and are currently operating above pre-pandemic levels and expect to continue to see growth in ~~F&I~~Fixed Operations revenues and gross profit ~~per retail unit is attributed~~throughout 2024.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

F&I – Franchised Dealerships Segment

The following table provides a reconciliation of Franchised Dealerships Segment reported basis and same store basis for F&I:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit and per unit data)
Total F&I revenue:
Same store	$	119.3	$	115.3	$	4.0	3	%
Acquisitions, open points, dispositions and holding company	0.3		1.8		(1.5)		NM
Total as reported	$	119.6	$	117.1	$	2.5	2	%

Total F&I gross profit per retail unit (excludes fleet):
Same store	$	2,350	$	2,370	$	(20)	(1)	%
Reported	$	2,348	$	2,360	$	(12)	(1)	%

Total combined retail new and used vehicle unit sales:
Same store	50,777		48,654		2,123		4	%
Acquisitions, open points, dispositions and holding company	186		992		(806)		NM
Total as reported	50,963		49,646		1,317		3	%

NM = Not Meaningful

Our Franchised Dealerships Segment reported F&I results were as follows:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit and per unit data)
Reported F&I:
Revenue	$	119.6	$	117.1	$	2.5	2	%
Total combined retail new and used vehicle unit sales	50,963		49,646		1,317		3	%
Gross profit per retail unit (excludes fleet)	$	2,348	$	2,360	$	(12)	(1)	%

Our Franchised Dealerships Segment same store F&I results were as follows:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit and per unit data)
Same store F&I:
Revenue	$	119.3	$	115.3	$	4.0	4	%
Total combined retail new and used vehicle unit sales	50,777		48,654		2,123		4	%
Gross profit per retail unit (excludes fleet)	$	2,350	$	2,370	$	(20)	(1)	%

Same Store Franchised Dealerships Segment F&I – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

F&I revenue increased approximately $4.0 million, or 4%, due primarily to an increase in gross profit per service contract and gross profit per other aftermarket contract due to additional product offerings and increased visibility into performance drivers provided by our proprietary internal software applications. These increases in gross profit per contract more than offset the impact of a 2.0% decrease intotal combined retail new and used vehicle unit sales volume, ~~and lower penetration rates. The Houston market’s incremental sales volume drove the F&I gross profit increase for the quarter. Replacement vehicle demand as~~offset partially by a ~~result of Hurricane Harvey drove an 11.4% increase~~1% decrease in F&I gross profit per retail unit. F&I gross profit per retail unit decreased $20 per unit to $2,350 per unit, due primarily to a decrease in ~~our Houston market.~~

the other aftermarket contract penetration rate.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Finance contract revenue for combined retail new and used vehicles remained flat year over year, due primarily to a 240-basis point increase in the finance contract penetration rate offset by a 7% decrease in gross profit per finance contract. Service contract revenue for combined retail new and used vehicles increased 18%, due primarily to an 11% increase in gross profit per service contract and a 100-basis point increase in the service contract penetration rate. Other aftermarket contract revenue for combined retail new and used vehicles increased 7%, due primarily to an 8% increase in gross profit per other aftermarket contract, partially offset by a 670-basis point decrease in the other aftermarket contract penetration rate.

Results of Operations – EchoPark Segment

All currently operating EchoPark stores in a local geographic market are included within the same market group as of the first full month following the first anniversary of the market’s opening or acquisition. Same market results may vary significantly from reported results due to the closure of stores that are no longer included in same market results.

On June 22, 2023, Sonic announced a plan to indefinitely suspend operations at eight EchoPark locations and 14 related delivery/buy centers. In addition, during the third quarter of 2023, we closed three Northwest Motorsport locations within the EchoPark Segment. In January 2024, we closed the remaining seven Northwest Motorsport stores. In light of these closures, we believe the following discussion of EchoPark Segment results on a same market basis provides a meaningful year-over-year comparison.

Used Vehicles and F&I – EchoPark Segment

Our EchoPark operating strategy focuses on maximizing total used vehicle-related gross profit (based on a combination of retail used vehicle unit sales volume, front-end retail used vehicle gross profit (loss) per unit and F&I gross profit per retail unit) rather than realizing traditional levels of front-end retail used vehicle gross profit per unit. As such, we believe the best per unit measure of gross profit performance at our EchoPark stores is a combined total gross profit (loss) per retail unit, which includes both front-end retail used vehicle gross profit (loss) and F&I gross profit per retail unit sold. See the discussion under the heading “Results of Operations - Consolidated” for additional discussion of the macro drivers of used vehicle revenues and F&I revenues.

All Fixed Operations activity at our EchoPark stores supports our used vehicle inventory reconditioning operations and EchoPark stores do not currently perform customer pay repairs or maintenance work and are not permitted to perform manufacturer-paid warranty repairs. As such, reconditioning amounts that are classified as Fixed Operations revenues and cost of sales in our Franchised Dealerships Segment are presented as used vehicle cost of sales for the EchoPark Segment.

The following table provides a reconciliation of EchoPark Segment reported basis, same market basis and closed market basis for retail used vehicles:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit data)
Total retail used vehicle revenue:
Same market	$	473.2	$	433.7	$	39.5	9	%
Closed stores	9.7		138.8		(129.1)		NM
Total as reported	$	482.9	$	572.5	$	(89.6)	(16)	%

Total retail used vehicle gross profit (loss):
Same market	$	5.6	$	(9.8)	$	15.4	157	%
Closed stores	(0.3)		(2.0)		1.7		NM
Total as reported	$	5.3	$	(11.8)	$	17.1	145	%

Total retail used vehicle unit sales:
Same market	17,618		15,551		2,067		13	%
Closed stores	363		4,429		(4,066)		NM
Total as reported	17,981		19,980		(1,999)		(10)	%
NM = Not Meaningful

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table provides a reconciliation of EchoPark Segment reported basis, same market basis and closed market basis for F&I:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions)
Total F&I revenue:
Same market	$	47.5	$	38.3	$	9.2	24	%
Closed stores	0.4		11.7		(11.3)		NM
Total as reported	$	47.9	$	50.0	$	(2.1)	(4)	%
NM = Not Meaningful

Our EchoPark Segment reported retail used vehicle and F&I results were as follows:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit and per unit data)
Reported retail used vehicle and F&I:
Retail used vehicle revenue	$	482.9	$	572.5	$	(89.6)	(16)	%
Retail used vehicle gross profit (loss)	$	5.3	$	(11.8)	$	17.1	150	%
Retail used vehicle unit sales	17,981		19,980		(1,999)		(10)	%
Retail used vehicle revenue per unit	$	26,854	$	28,653	$	(1,799)	(6)	%
F&I revenue	$	47.9	$	50.0	$	(2.1)	(4)	%
Combined retail used vehicle gross profit and F&I revenue	$	53.2	$	38.2	$	15.0	39	%
Combined retail used vehicle and F&I gross profit per unit	$	2,955	$	1,906	$	1,049	55	%

Our EchoPark Segment same market retail used vehicle and F&I results were as follows:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit and per unit data)
Same market retail used vehicle and F&I:
Retail used vehicle revenue	$	473.2	$	433.7	$	39.5	9	%
Retail used vehicle gross profit (loss)	$	5.6	$	(9.8)	$	15.4	157	%
Retail used vehicle unit sales	17,618		15,551		2,067		13	%
Retail used vehicle revenue per unit	$	26,859	$	27,889	$	(1,030)	(4)	%
F&I revenue	$	47.5	$	38.3	$	9.2	24	%
Combined retail used vehicle gross profit and F&I revenue	$	53.1	$	28.5	$	24.6	86	%
Combined retail used vehicle and F&I gross profit per unit	$	3,018	$	1,833	$	1,185	65	%

Same Market EchoPark Segment Retail Used Vehicles and F&I – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Retail used vehicle revenue increased approximately $39.5 million, or 9%, due primarily to a 13% increase in retail used vehicle unit sales volume, offset partially by a 4% decrease in retail used vehicle revenue per unit. Combined retail used vehicle gross profit and F&I revenue increased approximately $24.6 million, or 86%, due primarily to a $9.2 million, or 24%, increase in F&I revenue. The increase in combined retail used vehicle and F&I gross profit per unit was due primarily to improvement in inventory acquisition cost as a result of lower wholesale auction prices, sourcing a higher percentage of inventory from non-auction sources, and expanding our inventory to include older vehicles, which typically earn a higher gross profit per unit.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Wholesale Vehicles – EchoPark Segment

See the discussion under the heading “Results of Operations – Consolidated” for additional discussion of the macro drivers of wholesale vehicle revenues.

The following table provides a reconciliation of EchoPark Segment reported basis, same market basis and closed market basis for wholesale vehicles:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit data)
Total wholesale vehicle revenue:
Same market	$	25.5	$	17.9	$	7.6	42	%
Closed stores	3.1		9.1		(6.0)		NM
Total as reported	$	28.6	$	27.0	$	1.6	6	%

Total wholesale vehicle gross profit (loss):
Same market	$	0.1	$	1.2	$	(1.1)	(92)	%
Closed stores	(0.7)		(0.1)		(0.6)		NM
Total as reported	$	(0.6)	$	1.1	$	(1.7)	(155)	%

Total wholesale vehicle unit sales:
Same market	2,785		2,119		666		31	%
Closed stores	209		797		(588)		NM
Total as reported	2,994		2,916		78		3	%
NM = Not Meaningful

Our EchoPark Segment reported wholesale vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue	$	28.6		$	27.0		$	1.6	6	%
Gross profit (loss)	$	(0.6)		$	1.1		$	(1.7)	(155)	%
Unit sales	2,994			2,916			78		3	%
Revenue per unit	$	9,578		$	9,279		$	299	3	%
Gross profit (loss) per unit	$	(168)		$	427		$	(595)	NM
Gross profit (loss) as a % of revenue	(1.8)		%	4.6		%	(640)		bps
NM = Not Meaningful

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our EchoPark Segment same market wholesale vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Same market wholesale vehicle:
Revenue	$	25.5		$	17.9		$	7.6	42	%
Gross profit (loss)	$	0.1		$	1.2		$	(1.1)	(92)	%
Unit sales	2,785			2,119			666		31	%
Revenue per unit	$	9,155		$	8,475		$	680	8	%
Gross profit (loss) per unit	$	21		$	558		$	(537)	(96)	%
Gross profit (loss) as a % of revenue	0.2		%	6.6		%	(640)		bps

Same Market EchoPark Segment Wholesale Vehicles – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Same market wholesale vehicle revenue increased approximately $7.6 million, or 42%, due primarily to an 8% increase in wholesale vehicle revenue per unit, combined with a 31% increase in wholesale vehicle unit sales volume. As we adjust the inventory mix of nearly new versus older model year vehicles sold at retail going forward, the levels of wholesale vehicle revenue and gross profit may vary.

Results of Operations – Powersports Segment

As a result of acquisitions since the beginning of 2023, the change in reported amounts from period to period may not be indicative of the current or future operational or financial performance of our current group of operating stores. The following discussion of new vehicles, used vehicles, wholesale vehicles, parts, service and collision repair, and finance, insurance and other, net is on a same store basis, except where otherwise noted. Our Powersports Segment results are subject to seasonal variations, such that the second and third quarters are generally expected to contribute higher revenues and segment income than the first and fourth quarters.

New Vehicles – Powersports Segment

The following table provides a reconciliation of Powersports Segment reported basis and same store basis for retail new vehicles:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit data)
Total retail new vehicle revenue:
Same store	$	15.3	$	20.6	$	(5.3)	(26)	%
Acquisitions	0.6		0.2		0.4		NM
Total as reported	$	15.9	$	20.8	$	(4.9)	(24)	%

Total retail new vehicle gross profit:
Same store	$	2.1	$	3.9	$	(1.8)	(46)	%
Acquisitions	0.2		0.1		0.1		NM
Total as reported	$	2.3	$	4.0	$	(1.7)	(43)	%

Total retail new vehicle unit sales:
Same store	828		1,100		(272)		(25)	%
Acquisitions	17		7		10		NM
Total as reported	845		1,107		(262)		(24)	%

NM = Not Meaningful

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Powersports Segment reported retail new vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Reported retail new vehicle:
Revenue	$	15.9		$	20.8		$	(4.9)	(24)	%
Gross profit	$	2.3		$	4.0		$	(1.7)	(43)	%
Unit sales	845			1,107			(262)		(24)	%
Revenue per unit	$	18,781		$	18,793		$	(12)	—	%
Gross profit per unit	$	2,676		$	3,573		$	(897)	(25)	%
Gross profit as a % of revenue	14.2		%	19.0		%	(480)		bps

Our Powersports Segment same store retail new vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Same store retail new vehicle:
Revenue	$	15.3		$	20.6		$	(5.3)	(26)	%
Gross profit	$	2.1		$	3.9		$	(1.8)	(46)	%
Unit sales	828			1,100			(272)		(25)	%
Revenue per unit	$	18,512		$	18,740		$	(228)	(1)	%
Gross profit per unit	$	2,553		$	3,549		$	(996)	(28)	%
Gross profit as a % of revenue	13.8		%	18.9		%	(510)		bps

Same Store Powersports Segment Retail New Vehicles – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Retail new vehicle revenue decreased ~~4.5%~~26%, due primarily to a 25% decrease in retail new vehicle unit sales volume and a 1% decrease in retail new vehicle average selling prices. Retail new vehicle gross profit decreased approximately $1.8 million, or 46%, as a result of lower retail new vehicle unit sales volume and lower retail new vehicle gross profit per unit. Retail new vehicle gross profit per unit decreased $996 per unit, or 28%, to $2,553 per unit, due primarily to higher inventory invoice cost and changes in brand mix.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Used Vehicles – Powersports Segment

The following table provides a reconciliation of Powersports Segment reported basis and same store basis for retail used vehicles:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit data)
Retail used vehicle revenue:
Same store	$	2.7	$	4.3	$	(1.6)	(37)	%
Acquisitions	0.7		0.5		0.2		NM
Total as reported	$	3.4	$	4.8	$	(1.4)	(29)	%

Retail used vehicle gross profit:
Same store	$	0.7	$	0.9	$	(0.2)	(22)	%
Acquisitions	0.2		0.1		0.1		NM
Total as reported	$	0.9	$	1.0	$	(0.1)	(10)	%

Retail used vehicle unit sales:
Same store	336		401		(65)		(16)	%
Acquisitions	73		43		30		NM
Total as reported	409		444		(35)		(8)	%

NM = Not Meaningful

Our Powersports Segment reported retail used vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Reported retail used vehicle:
Revenue	$	3.4		$	4.8		$	(1.4)	(30)	%
Gross profit	$	0.9		$	1.0		$	(0.1)	(10)	%
Unit sales	409			444			(35)		(8)	%
Revenue per unit	$	8,238		$	10,864		$	(2,626)	(24)	%
Gross profit per unit	$	2,185		$	2,328		$	(143)	(6)	%
Gross profit as a % of revenue	26.5		%	21.4		%	510		bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Powersports Segment same store retail used vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Same store retail used vehicle:
Revenue	$	2.7		$	4.3		$	(1.6)	(37)	%
Gross profit	$	0.7		$	0.9		$	(0.2)	(22)	%
Unit sales	336			401			(65)		(16)	%
Revenue per unit	$	8,180		$	10,805		$	(2,625)	(24)	%
Gross profit per unit	$	2,202		$	2,274		$	(72)	(3)	%
Gross profit as a % of revenue	26.9		%	21.0		%	590		bps

Same Store Powersports Segment Retail Used Vehicles – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Retail used vehicle revenue decreased 37%, due primarily to a 24% decrease in retail used vehicle average selling prices and a 16% decrease in retail used vehicle unit sales volume. Retail used vehicle gross profit decreased approximately $0.2 million, or 22%, as a result of lower retail used vehicle unit sales volume and lower retail used vehicle gross profit per unit. Retail used vehicle gross profit per unit decreased $72 per unit, or 3%, to $2,202 per unit, due primarily to lower average retail selling prices.

Wholesale Vehicles – Powersports Segment

The following table provides a reconciliation of Powersports Segment reported basis and same store basis for wholesale vehicles:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit data)
Total wholesale vehicle revenue:
Same store	$	0.3	$	0.1	$	0.2	200	%
Acquisitions	(0.2)		0.1		(0.3)		NM
Total as reported	$	0.1	$	0.2	$	(0.1)	(50)	%

Total wholesale vehicle gross profit (loss):
Same store	$	0.1	$	(0.1)	$	0.2	200	%
Acquisitions	(0.1)		0.1		(0.2)		NM
Total as reported	$	—	$	—	$	—	—	%

Total wholesale vehicle unit sales:
Same store	10		6		4		67	%
Acquisitions	3		1		2		NM
Total as reported	13		7		6		86	%

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Powersports Segment reported wholesale vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Reported wholesale vehicle:
Revenue	$	0.1		$	0.2		$	(0.1)	(50)	%
Gross profit (loss)	$	—		$	—		$	—	—	%
Unit sales	13			7			6		86	%
Revenue per unit	$	17,408		$	13,993		$	3,415	24	%
Gross profit (loss) per unit	$	(2,798)		$	(125)		$	(2,673)	NM
Gross profit (loss) as a % of revenue	(16.1)		%	(0.9)		%	(1,520)		bps

Our Powersports Segment same store wholesale vehicle results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions, except unit and per unit data)
Same store wholesale vehicle:
Revenue	$	0.3		$	0.1		$	0.2	200	%
Gross profit (loss)	$	0.1		$	(0.1)		$	0.2	200	%
Unit sales	10			6			4		67	%
Revenue per unit	$	21,755		$	16,075		$	5,680	35	%
Gross profit (loss) per unit	$	(3,637)		$	(145)		$	(3,492)	NM
Gross profit (loss) as a % of revenue	(16.7)		%	(0.9)		%	(1,580)		bps

Same Store Powersports Segment Wholesale Vehicles – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Same store wholesale vehicle revenue increased approximately $0.2 million, due to higher wholesale vehicle unit sales volume and higher wholesale vehicle average selling prices. Same store wholesale vehicle gross profit (loss) improved approximately $0.2 million.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Fixed Operations – Powersports Segment

The following table provides a reconciliation of Powersports Segment reported basis and same store basis for Fixed Operations:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions)
Total Fixed Operations revenue:
Same store	$	6.1	$	6.4	$	(0.3)	(5)	%
Acquisitions	0.7		0.3		0.4		NM
Total as reported	$	6.8	$	6.7	$	0.1	1	%

Total Fixed Operations gross profit:
Same store	$	2.8	$	3.2	$	(0.4)	(13)	%
Acquisitions	0.3		0.1		0.2		NM
Total as reported	$	3.1	$	3.3	$	(0.2)	(6)	%

NM = Not Meaningful

Our Powersports Segment reported Fixed Operations results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions)
Reported Fixed Operations:
Revenue
Customer pay	$	1.9		$	2.6		$	(0.7)	(27)	%
Warranty	0.4			0.3			0.1		33	%
Wholesale parts	0.2			0.1			0.1		100	%
Internal, sublet and other	4.3			3.7			0.6		16	%
Total revenue	$	6.8		$	6.7		$	0.1	1	%

Gross profit
Customer pay	$	0.8		$	1.4		$	(0.6)	(43)	%
Warranty	0.3			0.2			0.1		50	%
Wholesale parts	0.1			—			0.1		100	%
Internal, sublet and other	1.9			1.7			0.2		12	%
Total gross profit	$	3.1		$	3.3		$	(0.2)	(6)	%

Gross profit as a % of revenue
Customer pay	43.6		%	55.1		%	(1,150)		bps
Warranty	70.8		%	56.7		%	1,410		bps
Wholesale parts	25.5		%	20.5		%	500		bps
Internal, sublet and other	46.1		%	45.9		%	20		bps
Total gross profit as a % of revenue	46.4		%	48.9		%	(250)		bps

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Powersports Segment same store Fixed Operations results were as follows:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions)
Same store Fixed Operations:
Revenue
Customer pay	$	1.7		$	2.5		$	(0.8)	(32)	%
Warranty	0.4			0.3			0.1		33	%
Wholesale parts	0.2			0.1			0.1		100	%
Internal, sublet and other	3.8			3.5			0.3		9	%
Total revenue	$	6.1		$	6.4		$	(0.3)	(5)	%

Gross profit
Customer pay	$	0.7		$	1.4		$	(0.7)	(50)	%
Warranty	0.3			0.2			0.1		50	%
Wholesale parts	0.1			—			0.1		100	%
Internal, sublet and other	1.7			1.6			0.1		6	%
Total gross profit	$	2.8		$	3.2		$	(0.4)	(13)	%

Gross profit as a % of revenue
Customer pay	42.4		%	55.0		%	(1,260)		bps
Warranty	70.5		%	56.5		%	1,400		bps
Wholesale parts	25.5		%	20.5		%	500		bps
Internal, sublet and other	44.7		%	45.7		%	(100)		bps
Total gross profit as a % of revenue	46.6		%	49.1		%	(250)		bps

Same Store Powersports Segment Fixed Operations – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Same store Fixed Operations revenue decreased approximately $0.3 million, or 5%, and same store Fixed Operations gross profit decreased approximately $0.4 million, or 13%, primarily due to lower parts and accessories volume and higher inventory costs of parts and accessories. Same store customer pay revenue decreased approximately $0.8 million, or 32%, and same store customer pay gross profit decreased approximately $0.7 million, or 50%. Same store warranty revenue increased approximately $0.1 million, or 33%, and same store warranty gross profit increased approximately $0.1 million, or 50%. Same store wholesale parts revenue increased approximately $0.1 million, or 100%, and same store wholesale parts gross profit increased approximately $0.1 million, or 100%. Same store internal, sublet and other revenue increased approximately $0.3 million, or 9%, and same store internal, sublet and other gross profit increased approximately $0.1 million, or 6%.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

F&I – Powersports Segment

The following table provides a reconciliation of Powersports Segment reported basis and same store basis for F&I:


	Three Months Ended March 31,		Better / (Worse)
	2024	2023	Change		% Change
	(In millions, except unit and per unit data)
Total F&I revenue:
Same store	1.4	1.5	$	(0.1)	(7)	%
Acquisitions	0.1	—	0.1		NM
Total as reported	1.5	1.5	$	—	—	%

Total F&I gross profit per retail unit (excludes fleet):
Same store	1,225	981	$	244	25	%
Reported	1,197	980	$	217	22	%

Total combined retail new and used vehicle unit sales:
Same store	1,164	1,501	(337)		(22)	%
Acquisitions	90	50	40		NM
Total as reported	1,254	1,551	(297)		(19)	%

NM = Not Meaningful

Our Powersports Segment reported F&I results were as follows:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit and per unit data)
Reported F&I:
Revenue	$	1.5	$	1.5	$	—	—	%
Total combined retail new and used vehicle unit sales	1,254		1,551		(297)		(19)	%
Gross profit per retail unit (excludes fleet)	$	1,197	$	980	$	217	22	%

Our Powersports Segment same store F&I results were as follows:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit and per unit data)
Same store F&I:
Revenue	$	1.4	$	1.5	$	(0.1)	(7)	%
Total combined retail new and used vehicle unit sales	1,164		1,501		$	(337)	(22)	%
Gross profit per retail unit (excludes fleet)	$	1,225	$	981	$	244	25	%

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Same Store Powersports Segment F&I – Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Same store F&I revenue decreased approximately $0.1 million, or 7%, primarily due to a ~~50 basis~~22% decrease in retail new and used vehicle unit sales volume. Same store F&I gross profit per retail unit increased $244 per unit, or 25%, to $1,225 per unit, primarily due to an increase in gross profit per other aftermarket contract. Same store finance contract revenue decreased 13%, primarily due to lower retail new and used vehicle unit sales volume, offset partially by a 350-basis point ~~decrease~~increase in the combined new and used vehicle finance contract penetration ~~rate and~~rate. Same store service contract revenue decreased 8%, primarily due to a ~~1.9%~~12% decrease in ~~gross profit per finance contract. Service~~retail new and used vehicle service contract ~~revenue increased 7.2% due primarily to an 11.3% increase in gross profit per service contract,~~unit sales volume, offset partially by a 60 basis point decrease in the service contract penetration rate. Other aftermarket contract revenue increased 8.0%, driven primarily by a 10.8% increase in gross profit per aftermarket contract, offset partially by an 80 basis point decrease in the other aftermarket penetration rate.

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~F&I revenues increased approximately $2.8 million, or 1.1%, and F&I gross profit per retail unit increased $35, or 2.6%. The growth in F&I revenues and gross profit per retail unit is attributed to an~~6% increase in gross profit per service contract and a 380-basis point increase in the service contract penetration rate. Same store other aftermarket contract revenue increased 12%, driven primarily by a 48% increase in gross profit per other aftermarket contract ~~due to additional product offerings~~ and ~~increased visibility into performance drivers provided~~a 110-basis point increase in the other aftermarket contract penetration rate, offset partially by ~~our proprietary internal software applications. These increases in gross profit per contract more than offset the impact of~~ a ~~1.4%~~24% decrease in ~~combined~~ retail new and used vehicle unit sales ~~volume and lower penetration rates.~~

Finance contract revenue decreased 5.5%, primarily due to a 100 basis point decrease in the combined new and used vehicle finance contract penetration rate and a 2.9% decrease in gross profit per finance contract. Service contract revenue increased 6.0% due primarily to an 11.5% increase in gross profit per service contract, offset partially by a 130 basis point decrease in the service contract penetration rate. Other aftermarket contract revenue increased 5.0%, driven primarily by a 9.4% increase in gross profit per aftermarket contract, offset partially by a 340 basis point decrease in the other aftermarket penetration rate. During the nine months

volume.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ended September 30, 2017, we began offering service and other aftermarket products from a new vendor, the transition to which initially disrupted our associates’ selling processes and led to lower penetration rates and gross profit than we would expect going forward.

Segment Results

Summary

In the following ~~tables~~table of financial data, total segment income (loss) (defined as income (loss) before taxes and impairment charges for each reportable segment) of the ~~operating~~reportable segments is reconciled to consolidated ~~operating~~ income (loss):

Three Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit data)

Revenues:

Franchised Dealerships

$
2,448,574

$
2,514,240

$
(65,666
)

(2.6
%)
Pre-Owned Stores

57,127

43,688

13,439

30.8
%
Total consolidated revenues

$
2,505,701

$
2,557,928

$
(52,227
)

(2.0
%)
Segment income (loss) (1):

Franchised Dealerships

$
51,384

$
48,265

$
3,119

6.5
%
Pre-Owned Stores

(4,504
)

(4,010
)

(494
)

(12.3
%)
Total segment income (loss)

46,880

44,255

2,625

5.9
%
Interest expense, other, net

(13,028
)

(13,016
)

(12
)

(0.1
%)
Other income (expense), net

4

11

(7
)

(63.6
%)
Income (loss) from continuing operations before taxes

$
33,856

$
31,250

$
2,606

8.3
%

Retail new and used vehicle unit sales volume:

Franchised Dealerships

63,558

65,063

(1,505
)

(2.3
%)
Pre-Owned Stores

2,400

1,585

815

51.4
%
Total retail new and used vehicle unit sales volume

65,958

66,648

(690
)

(1.0
%)
before taxes and impairment charges. See above for tables and discussion of results by reportable segment.

~~(1)~~

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


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions, except unit data)
Segment Revenues:
Franchised Dealerships Segment revenues:
Retail new vehicles	$	1,439.9	$	1,421.0	$	18.9	1	%
Fleet new vehicles	19.6		18.8		0.8		4	%
Total new vehicles	$	1,459.5	$	1,439.8	$	19.7	1	%
Used vehicles	729.3		767.6		(38.3)		(5)	%
Wholesale vehicles	48.6		58.4		(9.8)		(17)	%
Parts, service and collision repair	439.9		423.8		16.1		4	%
Finance, insurance and other, net	119.6		117.1		2.5		2	%
Franchised Dealerships Segment revenues	$	2,796.9	$	2,806.7	$	(9.8)	—	%

EchoPark Segment revenues:
Retail new vehicles	$	—	$	1.0	$	(1.0)	(100)	%
Used vehicles	482.9		572.5		(89.6)		(16)	%
Wholesale vehicles	28.6		27.0		1.6		6	%

Finance, insurance and other, net	47.9		50.0		(2.1)		(4)	%
EchoPark Segment revenues	$	559.4	$	650.5	$	(91.1)	(14)	%

Powersports Segment revenues:
Retail new vehicles	$	15.9	$	20.8	$	(4.9)	(24)	%


Used vehicles	3.4		4.8		(1.4)		(29)	%
Wholesale vehicles	0.1		0.2		(0.1)		(50)	%
Parts, service and collision repair	6.8		6.7		0.1		1	%
Finance, insurance and other, net	1.5		1.5		—		—	%
Powersports Segment revenues	$	27.7	$	34.0	$	(6.3)	(19)	%

Total consolidated revenues	$	3,384.0	$	3,491.2	$	(107.2)	(3)	%

Segment Income (Loss) (1):
Franchised Dealerships Segment (2)	$	62.7	$	109.8	$	(47.1)	(43)	%
EchoPark Segment (3)	(2.9)		(46.8)		43.9		94	%
Powersports Segment	(2.3)		0.6		(2.9)		(483)	%
Total segment income (loss)	$	57.5	$	63.6	$	(6.1)	(10)	%
Impairment charges (4)	(1.0)		—		(1.0)		(100)	%
Income (loss) before taxes	$	56.5	$	63.6	$	(7.1)	(11)	%

Segment Retail New and Used Vehicle Unit Sales Volume:
Franchised Dealerships Segment	50,963		49,646		1,317		3	%
EchoPark Segment	17,981		19,991		(2,010)		(10)	%
Powersports Segment	1,254		1,551		(297)		(19)	%
Total retail new and used vehicle unit sales volume	70,198		71,188		(990)		(1)	%

Nine Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands, except unit data)

Revenues:

Franchised Dealerships

$
7,051,291

$
7,077,666

$
(26,375
)

(0.4
%)
Pre-Owned Stores

147,978

97,200

50,778

52.2
%
Total consolidated revenues

$
7,199,269

$
7,174,866

$
24,403

0.3
%
Segment income (loss) (1):

Franchised Dealerships

$
125,397

$
141,119

$
(15,722
)

(11.1
%)
Pre-Owned Stores

(17,429
)

(10,639
)

(6,790
)

(63.8
%)
Total segment income (loss)

107,968

130,480

(22,512
)

(17.3
%)
Interest expense, other, net

(39,200
)

(37,560
)

(1,640
)

(4.4
%)
Other income (expense), net

(14,490
)

120

(14,610
)

(12175.0
%)
Income (loss) from continuing operations before taxes

$
54,278

$
93,040

$
(38,762
)

(41.7
%)

Retail new and used vehicle unit sales volume:

Franchised Dealerships

183,080

184,991

(1,911
)

(1.0
%)
Pre-Owned Stores

6,122

3,662

2,460

67.2
%
Total retail new and used vehicle unit sales volume

189,202

188,653

549

0.3
%

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

~~Franchised Dealerships Segment~~

~~See the previous headings “New Vehicles,” “Used Vehicles,” “Wholesale Vehicles,” “Parts, Service~~before taxes and Collision Repair (“Fixed Operations”)” and “Finance, Insurance and Other, Net (“F&I”)” for further discussion of the operating results of the Franchised Dealerships Segment and the Pre-Owned Stores Segment. The previous tables and discussion include operating results for the Pre-Owned Stores Segment as the results for our pre-owned stores are not individually material to the combined operating results.

~~Pre-Owned Stores Segment~~

We opened the first two EchoPark locations in Colorado in November and December 2014, the third location in January 2015, the fourth and fifth locations in June 2016 and the sixth location in June 2017. By the end of 2018, we expect to break ground on approximately 10 EchoPark locations in the Florida, Georgia, North Carolina, South Carolina and Texas markets. Our EchoPark business operates independently from our previously existing new and used dealership sales operations and offers customers an exciting shopping and buying experience. As of September 30, 2017, we operated two non-EchoPark stores in the Florida and Texas markets.

~~During~~impairment charges.

(2)For the three months ended ~~September 30, 2017, the Pre-Owned Stores Segment generated revenue~~March 31, 2024, amount includes approximately $2.2 million of pre-tax charges for severance and long-term compensation expense and approximately ~~$57.1~~$1.0 million ~~up $13.4 million, or 30.8%,~~of pre-tax impairment charges related to property and gross profit of approximately $6.2 million, up $1.5 million, or 32.5%. The Pre-Owned Stores Segment retail used vehicle unit sales volume was 2,400 units, up 815 units, or 51.4%, and retail used vehicle gross profit per unit was $830, a decrease of $266, or 24.3%, due primarily to higher costs of acquisition of inventory at auction as we ramped up inventory at our newest locations. The Pre-Owned Stores Segment F&I gross profit per unit was $1,077, up $10, or 0.9%, from the prior year period, driven by higher F&I gross profit per unit at the stores opened in the last 12 months as operations at these stores continued to mature. We believe that as the operating runway at these stores grows, our training and playbook processes will enable our customer experience guides to more effectively provide F&I products to our customers and achieve targeted levels of F&I gross profit per unit. The Pre-Owned Stores Segment incurred a $4.8 million pre-tax loss duringequipment.

(3)For the three months ended ~~September 30, 2017, compared~~March 31, 2024, amount includes approximately $2.1 million of pre-tax charges for severance and long-term compensation expense and approximately $2.1 million of pre-tax charges related to ~~a $4.2 million pre-tax loss in~~closed store accrued expenses related to the ~~prior year period.~~

~~During~~indefinite suspension of operations at certain EchoPark locations. For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, amount includes approximately $2.0 million of pre-tax charges for long-term compensation expense.

(4)For the ~~Pre-Owned Stores Segment generated revenue of approximately $1480.0 million, up $50.8 million, or 52.2%, and gross profit of approximately $16.2 million, up $4.9 million, or 43.4%. The Pre-OwnedStores Segment~~retail used vehicle unit sales volume was 6,122 units, up 2,460 units, or 67.2%, and retail used vehicle gross profit per unit was $904, a decrease of $251, or 21.7%, due primarily to higher costs of acquisition of inventory at auction as we ramped up inventory at our newest locations. The Pre-Owned Stores Segment F&I gross profit per unit was $1,092, down $75, or 6.4%, from the prior year period, driven by lower F&I gross profit per unit in the first half of 2017 at the stores opened in the last 12 months. We believe that as the operating runway at these stores grows, our training and playbook processes will enable our customer experience guides to more effectively provide F&I products to our customers and achieve targeted levels of F&I gross profit per unit. The Pre-Owned Stores Segment incurred an $18.1 million pre-tax loss during the ninethree months ended ~~September 30, 2017, compared to an $11.1~~March 31, 2024, amount includes approximately $1.0 million of pre-tax ~~loss in the prior year period. The loss~~property and equipment charges for the ~~nine months ended September 30, 2017 includes approximately $2.4 million of impairment charges and lease exit charges.~~

Franchised Dealerships Segment.

Selling, General and Administrative (“SG&A”) Expenses

– Consolidated

Consolidated SG&A expenses are comprised of four major groups: compensation expense, advertising expense, rent expense and other expense. Compensation expense primarily relates to ~~dealership~~store personnel who are paid a commission or a salary plus commission and support personnel who are generally paid a fixed salary. Commissions paid to ~~dealership~~store personnel typically vary depending on gross profits realized and sales volume objectives. Due to the salary component for certain ~~dealership~~store and corporate personnel, gross profits and compensation expense do not change in direct proportion to one another. Advertising expense and other expense vary based on the level of actual or anticipated business activity and the number of dealerships ~~owned.~~in operation. Rent expense typically varies with the number of ~~dealerships~~store locations owned, investments made for facility improvements and interest rates. Other expense includes various fixed and variable expenses, including gain on the disposal of franchises, certain customer-related costs ~~(e.g.,~~such as gasoline and service ~~loaners),~~loaners, and insurance, training, legal and ITinformation technology expenses, which may not change in proportion to gross profit levels.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~The following tables set forth information related to our reported SG&A expenses:~~

Three Months Ended
September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands)

SG&A expenses:

Compensation

$
172,691

$
171,287

$
(1,404
)

(0.8
%)
Advertising

15,846

14,987

(859
)

(5.7
%)
Rent

17,711

18,037

326

1.8
%
Other

77,726

77,830

104

0.1
%
Total SG&A expenses

$
283,974

$
282,141

$
(1,833
)

(0.6
%)

SG&A expenses as a % of gross profit:

Compensation

47.6
%

47.7
%

10

bps

Advertising

4.4
%

4.2
%

(20
)

bps

Rent

4.9
%

5.0
%

10

bps

Other

21.4
%

21.7
%

30

bps

Total SG&A expenses as a % of gross profit

78.3
%

78.6
%

30

bps

Nine Months Ended
September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands)

SG&A expenses:

Compensation

$
520,420

$
506,894

$
(13,526
)

(2.7
%)
Advertising

46,448

45,834

(614
)

(1.3
%)
Rent

55,309

55,265

(44
)

(0.1
%)
Other

247,962

235,728

(12,234
)

(5.2
%)
Total SG&A expenses

$
870,139

$
843,721

$
(26,418
)

(3.1
%)

SG&A expenses as a % of gross profit:

Compensation

48.5
%

47.9
%

(60
)

bps

Advertising

4.3
%

4.3
%

0

bps

Rent

5.2
%

5.2
%

0

bps

Other

23.0
%

22.4
%

(60
)

bps

Total SG&A expenses as a % of gross profit

81.0
%

79.8
%

(120
)

bps

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016~~

Overall SG&A expenses increased in dollar amount, primarily due to higher advertising, compensation and employee benefit-related expenses related to new manufacturer-awarded open points and EchoPark locations, storm-related physical damage costs, higher medical and workers’ compensation insurance expenses and IT expenses, offset partially by a gain on the disposal of a dealership. Overall SG&A expenses decreased as a percentage of gross profit due primarily to the effects of a gain on the disposal of a dealership.

Compensation expense increased in dollar amount, while percentage of gross profit decreased slightly, primarily due to higher levels of compensation and employee benefit-related expenses related to new manufacturer-awarded open points and EchoPark locations and higher medical insurance expenses.

Advertising expense increased both in dollar amount and as a percentage of gross profit due primarily to marketing efforts related to establishing new manufacturer-awarded open points and EchoPark locations.

Rent expense decreased both in dollar amount and as a percentage of gross profit due primarily to the combined effects of our strategy to own more of our dealership properties, offset partially by higher rent expense for additional inventory storage locations.

Other SG&A expenses decreased both in dollar amount and as a percentage of gross profit due primarily to a gain on the disposal of a dealership, offset partially by increases in storm-related physical damage costs, workers’ compensation insurance expenses and IT expenses.

~~On an adjusted basis,~~ Typically, SG&A expenses as a percentage of gross profit ~~were 79.6%, up 40 basis points from~~are highest in the ~~prior~~first quarter of the year, ~~period. For~~due to the ~~three months ended September 30, 2017, adjusted SG&A expenses exclude approximately $8.5 million~~seasonal nature of ~~gain on~~our business and the ~~disposal~~effects of ~~a dealership, offset partially by approximately $3.0 million of storm-related physical damage charges~~certain payroll taxes and ~~approximately $1.0 million of legal and other charges. For~~fringe benefits that occur early in the ~~three months ended September 30, 2016, adjusted SG&A expenses exclude a benefit of approximately $2.4 million~~year.

The following table sets forth information related to ~~an adjustment to estimated storm-related physical damage and approximately $0.1 million of legal expenses.~~

~~Nine~~our consolidated reported SG&A expenses:


	Three Months Ended March 31,						Better / (Worse)
	2024			2023			Change		% Change
	(In millions)
SG&A expenses:
Compensation	$	247.3		$	258.8		$	11.5	4	%
Advertising	22.3			26.1			3.8		15	%
Rent	9.3			11.3			2.0		18	%
Other	113.3			116.6			3.3		3	%
Total SG&A expenses	$	392.2		$	412.8		$	20.6	5	%

SG&A expenses as a % of gross profit:
Compensation	46.1		%	46.7		%	60		bps
Advertising	4.2		%	4.7		%	50		bps
Rent	1.7		%	2.0		%	30		bps
Other	21.1		%	21.2		%	10		bps
Total SG&A expenses as a % of gross profit	73.1		%	74.6		%	150		bps

Three Months Ended ~~September 30, 2017~~March 31, 2024 Compared to ~~Nine~~Three Months Ended ~~September 30, 2016~~

March 31, 2023

Overall SG&A expenses ~~increased~~decreased in both in dollar amount and as a percentage of gross profit, primarily due to ~~higher advertising, compensation~~the closure of certain EchoPark and ~~employee benefit-related expenses related to new manufacturer-awarded open points and EchoPark~~Northwest Motorsport locations ~~storm-related physical damage costs, IT expenses, customer-related costs and insurance expenses, offset partially by a gain on~~since the ~~disposal~~first quarter of ~~a dealership.~~

2023. Compensation expense ~~increased~~decreased in both dollar amount and as a percentage of gross profit. Advertising expense decreased in both dollar amount and as a percentage of gross profit, as a result of adapting our advertising spending to current retail automotive market conditions, including higher inventory availability and lower new vehicle gross profit levels. Rent expense decreased in both dollar amount and as a percentage of gross profit, primarily due to ~~higher levels~~the purchase of ~~compensation and employee benefit-related expenses related to new manufacturer-awarded open points and EchoPark locations.~~

Advertising expense increased in dollar amount and was flat as a percentage of gross profit due primarily to marketing efforts related to establishing new manufacturer-awarded open points and EchoPark locations.

~~Rent expense increased slightly in dollar amount and was flat as a percentage of gross profit due primarily to lease exit charges related to the relocation of a dealership~~several properties that were previously leased and the closure of ~~two stand-alone pre-owned~~ stores ~~acquired~~ in ~~2016.~~

the EchoPark Segment. Other SG&A expenses ~~increased~~decreased in both in dollar amount and as a percentage of gross profit, ~~due~~ primarily to increases in storm-related physical damage costs, IT expenses, workers’ compensation and garage insurance expenses, and customer-related costs, offset partially by a gain on the disposal of a dealership.

On an adjusted basis, SG&A expenses as a percentage of gross profit were 80.7%, up 130 basis points from the prior year period. For the nine months ended September 30, 2017, adjusted SG&A expenses exclude approximately $10.0 million of expense due to ~~storm-related physical damage, approximately $1.0~~a decrease of $9.7 million of lease exit charges and approximately $1.8 million of legal and other charges, offset partially by a gain of approximately $8.5 million on the disposal of a dealership. For the nine months ended September 30, 2016, adjusted SG&A expenses exclude a charge of approximately $3.6 million for storm-related physical damage and approximately $0.1 million of legal expenses.

in building maintenance.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SG&A expenses for the three months ended March 31, 2024 included approximately $2.2 million of pre-tax charges for severance and long-term compensation expense and approximately $1.0 million of pre-tax impairment charges related to property and equipment for the Franchised Dealerships Segment. For the EchoPark Segment, SG&A expenses for the three months ended March 31, 2024 also included approximately $2.1 million of pre-tax charges for severance and long-term compensation expense and approximately $2.1 million of pre-tax charges related to closed store accrued expenses in connection with the indefinite suspension of operations at certain EchoPark locations. SG&A expenses for the three months ended March 31, 2023, amount includes approximately $2.0 million of pre-tax charges for long-term compensation expense.

Impairment Charges

– Consolidated

Impairment charges ~~decreased~~were approximately ~~$5.9~~$1.0 million ~~and $2.9 million during~~for the three ~~and nine~~ months ended ~~September 30, 2017, respectively. Impairment~~March 31, 2024, related to capitalized information technology project costs that were abandoned when we closed the remaining Northwest Motorsport stores in January 2024. There were no impairment charges for the three ~~and nine~~ months ended ~~September 30, 2017~~ ~~include the write-off of goodwill and property and equipment related to the closure of two stand-alone pre-owned stores that were purchased in 2016,~~ ~~in addition to the write-off of capitalized costs associated with certain construction projects. Impairment charges for the three and nine months ended September 30, 2016 include~~ ~~the write-off of property and equipment to be demolished in conjunction with a facility construction project and the write-off of costs associated with certain construction projects.~~

March 31, 2023.

Depreciation and Amortization

– Consolidated

Depreciation and amortization expense increased approximately ~~$2.8~~$2.0 million, or ~~13.8%, and approximately $8.4 million, or 14.7%~~6%, during the three ~~and~~ ~~nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024, due primarily to acquisitions and completed construction projects and purchases of fixed assets for use in our franchised dealerships and ~~pre-owned~~EchoPark and powersports stores.

Interest Expense, Floor Plan

– Consolidated

We typically maintain a floor plan deposit balance (as shown in the table below under the heading “Liquidity and Capital Resources”) that earns interest income based on the floor plan interest rate, effectively reducing the net used vehicle floor plan interest expense. The below discussion of interest expense, floor plan includes the effect of interest income earned on the floor plan deposit balance, unless otherwise noted. Our interest expense, floor plan fluctuates with changes in our outstanding borrowing and associated interest rates, which are variable based on SOFR or the U.S. prime rate, plus a credit spread.

Three Months Ended ~~September 30, 2017~~March 31, 2024 Compared to Three Months Ended ~~September 30, 2016~~

March 31, 2023

Interest expense, floor plan for new vehicles increased approximately ~~$1.8~~$6.8 million. The average interest rate applied to the new vehicle floor plan increased in the three months ended March 31, 2024, resulting in $5.5 million ~~or 31.0%.~~of the overall increase. The average new vehicle floor plan notes payable balance increased approximately ~~$14.9~~$102.9 million, ~~resulting~~which resulted in ~~an increase in new vehicle floor plan interest expense~~$1.3 million of ~~approximately $0.1 million. The average new vehicle floor plan interest rate was 2.40%, up from 1.85% in~~ the ~~prior year period, resulting in an increase in new vehicle floor plan interest expense of approximately $1.7 million.~~

overall increase.

Interest expense, floor plan for used vehicles ~~increased~~decreased approximately ~~$0.4~~$1.1 million ~~or 50.1%. The average used vehicle~~including the effect of interest income earned on the floor plan ~~notes payable~~deposit balance, ~~decreased approximately $2.2~~which contributed to $0.5 million ~~which did not materially impact~~of this decrease. Excluding the effect of interest income earned on the floor plan interest expense. The average used vehicle floor plan interest rate was 2.60%, up from 1.71% in the prior year period, resulting in an increase in used vehicle floor plan interest expense of approximately $0.4 million.

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~Interest expense, floor plan for new vehicles increased approximately $5.6 million, or 31.2%. The average new vehicle floor plan notes payable~~deposit balance, ~~increased approximately $13.1 million, resulting in an increase in new vehicle floor plan~~ interest expense of approximately $0.2 million. The average new vehicle floor plan interest rate was 2.33%, up from 1.79% in the prior year period, resulting in an increase in new vehicle floor plan interest expense of approximately $5.4 million.

~~Interest~~ expense, floor plan for used vehicles ~~increased~~decreased approximately ~~$1.0~~$0.6 million. Excluding the effect of interest income earned on the floor plan deposit balance, the average interest rate applied to the used vehicle floor plan decreased in the three months ended March 31, 2024, driving $0.8 million ~~or 55.4%.~~of the overall decrease. The average used vehicle floor plan notes payable balance increased approximately ~~$1.0~~$10.0 million, which ~~did not materially impact floor plan interest expense. The average used vehicle floor plan interest rate was 2.51%, up from 1.62% in the prior year period, resulting in an increase in~~increased used vehicle floor plan interest expense ofby approximately ~~$1.0~~$0.2 million.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Interest Expense, Other, Net

– Consolidated

Interest expense, other, net is summarized in the ~~schedules~~table below:


	Three Months Ended March 31,				Better / (Worse)
	2024		2023		Change		% Change
	(In millions)
Stated/coupon interest	$	22.5	$	22.7	$	0.2	1	%

Deferred loan cost amortization	1.6		1.6		—		—	%
Interest rate hedge expense (benefit)	0.2		0.4		0.2		50	%
Capitalized interest	(0.6)		(0.6)		—		—	%
Interest on finance lease liabilities	5.3		4.2		(1.1)		(26)	%
Other interest	—		0.1		0.1		100	%
Total interest expense, other, net	$	29.0	$	28.4	$	(0.6)	(2)	%

Three Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands)

Stated/coupon interest

$
12,255

$
11,448

$
(807
)

(7.0
%)
Discount/premium amortization

-

41

41

100.0
%
Deferred loan cost amortization

591

636

45

7.1
%
Cash flow swap interest

641

1,351

710

52.6
%
Capitalized interest

(579
)

(600
)

(21
)

(3.5
%)
Other interest

120

140

20

14.3
%
Total interest expense, other, net

$
13,028

$
13,016

$
(12
)

(0.1
%)

Nine Months Ended September 30,

Better / (Worse)

2017

2016

Change

% Change

(In thousands)

Stated/coupon interest

$
36,403

$
33,504

$
(2,899
)

(8.7
%)
Discount/premium amortization

28

121

93

76.9
%
Deferred loan cost amortization

1,784

1,866

82

4.4
%
Cash flow swap interest

2,231

3,667

1,436

39.2
%
Capitalized interest

(1,589
)

(2,063
)

(474
)

(23.0
%)
Other interest

343

465

122

26.2
%
Total interest expense, other, net

$
39,200

$
37,560

$
(1,640
)

(4.4
%)

Interest expense, other, net was flat for the three months ended September 30, 2017, primarily due to higher stated/coupon interest related to additional mortgage notes payable balances, offset partially by a decrease in cash flow swap interest payments. Interest expense, other, net increased approximately ~~$1.6~~$0.6 million, or ~~4.4%~~2%, during the nine months ended September 30, 2017, primarily due to higher stated/coupon interest related to additional mortgage notes payable balances, and lower levels of interest capitalized in conjunction with construction projects, offset partially by a decrease in cash flow swap interest payments. Stated/coupon interest for the nine months ended September 30, 2017 includes approximately $0.7 million of double-carry interest for the period during which the 7.0% Notes and the 6.125% Notes were both outstanding.

~~Other Income (Expense), Net~~

~~Other income was flat~~ during the three months ended ~~September 30, 2017. Other expense increased approximately $14.6 million during the nine months ended September 30, 2017, due to a charge of approximately $14.6 million~~March 31, 2024. The increase was primarily related to ~~the extinguishment~~higher interest on finance lease liabilities as a result of ~~the 7.0% Notes in the nine months ended September 30, 2017.~~

a rising interest rate environment.

Income Taxes

The overall effective income tax rate ~~from continuing operations~~ was ~~41.7% and 41.0%~~27.0% for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024 and ~~was 39.3% for both the three and nine months ended September 30, 2016. Income tax expense~~25.0% for the three ~~and nine~~ months ended ~~September 30, 2017 includes a $0.4 million discrete charge related to a non-deductible asset impairment charge. Our~~March 31, 2023. Sonic’s effective income tax rate varies from year to year based on the level of taxable income, the distribution of taxable income between states in which ~~we operate~~the Company operates and other tax adjustments. We expect the effective tax rate in future periods to fall within a range of 38.0% to 40.0% before the impact, if any, of changes in valuation allowances related to deferred income tax assets or discrete tax adjustments.

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~Discontinued Operations~~

~~Significant components of results from discontinued operations were as follows:~~

Liquidity and Capital Resources

We require cash to ~~fund~~service debt, ~~service, operating~~meet lease obligations, manage working capital requirements, make facility ~~improvements~~ and other capital improvements, ~~and~~pay dividends on our common stock, ~~and to~~ finance acquisitions and otherwise invest in our business. We rely on cash flows from operations, borrowings under our revolving credit and floor plan borrowing arrangements, real estate mortgage financing, asset sales and offerings of debt and equity securities to meet these requirements. We closely monitor our available liquidity and projected future operating results in order to remain in compliance with restrictive covenants under the 2016 Credit Facilities and other debt obligations and lease arrangements. However, our liquidity could be negatively affected ~~if we fail~~by business performance and could result in failure to comply with the financial covenants in our existing debt obligations or lease arrangements. After giving effect to the applicable restrictions on the payment of dividends under our debt agreements, as of ~~September 30, 2017,~~March 31, 2024, we had approximately ~~$113.6~~$264.1 million of net income and retained earnings free of such restrictions. Cash flows provided by our dealerships are derived from various sources. The primary sources include individual consumers, automobile manufacturers, automobile manufacturers’ captive finance subsidiaries and ~~finance companies.~~other financial institutions. Disruptions in these cash flows could have a material adverse impact on our operations and overall liquidity.

Because the majority of our consolidated assets are held by our dealership subsidiaries, the majority of our cash flows from operations are generated by these subsidiaries. As a result, our cash flows and our ability to service our obligations depend to a substantial degree on the results of operations of these subsidiaries, their contractual obligations and capital requirements, and their ability to provide us with cash.

We had the following liquidity resources available as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016:~~

2023:


	March 31, 2024		December 31, 2023
	(In millions)
Cash and cash equivalents	$	15.1	$	28.9
Floor plan deposit balance	320.0		345.0
Availability under the Revolving Credit Facility	338.5		298.6

Availability under the Mortgage Facility	173.0		173.0

Total available liquidity resources	$	846.6	$	845.5

September 30, 2017

December 31, 2016

(In thousands)

Cash and cash equivalents

$
13,379

$
3,108

Availability under the 2016 Revolving Credit Facility

83,963

207,053

Availability under our used vehicle floor plan facilities

15,838

46,423

Floor plan deposit balance

-

10,000

Total available liquidity resources

$
113,180

$
266,584

During the three months ended September 30, 2017, our overall liquidity decreased due to the acquisition of a pre-owned business and reductions in cash flows as a result of the impact of Hurricanes Harvey and Irma on operations in our Alabama, Florida, Georgia and Houston markets. While the effect of the acquisition will have a longer-term effect on our liquidity, the effect of the hurricanes is expected to be temporary. As of October 12, 2017, our overall liquidity increased approximately $21.8 million to approximately $135.0 million, and we expect to continue to see further improvements in the fourth quarter.

We ~~participate in~~maintain a ~~program with two of our manufacturer-affiliated finance companies (the~~ floor plan deposit balance (as shown in the table above) ~~wherein we maintain a deposit balance with the lender~~ that ~~earns~~offsets interest based on the agreed upon ~~rate.~~floor plan interest rate, effectively reducing the net used vehicle floor plan interest expense with the lender. This deposit balance is not designated as a ~~pre-payment~~prepayment of notes payable –- floor plan, nor is it our intent to use this amount to offset principal amounts owed under notes payable –- floor plan in the future, although we have the right and ability to do so. The ~~balance~~deposit balances of ~~$10.0~~$320.0 million as of March 31, 2024 and $345.0 million as of December 31, ~~2016 is~~2023 are classified inas other current assets in the accompanying unaudited condensed consolidated balance ~~sheets.~~

sheets as of March 31, 2024 and December 31, 2023.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Floor Plan Facilities

We finance all of our new and certain of our used vehicle inventory through standardized floor plan facilities ~~with~~with: (1) certain manufacturer captive finance companies (classified as notes payable - floor plan - trade in the accompanying unaudited condensed consolidated balance sheets) and (2) a syndicate of manufacturer-affiliated captive finance companies and commercial ~~banks.~~banks (classified as notes payable - floor plan - non-trade in the accompanying unaudited condensed consolidated balance sheets). These floor plan facilities are due on demand and currently bear interest at variable rates based on either ~~LIBOR~~one-month Term SOFR or ~~the~~ prime ~~rate.~~plus an additional spread, as applicable. The ~~weighted average~~weighted-average interest

~~SONIC AUTOMOTIVE, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

rate for our combined new and used vehicle floor plan facilities was ~~2.42%~~5.82% and ~~2.35% in~~4.53% for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024 and ~~1.84%~~2023, respectively. Excluding the effect of interest income earned on the floor plan deposit balance, the weighted-average interest rate for our combined new and ~~1.78% in~~used vehicle floor plan facilities was 7.14% and 5.82% for the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2024 and 2023, respectively.

We receive floor plan assistance in the form of direct payments or credits from certain manufacturers. Floor plan assistance received is capitalized in inventory and ~~charged against~~recorded as a reduction of cost of sales when the associated inventory is sold. We received approximately ~~$9.6~~$14.4 million and ~~$31.3~~$12.7 million in ~~floor plan~~manufacturer assistance in the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024 and ~~approximately $11.6 million and $32.6 million in floor plan assistance in the three and nine months ended September 30, 2016,~~2023, respectively. We recognized ~~manufacturer floor plan assistance~~ in cost of sales ~~of approximately $11.8~~approximately $15.0 million and ~~$32.7~~$13.1 million in manufacturer assistance in the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024 and ~~approximately $11.3 million and $32.2 million in the three and nine months ended September 30, 2016,~~2023, respectively.Interest payments under each of our floor plan facilities are due monthly and we are generally not required to make principal repayments prior to the sale of the associated vehicles.

Long-Term Debt and Credit Facilities

On March 10, 2017, we issued $250.0 million in aggregate principal amount of 6.125% Notes which mature on March 15, 2027. The 6.125% Notes were issued at a price of 100.0% of the principal amount thereof. We used the net proceeds from the issuance of the 6.125% Notes to repurchase all of the outstanding 7.0% Notes during the nine months ended September 30, 2017. Remaining proceeds from the issuance of the 6.125% Notes will be used for general corporate purposes. The 6.125% Notes are our unsecured senior subordinated obligations and are guaranteed by our domestic operating subsidiaries. Interest on the 6.125% Notes is payable semi-annually in arrears on March 15 and September 15 of each year.

See Note 6, “Long-Term Debt,” to the accompanying unaudited condensed consolidated financial statements for a discussion of our long-term debt, mortgage notes and credit facilities and compliance with debt covenants.

Capital Expenditures

Our capital expenditures include the purchase of land and buildings, the construction of new franchised dealerships, ~~pre-owned~~EchoPark and powersports stores and collision repair centers, building improvements and equipment purchased for use in our franchised dealerships and ~~pre-owned~~EchoPark and powersports stores. We selectively construct new or improve existing franchised dealership facilities to maintain compliance with manufacturers’ image requirements. We typically finance these projects through cash flows from operations, new mortgages or ~~alternatively, through~~ our credit facilities. ~~We also fund these projects through cash flows from operations.~~

Capital expenditures in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 were approximately ~~$181.9 million.~~$43.8 million, including approximately $43.0 million related to our Franchised Dealerships Segment, approximately $0.4 million related to our EchoPark Segment and approximately $0.4 million related to our Powersports Segment. Of ~~this amount, $71.1~~the total capital expenditures, approximately $32.0 million was related to facility construction projects, ~~and $82.9~~approximately $1.4 million was related to r~~eal~~acquisitions of real estate ~~acquisitions, while fixed~~(land and buildings) and approximately $10.4 million was for other fixed assets utilized in our ~~store operations accounted for~~operations.

All of the ~~remaining $27.9~~$43.8 million ~~of capital expenditures.~~

~~Of the~~in gross capital expenditures in the ~~nine~~three months ended ~~September 30, 2017, approximately $38.4 million~~March 31, 2024 was funded through ~~mortgage financing and approximately $143.5 million was funded through~~existing cash ~~from operations and use of our credit facilities.~~balances. As of ~~September 30, 2017,~~March 31, 2024, commitments for facility construction projects totaled approximately ~~$25.6 million. We expect investments related to capital expenditures~~$28.3 million, nearly all of which is expected to be ~~partly dependent upon our overall liquidity position and~~completed in the ~~availability of mortgage financing to fund significant capital projects.~~

~~Stock~~next 12 months.

Share Repurchase Program

Our Board of Directors has authorized us to repurchase shares of our Class A ~~common stock.~~Common Stock. Historically, we have used our share repurchase authorization to offset dilution caused by the exercise of stock options or the vesting of equity compensation awards and to maintain our desired capital structure. During the ~~nine~~three months ended ~~September 30, 2017, our Board of Directors authorized an additional $100.0 million to repurchase shares of our Class A common stock. During the~~ ~~three and nine months ended September 30, 2017~~,March 31, 2024, we repurchased approximately ~~0.7 million and 2.0~~0.5 million shares of our Class A ~~common stock, respectively,~~Common Stock for approximately ~~$11.4~~$27.0 million ~~and $37.3 million, respectively,~~ in open-market transactions at prevailing market prices and in connection with tax ~~withholdings~~withholding on the vesting of equity compensation awards. As of ~~September 30, 2017,~~March 31, 2024, our total remaining share repurchase authorization was approximately ~~$107.7~~$259.7 million. Under the ~~2016~~ Credit Facilities, share repurchases are permitted to the extent that no ~~event~~Event of ~~default exists.~~

Default exists and we do not exceed the restrictions set forth in our debt agreements. After giving effect to the applicable restrictions on share repurchases and certain other transactions under our debt agreements, as of March 31, 2024, we had approximately $264.1 million of net income and retained earnings free of such restrictions.

Our share repurchase activity is subject to the business judgment of our Board of Directors and management, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements and covenant compliance, the current economic environment and other factors considered by our Board of Directors and management to be relevant. These factors are considered each quarter and will be scrutinized as our Board of Directors and management determine our share repurchase policy in the future.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Dividends

During the three months ended ~~September 30, 2017,~~March 31, 2024, our Board of Directors approved a cash dividend of ~~$0.05~~$0.30 per share on all outstanding shares of Class A and Class B ~~common stock~~Common Stock as of ~~September~~March 15, ~~2017 to be~~2024, which was paid on ~~October 13, 2017.~~April 15, 2024. Subsequent to ~~September 30, 2017,~~March 31, 2024, our Board of Directors approved a cash dividend of ~~$0.05~~$0.30 per share on all outstanding shares of Class A and Class B ~~common stock~~Common Stock as of ~~December 15, 2017~~June 14, 2024 to be paid on ~~January 12, 2018. Under~~July 15, 2024. The Credit Facilities permits quarterly cash dividends on our Class A and Class B Common Stock up to $0.18 per share so long as no Event of Default has occurred and is continuing and provided that we remain in compliance with all financial covenants under the ~~2016~~ Credit ~~Facilities,~~Facilities. Additional dividends are permitted subject to the ~~extent that no event of default exists~~limitations on restricted payments set forth in the Credit Facilities. The 2029 Indenture and ~~we are in compliance with~~ the ~~financial covenants contained therein. The indentures governing our outstanding 5.0% Notes and 6.125% Notes~~2031 Indenture also contain restrictions on our ability to pay dividends. After giving effect to the applicable restrictions on share repurchases and certain other transactions under our debt agreements, as of March 31, 2024, we had approximately $264.1 million of net income and retained earnings free of such restrictions. The declaration and payment of any future dividend is subject to the business judgment of our Board of Directors, taking into consideration our historical and projected results of operations, financial condition, cash flows, capital requirements and covenant compliance, share repurchases, the current economic environment and other factors considered by our Board of Directors to be relevant. These factors are considered each quarter and will be scrutinized as our Board of Directors determines our ~~future~~ dividend ~~policy.~~policy in the future. There is no guarantee that additional dividends will be declared and paid at any time in the future. See Note 6, “Long-Term Debt,” to the c~~onsolidated~~accompanying unaudited condensed consolidated financial statements ~~in our Annual Report on Form 10-K for the year ended December 31, 2016~~ for a description of restrictions on the payment of ~~dividends~~.

dividends.

Cash Flows

Cash Flows from Operating Activities – Net cash provided by operating activities in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 was approximately ~~$188.1~~$70.1 million. This provision of cash was comprised primarily of ~~cash inflows related to operating profits and~~net income less non-cash items, a decrease in receivables, and ~~inventories,~~an increase in trade accounts payable and other liabilities, offset partially by an increase in inventories and a decrease in notes payable – floor plan – trade. ~~In the~~ ~~nine months ended September 30, 2016~~, net cash provided by operating activities was approximately $241.5 million. This provision of cash was comprised primarily of cash inflows related to operating profits and a decrease in receivables, inventories and other assets, offset partially by a decrease in notes payable – floor plan – trade.

Net cash used in ~~investing~~operating activities in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 was approximately ~~$235.5~~$34.0 million. This use of cash was comprised primarily of ~~purchases of land, property and equipment and the acquisition of one pre-owned vehicle business,~~an increase in inventories, offset partially by ~~proceeds from the sale of one franchised dealership.~~ ~~Net cash used~~net income less non-cash items, a decrease in ~~investing activities~~receivables and an increase in ~~the nine months ended September 30, 2016 was approximately $169.9 million. This use of cash was comprised primarily of purchases of land, property~~trade accounts payable and ~~equipment and the acquisition of three stand-alone pre-owned vehicle businesses.~~

Net cash provided by financing activities in the nine months ended September 30, 2017 was approximately $57.7 million. This provision of cash was comprised primarily of proceeds from issuance of long-term debt (including mortgages) and net borrowings on revolving credit facilities, ~~offset partially by~~ ~~repurchases of debt securities and purchases of treasury stock and net repayments on notes payable – floor plan – non-trade.~~ Net cash used in financing activities in the nine months ended September 30, 2016 was approximately $72.3 million. This use of cash was comprised primarily of purchases of treasury stock, payments on notes payable – floor plan – non-trade and principal payments and repurchases of long-term debt, offset partially by proceeds from issuance of mortgage-related long-term debt.

other liabilities.

We arrange our inventory floor plan financing through both manufacturer captive finance companies and a syndicate of manufacturer-affiliated finance companies and commercial banks. Our floor plan financed with manufacturer captives is recorded in the accompanying unaudited condensed consolidated balance sheets as ~~trade~~notes payable - floor plan ~~liabilities~~- trade (with the ~~resulting~~ change in balance being reflected asin operating cash flows). Our dealerships that obtain floor plan financing from a syndicate of manufacturer-affiliated finance companies and commercial banks record their obligation in the accompanying unaudited condensed consolidated balance sheets as ~~non-trade~~notes payable - floor plan ~~liabilities~~- non-trade (with the ~~resulting~~ change in balance being reflected asin financing cash flows).

Due to the presentation differences for changes in trade floor plan financing and non-trade floor plan financing in the accompanying unaudited condensed consolidated statements of cash flows, decisions made by us to move dealership floor plan financing arrangements from one finance source to another may cause significant variations in operating and financing cash flows without affecting our overall liquidity, working capital or cash ~~flow.~~ flows. Upon entering into the Floor Plan Facilities in April 2021, the majority of our outstanding floor plan liabilities were reclassified from trade floor plan liabilities to non-trade floor plan liabilities, resulting in a significant reclassification of related floor plan liability cash flows from operating activities to financing activities.

Net cash ~~used in~~provided by combined trade and non-trade floor plan financing was approximately ~~$206.6 million and $167.3~~$13.4 million in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024. Net cash provided by combined trade and ~~2016, respectively.~~non-trade floor plan financing was approximately $193.0 million in the three months ended March 31, 2023. Accordingly, if all changes in floor plan notes payable were classified as an operating activity (to align changes in floor plan liability balances with the associated changes in inventory balances for cash flow classification), the result would have been net cash provided by operating activities of approximately ~~$113.2~~$91.2 million and ~~$204.8~~$154.8 million in the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, respectively.

~~Guarantees~~

Cash Flows from Investing Activities – Net cash used in investing activities in the three months ended March 31, 2024 was approximately $39.4 million. This use of cash was comprised primarily of the purchase of land, property and ~~Indemnification Obligations~~

~~In connection with~~equipment, partially offset by the ~~operation~~proceeds from the sale of land, property and ~~disposition~~equipment. Net cash used in investing activities in the three months ended March 31, 2023 was approximately $107.5 million. This use of ~~dealership franchises, we have entered into various guarantees~~cash was comprised primarily of the purchase of a powersports business (including real property), net of cash acquired, and ~~indemnification obligations. See Note 8, “Contingencies,” to~~ the ~~accompanying condensed consolidated financial statements. See also “Item 7. Management’s Discussion~~purchase of land, property and ~~Analysis~~equipment.

Cash Flows from Financing Activities – Net cash used in financing activities in the three months ended March 31, 2024 was approximately $44.5 million. This use of ~~Financial Condition~~cash was comprised primarily of purchases of treasury stock and ~~Results of Operations” and Note 12, “Commitments and Contingencies,” to~~payments on long-term debt. Net cash provided by financing activities in the ~~consolidated financial statements in our Annual Report on Form 10-K for the year~~three months ended ~~December~~March 31, ~~2016.~~

2023 was approximately $72.5

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

million. This provision of cash was comprised primarily of net borrowings on notes payable – floor plan – non-trade, offset partially by purchases of treasury stock and payments on long-term debt.

One metric that management uses to measure operating performance is Adjusted EBITDA (a non-GAAP financial measure) for each of the Company’s reportable segments and on a consolidated basis. We believe Adjusted EBITDA enables our operating performance to be compared across reporting periods on a consistent basis by excluding non-floor plan financing costs, non-cash items such as depreciation and amortization, stock-based compensation expense, and impairment charges, and other items that may affect the comparability of reporting periods, including, but not limited to, gains or losses from acquisitions or dispositions, facility exit costs, severance and long-term compensation charges, and storm damage charges. This non-GAAP financial measure is reconciled to net income (loss) (the most directly comparable GAAP financial measure) in the table below:


	Three Months Ended March 31, 2024								Three Months Ended March 31, 2023
	Franchised Dealerships Segment		EchoPark Segment		Powersports Segment		Total		Franchised Dealerships Segment		EchoPark Segment		Powersports Segment		Total
	(In millions)
Net income							$	42.0							$	47.7
Provision for income taxes							15.5								15.9
Income (loss) before taxes	$	62.7	$	(2.9)	$	(2.3)	$	57.5	$	109.8	$	(46.8)	$	0.6	$	63.6
Non-floor plan interest (1)	26.3		0.6		0.5		27.4		25.4		0.9		0.6		26.9
Depreciation & amortization (2)	31.5		5.4		1.0		37.9		28.2		7.0		0.7		35.9
Stock-based compensation expense	4.4		—		—		4.4		5.0		—		—		5.0

Impairment charges	1.0		—		—		1.0		—		—		—		—

Severance and long-term compensation charges	2.2		2.1		—		4.3		—		2.0		—		2.0
Closed store accrued expenses	—		2.1		—		2.1		—		—		—		—



Adjusted EBITDA (3)	$	128.1	$	7.3	$	(0.8)	$	134.6	$	168.4	$	(36.9)	$	1.9	$	133.4

(1)Includes the following line items from the accompanying unaudited condensed consolidated statements of operations, net of any amortization of debt issuance costs or net debt discount/premium included in footnote (2) below: interest expense, other, net.

(2)Includes the following line items from the accompanying unaudited condensed consolidated statements of cash flows: depreciation and amortization of property and equipment; debt issuance cost amortization; and debt discount amortization, net of premium and other amortization.

(3)Adjusted EBITDA is a non-GAAP financial measure.

Seasonality

Our operations are subject to seasonal variations. Due in part to our franchised dealerships brand mix and the seasonal nature of automotive retail, the first quarter historically has contributed less operating profit than the second and third quarters, while the fourth quarter historically has contributed the highest operating profit of any quarter. Weather conditions and the timing of manufacturer incentive programs and model changeovers cause seasonality and may adversely affect vehicle demand and, consequently, our profitability. Comparatively, parts and service demand has historically remained stable throughout the year.

Future Liquidity Outlook

We believe our best sources of liquidity for operations and debt service remain cash flows generated from operations combined with the availability of borrowings under our floor plan facilities (or any replacements thereof) ~~and our 2016~~, the Credit Facilities (or any replacements thereof), the Mortgage Facility (or any replacements thereof) and real estate mortgage financing, selected dealership and other asset sales and our ability to raise funds in the capital markets through offerings of debt or equity securities. Because the majority of our consolidated assets are held by our dealership subsidiaries, the majority of our cash flows from operations are generated by these subsidiaries. As a result, our cash flows and our ability to service our obligations depend to a substantial degree on the results of operations of these subsidiaries, their contractual obligations and capital requirements, and their ability to provide us with cash.

We do not currently anticipate any materially negative changes to our cost of, or access to, capital over the next 12 months.

SONIC AUTOMOTIVE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Off-Balance Sheet Arrangements

Guarantees and Indemnification Obligations

In connection with the operation and disposition of our dealerships, we have entered into various guarantees and indemnification obligations. When we sell dealerships, we attempt to assign any related lease to the buyer of the dealership to eliminate any future liability. However, if we are unable to assign the related leases to the buyer, we will attempt to sublease the leased properties to the buyer at a rate equal to the terms of the original leases. In the event we are unable to sublease the properties to the buyer with terms at least equal to our leases, we may be required to record lease exit accruals. As of March 31, 2024, our future gross minimum lease payments related to properties subleased to buyers of sold dealerships totaled approximately $6.4 million. Future sublease payments expected to be received related to these lease payments were approximately $6.2 million at March 31, 2024.

In accordance with the terms of agreements entered into for the sale of our dealerships, we generally agree to indemnify the buyer from certain liabilities and costs arising subsequent to the date of sale, including environmental exposure and exposure resulting from the breach of representations or warranties made in accordance with the agreements. While our exposure with respect to environmental remediation is difficult to quantify, our maximum exposure associated with these general indemnifications was approximately $8.0 million as of both March 31, 2024 and December 31, 2023. These indemnifications typically expire within a period of one to three years following the date of sale. The estimated fair value of these indemnifications was not material and the amount recorded for this contingency was not significant at March 31, 2024.

We also guarantee the floor plan commitments of our 50%-owned joint venture, and the amount of such guarantee at both March 31, 2024 and December 31, 2023 was approximately $4.3 million. We expect the aggregate amount of the obligations we guarantee to fluctuate based on dealership disposition activity. Although we seek to mitigate our exposure in connection with these matters, these guarantees and indemnification obligations, including environmental exposures and the financial performance of lease assignees and sublessees, cannot be predicted with certainty. An unfavorable resolution of one or more of these matters could have a material adverse effect on our liquidity and capital resources. See ~~“Item 7. Management’s Discussion~~Note 7, “Commitments and ~~Analysis of Financial Condition~~Contingencies,” to the accompanying unaudited condensed consolidated financial statements and ~~Results of Operations – Off-Balance Sheet Arrangements”~~Note 12, “Commitments and Contingencies,” to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

~~Seasonality~~

~~Our operations are subject to seasonal variations. The first quarter normally contributes less operating profit than the second, third~~2023 for further discussion regarding these guarantees and fourth quarters. Weather conditions, the timing of manufacturer incentive programs and model changeovers cause seasonality and may adversely affect vehicle demand and, consequently, our profitability. Comparatively, parts and service demand remains stable throughout the year.

indemnification obligations.

SONIC AUTOMOTIVE, INC.

Item 3. ~~Quantitativ~~eQuantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

Our variable rate floor plan facilities, ~~2016~~the Revolving Credit Facility, the Mortgage Facility and our other variable rate notes expose us to risks caused by fluctuations in the applicable interest rates. The total net outstanding balance of such variable instruments, after considering the effect of ~~our~~outstanding cash flow hedge instruments, was approximately $1.7 billion at March 31, 2024. Based on that amount along with the notional value of interest rate ~~swaps and rate~~ caps ~~(see below), was approximately $911.7 million at September 30, 2017. An increase~~ in ~~interest rates~~place on that date, a decrease of 100 basis points in the underlying interest rates would have ~~caused a change in~~reduced interest expense by approximately $3.8 million while a 100-basis point increase in rates would have resulted in approximately $2.8 million of ~~approximately $11.5 million in~~additional interest expense for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2024. Of those changes, approximately $2.9 million of the ~~total change in interest expense,~~decrease and approximately ~~$10.0~~$1.8 million of the increase would have resulted from the floor plan, ~~facilities.~~

~~In addition to our variable rate debt, certain~~net of our dealership lease facilities have monthly lease payments that fluctuate based on LIBOR interest rates. An increase in interest rates of 100 basis points would not have had a significant impact on rent expense inoffset. The difference between the ~~nine months ended September 30, 2017 due to~~increases and decreases results from the ~~leases containing LIBOR floors which were above the LIBOR rate during the nine months ended September 30, 2017.~~

We also have interest rate cash flow swap agreements to effectively convert a portion of our LIBOR-based variable rate debt to a fixed rate. In addition, we have interest rate cap agreements to limit our exposure to increases in LIBOR rates above certain levels. Under the terms of these cash flow swaps and interest rate caps, interest rates reset monthly. The fair value of these interest rate swap and rate cap positions at September 30, 2017 was a net asset of approximately $1.4 million, with approximately $3.8 million included in other assets and approximately $0.5 million in other current assets in the accompanying condensed consolidated balance sheets, offset partially by approximately $1.8 million included in other accrued liabilities and approximately $1.1 million included in other long-term liabilities in the accompanying condensed consolidated balance sheets. The fair valuemitigating effect of the interest rate swap positions at December 31, 2016 was a net liability of approximately $3.7 million, with approximately $4.1 million included in other accrued liabilities and approximately $2.4 million included in other long-term liabilities in the accompanying condensed consolidated balance sheets, offset partially by approximately $2.8 million included in other assets in the accompanying condensed consolidated balance sheets.

~~Under the terms of these cash flow swaps, we will receive and pay interest based on the following:~~

~~(1)~~

~~The one-month LIBOR rate was approximately 1.232% at September 30, 2017.~~

caps.

~~(2)~~

~~The effective date of these forward-starting swaps is July 2, 2018.~~

~~(3)~~

~~The effective date of these forward-starting swaps is July 1, 2019.~~

~~(4)~~

SONIC AUTOMOTIVE, INC.

~~Foreign Currency Risk~~

We purchase certain of our new vehicle and parts inventories from foreign manufacturers. Although we purchase our inventories in U.S. dollars, our business is subject to foreign exchange rate risk that may influence automobile manufacturers’ ability to provide their products at competitive prices in the United States. To the extent that we cannot recapture this volatility in prices charged to customers or if this volatility negatively impacts consumer demand for our products, this volatility could adversely affect our future operating results.

~~SONIC AUTOMOTIVE, INC.~~

Item 4. C~~ontrols~~Controls and Procedures.

Disclosure Controls and Procedures – Under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), we evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as ~~amended)~~amended (the “Exchange Act”)) as of ~~September 30, 2017.~~March 31, 2024. Based upon that evaluation, our CEO and our CFO concluded that our disclosure controls and procedures were effective as of ~~September 30, 2017.~~

March 31, 2024.

Changes in Internal Control ~~over~~Over Financial Reporting – There ~~has been~~were no ~~change~~changes in our internal control over financial reporting during the ~~three months~~quarter ended ~~September 30, 2017,~~March 31, 2024, that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance that the objectives of the control system are met and may not prevent or detect misstatements. In addition, any evaluation of the effectiveness of internal ~~controls~~control over financial reporting in future periods is subject to risk that those internal controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

SONIC AUTOMOTIVE, INC.

PART II – ~~OTH~~EROTHER INFORMATION

Item 1. Legal Proceedings.

~~We are involved,~~

For information regarding legal proceedings, see the discussion under the heading “Legal Matters” in Note 7, “Commitments and ~~expect~~Contingencies,” to ~~continue to be involved, in various legal and administrative proceedings arising out of~~ the conduct of our business, including regulatory investigations and private civil actions brought by plaintiffs purporting to represent a potential class or for which a class has been certified. Although we vigorously defend ourselves in all legal and administrative proceedings, the outcomes of pending and future proceedings arising out of the conduct of our business, including litigation with customers, employment-related lawsuits, contractual disputes, class actions, purported class actions and actions brought by governmental authorities, cannot be predicted with certainty. An unfavorable resolution of one or more of these matters could have a material adverse effect on our business,accompanying unaudited condensed consolidated financial ~~condition, results of operations, cash flows or prospects.~~

Included in other accrued liabilities and other long-term liabilities at September 30, 2017 was approximately $3.0 million and $0.2 million, respectively, in reserves that we were holding for pending proceedings. Except as reflected in such reserves, we are currently unable to estimate a range of reasonably possible loss, or a range of reasonably possible loss in excess of the amount accrued, for pending proceedings.

statements.

SONIC AUTOMOTIVE, INC.

Item 1A. Risk Factors.

There have been no material changes in our risk factors from those included in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2023.

SONIC AUTOMOTIVE, INC.

Item 2. ~~Unregistered~~Unregistered Sales of Equity Securities and Use of Proceeds.

The following table sets forth information about the shares of Class A ~~common stock~~Common Stock we repurchased during the three months ended ~~September 30, 2017:~~

March 31, 2024:

Total
Number
of Shares
Purchased

Average
Price Paid
per Share

Total Number
of Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)

Approximate Dollar
Value of Shares
that May Yet Be
Purchased Under the Plans or Programs (1)

(In thousands, except per share data)

July 1 – July 31, 2017

-

$
-

-

$
119,085

August 1 – August 31, 2017

667,115

$
17.09

667,115

$
107,686

September 1 – September 30, 2017

-

$
-

-

$
107,686

Total

667,115

667,115



	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
	(In millions, except per share data)
January 2024	—	$	—	—	$	285.8
February 2024	0.2	$	54.61	0.2	$	276.2
March 2024	0.3	$	52.68	0.3	$	259.7
Total	0.5			0.5

(1)On July 28, 2022, we announced that our Board of Directors had increased the dollar amount authorized for us to repurchase shares of our Class A Common Stock pursuant to our share repurchase program. Our share repurchase program does not have an expiration date and current remaining availability under the program is as follows:

~~(1)~~
	(In millions)


July 2022 authorization	~~On February 13, 2017, we announced that our Board of Directors had increased the dollar amount authorized for us~~$	500.0
Total active program repurchases prior to repurchase shares of our Class A common stock pursuant to our share repurchase program that we previously announced on January 20, 2016. Our share repurchase program does not have an expiration date and currentMarch 31, 2024	(240.3)
Current remaining availability ~~under the program is~~ as ~~follows:~~ of March 31, 2024	$	259.7

(In thousands)

January 2016 authorization

$
100,000

February 2017 authorization

100,000

Total active program repurchases prior to September 30, 2017

(92,314
)
Current remaining availability as of September 30, 2017

$
107,686

See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional discussion of restrictions on share repurchases and payment of dividends.

SONIC AUTOMOTIVE, INC.

Item 5. Other Information.

Insider Trading Arrangements

On February 26, 2024, Jeff Dyke, Sonic’s President and a director, adopted a trading plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. Mr. Dyke’s trading plan, which has a duration of one year commencing upon the expiration of the applicable mandatory cooling-off period under Rule 10b5-1, provides for the sale of up to 31,734 shares of Sonic’s Class A Common Stock, subject to volume and pricing limits.

On February 26, 2024, Heath R. Byrd, Sonic’s Executive Vice President and Chief Financial Officer adopted a trading plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. Mr. Byrd’s trading plan, which will commence on May 28, 2024 and expire on February 28, 2025, provides for the sale of up to 22,307 shares of Sonic’s Class A Common Stock, subject to volume and pricing limits.

None of our other directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408 of Regulation S-K) during the quarter ended March 31, 2024.

SONIC AUTOMOTIVE, INC.

Item 6. Exhibits.


Exhibit No.		Description


3.1		Amended and Restated Certificate of Incorporation of Sonic Automotive, Inc., dated August 7, 1997 (incorporated by reference to Exhibit 3.1 to the ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K for the ~~quarter~~year ended ~~March~~December 31, ~~2017~~2020 (File No. 001-13395)).
3.2
~~3.2~~	Certificate of Designation, Preferences and Rights of Class A Convertible Preferred Stock, dated March 20, 1998 (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (File No. 001-13395)).
3.3
~~3.3~~	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sonic Automotive, Inc., dated June 16, 1999 (incorporated by reference to Exhibit 3.3 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (File No. 001-13395)).
3.4
~~3.4~~	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sonic Automotive, Inc., dated April 18, 2017 (incorporated by reference to Exhibit 3.4 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (File No. 001-13395)).
3.5
~~3.5~~	Certificate of Amendment to the Amended and Restated ~~Bylaws~~Certificate of Incorporation of Sonic Automotive, Inc., dated ~~July 27, 2017~~May 3, 2021 (incorporated by reference to Exhibit ~~3.5~~4.4 to the Registration Statement on Form S-8 filed June 8, 2021 (File No. 333-256891)).
3.6		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sonic Automotive, Inc., dated May 16, 2023 (incorporated by reference to Exhibit 3.6 to the Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2017~~2023 (File No. 001-13395).)
3.7		Amended and Restated Bylaws of Sonic Automotive, Inc., dated February 10, 2021 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed February 12, 2021 (File No. 001-13395)).
31.1* 10.1		Sixth Amended and Restated Credit Agreement, dated as of March 13, 2024, among Sonic Automotive, Inc.; the subsidiaries of Sonic Automotive, Inc. named therein; each lender a party thereto; and Bank of America, N.A., as administrative agent, revolving swing line lender, new vehicle swing line lender, used vehicle swing line lender, l/c issuer and a lender (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed March 19, 2024 (File No. 001-13395)).
10.2		Fifth Amended and Restated Company Guaranty Agreement, dated as of March 13, 2024, by Sonic Automotive, Inc. to Bank of America, N.A., as administrative agent for each of the lenders (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed March 19, 2024 (File No. 001-13395)).
10.3		Sixth Amended and Restated Subsidiary Guaranty Agreement, dated as of March 13, 2024, by the subsidiaries of Sonic Automotive, Inc. named therein, as guarantors, to Bank of America, N.A., as administrative agent for each of the lenders (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed March 19, 2024 (File No. 001-13395)).
10.4		Sixth Amended and Restated Securities Pledge Agreement, dated as of March 13, 2024, among Sonic Automotive, Inc., the subsidiaries of Sonic Automotive, Inc. named therein and Bank of America, N.A., as administrative agent for each of the lenders (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed March 19, 2024 (File No. 001-13395)).
10.5		Sixth Amended and Restated Escrow and Security Agreement, dated as of March 13, 2024, among Sonic Automotive, Inc., the subsidiaries of Sonic Automotive, Inc. named therein and Bank of America, N.A., as administrative agent for each of the lenders (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed March 19, 2024 (File No. 001-13395)).
10.6		Sixth Amended and Restated Security Agreement, dated as of March 13, 2024, among Sonic Automotive, Inc., the subsidiaries of Sonic Automotive, Inc. named therein and Bank of America, N.A., as administrative agent for each of the lenders (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed March 19, 2024 (File No. 001-13395)).
10.7		Fifth Amendment to Credit Agreement, dated as of March 22, 2024, among Sonic Automotive, Inc.; the subsidiaries of Sonic Automotive, Inc. named therein; each financial institution party thereto; and PNC Bank, National Association, as administrative agent and a lender (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed March 27, 2024 (File No. 001-13395)).
31.1*		Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
31.2*	Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**
32.1**	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**
32.2**	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*
101.INS*	Inline XBRL Instance Document.
101.SCH*
101.SCH*	Inline XBRL Taxonomy Extension Schema Document.
101.CAL*
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

______________________________

*Filed herewith.

**Furnished ~~herewith.~~

herewith

SONIC AUTOMOTIVE, INC.

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SONIC AUTOMOTIVE, INC.

April 25, 2024

By:

/s/ DAVID BRUTON SMITH

~~Date: October 26, 2017~~

~~By:~~

~~/s/ B. SCOTT SMITH~~

David Bruton Smith

~~B. Scott Smith~~

Chairman and Chief Executive Officer ~~and President~~

~~Date: October 26, 2017~~

April 25, 2024

By:

~~By:~~

/s/ HEATH R. BYRD

Heath R. Byrd

Executive Vice President and Chief Financial Officer

																				Accumulated
	Class A				Class A						Class B									Other			Total
	Common Stock				Treasury Stock						Common Stock				Paid-In		Retained			Comprehensive			Stockholders’
	Shares		Amount		Shares			Amount			Shares		Amount		Capital		Earnings			Income (Loss)			Equity
	(In thousands)
Balance at December 31, 2016		62,967	$	630		(30,263	)	$	(536,166	)		12,029	$	121	$	721,695	$	541,146		$	(2,262	)	$	725,164
Shares awarded under stock compensation plans		490		5		-			-			-		-		41		-			-			46
Purchases of treasury stock		-		-		(2,027	)		(37,347	)		-		-		-		-			-			(37,347	)
Change in fair value of interest rate swap and rate cap agreements, net of tax expense of $1,099		-		-		-			-			-		-		-		-			1,792			1,792
Restricted stock amortization		-		-		-			-			-		-		8,902		-			-			8,902
Net income (loss)		-		-		-			-			-		-		-		31,031			-			31,031
Dividends declared		-		-		-			-			-		-		-		(6,614	)		-			(6,614	)
Balance at September 30, 2017		63,457	$	635		(32,290	)	$	(573,513	)		12,029	$	121	$	730,638	$	565,563		$	(470	)	$	722,974

	(In thousands)
Balance at December 31, 2016	$	9,790
Lease exit expense (1)		2,016
Payments (2)		(2,671	)
Other (3)		(1,377	)
Balance at September 30, 2017	$	7,758

	September 30, 2017		December 31, 2016
	(In thousands)
New vehicles	$	894,382	$	1,088,814
Used vehicles		296,929		282,288
Service loaners		130,657		128,821
Parts, accessories and other		68,085		70,778
Net inventories	$	1,390,053	$	1,570,701

	Covenant
	Minimum Consolidated Liquidity Ratio		Minimum Consolidated Fixed Charge Coverage Ratio		Maximum Consolidated Total Lease Adjusted Leverage Ratio
Required ratio		1.05		1.20		5.75
September 30, 2017 actual		1.12		1.75		4.84

Notional Amount			Pay Rate		Receive Rate (1)	Maturing Date
(In millions)
$	6.8			4.655%	one-month LIBOR	December 10, 2017
$	250.0			1.887%	one-month LIBOR	June 30, 2018
$	125.0			1.900%	one-month LIBOR	July 1, 2018
$	50.0	(2)		2.320%	one-month LIBOR	July 1, 2019
$	200.0	(2)		2.313%	one-month LIBOR	July 1, 2019
$	100.0	(3)		1.384%	one-month LIBOR	July 1, 2020
$	125.0	(2)		1.158%	one-month LIBOR	July 1, 2019
$	150.0	(3)		1.310%	one-month LIBOR	July 1, 2020
$	125.0			1.020%	one-month LIBOR	July 1, 2018
$	62.5	(4)		2.000%	one-month LIBOR	July 1, 2021
$	62.5	(4)		2.000%	one-month LIBOR	July 1, 2021
$	62.5	(4)		2.000%	one-month LIBOR	July 1, 2021
$	62.5	(4)		2.000%	one-month LIBOR	July 1, 2021

	Three Months Ended September 30, 2017
			Income (Loss)					Income (Loss)
			From Continuing					From Discontinued						Net
			Operations					Operations						Income (Loss)
	Weighted					Per					Per						Per
	Average					Share					Share						Share
	Shares		Amount			Amount		Amount			Amount			Amount			Amount
	(In thousands, except per share amounts)
Earnings (loss) and shares		43,496	$	19,730				$	(290	)				$	19,440
Effect of participating securities:
Non-vested restricted stock				(18	)				-						(18	)
Basic earnings (loss) and shares		43,496	$	19,712		$	0.45	$	(290	)	$	-		$	19,422		$	0.45
Effect of dilutive securities:
Stock compensation plans		315
Diluted earnings (loss) and shares		43,811	$	19,712		$	0.45	$	(290	)	$	(0.01	)	$	19,422		$	0.44

	Three Months Ended September 30, 2016
			Income (Loss)					Income (Loss)
			From Continuing					From Discontinued						Net
			Operations					Operations						Income (Loss)
	Weighted					Per					Per						Per
	Average					Share					Share						Share
	Shares		Amount			Amount		Amount			Amount			Amount			Amount
	(In thousands, except per share amounts)
Earnings (loss) and shares		45,118	$	18,969				$	(858	)				$	18,111
Effect of participating securities:
Non-vested restricted stock				(11	)				-						(11	)
Basic earnings (loss) and shares		45,118	$	18,958		$	0.42	$	(858	)	$	(0.02	)	$	18,100		$	0.40
Effect of dilutive securities:
Stock compensation plans		236
Diluted earnings (loss) and shares		45,354	$	18,958		$	0.42	$	(858	)	$	(0.02	)	$	18,100		$	0.40

	Nine Months Ended September 30, 2017
			Income (Loss)					Income (Loss)
			From Continuing					From Discontinued						Net
			Operations					Operations						Income (Loss)
	Weighted					Per					Per						Per
	Average					Share					Share						Share
	Shares		Amount			Amount		Amount			Amount			Amount			Amount
	(In thousands, except per share amounts)
Earnings (loss) and shares		44,281	$	32,024				$	(993	)				$	31,031
Effect of participating securities:
Non-vested restricted stock				(28	)				-						(28	)
Basic earnings (loss) and shares		44,281	$	31,996		$	0.72	$	(993	)	$	(0.02	)	$	31,003		$	0.70
Effect of dilutive securities:
Stock compensation plans		304
Diluted earnings (loss) and shares		44,585	$	31,996		$	0.72	$	(993	)	$	(0.02	)	$	31,003		$	0.70

	Nine Months Ended September 30, 2016
			Income (Loss)					Income (Loss)
			From Continuing					From Discontinued						Net
			Operations					Operations						Income (Loss)
	Weighted					Per					Per						Per
	Average					Share					Share						Share
	Shares		Amount			Amount		Amount			Amount			Amount			Amount
	(In thousands, except per share amounts)
Earnings (loss) and shares		45,930	$	56,475				$	(918	)				$	55,557
Effect of participating securities:
Non-vested restricted stock				(31	)				-						(31	)
Basic earnings (loss) and shares		45,930	$	56,444		$	1.23	$	(918	)	$	(0.02	)	$	55,526		$	1.21
Effect of dilutive securities:		��
Stock compensation plans		200
Diluted earnings (loss) and shares		46,130	$	56,444		$	1.22	$	(918	)	$	(0.02	)	$	55,526		$	1.20

	September 30, 2017				December 31, 2016
	Fair Value		Carrying Value		Fair Value		Carrying Value
	(In thousands)
7.0% Notes (1)	$	-	$	-	$	211,000	$	198,871
5.0% Notes (1)	$	282,764	$	289,273	$	284,934	$	289,273
6.125% Notes (1)	$	256,875	$	250,000	$	-	$	-
Mortgage Notes (2)	$	200,614	$	197,053	$	185,979	$	176,369
Other (2)	$	3,836	$	4,031	$	4,057	$	4,280

	Gains and Losses on Cash Flow Hedges			Defined Benefit Pension Plan			Total Accumulated Other Comprehensive Income (Loss)
	(In thousands)
Balance at December 31, 2016	$	(2,085	)	$	(177	)	$	(2,262	)
Other comprehensive income (loss) before reclassifications (1)		27			-			27
Amounts reclassified out of accumulated other comprehensive income (loss) (2)		1,765			-			1,765
Net current-period other comprehensive income (loss)		1,792			-			1,792
Balance at September 30, 2017	$	(293	)	$	(177	)	$	(470	)


	Three Months Ended September 30,						Nine Months Ended September 30,
Brand	2017			2016			2017			2016
Luxury:
BMW		17.2	%		19.7	%		19.1	%		20.1	%
Mercedes		9.5	%		10.7	%		10.1	%		10.2	%
Lexus		6.4	%		5.8	%		5.9	%		5.7	%
Audi		6.2	%		5.1	%		5.7	%		5.1	%
Land Rover		3.3	%		3.0	%		3.4	%		3.4	%
Cadillac		2.6	%		3.4	%		2.7	%		3.3	%
Porsche		2.5	%		2.3	%		2.5	%		2.3	%
MINI		1.3	%		1.5	%		1.4	%		1.7	%
Other luxury (1)		3.2	%		3.2	%		2.8	%		3.1	%
Total Luxury		52.2	%		54.7	%		53.6	%		54.9	%
Mid-line Import:
Honda		17.8	%		17.5	%		18.1	%		17.5	%
Toyota		12.6	%		11.7	%		12.1	%		11.5	%
Volkswagen		1.9	%		1.6	%		1.7	%		1.5	%
Hyundai		1.5	%		1.3	%		1.5	%		1.3	%
Other imports (2)		1.5	%		1.5	%		1.5	%		1.5	%
Total Mid-line Import		35.3	%		33.6	%		34.9	%		33.3	%
Domestic:
Ford		7.7	%		6.5	%		7.0	%		6.5	%
General Motors (3)		4.8	%		5.2	%		4.5	%		5.3	%
Total Domestic		12.5	%		11.7	%		11.5	%		11.8	%

Total		100.0	%		100.0	%		100.0	%		100.0	%

	Three Months Ended September 30,				Better / (Worse)
	2017		2016		Change			% Change
	(In thousands, except unit data)
Total new vehicle revenue:
Same store	$	1,348,084	$	1,365,641	$	(17,557	)		(1.3	%)
Acquisitions and dispositions		14,217		9,503		4,714		NM
Total as reported	$	1,362,301	$	1,375,144	$	(12,843	)		(0.9	%)

Total new vehicle gross profit:
Same store	$	64,316	$	62,202	$	2,114			3.4	%
Acquisitions and dispositions		1,922		186		1,736		NM
Total as reported	$	66,238	$	62,388	$	3,850			6.2	%

Total new vehicle units:
Same store		35,063		35,639		(576	)		(1.6	%)
Acquisitions and dispositions		426		415		11		NM
Total as reported		35,489		36,054		(565	)		(1.6	%)

NM = Not Meaningful

	Nine Months Ended September 30,				Better / (Worse)
	2017		2016		Change			% Change
	(In thousands, except unit data)
Total new vehicle revenue:
Same store	$	3,749,137	$	3,799,558	$	(50,421	)		(1.3	%)
Acquisitions and dispositions		60,165		26,620		33,545		NM
Total as reported	$	3,809,302	$	3,826,178	$	(16,876	)		(0.4	%)

Total new vehicle gross profit:
Same store	$	183,239	$	186,356	$	(3,117	)		(1.7	%)
Acquisitions and dispositions		3,799		322		3,477		NM
Total as reported	$	187,038	$	186,678	$	360			0.2	%

Total new vehicle units:
Same store		97,348		99,275		(1,927	)		(1.9	%)
Acquisitions and dispositions		1,784		1,166		618		NM
Total as reported		99,132		100,441		(1,309	)		(1.3	%)

NM = Not Meaningful

	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
	(In thousands, except per share data)
July 1 – July 31, 2017		-	$	-		-	$	119,085
August 1 – August 31, 2017		667,115	$	17.09		667,115	$	107,686
September 1 – September 30, 2017		-	$	-		-	$	107,686
Total		667,115				667,115

	(In thousands)
January 2016 authorization	$	100,000
February 2017 authorization		100,000
Total active program repurchases prior to September 30, 2017		(92,314	)
Current remaining availability as of September 30, 2017	$	107,686